Geopolitics and American Economic Competitiveness

When I was in high school, I read the classic book The Rise and Fall of the Great Powers by Paul Kennedy. In the early 1990s, Kennedy and others were focused on the rise of Japan and the presumed geopolitical decline of the United States. These predictions of imminent American decline were of course wrong, or at least premature.

Earlier this week, I wrote about the effects of automation on the U.S. and global economies. The key point was that contemporary technological innovations are tending to make many workers redundant. Travel agents, secretaries, legal assistants, factory workers, and many other groups of workers are being replaced by computers and robots. Rising productivity is not leading to net growth in jobs, and many economists are warning that we should get used to a “new normal” of higher unemployment (and lower economic growth rates). For the sake of argument, let’s assume that these trends do persist over the next few decades.

If these problematic economic trends persist in the United States, what will that mean for global geopolitics? Here are a few key possibilities:

  1. Military spending in the U.S. will inevitably decline, as even many influential Republicans recognize. Future American leaders will be much less likely to engage in long-term military campaigns like those in Iraq (2003-2011) and Afghanistan (2001-present). The prospects for Pentagon-led “nation building” missions will decline significantly. NATO’s capabilities will dwindle even more than they already have.
  2. Sluggish economic growth and political gridlock in Washington could lead to lack of action on the public debt. In last night’s debate, Mitt Romney aptly used the phrase “on the road to Greece” to refer to America’s fiscal ill health. Though the U.S. has key advantages over Greece, the performance of American political elites over the last 12 years does not bode well for the future. If holders of U.S. public debt demand higher returns and provoke a sovereign debt crisis, the world’s superpower could enter into a period of rapid global retreat, just as Britain did in the 20th century.
  3. Anemic, jobless growth could lead to trade protectionism and economic nationalism reminiscent of the pre-World War II period. True, the Great Recession (2007-) was remarkable for its lack of economic nationalism. But if economic conditions do not improve significantly in the next decade, the World Trade Organization and free trade agreements could become big targets, especially for the Democratic Party.

Just as Paul Kennedy’s prediction of American decline in the late 1980s was wrong, contemporary pessimists could be very wrong about imminent U.S. decline. Economists, after all, do not excel at long-term prediction, despite the grander claims of some. What are your thoughts about recent economic trends in the United States?

1 thought on “Geopolitics and American Economic Competitiveness

  1. Very thought provoking post! I believe that most American’s eyes glaze over when trying to understand economics but always have some immediate conclusion they’re willing to jump to in order to strengthen the economy.

    I am in the camp that believes it will be a slow growth back. In order to maintain stability, a slower and sustainable growth is more well-suited for our long term needs. If this last crisis has taught us anything, it is that we must look deeper into solving problems and that there must be collaboration to do so.

    Living in a town of 34,000 people, I find that we don’t know how to run our own local economies anymore without aids, grants, incentives or some other push. It should be better understood within small microcosms but yet it’s not. Our metro area serves a total of 375,000 and with each piece of the landscape looking out for their own it often acts as a disservice to the area as a whole. Despite what the locals think, it’s a one horse town – Caterpillar. Without their headquarters, we crumble. No one truly understands how so many things are reliant one their main horse in their towns and in most cases, those company’s hold the fates of entire communities.

    We’ve automated processes, commodified experiences, and decentralized our operations. We’ve become the factories in our towns and not the communities our towns need. It’s not doom and gloom, but we must have reasonable expectations.

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