By 1783, King George had lost the American Colonies and the First British Empire was on the decline. The Empire never saw it coming: a rugged assembly of un-militarized, distant and subservient people rose to challenge (and defeat) the most powerful and feared civilization of its time.
The shift of power was so dramatic that America became the “Second World” (Europe being the First World; the poor nations later became the Third World).
America entered the world as a fledgling nation and in the short span of a century rose to be an economic power to be reckoned with. Give it another century, and it became the dominant nation, culture and society of its time.
None of America’s ascent to world-dominance happened by accident. In history, ideas precede and actions follow. For 200 years America has been the birthplace of the way-of-life that shaped the following century (call it economic-model, call it society, it’s the same thing). We rode the waves that changed the world (we created many of those waves), rose to dominance, promoted justice wherever we could and helped entire nations rise from poverty.
Empires, however, fall. Some of them fall hard. They all took their dominance for granted. Do we?
The OECD (Organization for Economic Cooperation and Development) reports that 10 years ago rich countries produced two thirds of the world economy; today, that share has fallen to about half and will further fall to about 40 percent by 2020 (in other words, the bulk of economic activities will be in emerging economies). Will historians see the current decade as the start of America’s economic demise?
According to The Economist magazine the explanation for the rapid shift in economic influence is not only the growth of emerging countries (which we can do nothing about), but equally the lack of growth in America, Europe and Japan (which, as far as the USA goes, is entirely within our control).
It is depressing enough that the financial crisis that brought the world to the brink of “economic deconstruction” is entirely the making of the rich nations, but it is totally appalling to me that most economic spheres have turned (or are turning) the page, while we are not (I wrote in last’s week column that Germany, some European countries, China and other emerging economies are growing at a rapid rate, in contrast to the US lack of growth and employment).
It is well known that economic downturns breed more woes, unless employment is restored quickly. The Keynesians would correctly argue that unemployment erodes consumption power, breeding more downturn. They would also argue that misguided austerity takes the wind out of a recovery. Improvements to the structure of taxation and spending are as important as deficit reduction.
It is exactly at times like this that a country needs leadership, but I see little of it in Washington. Yes, we are a nation of people who have the power and the propensity to be heard, but I currently see only the old political game: take no action, force your opponent’s move, use it to your advantage. It’s clever, but it doesn’t fill my dinner plate, and most importantly, it is bankrupting our children’s future.
From birth, we have been a smart, quick-to-react and pragmatic nation. Let’s drop the politics, and go to work.
Giancarlo Pozzi is a CPA in Bend. He can be reached at Giancarlo@pozzi-cpa.com