Unhappy America

America
The Economist
Leader
Unhappy America
Jul 24th 2008

If America can learn from its problems, instead of blaming others, it will
come back stronger

NATIONS, like people, occasionally get the blues; and right now the United
States, normally the world's most self-confident place, is glum. Eight out
of ten Americans think their country is heading in the wrong direction. The
hapless George Bush is partly to blame for this: his approval ratings are now
sub-Nixonian. But many are concerned not so much about a failed president as
about a flailing nation.

One source of angst is the sorry state of American capitalism (see article).

The "Washington consensus" told the world that open markets and
deregulation would solve its problems. Yet American house prices are falling
faster than during the Depression, petrol is more expensive than in the 1970s, banks are
collapsing, the euro is kicking sand in the dollar's face, credit is scarce,
recession and inflation both threaten the economy, consumer confidence is an
oxymoron and Belgians have just bought Budweiser, "America's beer".

And it's not just the downturn that has caused this discontent. Many
Americans feel as if they missed the boom. Between 2002 and 2006 the incomes
of 99% rose by an average of 1% a year in real terms, while those of the top 1% rose
by 11% a year; three-quarters of the economic gains during Mr Bush's
presidency went to that top 1%. Economic envy, once seen as a European vice,
is now rife. The rich appear in Barack Obama's speeches not as entrepreneurial
role models but as modern versions of the "malefactors of great wealth"
denounced by Teddy Roosevelt a century ago: this lot, rather than building trusts,
avoid taxes and ship jobs to Mexico. Globalisation is under fire: free trade is
less popular in the United States than in any other developed country, and a
nation built on immigrants is building a fence to keep them out. People
mutter about nation-building beginning at home: why, many wonder, should
American children do worse at reading than Polish ones and at maths than Lithuanians?

The dragon's breath on your shoulder

Abroad, America has spent vast amounts of blood and treasure, to little
purpose. In Iraq, finding an acceptable exit will look like success;
Afghanistan is slipping. America's claim to be a beacon of freedom in a dark world has
been dimmed by Guantánamo, Abu Ghraib and the flouting of the Geneva
Conventions amid the panicky "unipolar" posturing in the aftermath of
September 11th.

Now the world seems very multipolar. Europeans no longer worry about
American ascendancy. The French, some say, understood the Arab world rather
better than the neoconservatives did. Russia, the Gulf Arabs and the rising powers
of Asia scoff openly at the Washington consensus. China in particular spooks
America-and may do so even more over the next few weeks of Olympic
medal-gathering. Americans are discussing the rise of China and their
consequent relative decline; measuring when China's economy will be bigger and counting its
missiles and submarines has become a popular pastime in Washington. A few
years ago, no politician would have been seen with a book called "The
Post-American World". Mr Obama has been conspicuously reading Fareed Zakaria's recent
volume.

America has got into funks before now. In the 1950s it went into a
Sputnik-driven spin about Soviet power; in the 1970s there was Watergate,
Vietnam and the oil shocks; in the late 1980s Japan seemed to be buying up America. Each
time, the United States rebounded, because the country is good at fixing
itself. Just as American capitalism allows companies to die, and to be
created, quickly, so its political system reacts fast. In Europe, political leaders
emerge slowly, through party hierarchies; in America, the primaries permit
inspirational unknowns to burst into the public consciousness from nowhere.

Still, countries, like people, behave dangerously when their mood turns
dark. If America fails to distinguish between what it needs to change and
what it needs to accept, it risks hurting not just allies and trading partners, but
also itself.

The Asian scapegoat

There are certainly areas where change is needed. The credit crunch is in
part the consequence of a flawed regulatory system. Lax monetary policy
allowed Americans to build up debts and fuelled a housing bubble that had to burst
eventually. Lessons need to be learnt from both of those mistakes; as they do
from widespread concerns about the state of education and health care.
Over-unionised and unaccountable, America's school system needs the same
sort of competition that makes its universities the envy of the world. American
health care, which manages to be the most expensive on the planet even though it
fails properly to care for the tens of millions of people, badly needs reform.

There have been plenty of mistakes abroad, too. Waging a war on terror was
always going to be like pinning jelly to a wall. As for Guantánamo Bay, it
is the most profoundly un-American place on the planet: rejoice when it is shut.
In such areas America is already showing its genius for reinvention. Both
the Republican and Democratic presidential candidates promise to close
Guantánamo. As his second term ticks down, even Mr Bush has begun to see the
limits of unilateralism. Instead of just denouncing and threatening the "axis of
evil" he is working more closely with allies (and non-allies) in Asia to calm
down North Korea. For the first time he has just let American officials join
in the negotiations with Iran about its fishy nuclear programme (see article).

That America is beginning to correct its mistakes is good; and there's
plenty more of that to be done. But one source of angst demands a change in
attitude rather than a drive to restore the status quo: America's relative
decline, especially compared with Asia in general and China in particular.

The economic gap between America and a rising Asia has certainly narrowed;
but worrying about it is wrong for two reasons. First, even at its present
growth rate, China's GDP will take a quarter of a century to catch up with
America's; and the internal tensions that China's rapidly changing
economy has caused may well lead it to stumble before then. Second, even if Asia's rise
continues unabated, it is wrong-and profoundly unAmerican-to regard this
as a problem. Economic growth, like trade, is not a zero-sum game. The faster
China and India grow, the more American goods they buy. And they are booming
largely because they have adopted America's ideas. America should regard
their success as a tribute, not a threat, and celebrate in it.

Many Americans, unfortunately, are unwilling to do so. Politicians seeking a
scapegoat for America's self-made problems too often point the finger at
the growing power of once-poor countries, accusing them of stealing American
jobs and objecting when they try to buy American companies. But if America
reacts by turning in on itself-raising trade barriers and rejecting foreign
investors-it risks exacerbating the economic troubles that lie behind its current funk.

Everybody goes through bad times. Some learn from the problems they have
caused themselves, and come back stronger. Some blame others, lash out and
damage themselves further. America has had the wisdom to take the first
course many times before. Let's hope it does so again.