The Post-American World: Release 2.0 (22 page)

Scholars have debated the causes of Britain’s decline since shortly after that decline began. Some have focused on geopolitics; others, on economic factors like low investment in new plants and equipment, bad labor relations, and a loss of marketing skills. British capitalism had remained old-fashioned and rigid. British industries were set up as small cottage-scale enterprises with skilled craftsmen rather than the rationally organized mass factories that sprang up in Germany and the United States. There were signs of broader cultural problems as well. A wealthier Britain was losing its focus on practical education. Science and geography were subordinated to literature and philosophy. British society retained a feudal cast, given to it by its landowning aristocracy. This elite disdained manufacturing and technology, so much so that successful entrepreneurs would set themselves up as faux aristocrats, with country houses and horses, and hide every trace of where the money had come from. Rather than study chemistry or electrical engineering, their sons spent their days at Oxbridge ingesting the history and literature of ancient Greece and Rome.
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Perhaps none of these failings were actually crucial. Paul Kennedy points out that Britain’s dominance in the nineteenth century was the product of a series of highly unusual circumstances. Given its portfolio of power—geography, population, resources—it could reasonably have expected to have 3 to 4 percent of global GDP, but its share rose to around ten times that figure. As those unusual circumstances abated—as other Western countries caught up with industrialization, as Germany united, and as the United States resolved its North-South divide—Britain was bound to decline. The British statesman Leo Amery saw this clearly in 1905. “How can these little islands hold their own in the long run against such great and rich empires as the United States and Germany are rapidly becoming?” he asked. “How can we with forty millions of people compete with states nearly double our size?” It is a question that many Americans are now asking about the United States in the face of China’s ascent.

Good Politics, Bad Economics

Britain managed to maintain its position as the leading world power for decades after it lost its economic dominance, thanks to a combination of shrewd strategic outlook and good diplomacy. Early on, as it saw the balance of power shifting, London made one critical decision that extended its influence by decades: it chose to accommodate itself to the rise of America rather than to contest it. In the decades after 1880, on issue after issue London gave in to a growing and assertive Washington. It was not easy for London to concede control to its former colony, a country with which it had fought two wars (the Revolutionary War and the War of 1812) and in whose recent Civil War it had sympathized with the secessionists. Still, Britain ultimately ceded the Western Hemisphere to its former colony, despite having vast interests of its own there.
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It was a strategic masterstroke. Had Britain tried to resist the rise of the United States, on top of all its other commitments, it would have been bled dry. For all of its mistakes over the next half century, London’s strategy toward Washington—one followed by every British government since the 1890s—meant that Britain could focus its attention on other critical fronts. As a result, it remained the master of the seas, controlling its lanes and pathways with “five keys” that were said to lock up the world—Singapore, the Cape of Africa, Alexandria, Gibraltar, and Dover.

Britain maintained its control of the empire and worldwide influence with relatively little opposition for many decades. In the settlement after World War I, it took over 1.8 million square miles of territory and thirteen million new subjects, mostly in the Middle East. Still, the gap between its political role and its economic capacity was growing. While the empire might originally have been profitable, by the twentieth century it was an enormous drain on the British treasury. And this was no time for expensive habits. The British economy was reeling. World War I cost over $40 billion, and Britain, once the world’s leading creditor, had debts amounting to 136 percent of domestic output afterwards.
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The tenfold rise in government debt meant that by the mid-1920s interest payments alone sucked up half the government’s budget. Britain wanted to keep up militarily and, after World War I, bought up the German fleet at fire-sale prices and momentarily retained its status as the leading naval power. But, by 1936, Germany’s defense spending was three times higher than Britain’s.
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The same year that Italy invaded Abyssinia, Mussolini also placed fifty thousand troops in Libya—ten times the number of British troops guarding the Suez Canal.
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It was these circumstances—coupled with the memory of a recent world war that killed more than seven hundred thousand young Britons—that led the British governments of the 1930s, facing the forces of fascism, to prefer wishful thinking and appeasement to confrontation.

Financial concerns now dictated strategy. The decision to turn Singapore into a “massive naval base” is a perfect illustration of this. Britain saw this “eastern Gibraltar” as a strategic bottleneck between the Indian and Pacific oceans that could stop the westward movement of Japan. (Britain had the option of maintaining its alliance with Tokyo—more accommodation—but the United States and Australia had objected.) The strategy was sensible. Given Britain’s precarious finances, however, there was not enough money to fund it. The dockyards were too small for a fleet that could have taken on the Japanese, the fuel insufficient, the fortifications modest. When the Japanese attack came in 1942, Singapore fell in one week.

World War II was the final nail in the coffin of British economic power. (In 1945, American GDP was ten times that of Britain.) Even then, however, Britain remained remarkably influential, at least partly because of the almost superhuman energy and ambition of Winston Churchill. When you consider that the United States was paying most of the Allies’ economic costs, and Russia was bearing most of the casualties, it took extraordinary will for Britain to remain one of the three major powers deciding the fate of the postwar world. The photographs of Roosevelt, Stalin, and Churchill at the Yalta Conference in February 1945 are somewhat misleading. There was no “big three” at Yalta. There was a “big two” plus one brilliant political entrepreneur who was able to keep himself and his country in the game, so that Britain maintained many elements of great powerdom well into the late twentieth century.

Of course, it came at a cost. In return for its loans to London, the United States took over dozens of British bases in the Caribbean, Canada, the Indian Ocean, and the Pacific. “The British empire is handed over to the American pawnbroker—our only hope,” said one member of Parliament. The economist John Maynard Keynes was more enraged, describing the Lend-Lease Act as an attempt to “pick out the eyes of the British empire.” Less emotional observers saw that it was inevitable. Arnold Toynbee, by then a distinguished historian, consoled Britons that America’s “hand will be a great deal lighter than Russia’s, Germany’s, or Japan’s, and I suppose these are the alternatives.”

The fundamental point is that Britain was undone as a great global power not because of bad politics but because of bad economics. It had great global influence, but its economy was structurally weak. And it made matters worse by attempting ill-advised fixes—going off and on the gold standard, imposing imperial tariffs, running up huge war debts. After World War II, it adopted a socialist economic program, the Beveridge Plan, which nationalized and tightly regulated large parts of the economy. This may have been understandable as a reaction to the country’s battered condition, but by the 1960s and 1970s it had condemned Britain to stagnation—until Margaret Thatcher helped turn the British economy around in the 1980s.

Despite a seventy-year-long decline in its relative economic place, London played its weakening hand with impressive political skill. Its history offers some important lessons for the United States.

America’s Long Run

First, however, it is essential to note that the central feature of Britain’s decline—irreversible economic deterioration—does not really apply to the United States today. Britain’s unrivaled economic status lasted for a few decades; America’s has lasted more than 130 years. The U.S. economy has been the world’s largest since the middle of the 1880s, and it remains so today. In fact, America has held a surprisingly constant share of global GDP ever since. With the brief exception of the late 1940s and 1950s—when the rest of the industrialized world had been destroyed and America’s share rose to 50 percent!—the United States has accounted for roughly a quarter of world output for over a century (32 percent in 1913, 26 percent in 1960, 22 percent in 1980, 27 percent in 2000, and 26 percent in 2007).
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It is likely to slip but not significantly in the next two decades.

This difference between America and Britain can be seen in the burden of their military budgets. Britannia ruled the seas but never the land. The British army was sufficiently small that the German chancellor Otto von Bismarck once quipped that, were the British ever to invade Germany, he would simply have the local police force arrest them. Meanwhile, London’s advantage over the seas—it had more tonnage than the next two navies put together—came at ruinous cost to its treasury. The American military, in contrast, dominates at every level—land, sea, air, space—and spends more than the next fourteen countries put together, accounting for almost 50 percent of global defense spending. Some argue that even this understates America’s military lead against the rest of the world because it does not take into account the U.S. scientific and technological edge. The United States spends more on defense research and development than the rest of the world put together. And, crucially, it does all this without breaking the bank. Defense expenditure as a percent of GDP is now 4.9 percent, lower than it was for most of the Cold War. (Under Eisenhower, it rose to 10 percent of GDP.) The secret here is the denominator. As U.S. GDP grows larger and larger, expenditures that would have been backbreaking become affordable. The Iraq War may have been a tragedy or a noble endeavor, depending on your point of view. Either way, however, it did not bankrupt the United States. The war has been expensive, but the price tag for Iraq and Afghanistan together—$125 billion a year at its peak—represents less than 1 percent of GDP. Vietnam, by comparison, cost 1.6 percent of American GDP in 1970 and tens of thousands more soldiers’ lives.

American military power is not the cause of its strength but the consequence. The fuel is America’s economic and technological base, which remains extremely strong, even in the wake of the worst recession since the 1930s. The United States does face larger, deeper, and broader challenges than it has ever faced in its history, and the rise of the rest does mean that it will lose some share of global GDP. But the process will look nothing like Britain’s slide in the twentieth century, when the country lost the lead in innovation, energy, and entrepreneurship. America will remain a vital, vibrant economy, at the forefront of the next revolutions in science, technology, and industry—as long as it can embrace and adjust to the challenges confronting it.

The Future Is Here

When trying to explain how America will fare in the new world, I sometimes say, “Look around.” The future is already here. Over the last twenty years, globalization has been gaining breadth and depth. More countries are making goods, communications technology has been leveling the playing field, capital has been free to move across the world. And America has benefited massively from these trends. Its economy has received hundreds of billions of dollars in investment—a rarity for a country with much capital of its own. Its companies have entered new countries and industries with great success and used new technologies and processes, all to keep boosting their bottom lines. Despite two decades of a very expensive dollar, American exports have held ground.

According to the World Economic Forum, the United States remains the most competitive major economy in the world. (Switzerland, Sweden, and Singapore score higher, but their combined population is 22 million, about the size of greater Los Angeles.) It ranks first in innovation, seventh in availability of latest technologies, first in university-industry collaboration on R&D, and fourth in the quality of its scientific research institutions. China does not come within twenty countries of the United States in any of these, and India breaks the top ten on only two counts: market size and national savings rate. In virtually every sector that advanced industrial countries participate in, U.S. firms lead the world in productivity and profits. America’s superior growth trajectory might be petering out, and perhaps its growth will be more “normal” for an advanced industrial country for the next few years. But the general point—that America is a highly dynamic economy at the cutting edge, despite its enormous size—still holds.

Look at the industries of the future. Nanotechnology—applied science dealing with the control of matter at the atomic or molecular scale—is considered likely to lead to fundamental breakthroughs over the next fifty years. At some point in the future, or so I’m told, households will construct products out of raw materials, and businesses will simply create the formulas that turn atoms into goods. Whether this is hype or prescience, what is worth noticing is that by every conceivable measure, the United States dominates the field. It has more dedicated nanocenters than the next three nations (Germany, the United Kingdom, and China) combined, and many of its new centers focus on narrow subjects with a high potential for practical, marketable applications—such as the Emory-Georgia Tech Nanotechnology Center for Personalized and Predictive Oncology. At market exchange rates, government nanotech funding in the United States is almost double that of its closest competitor, Japan. And while China, Japan, and Germany contribute a fair share of journal articles on nanoscale science and engineering topics, the United States has issued more patents for nanotechnology than the rest of the world combined, highlighting America’s unusual strength in turning abstract theory into practical products.