The 21st Century Another American Century? Don’t Bet on It

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In conjunction with our latest Freakonomics Radio podcast, “The Folly of Prediction,” I decided to reach out to a former professor of mine, Raymond Horton, whose modern political economy class is a student favorite at Columbia Business School. I wanted to know what Horton thought the worst prediction ever was, particularly regarding the intersection of politics and economics. He immediately pointed to a Foreign Affairs essay written by Mortimer Zuckerman in 1998, in which Zuckerman boldly lays out the case that, like the 20th century, the 21st will also be marked by American dominance.

We’re barely a decade into the new century, so you may think it’s too early to pass judgment on Zuckerman’s prediction. But given the way things have played out over the last several years, it does look to be on shaky ground. At least that’s the opinion of Ray Horton.

Once you’ve finished reading Horton’s essay, we’d love to hear what you think count as some of the worst predictions ever.

The 21st Century the American Century? Don’t Bet on It
By Raymond Horton

On the eve of the 21st century Mortimer Zuckerman used the pages of Foreign Affairs to predict it would be “America’s century,” like the one just ending. At the time it didn’t seem as wayward as it does now. Back then the American political economy was firing on all cylinders, according to the usual metrics of good and bad. The economy was producing more and employing more, per capita incomes were rising, and even unemployment was headed in the right direction. To top it off, the federal government was beginning to run surpluses that could be used to make America even stronger.

Thirteen years later the U.S. is not firing on many of the recognized cylinders. Things have changed for the worse in a short period of time. Relatively few experts, and more importantly, relatively few common people are confident about the future of America. And while the U.S. has stagnated, some countries have prospered—again by the usual metrics. This combination of decline at home and rise abroad has reduced America’s international power markedly. Not many are predicting that this will be changing anytime soon. The safer bet, informed by events in the period since Zuckerman’s prediction, is that the 21st century will not be America’s.

Since then, two signal events stand out as path changers: 9/11 and, seven years later, the financial crisis. The former started the U.S. on an unsustainable fiscal path, the product of two wars and three years of tax cutting that would not have happened without the protective cover of 9/11. The latter led to a particularly severe kind of recession from which the economy still hasn’t recovered, thereby exacerbating the country’s structural deficit. To make things worse the decision makers are stymied, frozen by disagreement over what is causing the stagnation and how to cure it.

In many other countries (China is the outstanding example) decision makers are not stymied. China’s economy continues to grow at breakneck speed, promising to surpass America’s in purchasing power by the end of the decade. And China’s military capacity is also growing fast. India too appears to be on its way to Great Power status due to its economic and demographic advances. Of course, the development of other countries can be changed by unforeseen events, their 9/11’s if you will, or altered by the failure of their decision makers to adapt to foreseeable events. Time will tell, but at this point I wouldn’t bet that this century will belong to America.

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  1. Joshua Northey says:

    I am as down on America’s future as anybody.

    I think there is a significant likelihood declining relative standard of living (lazy suburbanite kids will grow up to be only in the top 20% of the world economically speaking instead of the top 5% and will hugely resent it) will lead to…

    a coup and/or
    civil war and/or
    foreign offensive war morphing into WWIII

    in the next 50-75 years.

    Yet even with that belief I find “And while the U.S. has stagnated, some countries have prospered—again by the usual metrics. ” kind of comical. Which countries exactly are “prospering” compared to the US? Sure some countries coming from an extremely low base are growing very quickly, but it is not clear their overall situation is stable or that the growth will have any inertia once they gain relative parity.

    “In many other countries (China is the outstanding example) decision makers are not stymied. China’s economy continues to grow at breakneck speed, promising to surpass America’s in purchasing power by the end of the decade. And China’s military capacity is also growing fast. India too appears to be on its way to Great Power status due to its economic and demographic advances.”

    Of course China and India are going to become much stronger powers in the next century. But it is not as though the US didn’t have competitors for much of the 20th. Germany in various forms, the British Empire, Japan, the USSR in its screwed up paranoid way.

    The growth of China and India is much more likely to lead to the crowding off of the smaller “European” Countries on the world stage. Canada, Australia, Italy, Spain, will lose a lot of their remaining relevance.

    The US is still going to be the preeminent power for quite a while just because it has so much wealth and military inertia built up.

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    • Charles says:

      Not that Australia really had any relevance, but we do enjoy an economy and standard of living above that of the US, and this has indeed been improving throughout this ‘credit crisis’ that everyone keeps talking about. So we may not be global power competitors, but that doesn’t mean we’re not prospering compared to the US while having a similar level of development.

      As for China and India becoming global powers, the big difference between them, the US, Russia, Germany and Japan is their population size – China is now the second largest economy and have a far larger population than the US, so if their economy and GDP per capita continue to grow, they will easily be able to eclipse US power, and that of your traditional global challengers listed above. That is, if they’re able to continue their growth, and then maintain their level of development (same goes for India) – after all, they do rely very heavily on the consumption of the developed nations…

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    • Martin@Oz says:

      I’m not too sure Joshua. China doesn’t have to achieve anywhere near economic parity on a per capita basis to overtake the US, due to its overwhelming preponderance of population. Even if your average Chinese person eventually produces only 1/3 that of the average American, China still wins.

      Of course the Chinese economy could still collapse for any number of unforeseen reasons, and I could crash into a telegraph pole on my drive home tonight, but chances are I won’t.

      Re your comment on the marginalisation of smaller western countries as China continues to grow, if anything Canada and Australia are set for a economic bonanza as China steams ahead. Certainly the primary reason the Oz economy has continued to grow powerfully in recent years as the US and most of Europe has slid into recession is because of China’s hunger for our resources.

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  2. Mark says:

    Close contender: Alexander Wendt 2003 Why a World State is Inevitable…

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  3. Gilbert says:

    Bad prediction? How about “Dow 36,000″

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  4. Rafael says:

    American arrogance and greed will only accelerate their demise. They’ve had a great opportunity to set an example as the world’s largest economy and they threw it away. Time will tell, hopefully they’ll learn from their mistakes and be a bit more humble and easy to deal with.

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  5. Ross says:

    China may be a great place to make cheap stuff, but it is not the most appealing place to live your life. As soon as any Chinese save up enough money, they want to emigrate to a Western democracy. That’s why I’m buying USA west coast real estate as fast I can.

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  6. Nick says:

    I’ve lived in China for 6 years. I don’t buy the Chinese Century or the Indian Century.

    Let’s start with China: China isn’t innovative enough and the government has to put too much effort just in keeping the country satisfied and under control. Also, let’s take into account that the country’s meteoric rise has been based on the former Japanese export model of state backed loans through state backed banks (you guys have done podcasts on this), only China has gone bigger (30% of GDP is bad debt… or more, cooked books?). We all saw how that has worked out for Japan. Furthermore, China’s age demographics are APPALLING due to the one child policy compared with the uncontrolled communist birth rates. Their end of life cycle care demands and stress on the economy by the amount of elderly in the next two and three decades is going to crush their younger workers. Plus, the little emperors aren’t going to want to do hard labor in the future, much of what has driven China’s impressive growth for the last 30 years. AND how can they project power? As of now, they are renovating a formerly incomplete USSR aircraft carrier. It take generations of aircraft carrier operation to know how to do it right and they have yet to start.

    India is too divided by its multiple parties, too much corruption and too many people without jobs. It’s hard for them to project power and control the global markets when they cannot really reach a consensus at home. Furthermore, they are and will be more focused on safety and protection from Pakistan in the near and mid future, rather than projection power globally.

    How about the EU? They have 27 nations and no united sense of nationality, no one fiscal policy mechanism, no united army and no one leader.

    Maybe the USA is in dire straits, but it’s still theirs to lose and I believe they will rebound. Takes a lot to make the leap to their level. Don’t buy the doom/gloom hype that America is done.

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    • Mike B says:

      China is also destroying its environment at an alarming pace. Their whole economic strategy has been to basically “insource” the developed world’s toxic production processes. While the United States may have large Medicare and Pension liabilities, China is staring at trillions in environmental damage and unlike pensions you can’t simply choose to rescind poisoned air and water. Oh, and much of the country is running out of drinking water.

      In the 21st Century the United States may not have a 100 game season, but just like the Red Sox China is due for its own late season collapse. I should easily be able to win our division.

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  7. Dwight says:

    Paul Ehrlich in 1968: The battle to feed all of humanity is over. In the 1970s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now. At this late date nothing can prevent a substantial increase in the world death rate…

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  8. Lyle Smith says:

    China and India will be lucky to be in the same position that America is in today by the end of the century. These countries still have a very long way to go before they equal per capita U.S. income.

    … and China still is still an authoritarian state (so of course their decision makers aren’t stymied… there’s only one political party making the decisions). Their legal system is nascent. Very little tort law. Property rights are nascent. And this all going on within a non-democratic political system that China has yet to get away from after 2000 plus years.

    And India has cultural issues out the yin-yang that will take years to work themselves out, something akin maybe to the United States’ issue with slavery and then segregation, but a culture and life system that is much more ancient and well rooted.

    Neither of these countries is near to catching up the U.S. militarily either. China even buys equipment from Russia still.

    China also cannot feed itself without importing food stuffs now.

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