Cost of decline in American economic leadership
At the outset, we would like to say that this is not an article about political ideology or views on society and its peoples; nor is it an implication to the idea “America is the best country’ and all was well in the land of Uncle Sam before. There is a tectonic shift in the very principles that has made America the global economic leader for the better part of last century. Economics is the study of ‘seen and unseen’, and oftentimes, it is the unseen that drives the seen.
Aaron Sorkin wrote, “America is an idea, one that has worked for over a century.” This article is just an attempt to dissect the economic costs of the decline in American leadership in key sectors that will take years to redevelop of at all - Semicondusctors, Electronics just a couple exposed by the pandemic.
Any economic advancement involves what Schumpeter called disruptive Innovation; the rise of China and the waning of U.S. hegemony and moral authority. To most Americans, those are distant events that have little or no impact on their daily lives. But the decline in the general effectiveness of U.S. institutions will impose increasing costs and burdens on Americans. And if it eventually leads to a general loss of investor confidence in the country, the damage could be catastrophic for the Global economy.
With its high housing costs, poor infrastructure and transit and bitter political and racial divisions, the U.S. will be a less appealing place for high-skilled workers to live. That means companies will find other countries in Europe, Asia and elsewhere for investment, robbing the U.S. of high quality jobs and depressing wages while draining away the local spending that powers the service economy. That in turn will exacerbate some of the worst trends of U.S. decline -- less tax money means even more urban decay as infrastructure, education and social-welfare programs are forced to make big cuts.
America in the past has found ways to co-exist in the common ambition to succeed and grow. Terrible handling of the pandemic largely due to incapable leadership in Washington, the attack on the Capitol; failure to tackle the China economic uprising efficiently over the last decade leading to huge flaws in supply chains for the most basic 21st Century products are just few in a long line of examples over the last few years that have signalled the beginning of decline in US leadership.
Cadence said, we did not seek, nor did we provoke. It had to be an American President who had to stand up and say that allegations of election fraud over the last year by an overwhelming number of Republicans led by President Trump were false. In fact, it should have been said a year ago. Shame it took his approval ratings dropping to 30’s for President Biden to come out and say the most basic truth.
Almost every systematic economic advantage possessed by the U.S. is under threat. Unless there’s a huge push to turn things around -- to bring back immigrants, sustain research universities, make housing cheaper, lower infrastructure costs, reform the police and restore competence to the civil service - the result could be decades of stagnating or even declining living standards.
These consequences would look mild in comparison to what would happen if it lost its position as the financial centre of the world. with the dollar as the lynchpin of the global financial system. That means the U.S. has been able to borrow money cheaply, and Americans have been able to sustain their lifestyles through cheap imports. But if enough investors - foreign and domestic - lose confidence in the U.S.’s general effectiveness as a country, that advantage will vanish.