Saturday, January 16, 2010

Review: "How America Can Rise Again"

A Canadian friend of mine sent me a link to James Fallows' latest Atlantic Online article entitled "How America Can Rise Again." While I think highly of Mr. Fallows' writing, I am usually at odds with his conclusions. My reaction to this article was no exception.

In presenting his case, first he catalogs the ills currently plaguing the U.S.: high unemployment and loss of the middle class, disintegrating infrastructure, lagging communications development, dysfunctional Federal government, and military overreach. Then, as if laying out a balance sheet, he points to assets that offset these liabilities: relative openness of the society, welcoming of immigrants, plenty of money, world-leading university system, and a 400 year tradition of "jeremiads" leading to reflection and change. These strengths, he believes, will allow America to reshape itself through political reforms (he is partial to the Parliamentary system).

Mr. Fallows admits he has been away from the country for a few years and that his impressions of America, upon his return, are somewhat skewed by his experience in
China. Certainly, compared with China, America is more open, multi-ethnic, flexible, rich, and educated. One could stand in China today and compare it to China of twenty five years ago and make the same comparisons and come to the same conclusions. But it is questionable whether one can say that about America of 1985 and America of 2010. The weaknesses in America are real and growing, whereas the strengths, also real, are almost all in decline. Following the trend line of the past couple of decades, the future is bleak.

What do I mean? Let's take openness to immigrants, for example. Yes, Americans are generally an accepting people. It is common to find foreign born citizens or permanent residents in all walks of life, and there is absolutely no animosity aimed at them (unless they are Arab, which is a whole other discussion). If there is an anti-immigrant constituency, it is limited to "illegal" immigrants (read: Mexican). However, the laws and government policies concerning foreigners coming to the U.S. are a very different story. The visa hurdles, the quizzing and profiling at points of entry, the heavy hand of the Transportation Safety Administration, and the bureaucratic nightmare of running afoul of immigration rules (especially if you are Arab), has led to a decline in the number of foreign visits to the U.S. in the last ten years, despite a general rise in tourism and transnational travel in the rest of the world. Highly publicized incidents, such as that of the British little-old-ladies en-route to Australia who refueled in L.A. only to be forced to deplane and stand for hours with no bathroom breaks while awaiting interrogation by the TSA, have only served to shine a spotlight on our official "unwelcome" mat at the door. Official policy: if you are foreign, you are a potential enemy.

As for the flexibility of our society, that, too, is a relic of the past. What made us flexible economically and socially in the past was a relative dearth of legal restrictions. It has long been noted by European economists that the U.S. has been a marvelous job-creating machine over the last several decades in contrast to the relative stagnation of much of Europe. Double digit unemployment in France, Spain, and Germany has been the norm for over a generation. Why not in the U.S.? Because we had fewer reasons NOT to invest, NOT to hire, NOT to expand. In France, for example, it is very difficult to fire a worker (this was intended to tip the power scales in favor of workers), so employers are very reluctant to hire in the first place for fear of being burdened with unproductive workers. The result is institutionally encouraged unemployment. No such rules existed in the U.S., but when glancing at the ever-expanding mandates on employers for documentation, citizenship verification, mandatory leave, matching taxes, minimum wages, and soon-to-be government required insurance, one can see the disincentives to hiring building up. We are not yet France, but we are no longer encouraging employment.

And employment is only one area of rigidity. Business licenses, zoning, permits, professional licensing, and continuously changing IRS accounting rules make starting a new enterprise a daunting task. John Stossel did a report on a French company that made pay-per-use curbside toilets and the trials and tribulations they endured trying to get through New York City's regulatory maze. In the end, the company chose not to enter the U.S. market due to onerous regulation, despite strong approval and demand from the New Yorkers who got try out the prototype. When our business environment is less flexible than that of France, we are almost certainly headed in the wrong direction.

What's more is that the mood in Washington is toward more, not less, regulations and mandates. The recent TARP program, the Stimulus Bill of 2009, and the actions of the Federal Reserve in bailing out large financial institutions send a clear message: We Will Not Allow Change To Happen. James Fallows considers our flexibility to be one of our greatest strengths, as indeed it has been, but it is quickly fading as we build institutional firewalls that prevent change from happening.

Mr. Fallows makes the puzzling case that we are wealthy enough to remake the countries of the Middle East, so we are wealthy enough to rebuild our infrastructure. It does not seem to occur to him that one of the main reasons our infrastructure has not been repaired is BECAUSE we are bleeding our wealth into the sands of Iraq, Afghanistan, Pakistan, Yemen, and maybe soon Iran. One expense precludes the other. The longer we are expending our limited wealth (and ALL wealth is limited) overseas, the less likely we will have the resources to rebuild our roads and bridges. With the Obama administration seemly committed to never ending war, our infrastructure will continue to fray and unravel.

What's more is that it is becoming more apparent that for the last several decades Americans have been, at best, treading economic water. Due to anomalies in measuring wealth over time, it is difficult to put an exact number on it, but it is becoming disturbingly clear that where one income used to be enough to finance a middle class household, it now almost invariably takes two. In the past ten years, middle class Americans' incomes have been in decline. Draw that trend line again, and weep.

As far as the assertion that institutions of higher education will lead the way to the new American revival, I say, huh? For the last several decades, the vast majority of college graduates do not work in any field they studied for. Indeed, my own experience tells me that a college degree is particularly good at narrowing the field of candidates for an employer to consider, but with the exception of task-specific professions such as engineering, medicine, or law, most education takes place on the job. Our ever-increasing college graduate population has failed to guarantee our continuous growth, so I would not now look to the Universities to lead us out of our current decline.

Mr. Fallows talks about our history of jeremiads. I never heard that word before, but I like it. Yes, we have a long history of bleating into the wind how we are in decline due to our sins, then we pull out of it with some new a bigger advance in wealth and living standards. He states that this current decline may, in fact, be irreversible, but he goes back to the jeremiads of the past and shows how we roused ourselves from our stupor and conquered our ailments. He's betting on that happening again, just because it always happened in the past.

I hesitantly concur. There are numerous voices out there. Some are calling for more and bigger roles for government, some are calling for less. Some are wanting more war, some want to bring all our troops home. Some are clambering for more surveillance and security, and some are lobbying for the return of habeas corpus and our Bill of Rights. Some voices are even calling for a plutocracy of experts to run things (oh, how Platonic!). Which voices will be heard will determine whether or not we will recover or stagnate.

And finally, Mr. Fallows presents us with a political choice to make: "Doing more, or doing less." He chooses doing more with our political system in the form of public/private partnerships, though recognizing that the body politic is sick and "gangrenous." Without active public institutions, private efforts will dissolve into chaos and criminality, he says. To me, this is a bit of a jump. Maybe even a straw man. Doing less is exactly what the Chinese did in order to revive their economy. The Russians have also been experiencing growth as a result of "doing less."

If less can deliver more, then why shall we not consider that avenue of action? Fifty years of continuous government growth have led us to the "lost decade," so maybe it is time to reverse course a bit. The assertion that less government would deprive the society of wealth making opportunities, or even result in the breakdown of private institutions, is unsupported by American history, post cold-war history, economic theory, and current practical experience. James Fallows comes to, ironically, a very conservative don't-rock-the-boat conclusion: let's muddle through and everything will be fine.

This is almost certainly not how America can rise again.

1 comment:

  1. Eloquent. Your counter-argument is as compelling and well-thought-out as Fallows' however I have to say I prefer his more optimistic conclusions, because if I don't keep up hope then the despair-for-the-future creeps in and I find myself drunkenly and earnestly counseling my children not to have children of their own; and six years old is probably too young to have to endure that kind of talk from his father...

    I'd like to argue that there are some good governments or that even bad governments are progressive and ever-changing, however not too long ago my provincial government banned lawn fertilizers for properties zoned residential (but not for commercial/industrial spaces,) and just today my local city council voted to send just $10K to Haiti.
    So it seems that the ever-present Governmental stupidities, whether municipal, state, or federal - will continue on forever and will always escape scrutiny when cloaked in charity or environmentalism.

    And I too learned the new word - jeremiad. It's one of those cases where I've been jeremiad-ing all over the place for years without knowing the word for what I was doing.

    Thanks for that great, thought-provoking post.