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The only difference I may have with you is you seem to subscribe to the belief that what's past will repeat itself. Creative destruction, as industries wither or get exported, new ones crop up to take their place, the "pie" example.
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<p>Well, obviously nobody knows what is going to happen in the future. But I would just say that I have history strongly on my side. New industries have *always * cropped up in the past to replace old industries. For example, the modern biotechnology industry didn't even exist until a few decades ago. {I am not counting old food-based "biotechnology" like beer/winemaking or yogurt or cheese making, which has obviously been around for centuries.} Heck, even the Internet, while existing in some form since the early 1970's, didn't become a significant business opportunity until perhaps 15 years ago. Internet behemoths like Google are less than 10 years old, and Facebook is less than 4 years old. The first modern (that is, 2G) cellphone network was built less than 20 years ago. Hence, the point is, creative destruction has happened repeatedly in the past, and I don't see why that would stop happening now. History is on my side. </p>
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Right now the Indians and Chinese are not creating value, just making things. Soon they will create value. From steel to pharma to cars America is losing its dominance.
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<p>But here, I disagree with the premise. If China and India start actually creating more value-add, why would that necessarily be a bad thing for the US. The whole world would then become richer, including Americans. </p>
<p>I'll give you some examples. If I am suffering from diabetes, I don't care who discovers the insulin that will save my life. I just want somebody in the world to discover it. And in fact, insulin was discovered not by Americans, but by Canadians at the University of Toronto (who won the Nobel Prize for their efforts). Is America "worse off" because insulin was discovered by foreigners? I don't think so - in fact, I think America (along with the rest of the world is better off. Hundreds of thousands of American diabetes sufferers, as well as millions around the world, are better off because Canadians discovered insulin. Everybody is better off.</p>
<p>I am not just talking about basic research. Similarly, many of the best technologies and business models today are already not developed in the US. For example, when I said the first modern cellphone network was built less than 20 years ago, that network was developed not in the US, but in Finland. Europeans have been the pioneers of cellphone technology. In fact, I think it is a well known fact that Europe (as well as Japan and Korea) have far more advanced cellphone technologies than does the US. But again, does that make the US worse off? Again, I don't think so. American cellphone firms have been able to learn from the Europeans, Japanese and Koreans to make their technology better, with immense benefits to America. Similarly, American consumers have greatly benefitted from the immense increases in quality and reliability of Japanese car manufacturers. Not only have Toyota and Honda pioneered lean manufacturing techniques to produce highly reliable cars, but US car manufacturers have incorporated those techniques to greatly improve their reliability (i.e. American-made cars today are far far more reliable than they were 30 years ago). Again, this has proven to be immensely beneficial to American consumers, as I now need not worry about my car always breaking down. </p>
<p>The point is, I don't see why, if India and China indeed start moving up the economic value chain to become richer, that would be a bad thing for the US. I would think that would be a great thing for everybody. That would mean that those 2 countries would be producing more inventions, more technologies, more useful products, and therefore creating greater wealth for all.</p>
<p>Let me give you a historical analogy. Would you rather be the average British citizen today, or the average British citizen of 150 years ago? 150 years ago, the British Empire ruled the world. On the other hand, the average British citizen didn't live a particularly pleasant life. The term 'Dickensian' described the misery that a lot of average British people felt in their lives. Many were poor, unhealthy (i.e. the UK was absolutely filthy with industrial pollution at the time) and desperate. Now, to be fair, most of the world at that time was also poor and desperate (as most people in the world in the 1800's were impoverished peasants). Nevertheless, the point is, the average Brit in those days lived far worse lives than they do today, despite the fact that the UK is no longer a superpower. General world technological and economic growth in the last 150 years has improved the conditions of the average person everywhere, including in the UK. If India and China rise up, that means that world growth will necessarily increase. This is not a zero-sum game here.</p>
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Throw in demographics, increased Hispanic population, slowing down of immigration to the US from Asia (at least the smart Asians are not coming in at the same rate as before)national debt, etc I opine that the American century which began at Suez ended in Baghdad (maybe Saigon?).
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<p>Again, here I would argue that America does not need to be the world's superpower in order for the conditions of the average American to improve. The UK, France, Germany - all of these countries used to have superpower status in the past, but no longer. Yet the average citizen of those countries is better off now than they were back then. Does any French citizen really want to go back to living like the average French citizen of the days of Napoleon or Louis XIV? </p>
<p>Secondly, to your points regarding the 'weaknesses' of the US and hence loss of 'dominance' (which as I have argued, isn't very important anyway), I would still say that overall, the US has tremendous strengths that will probably allow it to maintain its dominance for a long time. For example, you point to demographics and to increasing Hispanic immigration. I don't think that is a bad thing for the US. In fact, overall it's probably a good thing. After all, not to sound jingoistic, not just any Hispanic is trying to immigrate. Those who are trying to immigrate are the ones who are young and energetic and willing to work. I would agree with you that if we were just attracting Hispanics who don't want to work at all and just want to come here to go on welfare, then that would indeed be a problem. But the vast majority of those that come here actually intend to work. {In fact, business commentators in Mexico have complained that too many of the hardest-working workers are trying to emigrate to the US, leaving the lazier ones in Mexico}. Is is precisely that constant influx of energetic, hard-working group of people that spurs US economic growth. Granted, the US needs some sort of immigration reform in order to incorporate all of the illegal immigrants who are here now, but the fact is, the US is still clearly strong enough economically to make Hispanics want to move to the US to work. {I would be far far more concerned if Hispanics *didn't *want to come here, as that would mean that the US must have a truly weak economy.}</p>
<p>As point in contrast, consider the 'challengers' to US dominance. Japan has practically no immigration and is now facing a demographic crisis as Japan is producing relatively few children and consequently the population is aging dramatically. It is estimated that by 2050, not only will Japan have significantly declined in population (as few new children will have replaced those who died) but nearly half of the population will be retired, which will imply a large decline in Japanese economic output. Furthermore, Japanese culture is notoriously hermetic and xenophobic towards outsiders, meaning that Japan is highly unlikely to be able to harmonoiously accept a large influx of foreigners. {For example, the relatively few ethnic minorities in Japan such as the Koreans and Chinese suffer from pervasive social discrimination.} Will Japan be able to change that? Perhaps. But it's going to be difficult.</p>
<p>The same thing is true, to a lesser extent, of the EU. Most EU countries, especially the richer ones, also face the same aging/demographic problem that Japan does due to low birthrates and difficulties in assimilating immigrants. Granted, there is a lot of *intra*EU migration going on, as EU citizens from the poorer East move to the West. But immigration from, say, Russia or Ukraine, or from Africa and the Middle East is far less accepted. {For example, Germans have had great difficulty in assimilating Turks, and the French have had problems assimilating immigrants from North Africa.} Furthermore, more importantly, growth rates of the EU have simply not kept pace with that in the US, and certainly not with China or India. </p>
<p>To be sure, some bright spots in the EU certainly shine. For example, Ireland has been one of the great turnaround stories of the last 15 years and now possesses one of the most dynamic economies in the world. London has solidified its status as a leading center in world finance and commerce, and is arguably even more prominent than is NYC in certain respects when it comes to high-end finance. Spain has experienced strong economic growth for many years now. Germany seems to be catching a strong second wind right now and France, under a new President, is attempting to enact economic reforms. </p>
<p>Having said all that, I would still say that I don't think that the EU will seriously challenge the US when it comes to 'dominance'. The EU still suffers from too many structural problems and individual economic laggards. Don't get me wrong - I think the EU will be a very strong #2 for a long time. But I don't think it will actually challenge for #1. {And yes, I am aware that, strictly speaking, the EU as a whole actually has a slightly larger GDP than does the US, but that's only because the EU keeps increasing its membership. When I say "#1", I mean on a more integrated level that includes not just economic influence, but also political and military influence on the world.} </p>
<p>Which leaves us with China and India. So let's take them in turn. We al know about China's breakneck economic growth. But China - because of its one-child policy - is also facing a serious demographic problem as China's population is also rapidly aging. Again, it has been estimated that by 2050, a significant proportion of the Chinese population will be retired. Couple that with the fact that China *needs*breakneck economic growth in order to head off a political crisis. The Chinese Communist Party is betting that it can produce enough economic growth to provide jobs to the millions of former rural farmers who are heading for the coastal cities every year, while at the same time not instigating a push for political reform. That's a tremendously tricky political balancing act. I hope it goes well, but it may not. The economic growth has produced numerous dislocations - with rampant pollution, the fraying of social welfare protections, bureaucratic corruption, and resultant tremendous social unrest. While millions of Chinese are clearly better off than they were before, millions are also worse off due to the loss of social protections and increasing corruption, and these millions may agitate for reform. Numerous Chinese political regimes in the past (i.e. the dynasties) have been toppled due to peasant unrest, and the current regime may fall for the same reason. China stands on the edge of a knife. If things go well, China will do well. But there is a significant chance that China will fall into rebellion and chaos. </p>
<p>As for India, I think that country's greatest problem is that, just like China, it has to face the issue of integrating millions of poor peasants into a modern economy, along with the special problems posed by ethnic/language diversity and the caste system (i.e. untouchability and the reservation system). Certainly, caste social restrictions have relaxed significantly in the cities, but what about the countryside? Certainly, if India could solve these problems, then India would be in great shape as it would be able to fully utilize the talents of its entire population. However, the caste system has evolved over thousands of years, and hence most likely defies any quick solution. Couple that with the fact that the License Raj, while weakened, is still very much alive. {For example, I read that India today still ranks in the bottom quartile of not all nations, but just developing nations in terms of the ease of starting a new business.} Corruption is still endemic in India. The physical infrastructure (i.e. roads, ports, electricity) is still rather backwards. </p>
<p>Again, to be sure, India (and China) have great potential. But they also has serious problems that it needs to address. Certainly, the US has problems too. But are the US's problems really more serious than the problems faced by China and India? We can debate that, but that's unclear to me.</p>