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unfolding America's political economy

Lax Americana

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Time to Start Thinking: America and the Spectre of Decline By Edward Luce Little, Brown 304 pages Best Price: Rs 518 (26% off) at shopping. indiatimes. com


Sometime ago, when Ed Luce was the Delhi-based south Asia chief of the Financial Times, he wrote a memorable and entertaining book on India's growth and change. Now based in the US, this is his take on America's current travails.
The sum of those problems does not make a pretty picture. Take one of the best known numbers about the structure of US society: over nearly 40 years, the average income of the middle class has stayed absolutely flat;in the same time, the richest 1 per cent of the population has become wealthier many times over.

Manufacturing has hollowed out, most blue collar jobs are now in the food and entertainment sectors. America could become a nation of burger flippers. One of the largest employers in the US is a company that aggregates people for temporary assignments: companies do not like taking on full-time employees with healthcare costs and other benefits. This giant shift towards casualisation of work is taking a huge toll: without any post-retirement benefits and little or no savings, people are forced to stay in the workforce longer and longer.

Luce points out, correctly, that America's politicians engaged in their parochial battles just don't understand the scale of the problem facing them. Even those who do are trapped in the gridlock of division of powers: even a tiny minority can stall any legislation or reform if they want to.

Republicans blame government for everything and push for ever-lower taxes, Democrats like Obama do not believe that America has a major problem, arguing that everything can be fixed with a bit of tweaking and faith in US exceptionalism.
But since the end of the Cold War, history has played its cards in unexpected ways. The fall of the Berlin Wall and the Soviet Empire was supposed to be the end of history, to be followed by the ceaseless march of western democratic and economic values across the world. Much of the world has resisted democracy. Many nations - including China and to some extent India - have found ways to practice capitalism spiced with heavy doses of state intervention .
Luce finds American policymakers, on the other hand, preaching free trade and laissez faire to their constituents. These constituents include giant businesses like IBM, GE or Microsoft many of which are quite happy exporting jobs and technology overseas where costs are cheaper, contributing directly to the further hollowing out of US manufacturing.

Another worrying trend is the increasing role of money in politics. Luce quotes Mark Hanna, a 19th century Republican millionaire and political operator saying, "There are two things that are important in politics. The first is money, and I can't remember what the second one is. "

Laughs apart, it is tough to believe that American politicians can pull themselves out of this plutocratic maze. Washington still looks to Wall Street for policy cues: the investment bankers that Dodd-Frank was supposed to regulate were the very people who made sure that it became toothless.

Young Americans increasingly do not care, or are unable to work for, a good education. An exhaustive survey of the schools system locates many faults, but the overriding reason for the rise in drop-out rates and poor sufficiency is the quality of families and neighbourhoods. Kids from better and richer neighbourhoods get better grades and have a higher chance of making it to college than poorer ones. And with large parts of the US turning into rust belts or zombie towns, grades will plummet.

One of the last great US systems which continues to thrive is its superb universities and colleges, unrivalled anywhere in the world. Yet, more and more people graduating are not Americans. And many non-Americans fresh out of college are unable to stay back to contribute to US growth because the government has cracked down on immigration after 9/11.

Luce correctly argues that there are no quick-fixes for America. It is possibly unlikely that it will ever revert to the post-War years of growth and prosperity in a world that is rapidly changing. Economics tells us that in an integrated world, wages and standards of living will converge across all countries. While India, China and many other countries play catch up, America might have to take a long pause. And as it does, the world may not have a single hegemon any more.

Reader's opinion (1)

Gvraghaviah Jun 21st, 2012 at 14:18 PM

Best article. Everyone should read and circulate to all.Govt.of India personnel in all ministries should also read and bring these to the notice of Ministers.
Every phaset of a country's life has been dealt with absolute clarity and examples.

 
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