In our March issue, Edward N. Luttwak argued that the United States is on the way to becoming a third-world country, as inferior to Japan as Brazil today is to us. Robert L. Bartley countered with the view that, far from being in a state of decline, the U.S. is still the wealthiest and most influential society in the world and is, moreover, heading toward even greater achievements in every sphere.
COMMENTARY solicited comments on this debate from a number of writers who have in recent years dealt with the allegations of American decline. Their responses appear below in alphabetical order.
Peter L. Berger:
The big dispute between “declinists” (a rather terrible term) and their critics is over the status of the United States as an economic power. Figures are hurled back and forth, trade deficits versus exchange rates, GNP (gross national product) per capita versus PPP (purchasing-power parity), and even more arcane econometric artifacts. Econometrics is a very imprecise discipline, best suited to dreamy, solitary types with a penchant for mysticism. Those who prefer a scientifically more rigorous approach to the world are better served by poetic intuition. Is the United States a society in decline? Here is a very strong intuition: people don’t fall all over themselves in order to clamber aboard a sinking ship.
This, of course, is literally so in regard to immigration. To be sure, other affluent societies also find themselves pressured by large numbers of would-be immigrants, though the United States continues to be the destination of first choice worldwide. What is more important, though, is that the United States is the only major industrial society that has shown itself able to integrate people coming from just about anywhere—indeed, the only society that is both politically and culturally positioned to favor such integration. The Europeans are agonizing over the problem. As for the Japanese, they are heading quite rapidly toward a moment when a number of trends will converge: their critically aging population (the highest life expectancy and close to the lowest birth rate of any advanced society); their belief that married women should stay at home with the children; their hysterical aversion to letting in foreigners (especially fellow Asians) for longer than brief visits; and their twin illusions that all manufacturing can be moved offshore and that all domestic-service industries can eventually be staffed by robots. Perhaps some economists will someday stumble on the fact (hard though it will be to translate it into mathematics) that American attitudes toward immigrants, and the institutions that embody these attitudes, are a comparative advantage for the American economy.
But there is another, even more important, point to be made: huge numbers of people who cannot or do not wish to move to America imitate America where they are. Put differently, whatever may be the superpower status of the United States in political, military, or economic terms, American culture enjoys a status of worldwide hegemony, with no likely competitors in sight. This hegemony begins with language. A few years ago Claudio Véliz, the Chilean historian, wrote a delightful essay entitled “A World Made in English.” True—and in American English. It is, of course, conceivable that one uses a language for purely instrumental reasons—say, as English is the lingua franca of international civil aviation—without thereby acquiring any other elements of the culture from which this language comes. In this case, however, that is very clearly not so: with American English comes an enormous package of other cultural components—habits, styles, institutions, values, entire world views. In this time and age one does not speak American innocently, as Iranian mullahs know well and as Komsomol officials used to know.
The world speaks American, sings American, dances American, dresses American, eats American. From Vladivostok to Valparaiso, millions of people of every race, color, or creed read or try to read the Reader’s Digest, listen and dance to rock music, wear jeans, and eat cheeseburgers. This short list of items of American popular culture can easily be expanded until it includes a substantial portion of what constitutes the structure of everyday experience. In the language of phenomenology, the “life-world” is being Americanized.
Anti-American ideologues have understood this process as one of cultural imperialism or colonization. If so, it is curious that it has occurred almost everywhere without any coercion or even much persuasion: the world is begging to be “colonized.” Why? Because this package of American behavior and commodities represents a distinctive angle on life, one which is desirable because it seems to fit well with the aspirations of the great modernizing transformation. The language, the music, the physical movements, and all the material accouterments represent values. To be sure, in part they are simply the values of material well-being. But that is by no means the whole story. There are also such values as individual rights and self-expression, innovation and experiment, egalitarianism, a distinctive sense of humor.
To say this, of course, is not to give blanket approval to every aspect of this triumphant popular culture, some of which one might find unattractive, even repugnant. Rather, it is simply to state a fact: American popular culture is absolutely dominant worldwide, and this dominance relates to styles of life and institutions that go far beyond popular culture—to the relations between the sexes and the generations, between rulers and ruled, and thus finally to the core institutions of democratic capitalism.
The status of American “high” culture is less absolute, less dramatic. It is quite dominant all the same. American ideas move powerfully around the world, too. The American goddess of democracy erected by the protesting students in the heart of Beijing was the most poignant image of this dominance. But here, too, there is a large package, this time an ideational one. It contains the value systems of romantic love and of education, of psychotherapeutic self-cultivation (in various denominational versions), of feminism, environmentalism, and other emancipatory gospels yet to be born. Asia Minor was once called the vagina deorum, the womb of the gods; today that womb is the American idea industry. Again, these doctrines and cults may be deemed severally good, bad, or indifferent. The point here, quite simply, is that they are American doctrines and cults. And, last but not least, the most dynamic and universally expanding religious movement in the world today is an evangelical Protestantism of unmistakably American provenance.
Is it possible that this cultural explosion goes hand in hand with the onset of economic doom, a final screech, as it were, of the owl of Minerva? It is possible. But it is not very likely. Actually, at least some of the reasons why it is unlikely might be put in econometric terms.
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Francis Fukuyama:
Paul Kennedy, in The Rise and Fall of the Great Powers, played a clever trick on conservatives by linking the question of decline to American military spending, causing them to see any discussion of decline as a politically motivated attack on the U.S. position in the world. But America has been in a long-term decline for reasons having nothing to do with defense spending, and Edward N. Luttwak has performed a service in delinking these issues. While long-time readers of Luttwak will note a familiar rhetorical overstatement of his case, I believe that we would do far better to heed his analysis of America’s present situation than Robert L. Bartley’s. While American values have triumphed around the world in recent years, it will do us no good to kid ourselves that everything is right with America. The fact that we can produce custom-built precision munitions is no consolation for not making decent automobiles. As with a star that has gone supernova, the light emanating from the United States continues to shine brightly at the periphery of the universe where it is observed by various Russians, Chinese, Lithuanians, and the like; but the energy at the core is rapidly extinguishing.
The first problem with Bartley’s argument is that he measures national success by consumption, at which Americans are without question good. He takes comfort in the fact that the American standard of living, measured by factors like the ownership of automobiles, televisions, VCR’s, and houses, is superior to that of other developed countries, including Japan. But that is just the problem: anyone can borrow a lot of money and throw a big party for himself, and if you measure your success by how much you have consumed, you will have done well. Yet in the long run, you (or your children) get to spend only what you produce. Those Japanese, with their small houses and long commutes on public transportation, are busy saving the difference between what they consume and produce, and lending it back to Americans so the latter can keep up their consumption of Japanese automobiles, television sets, and VCR’s.
Bartley’s relaxed attitude toward the trade deficit and the “hollowing-out” of the American manufacturing base would be appropriate if it were clear that the chief aim of everyone in the international economic system was the maximization of consumer welfare, as is arguably the case with the United States. Luttwak’s concept of “geoeconomics” attempts to articulate the fact that, contrary to the assumptions of liberal economic theory, economic activity also serves the national-security and prestige goals of nations, such as the control of leading-edge, high-value-added technologies. Life in a world filled with neomercantilist states like Japan means that the distribution of manufacturing capabilities between them and a more classically liberal state like the U.S. does not simply reflect “comparative advantage.” I am not sure that the solution to this problem is for the United States to resort to neomercantilism itself, as Luttwak at times seems to suggest. But we will not be happy if, as a nation, we become exclusively purveyors of potato chips rather than computer chips. There is something wrong with an economy that employs 70 percent of the world’s lawyers, and in which experienced programmers can be hired away by the Japanese for much less than the salary of a first-year associate in a New York law firm.
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At the root of our current economic difficulties is the problem of education, which Bartley mentions only in passing. Anyone with school-age children will know that we have let our public-school system deteriorate to an incredible extent over the past couple of generations. This wound is entirely self-inflicted, and has less to do with lack of public support for education than with the system’s capture by a top-heavy and closed educational establishment. Multiculturalism is only the latest in a series of educational fads to which we have exposed our children. Bartley rightly celebrates the information revolution, but this revolution has come at the expense of the traditional working class, whose children are wholly dependent on the public-school system to give them skills appropriate to a 21st-century economy. If they continue to be marginalized by a faltering school system, we will have retreated considerably from that equality of opportunity essential to American democracy. Much as vouchers and other market-oriented solutions may help, they are not a substitute for a serious education policy, which in the final analysis has to be a responsibility of the state rather than of markets.
Beyond the economic decline is a clear-cut deterioration in our moral life. If there is any broadly felt sense of malaise in the U.S. today, it has to do with the decline of community—from the breakdown of the family, to the prevalence of crime, to the loss of any meaningful sense of neighborhood, to the fragmentation of national purpose. Most of us could recognize in Tom Wolfe’s novel Bonfire of the Vanities our America, a place somewhat less appealing than the one celebrated by Bartley. This disintegration comes from deep within the heart of liberalism and the cult of rights it promotes. The retention of a society in which the moral bonds linking individuals have not been so badly frayed may in the end be a more important strength of contemporary Asian societies than their economic efficiency.
With the exception of the last point, these problems do not reflect any fundamental crisis of our civilization—as Bartley quotes the former French Foreign Minister, Jean François-Poncet, they are not anything that could not be fixed by a 50-cent-per-gallon gasoline tax. Yet I have not seen anyone in our political class (least of all on the Wall Street Journal‘s editorial page) willing to advocate even so minor a tax. I would like to be optimistic about the ability of American democracy to rise to this challenge, but it will certainly not happen if conservatives in this country spend their time asserting that no significant deterioration in American life has occurred.
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George Gilder:
We all knew that regardless of any peace dividend, there would be certain transitional problems in the passage to a post-cold-war world, but no one led us to expect the grisly traumas of demobilization now being suffered by Edward N. Luttwak. There should surely be some government program to ease the strains of conversion of such a powerful military thinker into an analyst of domestic affairs.
In any case, Luttwak shows much promise. Apart from his stylistic felicities, he excels most professional analysts in recognizing that the key social problem is female-headed families, that our educational system is foundering on a lack of discipline and standards, and that the U.S. suffers from “the most original invention of American statecraft: representation without taxation to extract ‘entitlements’ galore. . . .” If he pursued this line of thought further he might grasp that the vagrancy problem which so exercises him is caused not by some dire national decline but by the extension of welfare entitlements to the many millions of indigent people unable to fill out the forms for AFDC but nonetheless fully able to figure out how to qualify as homeless.
Luttwak also might connect all his portentous per-capita income data to the fact that, unlike his favored foreign countries, the U.S. has a population and workforce that has been expanding rapidly. Some 40 million new U.S. jobs were created since 1970, while job formation and population growth in Europe and Japan have inched up at a slow pace.
Luttwak’s airport index of national prospects shows conceptual creativity, but he is weak in application. Tokyo’s Narita is one of the world’s dingier aerodromes, less “shiny” by far than O’Hare, Miami, Dallas-Fort Worth, Los Angeles International, Seattle-Tacoma, Las Vegas, and several other American airports. As a newcomer to domestic journalism, Luttwak is allowed one article, I suppose, resorting to the taxi driver as political and economic consultant and symbol. But I hope this is the last. Anyway, in my experience, U.S. taxi drivers, outside of New York City, have a distinctly better command of English than do Tokyo’s.
On trade, Luttwak suffers from the outdated notion of a significant distinction between assets (land, hotels, technologies, corporate equities) and products (computers, capital equipment, films, software packages, sides of beef, oranges). In the current world economy, assets have become as reproducible and tradable as any other products or services. The chief difference is that when the Japanese buy an orange or a side of beef, they eat it and we do not have it any more; but after they buy the hotels or the technologies, we still have them, along with new funds to direct toward the creation of yet more valuable assets in the future. That is why all during the period when the Japanese were buying U.S. assets, total American assets were growing at an unprecedented pace and the average U.S. citizen approximately tripled his asset holdings.
Apparently unconscious of the globalization of capital markets, Luttwak seems to suppose that dollars accruing to a foreign firm are less likely to be invested in the U.S. than the dollars of an American firm. But in either case, the capital will flow toward the best opportunities; Barton Biggs of Morgan Stanley knows how to buy foreign equities just as well as Sony’s Akio Morita does. In recent years, Honda has invested a larger portion of its profits in the U.S. than has Ford. If the U.S. creates a bad investment climate by barring outsiders, both Americans and foreigners will send their investments elsewhere. If the U.S. favors entrepreneurship and creativity, both Americans and foreigners will continue to send money and talent here and we will continue to run a trade gap in the less important categories that Luttwak stresses.
Of course, if the U.S. fails to keep pace technologically or goes into a siege of bashing the rich and competent, the Japanese will become the world’s dominant power. But even if so, U.S. citizens will be better off than if both countries fail. Luttwak’s long preoccupation with war, which is truly a zero-sum contest, ill befits him for the complexities of positive-sum trade.
Luttwak is a fan of reciprocity and balance in trade and investment. I agree with Robert L. Bartley that they are, at best, numerological fetishes that distract us from everything important. Nonetheless, Luttwak does not even get the facts right. The Japanese have permitted a massive American invasion of their economy in recent years, and if Luttwak had opened his eyes after leaving Narita, he would have seen evidence that the Japanese now buy more U.S.-brand merchandise per capita than Americans buy Japanese-brand merchandise. Of course the real picture is more complicated than this, but it in no way justifies Luttwak’s xenophobia.
I am sure that Luttwak won’t believe it, but the U.S. is still doing fine in the technology race. Not only are we keeping pace with the Japanese in largely complementary fields, we are far outperforming the Europeans, who have chosen Luttwak’s policy of excluding Japanese products and investments. During the 1980’s, the U.S. expanded its global market share in total manufacturing, in manufactured exports, and in global capital-equipment sales. Just as all industries, including consumer electronics, are engorged by the expansion of digital computing, the U.S. holds more than 60 percent of the world market in computers, software, key peripherals (such as hard-disk drives and printers), and leading-edge microchips (such as microprocessors, chip sets, programmable logic devices, flash memories, and digital signal processors). The U.S. has three times the computer power per capita of Japan or Europe.
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As the world moves into a new era in communications, spearheaded by wireless telephony and fiber-optic video, the U.S. also maintains huge strength in communications equipment and services and is the global center of both the cellular-telephone and cable-TV industries. All of these industries, incidentally, were utterly dependent for their growth on Michael Milken’s junk bonds, which Luttwak ridicules. Luttwak finds General Instrument’s role in digital HDTV “pathetic,” but I assure him that the shareholders do not, as General Instrument will not only gain the flow of royalties that he disdains but is also likely to produce most of the cable-converter boxes, satellite descramblers, and other digital devices that will capture much of the hardware profit in the industry. In fact, the greatest beneficiaries of digital television, as I have pointed out elsewhere, are likely to be U.S. computer companies.
No one can deny the many portents of Japanese advance in cars, machine tools, robotics, supercomputers, memory chips, and leading-edge capital equipment, or Japanese dominance in consumer electronics. Fears of a U.S. collapse, however, are countervailed by the powerful U.S. position in computers and other electronic systems. In 1991, U.S. output of electronic systems was some $216 billion, almost twice Japan’s production and nearly equal to Japan and Europe put together. Even without military production, the U.S. produces over 50 percent more electronic gear than Japan. In software, the U.S. controls nearly two-thirds of the world market.
Decisive in all depictions of a dramatic Japanese gain in market share during the 1980’s is the collapse of the value of the dollar, largely engineered by trade-gap fetishists (like Luttwak). For example, between 1985 and 1988, when the biggest Japanese market-share gains were reported, Japan’s output of electronic equipment rose 61 percent. During that same period, however, the yen rose 90 percent against the dollar. Measured in yen rather than dollars, Japanese output actually declined, while U.S.-dollar output rose 20 percent. The dramatic alterations in market share are mostly a figment of global monetary shifts rather than changes in technological competitiveness.
One part of the explanation for real market-share losses by American firms is the inevitable slippage of the innovator. As radical innovations become routine products, the pioneer always loses share from the period of his original monopoly. If, like Luttwak, you keep your eyes on the declining dinosaurs (analog consumer electronics, commodity microchips) rather than on the ascendant industries (microprocessors, digital video), you might imagine that the leader (the U.S.) is actually falling behind.
Today, for example, market-share data would suggest that the U.S. is losing ground to the Japanese in supercomputers. A better way to put it is to say that the U.S. is shifting ground in supercomputers, from machines with one to eight processors to massively parallel machines with up to 64,000 processors. The Japanese have indeed caught up in conventional supercomputer hardware, but U.S. entrepreneurs have changed the rules of the game.
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In sum, the Japanese represent a major rival to the U.S. across the range of high technologies. But, despite the array of evidence offered by Luttwak, the U.S. remains on top in the information industry and promises to stay on top through the next decade.
In a world of increasingly global companies, the biggest short-run threat to U.S. supremacy, in fact, is not the Japanese government and its industrial policies but the U.S. government and its obsession with dominating the “entire food chain of electronics” for reasons of national security. No nation will ever again achieve the kind of industrial dominance and autonomy held by the U.S. after World War II. The new high-tech economy is globally interdependent. Nations that seek technical autarky will lose ground to nations open to the best ideas, immigrants, and technologies from around the world.
In the future, the balance of immigrants and ideas will be far more important than the balance of trade. Fast-growing and innovative nations will usually attract capital from around the world and thus run trade deficits. The U.S., for example, ran a trade gap for the first 150 years of its history as it used foreign capital to open the frontiers of the American West. Today, opening the frontiers of the information economy, the U.S. again attracts capital and runs trade deficits. But competitors should not on these grounds rush to sell short the American future.
To be sure, as Luttwak points out, there are serious clouds on the U.S. horizon. The long-term future of U.S. competitiveness depends on the success of the reform movements in education. With more school administrators in New York State alone than in all of Western Europe, the U.S. leads the world in educational bureaucracy and lags pathetically in educational achievement. This is no coincidence. Recent studies by the Brookings Institution show that in general the more bureaucrats in a school, the worse its performance. Also afflicting the schools is deterioration on the home front. Like many Western nations, the U.S. is suffering from a siege of family breakdown and from resulting outbreaks of crime, violence, and drug addiction. Ultimately the success of the U.S., as of all other societies, will depend on the moral fiber of the nation’s families, the source of the human capital that is crucial in the coming age of information.
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Harvey C. Mansfield, Jr.:
Edward N. Luttwak declares with a certain relish that the United States is headed downward into poverty and disgrace. It is not the first time we have heard a dire forecast for our country, and we know that at some time it will come true, since everything human is mortal. But one could wish for a more responsible formulation than Luttwak’s, one that would tell us what to do. What is the cause of our plight and has it a remedy? It makes no sense to sound off without first having made a “search for the deeper sources” of the trouble, the inquiry that Luttwak sets aside. A messenger of bad news will be kicked, and deserves to be, if he offers nothing but discouragement.
In fact, Luttwak does not seem to understand his own bad news. His theme is economic failure, but what really (and rightly) riles him is moral outrage over the impunity of louts, loiterers, and “unkempt urban vagrants” in contemporary America. He makes no mention of America’s tremendous victory in the cold war, topped off by sensational success in the Gulf War. Those were triumphs for the American way of life in politics and economics. But they left strangely untouched the critique of our way of life that comes from our anti-bourgeois culture and postmodern philosophy.
It is perhaps not so serious if our friends overtake us in some respects by imitating our system and acquiring its virtues. America has always intended itself as a model for mankind. Since our principles are universal, we have no right to begrudge the result of their acceptance by others. What would we have had the Japanese and Germans do instead of what they have done since World War II? American self-interest has nothing of its own to cherish when it denies the right of others’ self-interest.
What should concern us is not so much a failure to be first in everything as the possibility that we no longer believe in ourselves, i.e., in our principles. Our principles are self-interest and its accompanying bourgeois virtues, for self-interest does not work well without honesty and responsibility and it does not generate those virtues on its own. Luttwak suggests—he does not say—that our culture today, by simultaneously denying the legitimacy of self-interest and the value of good character, is the cause of mediocre economic performance. One could add that it is perhaps also the cause of political and constitutional ills which might be summarized as following from the attempt to make government guarantee happiness rather than protect freedom. That attempt does not destroy self-interest but only links it to loutishness and another less visible form of dependency rather than to bourgeois virtue. Louts are dependents who express their frustrated desire for freedom in surliness. More worrisome than louts are the yuppies, who find respectability in buying fancy new things and in living the life of live and let live. Their dependency is disguised by their informal manners, by their lack of interest in public affairs, and even by their economic productivity. Both kinds of dependent are bad citizens, a worse fault than being unproductive.
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What Americans need to do in the aftermath of victory in the cold war is, first, celebrate it. We should be proud of the bipartisan policy of containment that we sustained for 45 years despite all the difficulties republics have in keeping to a long-term enterprise. Victory was unexpected but not undeserved, and we owe ourselves a pat on the back. Our present gloomy mood, to which Luttwak contributes, is unbecoming and unreasonable.
Next, we should rethink the connection between our philosophy and culture, on the one hand, and our politics and economics, on the other. Why are they now so strikingly at odds? We have a postmodern philosophy that continues to attack modern progress even after totalitarianism, the worst political evil mankind has ever known, has been defeated and discredited for the foreseeable future, and American democracy has been vindicated as a model and a shield for all peoples. The same philosophy asserts that everything human is historical and hence denies the existence of a permanent human nature in which self-interest might be embedded. It therefore cannot explain why Communism, which ignored self-interest, failed to work; for according to the historicist view every system is adequate to its time and must “work” by definition.
Together with this philosophy we have a culture that is aggressively anti-bourgeois and intent on shocking and ridiculing the American citizen and the American entrepreneur. In our country now we have a culture war (James Davison Hunter has described it well in his Culture Wars) between those who want to be “inclusionary,” i.e., overlook all standards of bourgeois virtue, and those who want to apply those standards to all, even when they cause “disparate impact” on the poor and the less favored. In the former camp are almost all our culture-makers.
When I reflect on the discrepancy between our success and our self-hatred, I am unable to share the optimism of Robert L. Bartley. He offers the second industrial revolution as our salvation, while admitting that the first was more threatening to freedom. But suppose that the second revolution, while eroding the power of governments, should do the same for individuals, leaving them isolated and impotent in the “individualism” that Tocqueville predicted for us. And what of the third industrial revolution? What will it do to us? Science and technology, which originated in the desire of men to gain more power over their lives, seem instead to have left them as much or more in the grip of chance. It seems impossible to be sure that science is the friend of human freedom, but we are surely wedded to it, for good or ill, as a power of tremendous consequence in our lives whose future course we cannot foresee. Of our politics and economics, however, we should be more confident. They have served us well, and they have prevailed, so far, against the criticisms of our deep thinkers.
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Joseph S. Nye, Jr.:
Remember July 1990? Saddam Hussein had not yet invaded Kuwait, and the Soviet Union had just agreed to the reunification of Germany. The leaders of the Group of Seven top industrial nations held their annual summit in Houston, and the papers were full of stories about the new German and Japanese superpowers. “The cold war is over,” wags said, “and the Germans and the Japanese won.”
A year later, the Group of Seven met in London, but there were no stories about new superpowers. Contrary to the declinist view that nothing works in the United States, the high-tech weapons and the military bureaucracy performed well in the Gulf War, and Mikhail Gorbachev, leader of a collapsing Soviet superpower, came to London to appeal for aid. The New York Times referred to the summit as “a rude lesson in how quickly the world balance can change.” But the world balance does not change nearly as quickly as do the fads in how we look at it.
The end of the cold war has produced strange realignments in American politics and policy debates. Patrick J. Buchanan sounds like an early 70’s Democrat in urging America to come home, and Edward N. Luttwak has joined Paul Kennedy in proclaiming America’s decline. Luttwak tells us that “the totality of all the numbers contains irrefutable evidence,” then admits that his straight-line extrapolations and use of current exchange rates (rather than purchasing-power parities) may be misleading. Indeed they are, along with his selection of anecdotes. If one compares only the bad in the present with the good in the past, it is child’s play to show decline.
“Revivalists,” to use the term Paul Kennedy applied to my book, Bound To Lead, are not blind optimists, but we think that the talk of American decline has gone too far. As I showed in that book, the declinists are right that the United States is not as dominant economically as it was during the middle of the century. Right after World War II, the United States accounted for nearly half of world production; today we represent about 23 percent. But the higher figure was due to the effects of the war, which strengthened the United States while it weakened everyone else. For the next three decades other countries recovered their health and the American share of world product returned to its prewar levels. Since the mid-1970’s, however, the American share of world product has held stable. Moreover, if one uses purchasing-power parities, which correct the current exchange rate of currencies for what the money will buy in the local economy, our share both of world product and of the seven summit nations actually increased slightly in the 1980’s. This is a far cry from Luttwak’s comment that the path has been “straight downhill.”
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This does not mean the United States is free of problems. Some things are worrying. Not only do serious social problems like drug abuse and violent crime disrupt urban life, but important industrial sectors like consumer electronics and automobiles have slipped badly in market share. Household savings dropped from 7 percent in the 1970’s to 4 percent in the 1980’s, and the annual increase in our labor productivity, which averaged 2.7 percent in the 1950’s and 60’s, fell to 1.4 percent in the 1980’s—and it is the increase in labor productivity that allows businesses to pay higher wages without an inflationary effect.
There is also good news. The overall economic growth rate of 2.6 percent per year over the past two decades is above our 2-percent long-term historical average. The U.S. share of industrial countries’ manufactured exports dipped in the mid-1980’s, but ended the decade at about the same 16-percent level at which it started. Contrary to fears that we were losing our industry, manufacturing slightly increased its contribution to the GNP, and productivity in manufacturing increased by a healthy 3.5 percent per year in the 1980’s. The United States has a strong science-and-technology base, a deeply rooted entrepreneurial tradition, and well-developed capital markets. And contrary to conventional wisdom, public-opinion polls show that the American work ethic remains stronger than in many other industrial democracies. Luttwak may extol Europe, but as Robert L. Bartley shows, in terms of Schumpeter’s picture of capitalism as “creative destruction,” the United States and Japan are adapting to the revolutionary information-based economy better than is Europe.
Some people cite our debate over decline as a sign of sickness, and note that a strong person (or economy) does not worry about its health. But if concern about decline is proof of its presence, America has been finished since its start. The Founding Fathers were already worrying about decline in the 18th century. Anxiety returned with the closing of the frontiers in the 1890’s, and more recently after the Soviet Union launched Sputnik in the 1950’s.
Unlike our human bodies, nations are capable of rejuvenation or new starts. Britons who wrote about their country’s decline after it lost the American colonies in 1783 did not anticipate the industrial revolution or the Victorian era. Similarly, someone looking at the greed, shortsightedness, and weak political leadership in the United States in the 1920’s might wrongly have concluded that the country was in a long-term decline.
None of this is grounds for complacency. Unattended, the domestic problems described above will eat into our prosperity and strength like worms in the woodwork of a solid house. However, we have faced equal or larger problems in the past; and exaggeration of our current problems may foster inappropriate responses. The key to success will be to remain open to the outside world and adaptable to change. Social flexibility, class fluidity, and economic openness are American advantages compared to Europe and Japan. It would be ironic if fears of American decline or isolationist impulses led to policies of protectionism, resistance to foreign investment, and rejection of immigrants. Such responses would mean turning our backs on the characteristics that brought us where we are. Americans need to be confident, but not complacent, so that America’s capacity continually to reinvent itself may again prove to be our hidden strength.
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Paul Craig Roberts:
Edward N. Luttwak would have fared better in his exchange with Robert L. Bartley if he had emphasized more the ruination of our legal system, the difficulty of political leadership in a balkanized society, the demoralization of the workforce by employment privileges known as quotas, and our crazy policy of taxing capital. Instead, he relied on spurious income statistics, decline from an artificial post-World War II peak, and the shoddiness of our over-regulated public-transportation system. Nevertheless, I am also uncomfortable with Bartley’s tour de force, which rightly stresses the problems we have overcome and notes that there will always be an abundance of decline in a dynamic society as group and sectoral hegemonies are undermined by change.
Not being himself an economist, Luttwak relies on the misleading statistics of establishment economists whose own decline would be a great boon to our welfare. Designed to bash Ronald Reagan and to encourage income and wealth redistribution, these statistics tell us nothing about our economic condition. They have hoodwinked Luttwak into believing that “the vast majority of all working Americans are earning less and less.” I do not have the space here to display the full inventory of statistical tricks used to paint a false picture of the 1980’s. However, Luttwak needs to know a few of the ways in which he has fallen victim.
He relies on non-farm, non-supervisory payrolls for his idea that incomes are declining. However, what he has found is one of those areas that are in decline while things are getting better elsewhere. Non-supervisory payrolls ignore the growing share of the workforce in higher-paying jobs requiring greater skills. In testimony on August 5, 1988, Janet L. Norwood, the commissioner of the Bureau of Labor Statistics, told Congress that jobs requiring little training are “not growing as fast as those that require a lot of training.” Indeed, experts now acknowledge that the Reagan expansion created skilled jobs at a more rapid pace than our bureaucratized educational system could produce people to fill them, the result being a “skills gap.”
Luttwak also needs to know that, due to a peculiarity in the consumer price index (CPI) that was not corrected until 1983, inflation-adjusted real-income data understate the real-income growth in historical comparisons by overadjusting for inflation. Social Security payroll data and Census Bureau median income data show impressive income gains during the 1980’s. Economists like Paul Krugman and Benjamin Friedman hide this success by averaging it with the poor performance of the 1970’s.
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Open, dynamic societies fare better than societies run by a tight group of elites or by government planning. The tension in our society moves between two extremes. We have to maintain enough commonality to hold together, but not so much as to come under the sway of fossilized elites, who are forever tempted to turn an entrepreneurial society into one that pays rents to privileged and protected interests. Too much stability works against an entrepreneurial society. The bigger government grows and the more resistant to change society becomes, the more likely it is to decline.
Ronald Reagan, at least initially, opened things up, and upstarts and new wealth arose. Now reaction has set in, the economy is suffering, and new leadership is not apparent. In the 1990’s the economy might not do as well as in the 1980’s. This would give declinists a new lease on life. Established elites, of course, would be quick to turn an atmosphere of decline to their advantage by expanding the state at the expense of an opportunity society. Bartley’s triumphant optimism, soundly based on real successes, could give way, as he realizes, to a society driven by neurotic fears to seek security at all costs.
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I would like to mention three other things that imperil our future, largely because they are seldom remarked upon or even noticed. In the past quarter-century our legal system has eroded in two ways that threaten our existence as a free society. One erosion stems from the development of status-based law by actions of the Equal Employment Opportunity Commission (EEOC), the Department of Labor, and the federal judiciary, contrary to the clear statutory language and legislative history of the 1964 Civil Rights Act. For the sake of a higher cause, liberals winked at the law and instituted a “temporary” policy of racial, and now gender, quotas to jump-start integration. However, as law and history show, privileges are never temporary, and status-based employment and other privileges have become hereditary entitlements that undermine equality before the law. Moreover, these privileges are spreading. A status-based legal system, of course, is the antithesis of a free society.
The other danger to our legal system comes from the new aggressiveness of the state (dating perhaps from Robert Kennedy’s pursuit of Jimmy Hoffa) in going after “white-collar” defendants, the aggressiveness of lawyers and judges in unleashing tort and civil liabilities, and the rise of unaccountable administrative law. Together these developments undermine our property rights and the protections our legal system provides against Star Chamber proceedings.
Our legal system is under attack in a variety of other ways as well. The basic legal principle that there can be no crime without intent has been undermined by: criminal indictments based on “novel theories” by the prosecutors; the criminalization of accidents, as in the Exxon Valdez case; the use of vague securities laws to indict Michael Milken and others; and the use of statistical disparities to prove discrimination regardless of intent. Oliver North’s attorney, Brendan Sullivan, astonished a recent meeting of the Federalist Society when he revealed that Independent Counsel Lawrence Walsh subpoenaed him to testify against his own client before a grand jury. The extensive wetlands regulations have no statutory basis. And so forth.
Finally, there is the land mine at the very basis of Western thought. The philosopher Michael Polanyi argued that we will not understand the history of the 20th century until we can see it as the outcome of an inconsistency at the foundation of our intellectual frame of mind. The 18th-century Enlightenment had two results that combined to produce a destructive formula. On the one hand, Christian moral fervor was secularized, which produced demands for the moral perfection of society. On the other hand, modern science called into question the reality of moral motives. From the one we get moral indignation, and from the other, moral skepticism. These two disparate tendencies can be reconciled only by a joint attack on existing society. One focuses moral indignation against society, while the other preempts society’s defenses.
I have never discovered anyone, other than myself, who has paid any attention to Polanyi’s seminal insight. Formerly, liberals thought Polanyi was attacking their cherished Enlightenment, and they closed their ears. Today, it is merely routine to attack the Enlightenment, along with common decency and anything that sustains civilized life. What I have called the “denunciatory ethic” is the way we have come to demonstrate our moral independence from vested interests, and it presents great barriers to the affirmation of our civilization and its organizing principles.
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Irwin M. Stelzer:
Game, set, and match to Robert L. Bartley. Indeed, so complete is his destruction of Edward N. Luttwak’s declinist drivel that there is little one can add. But a few points are worth emphasizing.
Most important is Luttwak’s confusion of relative with absolute decline. To prove that the United States is headed toward third-world poverty, its children unemployed or reduced to selling their bodies in Japanese whorehouses, Luttwak reels off statistics that he says show that “By 1980, the pattern of decline had already set in.” Two problems. The first, as Bartley notes, is that Luttwak simply has no idea of how to make meaningful economic and statistical comparisons—or, worse, does know how, but chooses distortion instead. He cannot in the end answer the most basic question: if America is indeed such a disgusting, clapped-out country, why is it the country to which the world directs its capital, and which is the preferred destination of escapees from truly third-world countries from Haiti to Russia? Very few Americans seek permanent residence in Japan or Germany; ask any Japanese if he prefers a Tokyo suburb, with its miserably small houses, to Beverly Hills. (Bartley, by the way, did not have housing statistics handy. Here they are: newly built American houses average 2,000 square feet, new Japanese houses half that.)
The more fundamental problem is that Luttwak uses data relating to relative economic performance to support his assertion that America is in absolute decline. Immediately after claiming that “the pattern of decline ha[s] already set in,” he cites data showing that other countries are closing the productivity gap. We continue to improve, but others improve even faster, says Luttwak. So we are somehow diminished by the rising prosperity of others! Luttwak is clearly aware of this problem with his argument. He slyly says that we will become a third-world country (whatever that is) “at least by Japanese standards” and that our economy is in severe decline “by world standards,” thereby hinting, without quite saying, that his data refer to America’s position relative to other nations. Even if true—and it is not true—such a relative decline hardly carries the dire consequences of an absolute decline. We can do very nicely even as others also improve their lot.
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These technical problems with Luttwak’s article pale into insignificance, however, when compared with the elitist diatribe against America lurking just below the surface of his screed. Luttwak compares the polite, white-gloved Japanese taxi driver with New York’s “unkempt lout who resembles his counterparts in Islamabad or Kinshasa.” The xenophobic Japanese, of course, have no immigrants they care to accommodate: their pursuit of racial purity is sufficiently savage to warm the cockles of David Duke’s heart. America is, blessedly, different. True, it is irritating when a driver, recently arrived from Russia or Iran or Israel or Lebanon, cannot find Grand Central Station. But grin and bear it: his children, or at worst his children’s children, will soon be contributing the skills and drive with which newcomers have traditionally enriched the American economy.
Indeed, Luttwak’s entire account of travel from Tokyo’s Narita airport to New York’s Kennedy airport is a silly contrivance. Everyone knows that the infrastructure of the increasingly wormy Big Apple is not typical of the rest of the country. New York City is in particularly bad shape, sapped by liberal economic and social policies that are destroying its tax base. And its facilities are old. Fly to Orlando, Denver, or Phoenix, or even Chicago, and you get a different picture. True, the facilities are crowded relative to those of other countries. But that is because almost everyone in America can afford to fly. The American students who Luttwak says are doomed to stay in Europe’s cheapest hotels regularly buzz around their own country to visit relatives, drink beer on the beaches, ski, or sample the cultural delights that are no longer found in only a few large cities. Fares here are a fraction of those in Europe and Asia, thanks to airline deregulation; they are the envy of the world’s businessmen and tourists. Luttwak stands in line at American airports because others can afford to take equal places on that line—a phenomenon that intellectuals often find an offensive reminder that society does not accord them the deference to which they feel entitled. After all, few of the others in that line, and certainly none of the “unkempt louts” who maneuver their cabs to Luttwak’s hotel, have ever published in COMMENTARY. HOW dare they jostle him, or decline to wear white gloves while schlepping his bags!
One could raise dozens of additional problems with Luttwak’s Complaint. It is highly unlikely that producers of HDTV receivers will, as he contends, “earn each year” what comes to $1,000 per television set; there is nothing wrong with preferring royalties to manufacturing profits or to sharing risks by entering into joint ventures with foreign firms; our economy is invigorated, not sapped, by the decline of its corporate behemoths and their replacement by small entrepreneurial competitors; and the availability of efficiently made, maintenance-free Japanese cars and consumer-electronics products has enriched, not impoverished, Americans whose real incomes rose steadily until Bush abandoned Reaganomics in favor of Darmanism and the Brady Bunch.
Now, the obligatory, balancing conclusion. None of this is to say that America is without problems. Luttwak is right to worry about police without power to cope with vagrants, and the anti-educational impact of a multiculturalism that now forces radio stations to stop identifying Washington’s footballers as “Redskins.” But he is wrong to think America is in decline, and dangerously wrong in his protectionist prescriptions for its reversal. Neither he nor Patrick J. Buchanan can lock out the world’s goods and capital without producing the very decline in living standards that Luttwak says he fears.
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Jude Wanniski:
My inclination is to agree with both Edward N. Luttwak that America is in decline and with Robert L. Bartley that it is in ascendance. On a graph that would cover the last 200 years, the trend line would climb for 175 years and fall for 25. On a graph that would cover the last 25 years, the trend line would fall for fifteen, but move up for the last ten, although the last two years have been weak. This downward blip coinciding with the Bush recession cannot be ignored. Unless it is corrected, the upward trend that Bartley really identifies with the Reagan years will be seen merely as an upward blip on the secular decline of America toward the third-world standing Luttwak anticipates. My guess is that this decline will be arrested in the relatively near term, and that America will head into the 21st century in a big way. The idea that the American Century is over and done with is not correct. The century was spent struggling against the obsolete forces of the Old World, a process now essentially complete. America’s 21st century will be equivalent to Britain’s 19th, the Pax Americana of an “American Empire.”
Luttwak’s arguments should be appreciated for trying to probe for chinks in the edifice of “America-is-the-greatest.” His images of the almost-third-world experiences encountered by a traveler arriving at Kennedy airport and making his way to a Manhattan hotel ring true; the experience of “chronic disorganization of perfectly routine procedures” can be duplicated in many other instances of daily life. Yet that is hardly sufficient as a basis for his thesis of declinism, and his data regarding savings rates, productivity rates, income levels, etc. are skewed, inaccurate, and confused. He presents indications of American decline, but does not identify the dynamic at work that supposedly accounts for the slide. And his perspective is completely linear.
Bartley’s rejoinder, while nicely exposing the declinists’ straw man as a creation of their own anxieties, is a bit too mechanical, displaying almost boiler-plate optimism. In terms of recent trends, much of the bullish side of America’s power is based on the victories scored by supplysiders and their allies in the Reagan years. Yet Reagan’s “heir apparent” has been presiding over the dismantling of those victories, which Bartley presents as immutable. Just as we have to ponder the Coolidge Roaring 20’s giving way to the Hoover Depression of the 30’s, we have to consider the possibility that just as surely as Reagan was in Coolidge’s lineage, Bush is in Hoover’s. Bartley does not do so.
I am also unfavorably struck by Bartley’s observation that “the onslaught of modernity has not been good for institutions such as the family.” Is it “modernity” or simply the inflation of the last 25 years which, when combined with ever more onerous rates of taxation, battered and disrupted the stability of the American family? An American ascendance would have to see the repair of institutions such as the family, or I would doubt the ascendance.
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My own view is that the 20th century has been taken up with historic experiments in socialism and fascism, the latter being the elite, corporatist form of capitalism. In the process, the United States itself has been dragged through minor variants of both fascism and socialism. The former I identify most with Hoover and the early New Deal; the latter I identify with the later Roosevelt and the social agenda of liberal Democrats thereafter. The only economic theory consistent with entrepreneurial capitalism is supply-side theory, which dominated American history from its earliest days up to the Wall Street crash of 1929. The Keynesian fiscal model and Milton Friedman’s monetarist model are both consumer-driven, redistributionist, and zero-sum. In a true American ascendance, the rising tide lifts all boats. John F. Kennedy was a supply-sider surrounded by Keynesians, but his contribution was important nevertheless. Ronald Reagan was a supply-sider surrounded by monetarists, and his achievements in overcoming them were among the most important of the century.
From here on, the ascendance of America should be increasingly apparent, however this year’s presidential elections turn out. The inflation is behind us, as Reagan appointees to the Federal Reserve have been leading us back to a dollar as good as gold, at $350 an ounce. Society will once again tend to stabilize around a money that restores the links between effort and reward over long horizons. Traditional values which to Luttwak now seem beyond repair will once again knit together. The Democratic party, frustrated by the power of supply-side ideas, has finally abandoned its zero-sum redistributionist policy. The political competition in the elections remaining in this century will continue to regenerate the original American idea of entrepreneurial capitalism, and with it an America in ascendance.
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Ben J. Wattenberg:
I leave it to others to comment in detail about Edward N. Luttwak’s preposterous extrapolations of frequently preposterous economic data. On all that, Luttwak is only wrong. But his notion of the third-worldization of America is offensive.
Never mind that America is the number-one scientific, cultural, economic, linguistic, military, educational, political, and geopolitical power in the world, quite possibly the most influential nation in history, and, curiously for a nation that supposedly cannot compete, the world’s largest exporter, and gaining. This is the nation that Luttwak describes as “Japan’s Brazil.”
According to Luttwak’s elitist anecdotes and weird extrapolations, here we are, a third-world country, characterized by his archetypical New York taxi driver. That man, we are told, is an “unkempt lout who resembles his counterparts in Islamabad or Kinshasa rather than in London or Tokyo, where licensing requirements are strict and dress codes are enforced.” (Right, America needs a few more licensing regulations.)
Tsk, tsk, says Luttwak. Just compare these hackers to the well-mannered cabdriver in Tokyo, “neatly dressed . . . in white gloves,” or to similarly elegant ones in Zurich, Amsterdam, or Singapore.
Luttwak is right in this respect: America has never had much of a servant class. The Europeans and the Japanese beat us all to hell in white glovery, and that has troubled the international elegantsia for centuries. At various times in our history the unkempt loutish class in America consisted of Irish, Jews, and Italians. They were not servile; they did not wear white gloves; they did not defer to their betters. They were more interested in making a better life for themselves, and particularly for their children, who, as it turned out, did well here, changing America once again, and creating yet one more new world in the new world.
I wonder if Luttwak has ever talked to one of those unkempt louts behind the wheel. It’s a hobby of mine. I ask about America, and count the number of sentences until the word “opportunity” occurs. Usually, it is in the first one, as in, “America is a tough country, but there is more opportunity here than anywhere.”
I’m not sure I would want to be in the cab when Luttwak tells such a lout, who is working 70 hours a week in an entrepreneurial activity, that he exemplifies a “lack of diligence in the labor force.” In the New York area some of the children of the louts are winning the State Regents scholarships that used to go to Jewish kids. On straight merit.
And one meets the same sorts of upwardly-mobile immigrants near some other airports in America that are rather unlike the grimness that Luttwak (somewhat accurately) lays upon Kennedy airport. Investment capital has been available to expand airports in Washington, Miami, Denver, Orlando, Boston, Los Angeles, Dallas-Fort Worth, Raleigh-Durham, Las Vegas, Phoenix, and O’Hare (to begin what could be a massive list), and often brilliantly.
I am trying to place Luttwak’s screed about the third-worldization of America into the contemporary American political scene. Whom does he sound like? Where have I been hearing this stuff? The only name that registers is Patrick J. Buchanan’s.
Since Luttwak’s piece was written, the U.S. seems to have come out of a recession and Japan seems to be going into one. In his new role as the Grand Extrapolator, he might try running those trends out into the future. Is Japan becoming a third-world country?
