Is America on the Way Down? (Round Three)

In our March issue, Edward N. Luttwak and Robert L. Bartley debated the question “Is America on the Way Down?” In May, we published Round Two of this debate, with comments from nine writers who have in recent years dealt with allegations of American decline. The letters below (arranged in alphabetical order) cover both rounds, together with replies by Messrs. Bartley and Luttwak.

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To the Editor:
Edward N. Luttwak’s wildly erroneous predictions about the Gulf War—weeks of combat, thousands of American casualties—are finally comprehensible when one reads his article on America’s decline. What else would he have predicted of a country so hopelessly degenerate, unable even to handle his bags properly at Kennedy Airport?
Mr. Luttwak’s article overlooks all evidence he finds inconvenient. Surely he is aware of the demographic data showing the aging of the German and Japanese populations in the next twenty years: the number of retirees will increase much more quickly there than here, and the ratio of workers to retirees will worsen badly. The burden on the national budgets and the effect on savings are obvious. In the U.S., the size of the baby-boom generation, and the greater percentage of women now working, combined over the last twenty years to produce the reduced productivity associated with new entrants to the job market. For the next twenty years, as these groups reach forty to sixty years of age, American society will reap the benefits. These are among the many reasons to disbelieve Mr. Luttwak’s “straight-lining” of any downward trend he can find.
More surprisingly, he ignores the extraordinary contribution new immigrants are making to American society. Those who attend Cal Tech or MIT, or for that matter Harvard or Yale, are well aware that since the 1965 immigration reforms a huge migration of Asians has taken place, vastly enriching our society. To ignore the wonderful benefits of these population movements is a startling oversight for a man who is himself an immigrant to these shores.
Mr. Luttwak’s lengthy complaint about Kennedy Airport reveals his real problem with America. Arriving here, he finds himself thrust into contact with . . . them .To add insult to injury, the very customs inspectors themselves are . . . them, and probably even ask him, “Whaddaya mean you’re a consultant?”
This is a view of America that Henry Adams and Henry James would have appreciated. It appears that America is just not classy enough. More important than Mr. Luttwak’s economic errors, which are based on his inaccurate and misleading data, is this fundamental antipathy to the society that remains the world’s most open, most democratic, and most successful. . . .
Elliott Abrams
Washington, D.C.
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To the Editor:
. . . As far as he goes, Edward N. Luttwak is right. Readers of Correlli Barnett’s The Collapse of British Power will recognize the parallels with the declining Britain of the 20’s and 30’s: half-educated workers, nerveless political leadership, uncompetitive businessmen, collapsing and capital-starved basic industries. The factor-price equalization theory says that under perfect competition, free trade, and mobility of factors of production, both absolute and relative factor prices will tend to be equalized between countries. True, the real world does not match the frictionless ideal of economic theory, but once it began moving in that direction with freer trade, more mobile information and finance capital, and greater competition, the grinding-down of our relatively high-wage workforce became inevitable. On the evidence, it will continue.
Blinkered optimism lets Robert L. Bartley evade this implication of globalism—and evade also the evidence of social disintegration in our soaring violence, the rising savagery among our young, the illegitimacy and divorce plagues, the dying work-and-save ethic. These menaces, like our live-for-the-moment debt explosion, stem from a collapse of religious and moral beliefs that shows little sign of reversal. It is this crisis of belief, not (pace Mr. Luttwak) fatalistic resignation, which “ensure[s] that the decline will continue.” Mr. Luttwak at least grasps the wreckage of our mores; Mr. Bartley, bound for Utopia, gives noneconomic problems a paragraph or two and sails on, to further digs at “apostles of decline.” . . .
John Attarian
Ann Arbor, Michigan
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To the Editor:
. . . Edward N. Luttwak has by far a more cogent and compelling argument than Robert L. Bartley. . . . Not only does he assemble an impressive body of evidence, . . . he also effectively rebuts the objections of his opponents, the free-trade internationalists, who actually represent the apotheosis of a liberal perspective rather than a conservative one.
In a number of specific cases—ranging from the Japanese transplants in the automotive industry to the direct purchase by foreign interests of our leading-edge industries of entertainment, biotechnology, commercial aviation, and computers—Mr. Luttwak demonstrates convincingly that it does indeed matter which country is in the driver’s seat. . . .
His statistical evidence showing our relative decline in productivity and purchasing parities (the best measure of a nation’s standard of living) vis-à-vis our Japanese and European competitors is impressive, and unsuccessfully challenged by Mr. Bartley. For instance, Mr. Bartley states that between 1983 and 1990 real disposable per-capita income rose in America by 18 percent in inflation-adjusted dollars. However, he does not give the comparative figures for Japan or the Federal Republic of Germany, which were significantly higher, nor does he rebut Mr. Luttwak’s statement that over the last twenty years there has been a steady erosion in the earnings of non-farm, non-supervisory employees (over 80 percent of the workforce), with inflation-adjusted figures for 1990 having regressed to the 1965 level. When confronted by these contradictory claims, we have to conclude either that one of these gentlemen is playing fast and loose with the numbers or that the per-capita increase Mr. Bartley alludes to was enjoyed by only the top 20 percent of the workforce . . . and the standard of living for the majority of working Americans deteriorated.
When we move into the broader area of macroeconomic conditions, once again it is Mr. Luttwak rather than Mr. Bartley who is on target. According to Mr. Luttwak, the main source of our malaise is the chronic overconsumption and undercapitalization of our economy: the “capitalism without capital” charge that he levels throughout his article. In attempting to refute it, Mr. Bartley offers up a classic false analogy: he tells us that the immense and growing level of debt incurred by our country over the past decade is not only nothing to fret over, but actually an indication of our economic potency, since we went this route before in the 19th century, precisely in those decades when we were emerging as the world’s industrial colossus.
What Mr. Bartley fails to see here are the crucial differences in the uses of that capital then and now. In the 19th century we were borrowing to build up our industrial plant and infrastructure, which we carefully protected through the enactment of significant trade barriers, enabling us eventually to dominate the markets in the world’s leading commodities and retain those profits at home for further industrial development. The situation could not have been more different in the 1980’s, when our borrowing was used to finance massive government spending in the less productive, albeit necessary, areas of health, welfare, and defense.
That is one part of the picture. The other part is that the foreign investment Mr. Bartley so proudly hails as the world’s ringing endorsement of American capitalism was actually, as Mr. Luttwak demonstrates in many specific instances, a kind of corporate cuckolding whereby that investment capital was used to acquire primary control and the lion’s share of current and future profits emanating from the innovation of American enterprise. The notorious case of the now defunct Ampex Corporation, a pioneer in videocassette technology which was licensed to and marketed by Sony, among others, who then plowed these immense profits back into the acquisition of CBS Records and Columbia Pictures, offers a sobering view of the realities beneath the surface of Mr. Bartley’s “morning-in-America” boosterism.
So let us remember when we celebrate the next mega-album by Michael Jackson, or the next blockbuster hit at Columbia, that the Japanese are now at the top of the food chain when it comes time to divvying up the profits, and that there is virtually no reciprocity toward us to make up the difference. That is why it matters who emerges as the ultimate owners of the world’s most lucrative enterprises. And without sufficient domestic capital there is no way that this erosion—which is really the loss of control over our most promising industries and economic destiny—can be ameliorated. And that, in any economist’s language, should spell decline.
Finally, and most convincingly, the case of America’s decline can be made by detaching ourselves from the thralldom of the mighty dollar and taking a more generalized look at our culture. I invite anyone who is old enough to remember what it was like to be alive in America in the 1950’s, before the corrosive onslaught of the counterculture, . . . to compare what we had then with what we are confronted by now. If anyone can make this comparison and not come to the conclusion that there has been a frightening and precipitous decline—to the point in many areas of manifest barbarism—then that person is either being willfully dishonest or is so befogged by the vapors of liberalism that his capacity for effective judgment has been rendered impotent. . . .
Leonard Bakker
Berkeley, California
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To the Editor:
Something is obviously wrong in the U.S., and not with our future economic prospects alone. Los Angeles is burning, crime is on the increase, and the war against drugs is not being won. The test scores of American students are as poor today as they were in 1983 when the National Commission on Excellence in Education presented its report. . . .
A basic change in values caused by an explosion of expectations since the end of World War II explains our troubles. The values I refer to . . . are self-reliance, self-restraint, and self-discipline. They have been at the root of our past accomplishments, and they still govern in Japan, Taiwan, Singapore, and Korea. There, but not here, they still help to shape the characters and expectations of the young, and to determine the levels of performance of adults. Here, these values are often disregarded or even dismissed as devious instruments used to oppress the powerless and the poor. . . . Yet they are the intangible factors which cause students to succeed at their studies and motivate workers to care about their work and the quality of their products. It is these values, more than any police force on earth, which maintain law and civil order. They bring stability to families and reliability to all other human relationships. They even determine how many graffiti are to be found on the walls and how much litter in the streets. Without them, societies decay and disappear from the stage of history.
Such concepts as the public interest, property rights, the setting-up of critical standards, have all gone out of favor and must actually be defended instead of taken for granted. Permissiveness is king. . . . In the name of equality, children object to limit-setting by parents, students . . . demand the right to determine their own curriculum and do not attend classes. Having shed the old values, we live with less civility, less responsibility, less decency, a diminished competitive vigor, and the breakdown of the family. . . .
It is easy to ridicule Edward N. Luttwak’s “taxi-driver index,” but he is essentially correct. How a driver dresses, speaks, and maintains his car tells a lot about his self-image and the expectations drivers have of themselves and of others. Those who do not treat themselves and their belongings respectfully are not likely to treat other human beings or their property any better.
The battle to restore old values and to resuscitate the family will be difficult, and its outcome will remain in doubt for a very long time. . . .
Reuven Bar-Levav
Southfield, Michigan
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To the Editor:
Why does Edward N. Luttwak’s answer to “Is America on the Way Down?” come closer to how I sense things than Robert L. Bartley’s? By carefully picking the appropriate economic indicators, one can prove almost anything.
My maternal grandfather, who died 30 years ago, never owned a VCR. Neither did J.P. Morgan. My children do, but their futures are not as rosy as I would like. And I would wager that, to quote Mr. Bartley, “Park Avenue would lie awake at night worrying” if expenses continued to exceed income year after year in spite of books being balanced globally. He claims that “More than eighteen million new jobs were created” after the 70’s, but our population grew by more than that, and how many better-paying jobs were lost, to be replaced by closer-to-minimum-wage positions?
Avrom A. Blumberg
Evanston, Illinois
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To the Editor:
Robert L. Bartley states that the proponents of decline refuse to “use their eyes and ears” and choose instead to confuse themselves with statistics they do not understand. Thus, in order to satisfy Mr. Bartley’s strict research guidelines, I promise not to employ statistics I do not understand and will judge only the data which my eyes and ears bring to me.
While it is true that the U.S. is one of the world’s great undeveloped countries (. . . Mr. Bartley cites the figure of 26.3 persons per square mile; by this measure, Canada, with 6.7 persons per square mile, would be even greater), it should also be remembered that the equally liberal John Locke believed that “numbers of men are to be preferred to largeness of dominions” and the “right employing of lands is the great art of government.” Put another way, the question which Mr. Bartley should have attempted to answer is whether or not the land and labor of America are, today, being employed rightly.
Certainly, the Japanese know how to employ American resources—Mr. Bartley asserts quite proudly that Nissan, Honda, and Toyota (as a safeguard against protectionism) have all opened assembly plants in depressed areas. But do Americans themselves know what to do with their land? The high ratios which he cites of cars, VCR’s, televisions, and computers to individual Americans naturally fail to take into account the origins of these high-value products. Yes, Americans “created” them, but to what extent do they reap the rewards?
Moreover, when Mr. Bartley focuses on America’s current exports (i.e., bombs, missiles, armies, and precision weapons) he inadvertently confirms Paul Kennedy’s thesis of military production eventually overtaking economic development and leading to decline. At one time, Britain’s greatest “export” was the Royal Navy, whereas today (as seen and heard with my own eyes and ears last February), most English consumers are driving cars, watching TV’s, and using computers which were designed and manufactured elsewhere.
To be sure, many jobs continue to be created in the U.S. but I would venture to say that, like Canada (in which I use my eyes and ears every day), the much-awaited “service” and “information” jobs are primarily in the low-paying areas of restaurant help, data entry, telephone sales, and private security—necessary services, but hardly marketable to the world.
Finally, Mr. Bartley fondly remembers the seven wonderful years of Reagan tax cuts and confidently dismisses trade imbalances with the remark that “for every buyer there has to be a seller.” This is quite true, but as a corrective I would suggest to him that he also attempt to recall another vestige of the Reagan era, namely, the War on Drugs. As with all other imports, there has to be a buyer and a seller of illegal drugs, but there seems to be considerably less doubt regarding just which party in the drug transaction is more likely to reap the rewards. This may not be a “right” employment of land, but the interplay between dealers and addicts could be an instructive counter to Mr. Bartley’s analysis.
Philip Bousquet
Nepean, Ontario, Canada
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To the Editor:
Bravo to Paul Craig Roberts, in Round Two of the debate on American decline, for best showing what is right and wrong with Robert L. Bartley’s and Edward N. Luttwak’s articles. Mr. Roberts is correct that the secularization of religion, combined with moral skepticism, is a sure-fire formula for disaster. . . .
Angelo M. Codevilla
Hoover Institution
Stanford, California
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To the Editor:
. . . Although both Edward N. Luttwak and Robert L. Bartley present cogent arguments, I find myself agreeing more frequently with Mr. Bartley, particularly in his opposition to protectionism. As Mr. Luttwak, of all people, should recall, the Smoot-Hawley Tariff Act of 1930 did indeed preserve some American jobs—in exchange for World War II. Bad deal, no?
But in fairness to Mr. Luttwak, Mr. Bartley seems to underestimate the many self-imposed obstacles facing America. Most of these are well-known, of course: corporate short-termitis, “child-centered” education, failure-rewarding social programs, affirmative-action quotas, etc., etc. Overcoming them will take more than a gasoline tax.
However, one obstacle seems to have escaped notice—the stubborn refusal of American industry to go metric.
To those not raised on them—that is, 90 percent of the human race—working with English weights and measures poses a difficulty akin to that of translating Navajo epic poetry. (Is this, perhaps, one reason why foreigners shun American-manufactured goods?). . .
Perhaps the U.S. government could do as the British did: America’s people could continue to use their beloved customary units in everyday life, while America’s machines could (with some judicious prodding) become metric, and therefore salable abroad.
Whatever happens, I hope you make it. As a Canadian, I have selfish reasons for wanting the U.S. to survive and prosper; after all, what is a pilot fish without a healthy shark?
Gordon C. Galland
London, Ontario, Canada
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To the Editor:
Whether America is or is not in decline probably will not be known for decades and is, of itself, largely irrelevant. However, the lively debate between Edward N. Luttwak and Robert L. Bartley is valuable, apart from being a good read, as a starting point for examining our deficiencies and taking . . . steps to set America on the best course for the 21st century. So the debate must go on.
If you are taking a poll, then my vote is with Mr. Bartley that America is not in decline. Mr. Luttwak’s support for the contrary view, based primarily on statistics and projections derived from them, does not take into account the economic restructuring this country is now undergoing. The process, albeit painful, will lay the foundation for the resumption of solid growth.
Martin T. Goldblum
Beverly Hills, California
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To the Editor:
For the sake of our children and their children, we would prefer to think that Edward N. Luttwak is mistaken, but his grim argument, although driven a bit too hard, . . . seems to resonate and ring true. Though Robert L. Bartley in his rebuttal dispenses a few pleasant points of light, the broader outlook remains generally dark.
My own speculation, hardly unique, on the cause of our apparent decline locates its inception in the 60’s, when a worthy goal, that of eliminating the oppression of minorities, was somehow overwhelmed by a generation (my generation) of confused young people seeking, finally, little more than a license for self-gratification. Our elders, possibly unnerved by assassinations, unbalanced by rapidly accelerating change, and unsure about a war that they, too, did not fully support or understand, permitted too much too easily. Since then, a slack, self-indulgent attitude has been allowed, even encouraged, to flourish and infect our culture, our commerce, and our institutions.
Mr. Luttwak is correct in asserting that “Anglo-Saxon-style individualism could only be successful so long as there was still enough Calvinism to go around.” What we need now, though, rather than an upsurge in repression or conformity, is a greater degree of individual foresight, rigor, determination, and self-control. If and when, by virtue of these traits, we are collectively prepared to assume the full responsibility of our freedom, we will also be empowered to refocus our national ideals and redirect our national destiny. . . .
Harvey Gordon
Kalamazoo, Michigan
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To the Editor:
Your two superb articles under the rubric “Is America on the Way Down?” seem to be talking past each other.
While Edward N. Luttwak makes a powerful and accurate analysis of America’s slide into a third-world standard of living, . . . Robert L. Bartley gives little real evidence to counter this analysis. Instead Mr. Bartley accurately points out that the world is adopting “American ideas of democratic pluralism and market economics” and that for the moment we have predominance in military power. He describes our currently wealthy society with pride and derides any concern about our persistent trade deficit as ridiculous. Then he goes on about the electronic revolution, the information revolution, etc., etc., and argues that we are in a position to build “a new version of the institutions of the Belle Epoque.” The fundamental error in Mr. Bartley’s thesis is that while there are enormous prospects for positive changes in the world due to market economics, the march of technology, and so forth, this applies to the world and not just to America.
At the same time as these changes are occurring, the relative standard of living of most American citizens will probably be declining, as a result of the many depressing factors emphasized by Mr. Luttwak. Mr. Bartley, while rhapsodizing about the growth of world trade, totally ignores the failure of reciprocity in such trade. While the huge Japanese monopolies have incredibly unrestricted access to buying and controlling any part of the U.S. economy (Firestone Rubber, MCA Inc., Universal Pictures, Columbia Pictures, etc., etc.), the reverse does not hold true. As Mr. Luttwak says, “A U.S. buyer would have greater chances of being allowed to acquire the Sistine Chapel than 40 percent (controlling interest) of Mitsubishi Industries.” Of course, those few Americans who are wealthy enough to sell off their ranches, farms, homes, office buildings, factories, private colleges, movie companies, automobile companies, etc. to Japan Inc., will be comfortable for a few decades (unless confiscatory taxes reduce their profits) while their workers go on the dole or starve or revolt.
In his excellent book, Agents of Influence, . . . Pat Choate fists the six standard excuses used by the . . . half-a-billion-dollar-per-year Japanese propaganda machine in the U.S. to prevent any defensive action by the U.S. government. . . . Mr. Bartley in his article repeats Excuse Number 4—“globalization”—a concept which, to this Ph.D. physicist and engineer, is just globaloney from Wall Street and its bankers. These are the same people who told us that the huge transfer of wealth out of the U.S. with the jump in oil prices did not matter because it would be recycled into third-world governments. Alas, most of those loans are long in default and the middle-class U.S. taxpayer pays, as he is doing for the savings-and-loan scandal.
The globalization theme seeks to convince naive Americans that they can relax, that national borders are disappearing, that there is just a single global market, that national allegiance is outdated, so no one need worry about Japanese purchases of key American industries or about Japan’s march toward global domination in key industries based on high technology. . . . I do not buy this and no concerned American should either.
The future is not immutable. Our slide can be reversed by putting high tariffs on Japanese autos and trucks until their imports into America are no more than three times the number of U.S. cars and trucks (made by U.S.-owned companies) sold to Japan; ordering that 75-percent ownership of major Japanese factories (including the two giant motion-picture entertainment companies) in the U.S. be held by American citizens; requiring, as Canada does, that an independent U.S. board must approve foreign purchase of any American company. Of course, Wall Street will scream that such action will prevent investment in the U.S., but this is nonsense. We are by far the largest market in the world and foreign countries (which have such restrictions themselves, and often tougher ones) will still invest and make money.
The problems of today, as delineated by Edward N. Luttwak, can be overcome with the technology of tomorrow if and only if Americans own and control and get the profit from the manufacture and sale of this technology. . . . Not, as the greedy investment bankers prefer, by selling out to Japan.
Howard D. Greyber
Potomac, Maryland
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To the Editor:
I found Edward N. Luttwak’s affirmative response to the question, “Is America on the Way Down?,” . . . confused, insulting, and patronizing. . . .
Mr. Luttwak knows that the twenty-odd years after World War II were a period of American hegemony. The war created great vacuums in the vanquished countries as well as in most other parts of the world. It is not fair to use this artificially high point as a basis for comparison. In time, a new and entirely legitimate economic balance was created.
Notwithstanding the foregoing, the affirmative argument may be at least partially correct, but Mr. Luttwak has not sustained the point in a clear and convincing manner.
Henry S. Hacker
New York City
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To the Editor:
Both Edward N. Luttwak and Robert L. Bartley . . . ignore the important role of demographic trends in current American problems and future Japanese and European ones. . . .
Japan functions very differently from the United States for many reasons, but I think the most important one is the absence of ethnic diversity. This promotes uniformity, equality, homogeneity, and conformity. There is no “multiculturalism” debate in Japan. The Japanese have a strong streak of xenophobia and nationalism which leads them to have virtually no immigration. Indeed, they are even hostile toward Japanese who have been raised in foreign countries. But if immigration causes problems for the United States, its absence creates another set of problems for Japan.
Consider the Japanese population dilemma: with the longest life expectancies on the planet, a below-replacement fertility rate, and virtually no new immigration, the country’s population is currently growing hardly at all, and after 2010, according to United Nations projections, will experience negative population growth. The working-age population is likely to start declining by the end of this decade.
If the Japanese start welcoming immigrants in order to maintain population growth, they will face exactly the same problems Mr. Luttwak complains about in the U.S., problems stemming from ethnic diversity and immigration from poor countries. . . . If, on the other hand, they do not welcome immigrants, Japan faces a future of declining population and a shrinking labor force burdened with an ever-increasing share of population over sixty-five. . . . It is hard to believe Japan is the wave of the future when its population will be shrinking. Can Mr. Luttwak list the nations that have become dominant superpowers while their populations have declined?
Many of Japan’s strengths come from its response to low labor-force growth. With workers scarce, Japanese business firms invest far more in labor-saving technology and capital than do American firms. They also take better care of their workers, offering them greater stability, recruiting the unemployed for new jobs, and investing more in job training. The result of such policies is rapid growth in productivity and low unemployment. American business has not behaved this way over the last twenty years because of the abundance of labor caused by the coming-of-age of the baby boom as well as high immigration rates. But as our population growth slows down, it is reasonable to believe that U.S. firms will behave more like their Japanese counterparts.
The dilemma that Japan faces—accept immigrants and have your cities “Americanized” or don’t accept immigrants and watch your population age and decline—is also faced by Canada, Australia, Europe, and the more advanced Asian nations such as Taiwan and Singapore. . . .
The U.S. is . . . the most ethnically diverse country on earth, and as such, its ultimate contribution to the world may be in showing other countries how to transcend the population dilemma they face—as soon as we figure it all out for ourselves. . . .
Brian R. Horrigan
Philadelphia, Pennsylvania
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To the Editor:
. . . Edward N. Luttwak begins his argument by extending current economic trends to well into the next century. He claims that “if present trends simply continue” we will become an impoverished third-world nation some time early in the 21st century. But the extension of trends into the future is not a reliable means of predicting events, and there are many examples of its misuse. At the beginning of the AIDS epidemic, for example, the number of infected individuals was doubling every six weeks. Extending that rate of increase over ten years led to the prediction that by 1990 or so every adult in the U.S. would be infected. But the doubling time of AIDS dropped very quickly to six months, and then to one year, and eventually the rate dropped so low that it seems entirely possible that 1992 will have the same number of cases as 1991. . . .
Similarly, population-control zealots have long been issuing alarmist reports predicting that the U.S. population would explode unless drastic steps were taken to curb reproduction. All these predictions have turned out to be wrong. The mistake was in assuming that the country would continue to reproduce at the rate which it did in the two decades following World War II.
There are two parameters which will limit the Japanese rate of growth over the next 50 years. The first is Japan’s limited size. This island nation, smaller than California, is grossly overpopulated . . . and has a terrain that is mostly rugged and mountainous. There is simply a limit to how many factories can be built on these small islands. . . .
The second factor is the Japanese workforce. The Japanese have been described as “living like dogs and working like ants,” but the generation that behaved this way is the generation which saw its country destroyed in World War II. It is highly questionable whether the generation of Japanese in grade school today will be as willing to exist under these conditions.
In his discussion of Japanese growth, Mr. Luttwak also makes the mistake of ignoring World War II. He points out that in 1970 “Americans were two-and-a-half times as productive as the Japanese.” I am sure the statistic is true, but Japanese productivity in 1970 was still depressed as a result of the war. . . . Before the war, our economy produced 20 percent of the world’s goods and services. After the war, having avoided the carnage of total war and strategic bombing, we produced 50 percent of the world’s goods and services. Today our total is back around 20 percent. Rather than viewing this as a decline in our economy, we should view it as a recovery in the world’s economy. . . .
Mr. Luttwak’s discussion of the drop in earning power of American workers over the last twenty years can most charitably be described as muddled and confused. He claims that we are actually earning less now than in 1970, . . . but in fact wages have more than tripled during this time period. He then brings in inflation to write that, taking this factor into account, we earn less than we did in 1965. This is technically correct, perhaps, but that is all. We are, by any standard, much richer than we were in 1965. The “constant 1987 dollars” which are mentioned do not buy the same goods. I am typing this letter on a 486DX computer running at 33 megahertz. I paid $1,400 for it at a discount computer shop. In 1965 the best computer available cost several million dollars and could not do what my current computer does. My stereo sound system and TV are of such high quality that nothing manufactured in 1965 can compare. My CD player and laser-disc player are based upon technology which was not available in 1965 and so they could not be purchased in 1965 for any price. I will concede that the 55 cents I pay for a candy bar has outpaced inflation—i.e., the nickel bar of 1965 was a better bargain—but this does not support Mr. Luttwak’s contention that we are on the way to becoming a new Bangladesh.
Mr. Luttwak next compares the earnings of American manufacturing employees with their Japanese counterparts, and says the Japanese earn more. Yes, but so what? That higher salary does not go very far in Tokyo, the most expensive city in the world. The typical Japanese residence does not have indoor plumbing. By any stretch of the imagination we are living better. Perhaps the best indicator of wealth is the possession of land. The area of the United States is . . . 25 times that of Japan. Since our population is twice as large, we have 12.5 times more land per person.
Throughout his article Mr. Luttwak demonstrates an almost total ignorance of the fundamentals of economics—the science which deals with the distribution and exchange of goods and services. Money is not in itself something of value, it merely represents wealth. If the Japanese give us cars and consumer electronics and take little pieces of paper with the portraits of dead presidents on them, we are better off. It costs us virtually nothing to produce money. (I know, I used to work for the Mint.)
When we buy from Japan, they take our money and either buy goods from us with the money, or buy goods from other countries. At some point those dollars have to return to our shores where they are exchanged for our goods.
In practice, we buy from the Japanese what they are able to produce more efficiently than we can, while they buy from us what we produce more efficiently. They are better at producing cars while we are better at producing food. We give them our food for their cars. Both countries are better off. By permitting free trade we award our more efficient producers and force our less efficient producers to improve. . . .
Mr. Luttwak makes the point that if the Japanese own American manufacturing plants they get the profit. But the profits are generated in dollars, and so they must eventually return to this country. If the Japanese buy U.S. real estate we are not hurt. What are they going to do with Rockefeller Center, load it on a barge and sail it back to Tokyo? If the Japanese own this country the only way they can enjoy it is to move here. Will we be any the poorer if 200,000 Japanese millionaires come to our shores? The country has always been enriched by immigrants. The Japanese will be no exception to this rule.
Up until the 1950’s an American car could not be counted on to start when the ignition key was turned. Today there is not one bad American car being manufactured. This is the result of Japanese competition. . . .
In the relationship between the United States and Japan, the U.S. has the advantage. If a wall were to be erected between the U.S. and Japan over which goods could not be transferred, the only change in this country would be a rise in the price of home electronics and cars. A small number of farmers would also be forced off the land. But we would survive. If Japan were denied our market, the results would be devastating. Millions of Japanese workers would be thrown out of work. The social contract which has governed Japan since World War II would be broken. The result might well be the collapse of the postwar system of government. It is quite possible that the Japanese would launch a war to avert internal collapse. The most likely target of that war would be the People’s Republic of China. We are clearly better off continuing with our current policies than returning to protectionism. . . .
The relationship between the U.S. and Japan is clearly in the best interests of both countries, and there is absolutely no justification for the claim that we are on the path to becoming either a Bangladesh or a Brazil. . . .
Susan Jordan
Bureau of Medicine and Surgery
Navy Department
Washington, D.C.
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To the Editor:
I was more than pleased—relieved would be more like it—to see that COMMENTARY has finally opened its pages to a full-scale debate on the decline of America. . . . In that debate Edward N. Luttwak has performed a signal service, while Robert L. Bartley has proven how hollow the conservative refusal to face facts head-on really is.
What is most deficient about the Bartley thesis is its lack of any sense of teleology, that is, any sense that economic activity is not self-justifying but must serve wider purposes. Thus, . . . Mr. Bartley sings paeans to the growth of cable-TV systems and VCR ownership without ever wondering what ends up on our TV screens thanks to these new inventions. He admits almost in passing that, yes, ours is not a civilization that could either support or generate a Toulouse-Lautrec—instead we have our Robert Mapplethorpes by the busload. But that is precisely the point: what has made our civilization so nihilistic in the past few decades is precisely this abandonment of the notion that material well-being, however important a blessing in its own right, must yet serve wider, more spiritual purposes or it will turn in on itself and result in precisely the orgy of violence we are now enduring.
The newspaper headlines in the few months since this debate appeared in COMMENTARY have only served to confirm Mr. Luttwak’s thesis—and not in single file but in battalions. And I refer here not only to high-school students murdering each other . . . , or the addiction to drugs of so much of the population, or the morose mood of the electorate. I am also thinking of the poverty of the conservative movement as reflected in the election campaign so far. . . .
It is a remarkable achievement, in a way, to see the President’s approval rating plummet so dramatically following so popular a war, but this is surely related to the same blinkered, Panglossian view of the state of America that informs every sentence of the Bartley article. Either conservative political thinking gets rooted in the same sense of reality that Mr. Luttwak displays or it will go the way of Charles Lindbergh and Robert Taft, leaving the field to liberalism. . . .
[Fr.] Edward T. Oakes, S.J.
New York University
New York City
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To the Editor:
. . . How discouraging to find Edward N. Luttwak, most of whose writings are intelligent and insightful, once again in the same political bed as the crackpot Left. This time it is in bemoaning America’s economic decline and in peddling worn-out snake oil in favor of protectionism, mercantilism, and “industrial policy.” Alas, Mr. Luttwak emerges as a closet Gephardtian.
His evidence that America is sewer-bound:

Since World War II, Japan has grown faster than the U.S., which of course has also grown impressively. Ipso facto, America is becoming a banana republic.

The airports in America are in disgraceful shape compared with those of Europe and the Far East. One is reminded of the familiar old proof of the superiority of Communism based on comparisons between the Moscow and New York subway systems.

Tokyo is flooded with American prostitutes. Having myself never researched this market empirically, I can only wonder whether discovering Japanese prostitutes in pre-perestroika Moscow would have reinforced the proof, cited above, of the superiority of Communism.

Japan is willing to give America real goods and real physical assets in exchange for American financial assets and deeds to real estate. Real goods in exchange for paper—sounds like a good deal for the Yankees to me. For Mr. Luttwak, it shows the sky is falling.

In general Mr. Luttwak displays a fine 19th-century pre-Ricardian understanding of the balance of payments, international trade, and investment. . . . As for his views on “economic nationalism” and mercantilism, and his uncritical romanticizing of Japanese-style “industrial policy” (meaning bureaucratic politicization), I strongly recommend that Mr. Luttwak go back to being wrong about the things he really knows a great deal about, rather than being wrong about economics, his understanding of which is clearly limited.
Steven E. Plaut
University of Haifa
Haifa, Israel
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To the Editor:
As a professional economist who has spent some time on inter-country comparisons of economic growth, I was distressed by Edward N. Luttwak’s account of the state of the U.S. economy. . . . Mr. Luttwak repeats many of the errors Paul Kennedy made in The Rise and Fall of the Great Powers in his use of economic statistics, including the wrongful use of current exchange rates to compare gross-domestic-product (GDP) levels across countries, and the wrongful focus on international trade balances as measures of economic strength. But he also adds some errors and confusions of his own. . . .
One of these is a confusion about relative and absolute decline. It is hard to fathom whether Mr. Luttwak is predicting an absolute decline for the U.S. economy (falling per-capita GDP) in the years ahead . . . or merely a decline relative to other major industrial countries. Whether he realizes it or not, the two carry very different implications for an assessment of the U.S. economy. An absolute decline in GDP per capita over any extended period of time would be absolutely bad—but fortunately, despite what Mr. Luttwak may imply, it is extremely unlikely.
On the other hand, a decline in the U.S. per-capita GDP relative to other industrialized countries is not news—it has been going on since the end of World War II, when the war-torn European and Japanese economies started from very low levels of per-capita GDP. Further, it is in part a result of deliberate decisions made by U.S. economic policy-makers throughout the postwar period that the quicker the European and Japanese economies caught up with us, the faster we might grow ourselves.
The cosmopolitan free-trade system led by the U.S. after World War II had as an objective that other Western economies would catch up with it. This objective was embodied in the Marshall Plan, the Bretton Woods International Monetary System, and the use of U.S. gold reserves to provide the necessary liquidity for the growth of our allies. As a result of this policy, other industrial countries have gone a substantial part of the way toward catching up with the U.S. while the U.S. has over the last twenty years continued to grow at its historic rate established in 1870. This policy was based on the sensible premise that trading with wealthier, more productive partners with which technology flows could be two-way would allow us to grow faster. Now that other countries are getting close to us, and the full fruits of this policy are about to be enjoyed, some are getting cold feet.
For these reasons, Mr. Luttwak’s simple extrapolation of past growth rates 30 years into the future is flawed. Why should we expect the Japanese economy to grow as fast now, when it is the most productive economy and must forge its own innovations, as when it was number two or three and could cheaply borrow the more advanced technologies of the countries ahead of it?
A second of Mr. Luttwak’s errors is in the area of statistical evidence. His use and interpretation of economic statistics are naive and his use of current exchange rates to compare GDP across countries is flawed. He recognizes the limitations of comparing international levels and growth rates of GDP, but does not qualify his conclusions accordingly. (He claims that they show “irrefutable” evidence of decline.) Finally, he claims that time-series statistics on the U.S. economy have “none of the flaws of international comparisons” and are therefore “undisputed.” Wrong. Though they do not have the same flaws as international comparisons, they do have pitfalls of their own for the unwary user. Unfortunately, Mr. Luttwak falls into just about every pit. A few examples:
Mr. Luttwak makes much of our low savings rates compared to other countries—too much, when the hazards of comparing international rates are fully comprehended. Because savings are calculated as the difference between two very large and uncertainly measured aggregates, gross national product (GNP) and consumption, they are very hard to measure, let alone compare, across countries. Conventionally calculated measures of gross savings (which he uses) do not measure all savings. They do not, for example, count consumer expenditures on durable goods, which are clearly a form of saving. When a broader definition of saving is used, it has been estimated that two-thirds of the difference in savings rates between the U.S. and other developed countries disappears.
Moreover, savings rates are not calculated the same way in all countries. Japan, for example, includes government capital formation and a capital-consumption adjustment in its savings measure, while the U.S. does not. Fumio Hayashi estimates that adjusting for this difference reduces the Japanese savings rate in 1987 by almost half. After all the adjustments are made, it is probably safe to say that U.S. savings rates are still probably somewhat lower than in Japan and Europe. But it is not valid to claim that the difference is “disastrous.”
When the net international investment position of the U.S. became negative in 1985, the popular press was almost unanimous in voicing its concern that we were becoming like Mexico or Brazil. Mr. Luttwak echoes these concerns, and adds some more countries to the list, such as Malaysia, India, and China. What he does not mention is that the net international position of the U.S. is calculated by using book values, and this imparts a tremendous downward bias to our net position since U.S. assets held abroad were generally acquired much earlier than foreigners’ acquisition of U.S. assets. If all components are brought up to market value, the U.S. position in 1986, for example, is changed from a deficit of over $250 billion to a surplus of nearly $50 billion. Even if the U.S. were in a deficit, as Mr. Luttwak claims, the comparisons with less developed countries (LDC’s) are ridiculous. Unlike LDC’s, the U.S. debt is denominated in its domestic currency, so we face no problems servicing our liabilities should export earnings fall.
Mr. Luttwak makes much of the fact that real average hourly earnings for non-farm, non-supervisory workers (a majority of the total workforce) were not higher in 1991 than they were in 1965. He tries to interpret this statistic as a measure of income for a large bulk of the population. This measure is grossly inadequate for such purposes—by definition, it leaves out all non-wage income.
A much better measure is real per-capita GDP, which increased by roughly 50 percent over this period. This alone should have tipped him off that he was using a misleading measure of income. The measure he reports is not even a good measure of total compensation for labor, because it includes only wages and salaries paid by employers and does not include other employer-provided non-wage benefits, such as life and health insurance, and pensions and other employer-subsidized savings plans. Given the tendency for non-wage benefits to make up an ever-increasing share of the compensation package, it is wrong to think that movements in total compensation can be accurately measured by movements in average hourly earnings. . . .
I am not suggesting that there are no serious problems with the U.S. economy. U.S. economic growth could be faster, U.S. entrepreneurs could be more far-sighted, consumers more provident, policy-makers more intelligent. But the debate about the state of the U.S. economy and what to do about it is not helped by the sloppy use of statistics with little or no recognition of their meaning or measurement, or by ridiculous forecasts about the U.S. becoming the Brazil or even the Bangladesh of the 21st century.
Stephen Prowse
Vienna, Virginia
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To the Editor:
Edward N. Luttwak predicts decline for America, whose people’s “shared beliefs, above all in equality of opportunity in the pursuit of affluence” are doomed, he fears, to frustration. Robert L. Bartley retorts that the Sparta to the East “has collapsed and now even seeks to adopt American institutions of democracy and market economics”—by which he seems to mean exactly the same “shared beliefs” as those defined by his opponent; Mr. Bartley, however, thinks that the affluence being pursued will go on materializing in America. Then the “predominant activity” will be “collecting, processing, and communicating information.” . . .
Given such unity of opinion between your opponents about what American beliefs really are, the differences between their predictions are quite trivial.
A people devoted to “equality of opportunity in the pursuit of affluence” is already in the final stages of irreversible decadence, quite on the Spenglerian model. . . . America, it seems, is to be a pure mechanism, without a single idea. If so it will not be surprising if Americans devote themselves to that form of communicating information so eloquently imagined by the editor of the Wall Street Journal.
Whether the newly free people to the East will continue to be impressed remains to be seen. A few years ago America still, for them, stood for a living idea, something more like human community, creativity, and freedom of spirit.
Would someone tell me whether poetry communicates information?
Ian Robinson
University College
Swansea, Wales
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To the Editor:
In the debate between Edward N. Luttwak and Robert L. Bartley, . . . Mr. Luttwak makes some obeisance to the professional economist’s unhappiness with straight-line trend analysis because he considers it too simplistic. As a professional economist, I would answer that the problem is one of error rather than simplicity. Mr. Bartley does cite Malthus’s monumentally erroneous projections but many other examples are also available. The tired old “joke” in elementary statistics classes is that if a straight-line trend analysis had been applied to conditions in 19th-century Manchester, it would have shown that the city would currently be under six to ten feet of refuse (including manure). Mr. Luttwak might find it informative to review the U.S. Department of Energy’s predictions made in the 1970’s for energy prices for 1985 and 1990.
Undeterred by the economist’s problems with straight-line trend analysis, Mr. Luttwak plunges ahead fearlessly, and projects from recent trends in GNP per capita that in 2020, “the gap between Japanese and Americans at 5-to-1 would be just about the same as the 1980 gap between Americans and Brazilians.” (How the refuse is piling up!) Mr. Luttwak does have the good grace to note that if purchasing-power parities are used, the U.S. leads the list and grudgingly concedes that these “can depict living standards more or less realistically.” But he adds, “it is only comparisons based on straight exchange rates that determine the ‘who-does-what-to-whom’ of the international economy.” (Predictably, Mr. Bartley picks up the purchasing-power parities ball and runs with it for a touchdown with international standard-of-living comparisons.)
Mr. Luttwak’s point is not abundantly clear, but it seems to revolve around the supposed fact that it is gross exchange-rate values that determine which “parties” can buy and sell pieces of their economies, and that this will favor closed-door economies because open-door economies, like that of the U.S., depress the exchange rate of their currencies below their purchasing power at home. . . . Whatever the merits of the argument, we see trend analysis once again at work. With the “dirty float” in constant use in currency markets, Mr. Luttwak evidently believes that our monetary authorities will stand idly by while our standard of living is eroded in this fashion. (The financial news of February 28, 1992 was that the U.S. had intervened to support the dollar against the yen, for example.) Even so, it is not at all clear that the purchases of “attractive pieces” will diminish our standard of living.
Incredibly, Mr. Luttwak finds a way to use trends to deride the importance of purchasing-power plus gross-domestic-product criteria. He reports that the period of relative decline in this variable is just as evident and gives the trends of growth of this measure between 1970 and 1988. He does not, however, multiply the trend variable by the original amounts. I have done so and the figures in 1988 are as follows: U.S. =$19,540; Germany = $14,128; Italy = $12,958; and muscular Japan = $14,267. He concludes from all this that “the totality of all the relevant numbers contains irrefutable evidence that the American economy has long been in severe decline by world standards. . . .” He could have at least had the analytical integrity to state this as “severe relative decline.”
Mr. Luttwak’s infatuation with naive trend analysis extends to space as well as to time. In the classic putdown of statistical analysis, he generalizes from a broad sample of one when he uses Kennedy Airport in New York as evidence of severe decline in our economy. Many of us have done the compulsory hardship duty in JFK en route to Europe and elsewhere, but in my experience this airport fails to reflect the conditions in most of the nation’s airports. I am not a frequent traveler, but during the last year I have flown in and out of or changed planes in Chicago; Raleigh, North Carolina; Washington, D.C.; St. Louis; and Detroit. Nowhere did I find other than clean, well-policed, and seemingly efficient airports. All of these flights originated, of course, out of our airport in Phoenix. Mr. Luttwak complains that the JFK terminals belong to near-bankrupt airlines and that this accounts for their shabby conditions. Why, then, is it that our spanking new Barry M. Goldwater terminal, largely occupied by America West Airlines, already in Chapter 11, is a model of cleanliness and efficiency?
As to the poor taxi service to the city, this is most probably a result of New York’s medallion (monopoly) system for cabs. Mr. Luttwak should recall that the churlish employees in JFK are probably the best paid of similar employees in the nation, not to speak of the world. Could not it be the power of autocratic unions and the supine behavior of the politicians acquiescing in their demands that account for this behavior? . . .
As to the dreadful devastation encountered in the South Bronx and elsewhere in New York City, these conditions stem primarily from the political failure of the city to police itself adequately and the archaic rent-control measures still in force since World War II. . . .
To extrapolate the trends from JFK to the other airports in the nation, and to use these trends as well as those of other conditions in New York City as evidence of our national economic decline, would alone be sufficient to throw Mr. Luttwak out of court. In sum, a fair debate judge would have to enter a judgment of “no cause for action” against Mr. Luttwak in the debate, without even hearing Robert L. Bartley’s arguments.
David L. Shapiro
Scottsdale, Arizona
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To the Editor:
America is going in two directions at once. In some respects it is declining, in others it is growing greater and stronger. Thus both Edward N. Luttwak and Robert L. Bartley are right. America is an economic powerhouse, and Americans still enjoy a high standard of living compared to most of the rest of the world.
Nevertheless, as Mr. Luttwak points out, America’s infrastructure is falling apart. Moreover, in spite of the high per-capita ownership of cars, washing machines, television sets, and so on which Mr. Bartley points to, conditions for American workers began to deteriorate after the election of Ronald Reagan in 1980.
From the end of World War II until the election of Reagan, American workers ascended steadily out of the lower class up into the middle class. This was due to the growth of trade unions and various government programs. During that era American workers achieved health and pension benefits, became homeowners on a large scale, enjoyed paid vacations, and sent their children to college. Often they did this on one income; not so now.
Nowadays schoolchildren come home to empty apartments because both parents are away at work, assuming that the kids are lucky enough to live in a two-parent family. Few two-income families can afford to buy a house. People are thrown out of work because plants close, only to reopen in foreign countries where wages are paltry and working conditions abominable. For this and other reasons, nobody can depend upon a steady job. Health and pension benefits are getting harder for workers to come by. There are fewer and fewer good union jobs. A college education for the sons and daughters of working people is out of sight.
So no matter how bright the statistics look, no matter how good some members of the business and professional elites have it, American workers are sinking out of the middle class and back down into the lower class.
Hugh Sheehan
Fremont, California
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To the Editor:
The May issue of COMMENTARY—containing the second round of your debate on American decline, and mostly attacking Edward N. Luttwak’s thesis on the “third-worldization” of America—arrived simultaneously with the nationwide wave of riots, looting, and arson, which fully confirmed Mr. Luttwak’s position.
One must separate the two parts of his argument. America’s relative economic decline, a . . . consequence of the much-desired recovery of Europe and Japan from the ashes of war and the brilliant rise of newer Asian states, is a perfectly natural and healthy event. . . .
But the decline of American society in absolute terms over the last three decades is unmistakable. Gargantuan budget deficits, driven by the unstoppable growth of redistributionist “entitlement programs,” are pushing our nation to bankruptcy and financial collapse. Street crime has risen greatly in most cities and many suburban enclaves, . . . exacting direct and indirect costs estimated at $200-$300 billion each year. The schools of our major cities are increasingly being equipped with metal detectors, at a cost of tens of millions, considered the only means of dissuading teenagers from bringing guns into the classroom and shooting one another. And in the heart of New York City, an underclass mob shouting “Kill the Jews!” can corner and stab to death a young rabbinical student from Australia, as part of what is arguably the worst outbreak of worldwide anti-Semitic violence in five decades.
None of these examples

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