Another big reason is that the innovation that we have had (and something I have talked about quite a bit here) is made up of nothing. The CDO, the hedge fund, and the complex stock derivative have replaced actually investing in actual goods. Part of the reason for this is that our country is not really a manufacturer of goods any longer. Just as we changed from an agricultural society to an industrial one, now we are shifting from an industrial one to a global-technological-served based one.
Yet another reason is that change is just fucking difficult for cultures. Manzi describes the historical effects of this quite well. He concludes his discussion of societal transformation with these two paragraphs.
One obvious response is to use the political process to both slow down the rate of innovation to an acceptable pace and redistribute the country's economic output in a manner designed to maintain social harmony. That way, the pain of innovation is avoided and the pain of stagnation is mitigated — especially for the middle and lower classes, who are most vulnerable to the effects of both. This is the logic of the welfare state, and the direction pursued by much of Western Europe since the Second World War.
The problem, however, is that the United States does not exist in a vacuum, and making our internal economic changes less stressful is far from our only concern. We also face external challenges, especially rising competition from abroad. And our position in the global order means we cannot afford to go easy on ourselves and constrict innovation. Quite the opposite: We need rapid growth just to keep up.
Indeed. Witness the effect of what happens when you use the government to slow down the rate of innovation.From 1980 through today, America's share of global output has been constant at about 21%. Europe's share, meanwhile, has been collapsing in the face of global competition — going from a little less than 40% of global production in the 1970s to about 25% today. Opting for social democracy instead of innovative capitalism, Europe has ceded this share to China (predominantly), India, and the rest of the developing world. The economic rise of the Asian heartland is the central geopolitical fact of our era, and it is safe to assume that economic and strategic competition will only increase further over the next several decades.
Wow. That's a 15 percent drop in global output. To be honest, we can't afford to lose 5 percent. The way our economy stands right now and given how much we owe China, our country could end up in economic ruin.
The one question I have for anyone reading is this: how did China, with its restrictive government, end up beating Europe? I have a few ideas but need some rounding out. Juris?
And now the death of Markadelphia's dream:(
It is common to think of the post-war global economy as a baseline of normalcy to which we wish to return. But it seems more accurate to see that era as an anomaly: the apogee of relative global economic dominance by the West, and by the United States within the Western coalition. The hard truth is that the economic world of 1955 is gone, and even if we wanted it back — short of emerging from another global war unscathed with the rest of the world a smoking heap of rubble — we could not have it.
Yet the strategy of giving up and opting out of this international economic competition in order to focus on quality of life is simply not feasible for the United States. Europeans can get away with it only because they benefit from the external military protection America provides; we, however, have no similar guardian to turn to. We do not live in a Kantian world of perpetual commercial peace. Were America to retreat from global competition, sooner or later those who oppose our values would become strong enough to take away our wealth and freedom.
To put it simply, the world has changed and no one has our backs. That is why I applauded President Obama's acceptance speech in Oslo. America, more than any other country in the world, has to protect the economic freedom of the world. Because the world is filled with a bunch of greedy scumbags (Chavez, Jong-il, Ahmadinejad), our armed forces are the ones that are going to insure this stability and peace.
Unfortunately, our country has currently become "A House Divided" which will be the topic of the next post.