Great Power Shift?

The always extremely interesting Kevin Phillips in the Washington Post:

Here, then, is the unnerving possibility: that another, imminent global crisis could make the half-century between the 1970s and the 2020s the equivalent for the United States of what the half-century before 1950 was for Britain. This may well be the Big One: the multi-decade endgame of U.S. ascendancy. The chronology makes historical sense -- four decades of premature jitters segueing into unhappy reality.

Matt Yglesias comments:

The United States is currently the richest country in the world by a pretty wide margin. Since China and India are both growing from a much smaller base, it should be possible for them to maintain higher average growth rates over an extended period of time eventually overtake us in terms of overall GDP.

The US does not have to be overtaken by another country for its competitiveness to falter and its quality of life deteriorate.  The biggest threat to US competitiveness, from my perspective, stems from the increasing global competition for talent. While the US once held a powerful upper hand in attracting global talent which fueled its technological and entrepreneurial edge,  the edge has diminished for three interrelated reasons. One, US policies have made it harder for  talented outsiders to get in. Two, small states  like Canada, Australia, New Zealand, the UK, and some northern European countries have increased their ability to attract global talent. And three, both China and India (who have supplied a great deal of US technical talent in recent decades) are working to retain more of their young talent and attract back those that left.

I don't think we will see the ascendancy of another great power for some time, but the US may well lose ground - the cumulative result of small but significant improvements in competitive position from many quarters. And while I would never count the US out - its transformative and regenerative capabilities are unparalleled - the economic challenges America faces today do seem significantly  greater than at any time in recent memory.

Comments

[Zoe B]

It's true that Australia is actively recruiting talent. They have extremely generous (for Australia) funding for inviting sabbatical visitors or for getting their academics out into the larger world. The whole country has only about 17 million people (say, all of Pennsylvania and half of Ohio), and they are thousands of miles away from most population centers. Perth boasts of being the most isolated large city in the world. They have had a hard time competing for permanent employment of top-notch American academics (at least, in the sciences) because their pay scale and available grants funding are much lower than in the US.

Australia does have a variety of common labor market with New Zealand, which works well as they are culturally quite similar. NZ is about a 3 hour flight from Sydney. Citizens of Commonwealth countries are given some advantage for immigration (particularly for members of the working class). Moreover, during World War II Australia realized that it was a part of Asia (not just farthenmost Britain) and has welcomed a hugely diverse range of Asian immigrants. Australia also absorbed more Jewish Holocaust refugees (per capita) than any other nation. Australia (and NZ) are world-class in a few high-profile fields (computer graphics, medical research...) but their mega-region has much less range of opportunity than many in America.

Australia has an extremely generous social service system (funded in part by proceeds from mining). You are welcome to immigrate if you have the offer of a permanent job or can demonstrate that you are sufficiently wealthy not to need social services. Sabbatical visitors have to file a huge pile of visa paperwork to prove that they have their own health insurance, etc. Cambodian and Vietnamese boat people have languished in stateless limbo in refugee camps for years (perhaps now even decades) because they were not the sort of immigrant that Australia wants. And, despite the welcoming of Asian immigrants there still is a fair amount of racism - particularly focused against their own Aborigines. I think that very few folks of African descent have made their home in Australia. (Note: This skin-based similarity is from the Western point of view. The Aboriginal peoples feel kinship with Native Americans, but not so much with Africans).

Australia has the advantage of an incredible PR job. They are the land of outback pioneers, major movies, legendary beaches, that glorious Opera House; and their isolation offers the appeal of the private island far away from the troubles of the world. The average Australian is friendlier than even the average middle-American. My father (on a visit) found the place reminded him of America in the 1930s, before people got so afraid of each other. Plus, Australia has wombats. If you've had the privilege of meeting a wombat, you know what I mean.

[Michael Wells]

In today's NY Times Thomas Friedman writes about two books along the same lines, along with his own commentary.
http://www.nytimes.com/2008/05/21/opinion/21friedman.html?ref=opinion

[Mike L.]

As a US citizen resident in Australia, I agree and disagree with Zoe B. Australia is paradise compared with the south side of Chicago where I spent 15 years. Less of everything bad. More of everything good. Don't regret the move one bit. But I'm paid in US dollars. Their value has almost halved since I've been here - that I do regret!

[Kempton]

Large companies (e.g. Google, Microsoft, etc.) are setting up large research centres in China also help to grow and keep talents in China.

Of course, by setting up these research centres right next to top universities in China (and India, etc.), one can argue these companies are using these relatively cheaper brain power to help them make more money. :)

[Whitney Gunderson]

I'm glad I'm in the company of people like Richard Florida, Kevin Phillips and Matt Yglesias, all of whom are more accomplished than I, when I say the United States is in a precarious position, but still has tremendous potential.

I just spent a couple days in Chicago. Drove in from the southwest on I-55, which is in the middle of a huge construction project and is essentially gutted down the middle for about 15 miles. Had dinner with friends and the price of oil came up. The group consensus was that there had to be speculation.

Left Chicago Friday morning and took I-290 out. Merging onto west I-290 at about 10 MPH at about 11AM in the morning, there was a sign on a downtown loft building that said: "If you lived here, you would be home by now." Good advice, but even at 11AM in the morning, freeway traffic was very heavy. Once out of downtown, there was light traffic all the way to the I-88 tollway, but the tollway was also gutted and under construction for about 15 miles.

I also read in the paper that a runway expansion project at O'Hare is $400 million over budget in part because of rising fuel costs. Yikes!

http://www.chicagotribune.com/news/local/chi-faa-ohare-expansion_22may22,0,7925605.story

Had some drive-time to think about what is going to happen with the future price of oil in light of all the roadway construction and the conversation I had with friends. Chicago has the highest gas prices in the country. I don't think today's record high prices are speculation. I think they are bound to go higher. Plus, I think the price of oil will actually be capped in the future by limited supply. In economic speak, the demand curve will be on the very highest tip of the supply curve, and price will be supply limited. Support for this comes from Saudi Arabia amazingly not wanting to pump more oil when its $130 per barrel. They are thinking about how much oil will be left in 50 years.

When the price of oil is maxed at a supply limited amount, this will even out the global playing field even more than it already is, and Richard Florida's idea that "the biggest threat to U.S. competitiveness.... stems from the increasing global competition for talent" will become central for growing economy. Any other thoughts on this?