Let me put an alternative hypothesis. America in 2011 is Rome in 200AD or Britain on the eve of the first world war: an empire at the zenith of its power but with cracks beginning to show.
The experience of both Rome and Britain suggests that it is hard to stop the rot once it has set in, so here are the a few of the warning signs of trouble ahead: military overstretch, a widening gulf between rich and poor, a hollowed-out economy, citizens using debt to live beyond their means, and once-effective policies no longer working. The high levels of violent crime, epidemic of obesity, addiction to pornography and excessive use of energy may be telling us something: the US is in an advanced state of cultural decadence.
Empires decline for many different reasons but certain factors recur. There is an initial reluctance to admit that there is much to fret about, and there is the arrival of a challenger (or several challengers) to the settled international order. In Spain’s case, the rival was Britain. In Britain’s case, it was America. In America’s case, the threat comes from China.
Decline and fall of the American empire
There are nonetheless some obvious flaws in the argument.? First of all, if the high-consumers become as virtuous as the low-consumers, it just means that global demand will decline, unless for some reason investment rises in spite of declining consumption.? As demand declines, global unemployment will rise, in which case global savings won’t rise anyway because rising unemployment causes income to decline faster than consumption, which means the savings rate must decline even as income declines.? In other words low savers cannot raise their savings rate to the level of high savers without a decline, and perhaps a massive decline, in GDP growth.
Second, Americans are actually more productive and work longer hours than people in almost any other rich country, including the harder-working and higher-savings countries in Europe, so it is a little strange to deride them for being lazy spendthrifts simply because the US has a huge trade deficit – spendthrifts, maybe, but not lazy.? Still, the argument does anyway fit in with a lot of other cultural stereotypes – for example about Spaniards and Greeks, with their wild lifestyles, long siestas, and dissolute charm, or about Germans and Dutch, whose tasteless food, boring sex lives, and grim movies leave them no choice but to work away at office and factory.
But is this really why people in some countries love to save and people in other countries love to consume?? No, it isn’t.
Stop Blaming Trade Imbalances On Lazy Greeks, Industrious Germans And Other Stereotypes
The central challenge, which both Medvedev and Putin have acknowledged in their particular language and styles, is Russia’s enormous corruption problem. Unfortunately, this aspect of Russia’s economy seems to be getting only worse over time. During a recent visit to Moscow, I was struck by how many people told me that corruption under Medvedev was more extravagant than under Putin, when it was in turn more widespread than under Russia’s first president, Boris Yeltsin. More remarkable and more concrete is a recent interview by Russia’s chief military prosecutor in Rossiiskaya Gazeta, the government’s official newspaper, stating that almost 20 percent of the country’s military budget is “plundered” through corruption, including fake invoices and kickbacks. If this is happening in the military, it’s hard to imagine that the situation is different in the rest of Russia’s government bureaucracy. Medvedev himself has said that $35 billion in government funds was stolen in 2010.
Corruption Grows in Russia
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