With a growing number of people dissing America these days, I thought I’d take the contrarian position and explain why America wins. Before I list the reasons, I think we need to explain what it means to win. To win is to be better than the competition. It doesn’t mean things are getting better, because they aren’t. Everything is relative.
Whenever someone predicts the decline of America, I always ask compared to who? I’m not being argumentative, I really am interested in finding out. America certainly isn’t the best of everything, so why do we win?
- Welcome To Foreign Citizens – We take the best and brightest talents from around the planet and welcome them. Unlike other countries, we provide paths to citizenship, regardless of income level. Jared Diamond states in his book Collapse that 12% of Americans were born in a foreign country. He referred to our culture as having plasticity. We embrace and assimilate all cultures into our Melting Pot. Those ambitious immigrants can’t contribute to their home country.
- Open Accounting – This is bound to draw some chuckles at first, but stay with me. America historically does more to protect investors than anyone else. We go through periods of fraud (we are in one now), but we always emerge with more transparency. Emerging markets come and go. Investors chase high yield and make lots of money until the bottom falls out and the cycle repeats itself, only this time with a different emerging market. Does anyone remember how Japan was going to be the dominant economic force 20 years ago? Turns out they were using shady accounting to hide loan losses and run everything from cash flow. Zero Hedge just posted Galbraith On China’s Drastically Overstated Trade Surplus. An economics professor has gone throw all the numbers and came to the conclusion that the China story may be riddled with fraud. Really? Bad loans being covered up through cash flow. Here we go again. I could go on and on. We tend to focus on our own problems and not notice that the fraud is just as bad and often worse in other countries. Winston Churchill once said: “You can always count on Americans to do the right thing – after they’ve tried everything else.” Other countries can’t make the same claim.
- Protected By Two Oceans and The US Navy – This idea came from George Friedman. We are protected from foreign invasion by two massive oceans. During the time periods when other countries are fighting wars and rebuilding from those wars, we keep growing. We have a geographical advantage over other countries. He states the US Navy controls every ocean on the planet. Every trade shipping lane is under our control. All the other navies in the world combined don’t match the power of the US Navy. We can shut down or choose not to defend any ocean we decide to. Free trade isn’t free. For another country to step up and displace America, they will have to resolve naval issues, and building a Navy is extremely expensive and time-consuming.
There are other reasons, but those three I think are unique. We recruit the best people and most investment and then we protect them. #2 is a real concern for me. The sooner America cleans up the fraud, the sooner we can win back the trust of the world’s investors and grow again.
I hope this post doesn’t come across as the ranting of a blind patriot. Maybe I’m wrong, but I don’t see any up and coming countries that will be to the world what America was to the world in the 20th century. Do you? I see great places to travel to, great places to retire to, but no place better for economic and personal freedom.
Ed
Aug 1, 2009 — 11:32 pm
I believe a Dollar collapse is a certainty. Hence, not a winning situation for the U.S. government, resulting in a dramatic shift in the present form of power.
Ed
Aug 1, 2009 — 11:33 pm
Not a winning situation for the American people too, for that matter.
MAS
Aug 2, 2009 — 11:44 am
Again I ask, collapse against what? What currency will rise against the USD? European banks are far more leveraged than US Banks. China is tied to America. The Yen is already strong.
The US economic situation is dire, but it is dire everywhere I look. I do not see some other currency ready to take a leadership role.
Jim
Aug 2, 2009 — 1:24 pm
I think this is an interesting post …and I don’t necessarily disagree with any of your points …but I think the term “winning” needs additional definition.
Is it:
1) GDP growth
2) Per capita GDP
3) Per capita GDP growth
4) Some other measure of utility
We are kind of kind of comparing apples and oranges here. Some things to consider:
– China is benefiting from our discoveries by following us up the huge technological S curve we have created, but without the investment.
– China’s GDP is about 1/4 ours and they have 4 times the population …so their standard of living is currently a fraction of ours, but their growth potential is much higher.
– China can generate higher growth by ignoring spillover costs such as pollution, worker safety, corruption, etc …thereby making the numbers look better by sacrificing final utility.
So I guess my question is, “How will we know if we won?” 🙂
Jim
Aug 2, 2009 — 1:36 pm
Final comment …I always consider China to be about 40-50 years behind us (i.e. kind of like the US in the 60s and 70s, but with obviously differences).
They have a long journey ahead of them with many obstacles. Hopefully they will reach the point where we are at …and hopefully we will have moved to a better place as well (raising their bar even higher).
Ed
Aug 2, 2009 — 9:13 pm
re:The US economic situation is dire, but it is dire everywhere I look. I do not see some other currency ready to take a leadership role.
There have been rumors swirling for a while about a global reserve currency. I think we will be hearing more about this as time slips by.
MAS
Aug 2, 2009 — 9:31 pm
I don’t believe in the CHINA story. There, I said it. They have no transparency. The growth they claim to have experienced, can not be sustained. Just like other emerging markets in the past, they lowered prices to below costs and ran everything off cash flow. I think China is a Potemkin village.
But even if I am wrong, they will do nothing to attract the best talents in the world. America has won the race for the best minds in the world since Jamestown.
I don’t see a diverse economy that will compete with America for the best immigrants. I also don’t see a country stepping forth to provide more economic and government transparency (EX: https://www.data.gov/ than America. Yes, we are in a lull now, but I expect we will emerge from that.
I wish other countries would just look at our play book and copy it. I’d love to have a world where countries had to compete for citizens.
MAS
Aug 2, 2009 — 9:39 pm
Jim –
If the Global Reserve Currency ever gets any legs, I’ll reassess. For now, I think it is as likely as the Darsek becoming the reserve currency.
http://memory-alpha.wikia.com/wiki/Darsek
I’ve read that some traders are suspecting that other countries are now using the USD as the carry trade currency.
What happened to the YEN when when it was the carry trade currency? It got stronger, because when trades unwind, you have to buy back that currency. That increased demand forces its value up. Meanwhile it crushes exports.
Jim
Aug 2, 2009 — 11:45 pm
The majority of China is still a nation of farmers. Comparing the US to China is like comparing the best HS football team to the best Pro team.
I also think the idea of a reserve currency is a pipe dream of less powerful countries. The Euro is being used in a fairly homogenious subset of countries and nobody is happy with that. I think a common reserve currency is about as likely as a powerful UN.
Further, I am a bit confused with all the promises to the Chinese about reducing our debt and keeping a strong dollar.
– They are screwed and they know it. If they sell a large % of their t-bills the value of the ones they still hold falls off a cliff.
– If we devalue the $ (i.e. inflation), the amount of debt we hold drops substantially (in real dollars).
– Since this is in the US’s best interest I would expect this, but maybe they just want to string the Chinese along for now… not really sure?
Finally, I think the biggest problem with cheap money is the potential of new bubbles. Banks can borrow at 0.2% and lever up their trading again (equities, commodities, etc.). It took 20 years for the Yen to unwind, so I think it is impossible to predict a timeframe (i.e. when it might impact the US$). If I have it straight in my head, I think it should be a force for a weaker and weaker $ as long as the carry trade grows though.
Ed
Aug 3, 2009 — 12:32 pm
The U.S. should be compared to Rome not China. In actuality, the entire financial system is a sinking ship.
The U.N. may play a much more significant role in geo-politics in the coming near future after the collapse. We will have to wait and see.
Ed
Aug 4, 2009 — 9:00 am
“Why the U.S. Loses”
Seven phases of the collapse.
Stage 1: Pressure builds until commodity shortages reach breaking point
Stage 2: The collapse of commodity paper substitutes
Stage 3: Central bank exodus from dollar assets
Stage 4: The collapse of US credit markets
Stage 5: *****The collapse of US derivative markets*****
Stage 6: The end of Wall Street and Hyperinflation
Stage 7: US economic disintegration
MAS
Aug 4, 2009 — 9:11 am
If there is a loser, by definition there must be a winner. I keep asking the question: who wins?
ASIA depends on the US Consumer for their survival and European banks are in FAR WORSE shape than ours. For the USA to lose the rest of the world would have to decouple. I see no signs of that happening.
Ed
Aug 4, 2009 — 8:30 pm
re: I keep asking the question: who wins?
I keep telling you its a hybrid form of government that rises to power from among the ashes. Its a cross between Britians inherited Venetian style of Oligarchy, combined with the most superior military’s latest advanced technology of warfare, which happens to be in the U.S. The two party Democratic system will have disolved and hijacked by International bankers from within the “City of London”, and military leaders from both sides. This new global rule will force other countries to comply with a new set of principles, if the don’t they will be used as examples to other nations through a series of “shock and awe” campaigns by means of thermo-nuclear war. This will easily persuade other nations to follow suit.
The U.N. is a government of itself, which holds no borders, or no debt. Its the perfect agency to be used to control continents with Governors and kings under its leadership with a one world currency, if only they were allowed to. So they say.
Do you understand now who wins?
Do you think Im crazy?
Jim
Aug 5, 2009 — 12:00 am
Ed stated – “Do you think Im crazy?”
Crazy is a relative term. 🙂
I think trying to predict the results of a potential future crisis with that much detail is a stretch though. A bit like predicting who will survive a car accident beforehand. On the other hand, I think this is not over …and like a car crash it will end very badly.
MAS states – “If there is a loser, by definition there must be a winner.”
This is only true in a zero sum game. It is entirely possible to end up in a lose/lose scenario. If someone gets a smaller piece of the pie, is it because they gave up some …or because the pie just got smaller?
The promise of economics and technological innovation is that the pie is always supposed to get bigger. Here is one of the finest articles I’ve read lately on this very topic:
http://kk.org/thetechnium/was-moores-law/
It is about Moore’s Law (and much more). I think Ed’s Law is predicting an exponential decline however… 🙂
MAS
Aug 5, 2009 — 7:46 am
Ed –
I don’t think your hybrid form of government will rise up. One, I don’t think there will enough time. Two, back to #3 on my list: The US Navy. We control every ocean on the planet. The USA ensures that free trade is possible and that it FAVORS us. I seriously doubt we would take a back seat to some hybrid government, all while footing the naval bill.
Jim –
Thanks for the link on kk.org.
Ed
Aug 5, 2009 — 1:20 pm
As Eisenhower suggested. “Beware of the military industrialized complex”. The military bill is being footed mostly through large powerful corporations and their lobbyists. The money simply circulates back where it started.
A hybrid form of government is actually taking place as we speak. The U.S. has the most military bases scattered around the world for the interest of globalisation.
The current conditon of the world finacial system is the last step to be taken to smooth things out for the greedy international bankers.
The U.S. government will sell out the average American citizen to further their own interests, because of their close relationship with the bankers.
I think forces are at work to try and prevent this from happening through inovation and Moore’s law. To try and keep the U.S. intact to some degree. I just don’t think its going to work. In fact, Im so confident, I might as well say it not going to work.
If Washington and Jefferson were to come back from the grave, they no doubt would shit their pants when they discovered what has happened to our country.
Take for example T Mobile. The company is owned by Germans, the majority of their profits come from the U.S. Thirty percent of their employees are imported from India to the U.S.
When the collapse becomes more detrimental between whichever stage I mentioned, sweeping changes are inevitable.
The U.S. military will ensure that free trade favors the bankers and powerful corps. If they haven’t already.
Jim
Aug 5, 2009 — 2:10 pm
Ed – I think they created this for you man! 🙂
How Is America Going To End?
Slate’s “Choose Your Own Apocalypse” lets you map out the death of the United States.
http://www.slate.com/articles/news_and_politics/the_end_of_america/2009/08/how_is_america_going_to_end_8.html#sb2223286
They only have 144 theorys for America’s demise, but they said that there are at least 210 theories about why Rome collapsed …after the fact. It just doesn’t seem fair! 🙂
Ed
Aug 5, 2009 — 3:47 pm
Thanks Jim.
Im not sure which is the worst one. I really don’t like the “collapse from obesity” choice.
Anyway but that way is fine by me. 🙂
Jeff
Aug 7, 2009 — 10:26 pm
Mas, the fact that you need to boldly state “Why America Wins” and conjure up reasons to back it up says an awful lot about America.
1. Welcome To Foreign Citizens – This is true, but you will notice that you also attract millions of illegal Mexicans who breed like flies. You need to look at the future without today’s prejudice. Talent goes where the puck will be.
2. Open Accounting – Hardly the case. The American legal system and Wall Street go hand and hand. Crooks will find new ways to cook the books. Remember it was Americans who started the 2008-2009 Financial Crisis.
3. Protected By Two Oceans and The US Navy – This is America’s weakness. As the World’s oil depletes, what do you think will happen to the Middle East? This should explain why USA has hundreds of thousands of troops there right now. But will American finally claim victory after 10 tries by the West previously?
Lastly, I’d like to point out, no where in my comment did I mention another country. Empires were designed to fail, America will not defy history.
MAS
Aug 8, 2009 — 6:53 am
Jeff –
Interesting take.
1- “talent goes where the puck will be”. That is the big question I keep asking. Where will the puck be? What country is getting it right when it comes to economic and personal freedom? What other countries have diverse economies and healthy ecologies? What country looked at our play book from the 20th Century and said we can do better? Talent goes where they are welcome. America has a long history of welcoming talented foreign citizens.
2- I’m not defending the current crisis, which by the way was GLOBAL (EX: Iceland). I’m defending the way America has historically come back with stronger and more transparent laws to protect investors after every economic crisis. I am *hoping* we continue this trend, but I concede it is a concern.
3- Dude, I’m not defending every action by America. That would be silly. Having oceans on either side to protect from invasion is a good thing. And the importance of Navies and tree trade has a history much longer than our thirst for oil. In #1, you said I need to “look at the future without today’s prejudice”. The same holds true for energy. Will engineers sit on their hands for the next 5,10,20 years and not develop new sources or methods to conserve energy? I hope not.
Thanks for commenting to the 3 points in this post.