20 abril, 2013

US 'Decline' Ending or Just Beginning?

Anthony Wile
Global analyst Ian Bremmer has written a provocative new editorial posted at Reuters.com on "the end of the American Decline."
We've commented on some of Bremmer's ideas before because he's a youthful "big thinker" who has received a lot of publicity for several books on "big picture" capitalism and runs a successful research firm at a young age.
Perhaps his biggest idea, or the one he's the most famous for, is that Asia is pursuing a successful form of authoritarian, "state" capitalism. It's a kind of neo East-versus-West concept, and an intriguing one. You can see one of our articles here: Power Elite Versus State Capitalism - A New Meme!
The UK Telegraph back in 2010 summarized Bremmer's East-versus-West concept this way:

The latest threat to the global recovery – state capitalism ... A fascinating new book is about to hit the shelves. Called The End of the Free Market it argues that all-powerful governments from around the world will be the new driving force in the global economy, skewing the decision making process away from individuals, companies and the market towards states, political interests and authoritarianism. Stated in one bald paragraph it sounds a little apocalyptic. But Ian Bremmer (left), the highly respected author who is president of the Eurasia Group in the United States, makes a compelling case.
At the time, we wrote that Bremmer may have invented a new meme, albeit a gloomy one. He seems in a slightly more cheerful mood today, proposing that despite the challenges of Asian state capitalism, the US is up for the challenge and that its "relative decline" has been arrested. Here's how he puts it in his current editorial:
Since midway through George W. Bush's tenure, there's been a steady hum from the pundit class that America's best days are behind it. An overreaching foreign policy, rising public debt, and a growing wave of outsourced jobs means that America will soon lose its status as the world's preeminent power. America was quickly on its way to becoming Rome.
But the American Decline is now over (if it ever really began in the first place).
Compared with other major powers, America's future is looking brighter than before the financial crisis. The dollar remains remarkably attractive relative to other currencies. This resilience extends to American companies. In a March report, Goldman Sachs found that foreign investors owned a larger percentage of the U.S. equity market than at any time in the 68-year history of the study. The housing market is picking up, and dependence on foreign energy is falling.
Gridlock remains the order of the day in Washington, and Congress still has record-low approval ratings. But there are policy bright spots. Congress and the administration are not standing in the way of America's energy revolution. The Keystone XL pipeline will likely be approved. The pipeline, along with the Obama administration's emphasis on energy independence, helps strengthen the domestic economy.
On trade, the administration has managed to convince Japan to join Trans-Pacific Partnership talks. Should the trade consortium of countries ranging from the United States and Chile to Canada and Mexico to Singapore and Vietnam get off the ground, it will liberalize trade between members that represent nearly 40 percent of global GDP — and boost American trade and manufacturing. Then there is the nascent transatlantic equivalent that Obama mentioned in this year's State of the Union.
The third major policy positive: the forward movement in Washington on immigration reform. If that effort is successful, it could entice millions of illegal immigrants to pay U.S. taxes for the first time — and it could provide the labor force, skilled and unskilled, that many companies desperately need to ensure growth. A recent study by the Center for American Progress found that immigration reform could inject more than a trillion dollars into the U.S. economy.
So at a time when recession-riddled Europe is muddling through, and major developing economies like China have huge looming question marks, the United States is looking pretty good from the top down.
For me, this is all a bit simplistic. I'm not so sure that large, state-negotiated trade pacts and equally large industrial projects like the Keystone pipeline are the ticket to prosperity. To his credit, Bremmer grapples with this idea, as well, writing that the "bad news" is "things don't look as good from the bottom up" – and indeed, they don't.
But he makes a most ambitious statement, in closing: "America's decline is a myth. The United States' relative position in the world is improving, and Washington won't stand in the way ... Welcome to America's relative rise: Wall Street is back. Main Street? Maybe not."
This is a fairly breathtaking perspective. In fact, I have a suspicion that both the pipeline project and the immigration bill are aimed at creating a closer sociopolitical and economic union between the US, Mexico and Canada. The upshot in the near future may not be the much-discussed "North American Union" but it seems obvious to me that we're headed generally in that direction.
And whether Wall Street is "back" or not matters little to tens of millions of unemployed (as Bremmer himself acknowledges, to be fair). More importantly, it is fairly clear at this point that boosting various forms of monetization and securitization of the economy does very little to cure underlying ills. Printing debt money is NOT the way to build healthy economies, though there is little doubt it has helped stimulate equity markets, and those who anticipated the rise were well rewarded.
Those who don't see gold snapping back any time soon and who believe as Bremmer does that the US "relative decline" is over doubtless see current market levels as half full ... with more to come. Indeed, investors may find their portfolios fattening as money continues to pour from central banks and corporate America celebrates.
But as Bremmer himself warns, this is a most unbalanced kind of recovery. As investors we can take advantage of it but as concerned citizens of North America – and even of the world – we have to be concerned about prosperity that is so unequally applied. When only a relative few participate in wealth-generation, the chances for civil unrest rise considerably.
Bremmer recognizes this but I don't think he fully appreciates the dangers. He believes the US's "relative decline" is over but if these trends continue, we may look back one day in the uneasy knowledge it had just begun.

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