Zakaria: Chapter 6

The sun never set on the British Empire, and - according to a number of commentators - this can almost be said about the US influence around the globe. The British Empire is the closest thing to the level of American presence, influence, and dominance around the world. And he uses the case of the descent and fall of the Empire as a cautionary tale to the US.

The British decline began with the Boer War, which was a quick and easy triumph for the Brits. Keeping the ball rolling, they entered a conflict that was the beginning of their undoing, the Battle of Omdurman. In comparison with the US, the former becomes Afghanistan - though many would beg to differ on the count of it being a swift win for the US-led forces - and the latter the Iraq War. Britain overstretched itself, economically, and has allowed itself to implode as a result of near bankruptcy.

Therein lies one of the biggest differences between the US and the British Empire. The US is economically sound - despite the recent economic crisis, I believe that this will largely remain true for a long time to come - but has overstretched itself politically. As Zakaria points out in some of the other chapters, US has seen a decline in leadership legitimacy. This is largely a result of the American response to the post-911 world. American reaction has been to put up more barriers, which distances US from the rest of the world.

Zakaria is quick to point out that the terrorist threat is a real one, and that it should not be taken lightly. However, he believes that the American response has been to overkill. He is also optimistic. While a lot of financial capital has been going to other places - as a result of the rise of the rest - much of it still comes to America; an interesting fact, given that US is a nation with an abundance of capital. Many US companies are still very competitive, which, once again, is a result of the international competition they face.

US leads in a number of areas of technological and scientific research. However, as many point out, US must take a lead in educating more students in sciences and mathematics; areas largely dominated by foreigners. Graduates of US universities are still the most productive, innovative, and entrepreneurial labor force participants in the world. Zakaria presents a number of examples in which delegates from European and Asian nations come to the US with a hope of learning the American system that causes students to be more effective, creative, and critical thinkers. Let us not forget, however, that many of these American students are naturalized citizens, which means that immigration to the US is still a very important source of our talent. Furthermore, immigrants will increasingly become an important source of population growth for a nation that increasingly opts out of having children or births less children per household than before.

We all know about how many lament the nearly non-existent savings rate of the American public. However, Zakaria presents an interesting reevaluation of the dire statistics. He writes, "Education expenditures are considered 'consumption,' but in a knowledge-based economy, education functions more like savings - it is spending forgone today in order to increase human capital and raise future income and spending power. Private R&D, meanwhile, isn't included in national accounts at all, bur rather considered an intermediate business expense - even though most studies suggest that R&D on average has a high payoff, much higher than investing in bricks and mortar, which counts under the current measures as savings (p. 201)." Zakaria isn't clear about why we should include consumer durables in national accounting under the savings bracket. I will, therefore, exclude it. However, when you count (as a percentage of GDP) the traditional forms of savings - household and corporate - and add this figure (15%) to R&D (2.8%) and education (7.3%), the total figure is 25.1 percent of GDP. This figure, according to the Zakaria-presented measurements, is still lower than other nations - again, if you use the proposed measurement - but is higher than the doom and gloom figures we see in the media. Having said that, Americans are still borrowing 80 percent of the worlds surplus savings and using that money for consumption. Or, as Zakaria puts it, "We are selling off our assets to foreigners to buy a couple more lattes a day (p. 202)."

Back to the rise of the rest. In 1982, 78 of the 128 tennis players participating in the US Open were Americans. Fast forward to 2007, the American figure stood at 20. Similarly, the IPO (initial public offering) market used to be largely dominated by the US. In 2005, 24 of the 25 largest IPOs were held in countries other than the US. Other nations' revenues in the banking sector are pulling closer and closer to the figure for the US. In many respects the world standard is replacing the American standard.

Zakaria urges our "do-nothing" politicians to take note of this quickly-developing global scene and change their partisanship dabbling for a concerted, bi-partisan effort to renew American image in the world, and make US more competitive. He believes that most of our domestic issues can be fixed through minor adjustment and efforts that reach across the isle. As he puts it, "A set of sensible reforms could be enacted tomorrow to trim wasteful spending and subsidies, increase savings, expand training in science and technology, secure pensions, create a workable immigration process, and achieve significant efficiencies in the use of energy." He goes on to note that he does not include health care reform in the list because it is the one issue that requires tremendously complex set of policy and political actions. As someone who was trained in the social sciences, I am a bit reserved in my support for quick fixes. Through scenario playing, we must assess some secondary affects and chain reactions that could follow any policies that are implemented. However, I share his optimism in the ability of the US to devise creative solutions to many daunting problems facing our nation in this age of increasing globalization and internationalization.

Here is an article from Porter on American competitiveness.

Also, a related item from the NYTimes