It is with a combined sense of foreboding, regret and sorrow that I
write this article. It is also in the knowledge that I will be accused of being
an alarmist and an extremist. I believe we are witnessing more than the
beginning of the decline and fall of the United States.
I'm
depressed about this prognostication because I don't see hope of a more
benevolent world policeman than the U.S. Admittedly, it has made mistakes in
recent years. But I only have to think back to the Marshall Plan's critical
part in resurrecting West Germany
and the rest of Western Europe, and to the U.S. management of the
transformation of Japanese society after the Second World War to appreciate how
sorely we will miss it as the only real cop on the world beat. Nor do I foresee
a reasonable alternative — certainly not the United Nations, which is
hopeless, or China,
which is frightening.
The
manifestations of the U.S.
downfall are becoming more and more apparent. Clearly, the U.S. is overextended militarily, bogged down as
it is both in Afghanistan
and Iraq.
One wonders how it could handle another major crisis in the world without
resorting to unacceptably drastic measures.
In terms
of its fiscal and trade position, the U.S. is running larger and larger
deficits, which cannot be sustained. This is setting the stage for what some
have described as “the perfect economic storm.” If something
precipitates a run on the U.S. dollar (one thing saving it right now is the
lack of a credible alternative as a monetary store of value), the results would
be devastating. In an attempt to protect its falling currency, the Federal
Reserve Board would have to raise interest rates significantly, thereby killing
its housing boom. In addition, this sharp rise in interest rates would raise
the carrying costs substantially for its massive debts, both private and
public. Having no savings to fall back on, American consumers would be forced
to cut back dramatically on their spending. Investment could take an even
bigger nosedive, while how far the stock market would tumble is anyone's guess.
As the U.S. economy
staggered, the repercussions for countries like China,
Japan and Canada, which depend so much on the U.S. market
would be telling, to say the least. Indeed, it's probably the fear of these
repercussions that explains why so many countries are so reluctant to dump
their U.S. dollar holdings, despite the huge losses they've been taking on
them. But this only postpones the inevitable; adjustments will be more severe
the longer it is delayed.
Fiscally,
the U.S.
has been so reckless at the federal level that one must query how much further
it could go in deficit financing to try to stem the downward economic tide without
running out of credit. And this at a time when it is also facing massive bills
for homeland security, infrastructure deficiencies, and virtually all forms of
social security. One has to wonder when the well will run dry.
Yet as
worrisome as all these major concerns are, they still do not go to the heart of
what bothers me most about the U.S.'s
economic prospects. There are two other critical developments that are at the
core of my concerns — one being the deteriorating state of America's
education system and the other its declining research and development (R&D)
capability.
To assert
that the U.S.
education system is failing the country is to put it mildly. By every measure,
the performance of U.S.
students continues to decline in international comparisons. Just take the
number of engineers that the U.S.
is graduating as a proxy for its general education malaise. At 60,000 per year,
it stands at about one-sixth of China's
output. Although there is undoubtedly some quality variation in favour of the U.S., this
quantitative difference is bound to prove overwhelming.
The
engineering deficiency is reflected in the slipping position of the U.S. when it
comes to R&D. Some reports say India,
another country that is graduating far more engineers than the U.S., is now generating almost as many patents
as the U.S.
for multinational corporations.
To stay
ahead in a world of rapidly advancing technology, one cannot afford to be
falling so far behind in education and R&D. I used to argue that it doesn't
matter where the newest technology is invented as long as a country has the
capacity to adopt and diffuse that technology as fast as its rivals. But that,
too, ultimately depends upon having skilled talent to do so.
I've also
been comforting myself by thinking that if the U.S. recognizes its education and
R&D gap soon enough, it still has the resources to take on the challenge,
much as it determined to conquer outer space and to win the cold war. Now I
find myself increasingly questioning whether the U.S. can muster either the will or
the means to rise to the challenge soon enough to turn itself around.
The most
frightening aspect of this challenge is how little recognition there appears to
be of it. There is debate in the U.S. about its overstretched
military and about its rising fiscal and trade deficits. But there is precious
little discussion of its education and R&D shortcomings, which in the end
make other problems pale by comparison.
The
consequence of our neighbour's prospects will be devastating for Canada. But worse
still, in my judgment, will be the ramifications for the world at large —
economically, militarily, politically and socially. Those who resent America's
pre-eminent position in the world and cannot wait for it to end should be
thinking more than they do about the alternatives. If they did, they might
conclude as I have that we have a tragedy in the making. I wish somebody could
convince me that I am wrong.
John Crispo is dean emeritus of the Rotman School of
Management, University
of Toronto.
