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Reports of America's Decline Have Been Greatly Exaggerated


A certain type of pundit has always been drawn to the idea that America’s best days are behind it. That tendency went viral in the commentariat after the global financial crisis, with chin-strokers around the world gravely intoning about the end of ‘Washington Consensus’ and the inexorable rise of Asia and the BRICs.

American capitalism caused the crisis, the thinking went, and as such it has been discredited as a model for the world. And not only was America no longer a good example to emulate, but given that it was the the epicenter of the crisis, its chances of recovery were slimmer than just about anyone else’s. The establishment itself bought heavily into this meme, and to some degree it’s been a guiding principle of our foreign policy.

Via Meadia has tended to be more optimistic than most on America’s prospects. Yes, America faces real headwinds to full recovery, but its healthy demographics, its resilient and deceptively adaptive political system, its vibrant entrepreneurialism, and now its very promising domestic energy sector suggest that the case for gloom has, as always, been grossly overstated.

Dan Drezner, who it must be said never was a gloom-and-doom type himself, has penned an excellent essay in the UK Spectator very much along these lines. A taste:

Contrary to conventional wisdom, the United States has actually been deleveraging from the bubble years of the past decade. Yes, millions of households were in foreclosure in America three years ago — but taking the pain then has allowed recovery now. While commentators have focused on rising government debt, US households and companies have been tackling their own. According to the OECD, the debt-to-income ratio for American households has fallen from a pre-crisis 137 per cent to 116 per cent by the end of last year. That figure is now lower than European household indebtedness. Britain is at 160 per cent.

There are a lot more pithy comparative statistics to be found in the piece. It’s very much worth a read.

At one point, Drezner cites Larry Summers: ‘The great mistake of the gridlock theorists is to suppose that all progress comes from legislation and that more legislation consistently represents more progress.” Quite right, and it’s the one argument Drezner perhaps doesn’t make starkly enough: America’s global strength is less the result of the wise (or foolish) policies of any given administration than of the health and dynamism of American society.

[American flag photo courtesy Shutterstock.]

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  • Braincramp

    I respectfully disagree. There will be a day of reckoning as a result of the debt. It can’t be sustained, we have no plans to slow its growth, and its unwinding will be ugly.

    I’m 61 and I’m going to be okay. Generations to follow–people now in their twenties, thirties, and even forties, have NO chance of enjoying the standard of living boomers have, and for which THEY will pay.

    I tried for many years to enlighten my younger coworkers as to what their ignorance and disinterest was producing but the run-up to the 2012 election was my last hurrah. No more entitlement, tax, or monetary policy reform for me; like the 9,999 other baby boomers turning 65 every day now, I choose a denial of the laws of arithmetic. Just give me “mine” and to heck with you.

    Sorry about the rant…

  • bpuharic

    I lived in Dallas for 2 years and contrary to the myth WRM states here, red state taxes are pretty high too…especially on the poor.

  • Jim__L

    What happens to those numbers when the $17T+ national debt is included?

  • Pait

    Deleveraging is, of course, both unavoidable and healthy. It is also the cause of the persistent unemployment, a major disaster which is made worse by the failure of government to act appropriately.

    Had the US fought against unemployment more vigorously, deleveraging would have been faster and less problematic. It is a pity that so many people in government, business, and the media continue to devote an enormous amount of effort to not understand this basic economic fact.

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