Is America Dying?

Civilization: The West and the Rest 
by Niall Ferguson. The Penguin Press, 2011.

Erudite does not begin to describe Niall Ferguson. The Oxford-educated historian writes best-sellers, teaches at Harvard and does research at Stanford, is equally at home discussing the works of Pieter Bruegel and quantitative easing, and drops the names of Ming dynasty emperors as if he knows them personally. Civilization is a rare history book that includes color plates of 16th century paintings and charts of patents granted, organized by country of origin. Vastly catholic in his tastes and sources, Ferguson is also hugely ambitious in this, his 10th book. If the last history book you read was a dry college text, this is the volume from which to gain a new appreciation for what history can teach us.

History is not a hollow echo of the past but a fairly clear predictor of the future. In Ferguson's hands, it is not all hindsight. He asks what he calls “the most interesting question a historian of the modern era can ask”: How did the less-populous, less-sophisticated, less-advanced civilizations of the West come to dominate the rest? When the civilizations of Asia and South America were far ahead of pestilence-ridden Europe, how did fortunes turn 180 degrees and send Imperial China, the Maya, the Ottomans into such sudden decline? And if it could happen to them, could it happen to us? As so many bemoan the decline of Western civilization, Ferguson looks for the seeds of our demise in the implosion of the civilizations we conquered.

He finds six factors which he says are the “mainsprings of global power”:

• Competition
• Science
• Property rights
• Medicine
• Consumer society
• Work ethic

This list is not all that new. Francis Fukuyama argued in The End of History and the Last Man that two main forces push all societies toward capitalist liberal democracy: modern natural science and a desire for recognition, which drives innovation and personal achievement. What is new, of course, is that Ferguson's book was written post-9/11, post-Great Recession and just ahead of the Arab Spring. The BRICs have risen in this book. The Chinese economy now calls the shots more than any Western economy. And in the most striking contrast to Fukuyama's conclusions, the inevitable outcome is not always capitalist liberal democracy. The Chinese have capitalism without being democratic. The Russians have democracy (election fraud notwithstanding) but not liberalism. The Iranians have science without being capitalist, liberal or democratic. Turns out that in the new world disorder, you can pick and choose the pieces you want and beat the once-great powers at their own game.

Immensely readable, this book says a great deal very economically. Think for a moment about the title: Civilization. To cram all of that into 325 pages (plus 75 pages of bibliography, notes and index) is certainly an accomplishment. This necessitates a vocabulary that may have you reaching for a dictionary but does you the favor of assuming you're as smart as the author.

The buildup is considerable but the payoff, quite frankly, is something of a disappointment. Our civilization could indeed collapse—that happens surprisingly quickly as the book demonstrates over and over. But the cause which Ferguson delivers in literally his last sentence, is underwhelming. We still have the six factors stated above, obviously, and even as the citizens of the Middle East take to the streets demanding those things, the political powers that emerge (most obviously the Muslim Brotherhood) turn their countries inward, undermining the competitiveness and innovation that underpin global dominance. So how could they take control and why would we relinquish it?

“Pusillanimity.” That's it. Look it up.

The Price of Civilization
by Jeffrey D. Sachs. Random House, 2011.

Jeffrey Sachs is a scold. Even when you agree with him, you dislike the hectoring tone of moral indignation. From the first sentence of this, his third book, Sachs berates us for the “moral crisis” that lies “at the root of America's economic crisis.” That is, “the decline of civic virtue among America's political and economic elite.” Virtue? Well, yes, it is difficult to find much virtue in the likes of Bernie Madoff, philandering presidential hopefuls, CEOs with huge bonuses and low tax rates, or congressmen more intent on argument than solutions. And, yes, we can all play a part in fixing the very real problems that confront us, but being beaten over the head with our failings gets old by about page 10.

We watch too much television and spend too much time reading inane digital media. We don't save enough. We aren't well-informed as citizens. We advocate liberty but underestimate the very real role that government should play in our lives. We don't care about future generations. We pollute. We consume. We are, apparently, the creators of our own doom. It's amazing, given all our faults, that he doesn't wipe his hands of us.

Fortunately, there is a real villain here, according to Sachs. Someone we can blame all this on: Ronald Reagan. Reagan convinced us that government was the problem and went about deregulating to such an extent that huge inequality between rich and poor resulted. Reagan's combination of “conviction and charm” gave his argument the ring of truth so we went along. Sachs does make a case for the faulty logic and the parlous results. From 1981 to 2010, economic and employment growth both declined, earnings stagnated, the deficit widened and earnings by the top 1% of households rose from 10% to 21%. Only inflation improved. That other economists look at this data and draw completely different causes and conclusions is neither here nor there as far as Sachs is concerned, because obviously they are wrong. As a speaker at a Harvard tribute to Sachs once said, “Jeff is sometimes right and sometimes wrong, but never in doubt.”

His aims are certainly lofty: raising employment, reducing poverty, balancing the budget, improving access to education, avoiding environmental catastrophe, improving governance, national security and raising life satisfaction—an ambitious list with which no one could disagree. But his prescription for achieving them begins with a self-help remedy: mindfulness. We should turn off our TVs and become more mindful. This will turn us back into a sober-sided, virtuous society that can stop scrapping with each other and be nice.

In all fairness to Sachs (fairness is one of his favorite words), his ideas are more complicated than that, but by the time he gets to them, you may well have run out of patience.

That Used To Be Us
by Thomas L. Friedman and Michael Mandelbaum. Farrar, Straus and Giroux, 2011.

America used to lead the world and still does in many important ways. We are still the world's banker and often its policeman. We have the highest standard of living and the biggest economy. But a malaise has set in as all the books in this month's issue make clear: We just don't feel good about our future and our place in the world. We feel that Britain ruled the 19th century, we ruled the 20th and China will rule the 21st. And we have this awful feeling that it slipped through our fingers somehow, that we lost our grip without intending to or even noticing it was happening.

Friedman and Mandelbaum, both high-profile economic commentators, authors and lifelong friends, wrote this book to prove that our demise is not inevitable. They agree that there is a malaise and, to a certain extent, with Niall Ferguson's (see above) reason for it—a collective loss of nerve. But their solution is extremely radical compared to everyone else's.

This book is filled with the signature anecdotes from far-ranging travels and extensive reporting that characterize Friedman's Pulitzer Prize-winning journalism and best-sellers. He rides along with two young American engineers in India touring the country in a solar-powered car they invented. He talks to the world's largest maker of fabric-cutting equipment and software, still based in Buffalo, New York, far from the Asian hotbeds of textile manufacture. These sorts of Americans “just didn't get the word” that the end is nigh.

The book is also marked by an optimism that is lacking from almost anything else out there. The end is not nigh, thank you very much. America is fine. We've just taken our collective eye off the ball for too long but there is a way to get it back.

“We think it is time, figuratively speaking, to blow the place up,” write the authors. What they want is “a serious independent presidential candidate,” a third-party contender from outside a political system that is stuck “under the sway of powerful special interests” and “so sharply polarized that they are incapable of arriving at the deep, ideologically painful compromises that major initiatives, of the kind required to meet the major challenges America faces, will require.”

This is an idea that Friedman pushed at the Aspen Institute last July and in his op-ed column in The New York Times. He is talking about AmericansElect.com, the first online presidential nomination process. As of December 2011, there were half enough signators to the petition to put their platform on the national ballot next November. We need someone who is beholden to neither major party and none of the special interests, say the authors. We need someone who will just get on with it and who can bring us back together.

The last time there was a malaise of this proportion, Jimmy Carter put solar panels on the roof of the White House and wore a Mr. Rogers sweater on national TV and, hence, lost to the charismatic Ronald Reagan. That's where our problems began, according to Jeffrey Sachs (see above). It is tempting, as this book advocates, to throw the bums out and start over. Neither as scholarly as Ferguson nor as slanted as Sachs, That Used To Be Us has a bracing ring of good old American ingenuity and spirit.

DYING? NOT SO FAST. 
What's Next?: Unconventional Wisdom on the Future of the World Economy 
edited by David Hale and Lyric Hughes Hale. Yale University Press, 2011.

The dismal science of economics has become even more dubious in recent years because the profession seems to have been hijacked by partisan politics. Paul Krugman on the left and Douglas Holtz-Eakin on the right may be skillful observers and analysts of economic trends. But they are best known as intellectual water carriers for Democrats, in Krugman's case, or Republicans, who frequently cite Holtz-Eakin.

For business planners, a yawning chasm between the predictions of left- and right-leaning economists may help validate their personal political leanings or simply be entertaining. But it's not particularly useful in setting strategy and allocating resources. The husband and wife team of David Hale, a Chicago-based economics consultant, and Lyric Hughes Hale, a writer and commentator specializing in Asian affairs, has addressed this problem by presenting an array of economic outlooks that avoids partisan advocacy and relies on objective evidence.

Their starting point is the global reaction to the Great Recession of 2008 and 2009, a process that is by no means concluded. The book's 23 commentators comprise economists, institutional investors and journalists working in nearly all parts of the globe. In short essays, they offer forecasts drawn from data and their professional experience, not political ideologies.

As you might expect, the outlook is mixed. The corporate sector, especially in the United States, Canada and Australia, survived the recession fairly well and is primed for growth. Enterprises in Japan and Europe emerged in weaker shape. China is likely to become less attractive to foreign investment than before the recession, as the availability of cheap labor declines and government policy shifts toward stimulating consumption instead of exports. The consensus of the writers seems to be that short-term monetary and fiscal stimulus remains a proper tool for cementing economic recovery. The hard side effect of inflation has not emerged.

What can North American business executives and policymakers learn about stimulating economic growth from the recent economic policy mistakes in South Africa and successes in Canada and Australia? South Africa boosted welfare benefits but didn't invest in education and infrastructure. Canada and Australia didn't let their banks go wild but remain highly dependent on trading partners.

Will higher interest rates finally emerge after years of easy money? A possible “buyers strike” by bond investors looms. Will climate change create business opportunities or lapse into national protectionism? Probably both.

What's the best way to compare the outlooks for economic growth in Europe and America? America looks better. What national tax policy is best in a global economy? Demographic trends favor a value-added tax, currently employed in much of the world. How is ethical business conduct best achieved and policed? Not by cutting the staffs of government financial regulators or by imposing bureaucratic burdens on businesses that don't address the problem. If you stick to the facts, the questions and answers in global economics become far less dismal.

—Reviewed by Bill Barnhart