airworthy
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How Can An Economic Superpower Fall?

Sat May 03, 2003 6:20 am

I e-mailed an economist who had ties to the Federal Reserve Board. I asked him about the economic threats coming from the European Union and their proposed trade strategy.

He said "...the ability to adapt to science and technology is more important than the nature of the trading area."

What does everyone think? Can the United States be overtaken as the world's biggest economic superpower?

I think our educational system, combined with high R&D projects, and entrepreneurial strength will keep the USA in the top spot in the world.
 
Matt D
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RE: How Can An Economic Superpower Fall?

Sat May 03, 2003 6:28 am

Relying on your wonderful and prestigious past to ensure your wonderful and prestigious future is probably the most dangerous attitude you can take. Just ask Don Burr and PEOPLExpress or TWA "Old Timers".

The past is the past. But never lose sight of the present and future. If the US decides to rest on its laurels thinking it's untouchable, then it's absolutely possible for us to be unseated as #1.
 
Sonic
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RE: How Can An Economic Superpower Fall?

Sat May 03, 2003 6:37 am

I doubt USA will be oertaken by EU. I think there is too much speculation in the media about how EU could overtake US economically. However, there is other country that could and most likely will challenge USA in next few decades - China. It's economic power grows very fastly, same as technology. From manufactorer of cheap and often bad quality things it became technological superpower. It was the state which first launched commercial MagLev trains, it will soon have the tallest skyscreaper and probably could surpass USA and Russia in space program later also. Neither of those things could even be imagined in like 1970. Remember, that China has about 1250 millions people (USA has less then 300 millions, thus a bit more than one fifth of China's people), which means that Chinese GNP per capita could be just one fourth of US one and it would still surpass USA by the size of economy. With Chinese rowing rates and opening to capitalist economy, it doesn't sounds like an impossible thing.
 
Matt D
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RE: How Can An Economic Superpower Fall?

Sat May 03, 2003 6:40 am

I doubt USA will be oertaken by EU

Well for what it's worth:

Do you think that, in 1972, anyone actually thought that Airbus would ever amount to anything?

In 1948, do you think that any Americans ever thought, even in their wildest dreams that the Japanese would be selling us cars and electronics?
 
Sonic
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RE: How Can An Economic Superpower Fall?

Sat May 03, 2003 6:47 am

Matt D you are saying the truth - however, I doubt EU (which is a very bureucratic machine with many conflicts between member states themselves) could become the economic or technological superpower. Of course, only time will tell that. But saying that EU will overtake US is something like saying that Japan or Russia will. Of course, that could happen some time in the future, but by current situation it isn't likely. What I said is that by looking into current political situation, if US economic leadership would be lost, China would overtake it.
 
heavymetal
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RE: How Can An Economic Superpower Fall?

Sat May 03, 2003 6:56 am

Amen Matt D.

We as a nation go from periods of huge imagination (the 90s, tech, Internet) to periods of imaginative accounting (now), when the investment money holds off until visionaries return.

I hope those who get chub over such self-anointed titles enjoy our status as "world's only superpower" now (and clearly they are)....because the EU, China/Asia and even India are shaping up to be very serious contenders for the same title.
 
Alessandro
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RE: How Can An Economic Superpower Fall?

Sat May 03, 2003 6:28 pm

Economy is about trust, do people trust the US$ and US stock market better than other currencies or stocks? If yes, then the USofA will continue to lead,
if not someone else will. During GWB the world has seen wars and now talks about less public spending (tax cuts), if you cut public spending, education will surely suffer for these with poor parents and less people will be able to
get high education. I think the USofA is more dependent on the world than
it thinks, if people around the globe stop drinking Coca/Pepsi-cola and drive
Ford, then the US economy will suffer....
From New Yorqatar to Califarbia...
 
DoorsToManual
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RE: How Can An Economic Superpower Fall?

Sat May 03, 2003 9:03 pm

When it loses legitimacy in the eyes of its own people. Fortunately the US government has excellent ways of ensuring this won't happen.
 
airplay
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RE: How Can An Economic Superpower Fall?

Sat May 03, 2003 11:21 pm

Speaking as a citizen of America's largest trade partner, I can see the EU theory materializing.

With respect to Canada, the US has undermined the spirit and the rules of North American Free Trade Agreement several times. Our industries have been shaken by boycotts, increased tariffs, and US government subsidies that are clearly outside the law with respect to NAFTA.

Now we are faced with vague threats from various US legislators about "punishing" Canada economically because of our official Iraqi war stance. The threats will boil over when Canada decriminalizes pot in the near future since the US now promises to make it harder to deal and travel across the border.

The EU is looking more attractive as a focus of trade. In the aerospace field, we are already utilizing their products rather heavily. Airbus is just the tip of the iceberg.

Another thing the EU has that the US doesn't is inexpensive labour. The EU is diverse enough to be able to offer everything from hi-tech to lo-tech services at corresponding prices.

Of course the biggest obstacle for trade between the EU and Canada is the distance. It's much easier to move goods between the US and Canada....for now anyway.

Perhaps we can just ask them to load up all the Airbusses with goods on delivery flights...

 Smile

Anyway, we've got oil. We've got natural resources, we have tons of fresh water and hydro-electric power. The US won't ever stop buying that stuff. As far as McDonalds and Wal-Mart go, we all know we can do without those 21st century plagues. I foresee a transition where we move our economic "strawberries" into more than one basket. We need diverse trade policies that don't soley rely on the US during periods where it's led by an idiot like Bush.
 
delta-flyer
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RE: How Can An Economic Superpower Fall?

Sat May 03, 2003 11:45 pm

Airplay ... you just can't resist, can you? Regardless of the topic, your conclusion is always the same .... Bush is an idiot. Makes your credibility really soar!!!

I agree with Sonic ... China is the future world power. I suspect that by the end of this century, China will be #1. They exactly fit Airworthy's economist friend's remark .... "...the ability to adapt to science and technology is more important than the nature of the trading area."

That's exactly where China is heading.

The educational system in the USA does not offer a consistently good (or even adequate) product across the board. Certainly, we have the best schools anywhere, but they only cater to a small number of students -- by and large, the majority are mediocre, and many are clearly substandard.

The USA will, of course, continue to turn out top notch technology, but in smaller numbers than China. The EU will continue to be dragged down by domestic squabbles and bureaucracy, as one member suggests.

Pete
"In God we trust, everyone else bring data"
 
flyboy36y
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RE: How Can An Economic Superpower Fall?

Sun May 04, 2003 12:05 am

I think our educational system...

Is one of the worst on the planet...
 
N79969
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RE: How Can An Economic Superpower Fall?

Sun May 04, 2003 12:46 am

"We as a nation go from periods of huge imagination (the 90s, tech, Internet) to periods of imaginative accounting (now),"

Absolutlely not true. The creative accounting and supposed creative business went hand in hand. They are just being exposed now. The accounting misdeeds occurred almost entirely under Clinton's watch. They restate earning well back into the 1990s these days. Let's all be clear about that one. The huge imagination is not gone. I am confident that America's imagination is alive and well. However investors are just not throwing money hand over fist at bad ideas like wash-my-car.com or ijustwantyourmoneyyouidiot.com

It will be a long, long time before China becomes an actual superpower. Coastal China has seen a boom perhaps unprecedent in human history. However, the Chinese hinterland needs development and China has not done much about it. It will cost hundreds of billions and years to fix. There are great disparties within Chinese society that will also cause problems. China will not become a true economic superpower until the one-party state ends. The communists do not permit the free flow of information and that will retard the country's development in some measure.

I think that sometime in the 25-40 years we could see the fall of an economic superpower: Japan. The second largest economy in the world has gone from being world's largest creditor to the largest debtor in about 10 years. They effectively have zero economic growth and a sclerotic political system that prevents necessary reform. Japan has an assload of foreign reserves which can keep them afloat for a very long time.

Unlike the rise of military superpowers, the rise of an economic superpower would not harm or threaten the US. Ultimately it is in our interest to see China, India, and any other poor to become economically powerful. Not only would they be better off but we would also. The only potential downside for us is that our currency may no longer be the world currency for trade in many goods and commodities.

Despite his near-lunatic anti Bush rants, Paul Krugman has written an excellent book on this topic called "Pop Internationalism." The premise is that contrary to popular views, nations do not compete economically. It is worth a read.
 
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yyz717
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RE: How Can An Economic Superpower Fall?

Sun May 04, 2003 12:59 am

With respect to Canada, the US has undermined the spirit and the rules of North American Free Trade Agreement several times. Our industries have been shaken by boycotts, increased tariffs, and US government subsidies that are clearly outside the law with respect to NAFTA.

As a Canadian, I will admit that Canada is as guilty as the US of violating NAFTA in substance and spirit. The above comment is just a one-sided myopic viewpoint often espoused by Canada's hard left.

The EU is looking more attractive as a focus of trade.

Incorrect. Canadian trade is increasingly focused on the US. Canadian trade with Europe is at an all-time % low and continues to fall (due in part to Europe's marginal economic growth in the last 20 years). I suspect this comment was just to minimize the US impact on Canada (anti-Americanism?).

Another thing the EU has that the US doesn't is inexpensive labour.

The EU's extremely rigid labour laws make it a very expensive place to source labour.

We need diverse trade policies that don't soley rely on the US during periods where it's led by an idiot like Bush.

No. Canada needs to further integrate its economy into that of the US to ensure Canadian prosperity and efficiency. By the way, Bush is not an idiot.









I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.
 
heavymetal
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RE: How Can An Economic Superpower Fall?

Sun May 04, 2003 3:08 am

Despite his near-lunatic anti Bush rants

And it didn't take you long, En, to bring up 'Clinton's watch'.

Referring to Paul Krugman means, I assume, that you spend some time with the Times. I hope you noted this past week the almost jaw dropping casual indifference that most of 'the Street', and indeed some of its' biggest players, paid to the big score settling fines.

I also hope you read this excellent commentary by the Times editorial board:

http://www.nytimes.com/2003/05/01/opinion/01THU2.html?n=Top%2fOpinion%2fEditorials%20and%20Op%2dEd%2fEditorials

The huge imagination is not gone. I am confident that America's imagination is alive and well.

I am too. I just think, like a hermit crab, it crawls back into its' shell when the "in" thing seems to be blood & guts adventurism and new and wondrous ways to polarize the nation. Certainly the money that funds it does.

However investors are just not throwing money hand over fist at bad ideas like wash-my-car.com or ijustwantyourmoneyyouidiot.com

(chuckle) Or ideas like a Pentium microchip or an operating system offered up by a nerd from Harvard.

It will be a long, long time before China becomes an actual superpower.

I think you've lent creedence to Airworthy's original post. ....a citizen of a superpower badly underestimating the competition simply because their product...or in this case, their culture and politics...has always been regarded as inferior.

The People's Republic already is an economic superpower. It is so powerful , we in the States modify our very values and policies to suit it. For 40 years we scoffed and grunted at the Soviet form of Communism. We to this day still have Cuba on the 'silent treatment' for their transgressions against our values. But about 25 years ago, we smelled a sweet scent coming from a China no less communist and no less oppressive.....the smell of profit. Vast profit, from the growing change purses of a customer base four times the size of our own. It, like oil, addicted us. Since then, our addiction has transcended supply and gorged on demand as well. Not only do we get rich off of helping to build this massive new consumer economy, but in turn we integrated its' vast, cheap labor pool into a standard element in our own society.

China is in charge of Chinese markets. China is in charge of the vast factory of labor that pistons our own economy. We're not. That's power.

I'll sum it up by saying this, En....Here in the US, Wall Street reacts almost as extremely to a tiny virus in the streets of Hong Kong as it does to 300,000 Americans at war in Iraq.

That's power. And you may be assurred it isn't getting dimmer.

I think that sometime in the 25-40 years we could see the fall of an economic superpower: Japan. The second largest economy in the world has gone from being world's largest creditor to the largest debtor in about 10 years.

I hope you're paying very....very....close attention to that comment. "Largest debtor". Action word: "debt".

Unlike the rise of military superpowers, the rise of an economic superpower would not harm or threaten the US.

An economic superpower that's not a military superpower. Hmmmmn. There is modern precedent, Japan from the 60s to present day. But a first world economy more likely than not would require a first world projection/protection of will......the ability to get one's way, and keep it. Japan became an economic superpower over a period of time when a military superpower protected its' interests (still does). Let's envision an economic superpower that doesn't have that foriegn protection. The easy answer is, What would you do?

Exactly.

It's ironic that it took 8 years of a Democratic President to convince me what had essentially been a Republican lauded idea ....that free trade and economic integration can keep the peace better than armies and navies (Howard Dean got scalped last week, by his own brethren, for suggestting that exact notion). I'm still a firm believer in it. Which is why I think the unilateralism and Dirty Harry-jingoistic pablum eminating from the present Administration has done nothing to further that.
 
N79969
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RE: How Can An Economic Superpower Fall?

Sun May 04, 2003 3:31 am

Our policy towards China is shaped in large part by profit but it is about half the picture I would say. The actions taken with respect to China over the past 14 years while distasteful (the capital of my China is Taipei), were the right thing to do. China now needs GDP growth of something like 6-7% just to keep up with population growth. If the US had isolated China following Tiananmen, then two things would have happened: China would have fallen to the hard-liners and China could have gone into the throes of mass social unrest because of umemployment. Many academics have speculated that if China were to actually suffer mass unemployment and social unrest, they would drum up nationalism and go after Taiwan. Then we would step in and lots of Chinese would die. We did the right thing as unpleasant as that may be.

I agree that we should not underestimate China but I do not think I am. China is still a poor country. Despite the amazing skyscrapers in Guangzhou, Shanghai, Dalian, and everywhere else, I think they lack many things that would make them a superpower in the near or medium term. China is no superpower yet. They are big and they can affect us. If they cut us off, Wal-Mart would raises prices until we found alternate suppliers in SE Asia. There are plenty of takers in region that are ready to step up to the plate should China ever try to muscle us. They won't. They still need us more than we need them.

There is absolutely no comparison between the complete fiscal irresponsibility in Japan and US deficit spending. Japan's fiscal situation is untenable. No way. Many Japanese officials even refuse to acknowledge the problem. I won't go into the details of the Japanese situation, but they are screwed unless they turn things around in a hurry.

Hong Kong is a major entrepot with thousands moving in and out. If SARS broke out at a similar crossroads, we would have the same reaction. Notice we do not react as much to outbreaks in the Ebola river valley.

 
Klaus
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RE: How Can An Economic Superpower Fall?

Sun May 04, 2003 11:19 am

The EU already has surpassed the USA on a few economic indicators and more are to follow; And if foreign confidence in the US economy and fiscal policy should continue to erode as it does now, that process would just accelerate.

As for China, I suspect it´s quite a bit like a rather small western Germany with a gigantic eastern Germany tied to its back... Handicaps like that aren´t just overcome in a heartbeat or without substantial setbacks, although they ultimately can be. Even Germany is still fighting hard to overcome the stagnation of a mere 40 socialist years... In China, we´re talking about millenia of imperial plus a few decades of communist stagnation, and on a much larger scale.

But still: It´s not about "who´s got the biggest economy". The USA with their mere 290 million inhabitants couldn´t keep up in such a race in the long run anyway. It´s a lot more important how healthy the economy is - including its social, strategic and political environment.

In this respect, Europe is working hard on a vast range of reforms (it´s not always pretty, but all in all quite successful). China is determined to succeed. Japan is sleeping at the wheel. Africa is in a coma. Southern America is sick, but will probably come back. India has a hard time solving its social problems. But the USA even seem to be in regression to the 19th century. And that´s not good.
 
N79969
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RE: How Can An Economic Superpower Fall?

Sun May 04, 2003 1:23 pm

" But the USA even seem to be in regression to the 19th century. And that´s not good."

What a bunch of nonsense. The EU has probably the most sclerotic, ossified labor market in the world. The US is still the most dynamic economy despite the last few quarters of what can only be described as correction from the excesses of 1990s. While Europe has many bright spots, it is not as good as attracting talent and applying technology. There are still laws that prohibit entrepeneurs from starting to businesses after a certain number of bankruptcies.

Smart Chinese, Indians, etc are not flocking to Europe to seek opportunity. EU fiscal policy is no better than that of the US particulary with certain members exceeding their deficit limits. Actually those limits lengthen recessions in Europe.
 
BarfBag
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RE: How Can An Economic Superpower Fall?

Sun May 04, 2003 1:44 pm

The US, and many other countries, particularly Europe and Japan, face a demographic problem in the coming decades, as more and more of their population reaches retirement age and decreasing birth rates coupled with increasing life expectancy means that the ratio of the size of the dependent population to the size of the workforce will continue to increase. This would place a huge strain on the social security and retirement benefit programs in these countries.

This coming problem is most acute in countries like Japan, western Europe etc, which have high life expectancy coupled with very low birth rate; the U.S. has a higher birth rate, but it will still be a problem as the baby boomers get into their 60s. Even China will face this demographic problem within the next 3 decades because of their falling birth rates, and unless its able to develop significantly by then, its transition to a developed country would be a non-starter.

While this is a threat to many societies, its also an opportunity for others, like India, Indonesia and others. In India, in fact, a proposal was introduced to the Government very recently to further develop technical education and infrastructure with the sole aim of wresting additional business in the services sector from more advanced countries, through a combination of low-cost skilled workers and the demographic pressures in western countries causing their own workforces to shrink.
 
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RayChuang
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RE: How Can An Economic Superpower Fall?

Sun May 04, 2003 11:13 pm

I think the USA will survive economically in the long run for one good reason: despite the recent economic downturn we still have a stable economic market.

The problem with Europe is that the changing demographics of that continent could eventually case some quite ill effects there. This is especially true with the explosive immigration of people from the Middle East and northern Africa over the last 20 years--and these immigrants have very high birth rates.

As for Japan, they are still in trouble due to the fact they never really bothered to clean up their financial huge debt problem like what the US did with the Resolution Trust Corporation (RTC) did for the failing savings & loans companies.
 
N79969
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RE: How Can An Economic Superpower Fall?

Mon May 05, 2003 12:29 am

The advantage that the US has over other parts of the developed world is immigration. Japan has near zero. Europe has some but not on the scale of the US. The US does a far better job assimilating new arrivals than any other country.
 
airplay
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RE: How Can An Economic Superpower Fall?

Mon May 05, 2003 1:22 pm

As a Canadian, I will admit that Canada is as guilty as the US of violating NAFTA in substance and spirit. The above comment is just a one-sided myopic viewpoint often espoused by Canada's hard left.


Open your eyes YYZ717. The sale of Canadian Durham wheat is being attacked again this week. 18 billion worth of illegal agriculture subsidies are being questioned. The decimation of the west coast lumber industry due to unfair tariffs on Canadian board wood is under investigation. Cedar shakes, beef and pork. You name it, the US has violated NAFTA. Hard left? Man you are fixated aren't you Mr. McCarthy.

Incorrect. Canadian trade is increasingly focused on the US. Canadian trade with Europe is at an all-time % low and continues to fall (due in part to Europe's marginal economic growth in the last 20 years). I suspect this comment was just to minimize the US impact on Canada (anti-Americanism?).

Ah yes. The old "anti-American" chestnut. I wonder if you'll feel the same after Canada decriminalizes pot and the trade sanctions start.

The EU's extremely rigid labour laws make it a very expensive place to source labour.

Yes. That's why Portugal is manufacturing computer chips just like Mexico, Malaysia, Taiwan and other countries with inexpensive labour. Remember I said that the EU had a diverse workforce. That doesn't mean that EACH country has a source of cheap labour.

No. Canada needs to further integrate its economy into that of the US to ensure Canadian prosperity and efficiency. By the way, Bush is not an idiot.


Everyone is entitled to their opinion. No matter how "myopic".


 
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yyz717
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RE: How Can An Economic Superpower Fall?

Mon May 05, 2003 2:18 pm

I wonder if you'll feel the same after Canada decriminalizes pot and the trade sanctions start.

Celluci has said that US border checks will likely increase if Canada does decriminalize pot posession. This should further cause the Liberals to rethink what they're doing. Anyway, it makes no sense to decriminalize a dangerous addictive substance anyway.

The Fed Govt (whatever political stripe) should be HARMONIZING all Canadian laws with US laws as our 2 economies continue to integrate. Of course the hard left would disagree.


I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.
 
airplay
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RE: How Can An Economic Superpower Fall?

Tue May 06, 2003 12:25 pm

Anyway, it makes no sense to decriminalize a dangerous addictive substance anyway.


Yes. It's much better to spend billions of dollars in a vain attempt to keep 2% of the pot out of the country...

I am in no way a pot smoker but even I have read tons of documentation from auhthoritative sources that consider pot to be neither dangerous or addictive. And even if it was, why aren't we adding the use of cigarettes and liquer to the criminal code? How about gambling? It's been shown to be addictive and hazardous.

By decriminalizing pot, you put the criminals out of work and start drawing revenues from taxation much like you do with liquer. You can even introduce a new cash crop to make up for the loss of tobacco.

And...furthermore, the last 2 US presidents wouldn't be guilty of violations of federal law...no wait. Bush used Cocaine. Can't help him there.

 Smile
 
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yyz717
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RE: How Can An Economic Superpower Fall?

Tue May 06, 2003 2:12 pm

By decriminalizing pot, you put the criminals out of work and start drawing revenues from taxation

Incorrect. By decriminalizing pot, you will greatly encourage more people to try it, with the resulting greater "stoned" factor en masse.

I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.
 
airplay
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RE: How Can An Economic Superpower Fall?

Thu May 08, 2003 7:19 am

By decriminalizing pot, you will greatly encourage more people to try it, with the resulting greater "stoned" factor en masse.


So...the logic is that since pot is illegal, nobody is encouraged to use it and therefore the number of users will be low.

Well....it ain't working.

 Yeah sure

 
petertenthije
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RE: How Can An Economic Superpower Fall?

Thu May 08, 2003 7:56 am

In Holland I can still walk around without stumbling over stoned people. If I were to stumble over a stoned person it usually is a tourist. I won't mention the nation the tourists come from, but there are number of nations high (no pun intended) on the list.



Anyway, back to the topic of the question "Can an economic superpower fail?".

Yes they can, and they have.

In the 17th century Holland was the economic superpower matching the (economic) strength of the US today. After that the UK was the economic superpower.
Nowadays Holland still has a lot of big international companies (more than you would think for such a small country), but is no longer a superpower. The UK can be considered to be important, but a superpower? Probably not.

Attamottamotta!
 
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yyz717
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RE: How Can An Economic Superpower Fall?

Thu May 08, 2003 12:13 pm

Well....it ain't working.

I don't deny that pot use is high in Canada. If we decriminalize it, use will skyrocket.


I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.
 
Klaus
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N79969

Tue May 13, 2003 4:39 am

Klaus: But the USA even seem to be in regression to the 19th century. And that´s not good.

N79969: What a bunch of nonsense.

I´m still hoping that it will turn out to be just a temporary relapse and not a long-term regression, but I´m afraid the Bush administration´s policies are much more consistent with 19th century monarchs than with 21st century democratic leaders.

I´m talking about a distinctly imperial approach towards international policy, openly undemocratic behaviour in both internal and external matters ("patriot act", attempts to dispose of the UN) and an apparently total inability to remember the economic lessons learned throughout the past century.


N79969: The EU has probably the most sclerotic, ossified labor market in the world. The US is still the most dynamic economy despite the last few quarters of what can only be described as correction from the excesses of 1990s.

I´d be careful there. Europe is definitely on the move in almost all areas - labour regulations being among them. Besides, dynamic is not a value in itself as it is naturally opposed to stability. I´d prefer a steadily developing economy over a wildly oscillating one any day!


N79969: While Europe has many bright spots, it is not as good as attracting talent and applying technology.

Agreed, up to a point. But with better funding for education, we´re also wasting a lot less of the talent we´ve got at home. And the big "brain drain" of the 1930s/40s from Europe to the USA will not repeat anytime soon. It was an important factor in the USA´s dominance over Europe, in addition to the physical devastation.


N79969: There are still laws that prohibit entrepeneurs from starting to businesses after a certain number of bankruptcies.

As far as I know, such restrictions (as far as they exist in certain countries) only apply if you´ve crashed and burned repeatedly ripping off your creditors. And in that case, there just might be the suspicion you´re a crook, plain and simple. There´s a point where you´ll lose your driving license as well.


N79969: EU fiscal policy is no better than that of the US particulary with certain members exceeding their deficit limits. Actually those limits lengthen recessions in Europe.

Beg your pardon? The USA would have no chance in hell of joining the €uro with the lavish deficit spending of the Bush administration. Compared to that, the €uro nations´ fiscal policies are exemplary, even of those who are at or somewhat above the rather strict limits of the stability pact. Which is one of the pillars of the €uro´s current success. The keyword here is confidence.

Contrary to the long-standing criticism from abroad, Europe continues to develop and to reform; And although it´s not going as fast as it might, we´ll get there.

Even with the currently rather low internal growth rates in Europe, capital is on the run from the USA to Europe due to the insane fiscal policy perpetrated by Bush & Co and the resulting crumble of the Dollar. For foreign investors, it basically nullifies whatever growth there may have been left. The US finance minister just shrugging at the decline of the Dollar didn´t help, exactly, either.

Things may (and hopefully will) change again; But I´m afraid it may not come to pass until there´s a different president in the White House.

I´d much rather watch GWB being kicked out of there than having to see the fall of an economic superpower instead.
 
N79969
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RE: How Can An Economic Superpower Fall?

Tue May 13, 2003 5:56 am

Klaus,

While I do not agree with many of GWB's economic policies, I find your post to be full of wild exaggeration and hyperbole. First of all, the economic policy of the United States has not radically changed under GWB. The US is not pursuing mercantilism or anything else '19th century.' I won't address your first point about our policy towards the UN because it frankly makes little economic sense. Rather it sounds like you are simply venting your dislike for our President.

I will take the dynamism of the US economy to the 'stable' (stagnant is a better word) economy of Europe any day. With the exception of the UK and Ireland (and even France once in a while), Europe has produced negligible growth in jobs over the past decade. The US economy does not wildly oscillate from day to day or even year to year. We had a long and un-naturally large economic expansion that is now being countered by the usual cyclical downturn along with a big correction. You guys can have 'stability' if that what you call chronic unemployment.

The US still draws talent from around the world and not just from Asia. We draw a lot of the best and brightest from Europe as well. Perhaps our latest and best known poach in recent years is Linus Torvalds who created the Linux OS.

"Ripping off of your creditors." I think that has a different meaning in the US. All entrepeneurship necessarily involves risk taking and money is inevitably lost. Most successful entrepeneurs in the US fail several times before getting it right. I think this process is stymied in Europe because there is a limit at how many times you can fail. Germany is (was?) particularly notorious for its bankruptcy laws.

The EU chose to adopt the Growth and Stability Pact. The US has not adopted anything like it. I don't know if the Pact is anything more than a necessary evil. It limits fiscal discretion even in times of recession. That makes for sub-optimal economic policy at the country-level. I don't know if I would describe the fiscal health of European countries as exemplary either.

I am glad the dollar is declining. That should make our exports cheaper for now. That could be a valuable stimulus for the slow economy. I am not too worried about capital flight. It is really not a problem for the US right now.
 
Klaus
Posts: 20622
Joined: Wed Jul 11, 2001 7:41 am

N79969

Tue May 13, 2003 9:14 am

N79969: While I do not agree with many of GWB's economic policies, I find your post to be full of wild exaggeration and hyperbole. First of all, the economic policy of the United States has not radically changed under GWB. The US is not pursuing mercantilism or anything else '19th century.' I won't address your first point about our policy towards the UN because it frankly makes little economic sense. Rather it sounds like you are simply venting your dislike for our President.

It´s not that simple.

"The fall of an economic superpower" is not just brought about by a failure of its economy, even if that´s the ultimate indicator of its demise.

In this case, the Bush administration has very publicly made it their ultimate goal to "free the USA from undue foreign influence" by ripping to shreds every supra-national agreement, treaty or organisation that might compel the USA to active cooperation with others - in the delusional conviction that such cooperation would somehow diminish their own power through foreign influence, rather than supporting them through a global consensus in which their voice was respected and welcome.

Now the real world is beginning to turn out as a rather bleak and unfriendly place with the global public in strong opposition towards a US government whose blatant disregard for any kind of legitimacy and democratic due process has been evident both domestically and internationally.

The error is in taking all the good and essential things for granted, even when actively undermining their very basis at the same time.

It´s not just a matter of dislike, although some economic decisions are indeed influenced that way, and their combined weight can matter. It´s a matter of losing confidence in the ability and/or the will of a government to contribute to a sound and constructive framework for both political and economic progress.

When you´re damaging this confidence, you´re in for a rough ride. And that´s what we´re seeing right now; Both on the economic/fiscal and on the political level.


N79969: I will take the dynamism of the US economy to the 'stable' (stagnant is a better word) economy of Europe any day.

With the loads and the investment we´re taking on right now, it´s not too shabby. Even if there´s still considerable room for improvement. And the structural problems are being tackled. Just keep your image of Europe up to date, please.


N79969: You guys can have 'stability' if that what you call chronic unemployment.

The levels aren´t really that far off, especially when held to the same standards (which the official numbers are not). And I don´t think that introducing the class of the "working poor" to the European side would be that big an improvement. There are substantial problems on both sides of the pond.


N79969: The US still draws talent from around the world and not just from Asia. We draw a lot of the best and brightest from Europe as well. Perhaps our latest and best known poach in recent years is Linus Torvalds who created the Linux OS.

Yes, of course. But in the long run, that won´t be enough. You can´t permanently rely on an influx of human capital - just like the problems the negative trade balance is running into right now. At some point, you just need to stand on your own feet.


N79969: Most successful entrepeneurs in the US fail several times before getting it right. I think this process is stymied in Europe because there is a limit at how many times you can fail. Germany is (was?) particularly notorious for its bankruptcy laws.

I must admit I don´t know the current state of that matter over here in detail. But deregulation in many areas is happening as we speak, even if not as precipitously as elsewhere. We´ll probably never get exactly to the US situation. And I consider that A Good Thing in many respects.  Wink/being sarcastic


N79969: The EU chose to adopt the Growth and Stability Pact. The US has not adopted anything like it. I don't know if the Pact is anything more than a necessary evil. It limits fiscal discretion even in times of recession. That makes for sub-optimal economic policy at the country-level. I don't know if I would describe the fiscal health of European countries as exemplary either.

Just in comparison to the current US administration...  Wink/being sarcastic
The stability pact lays the groundwork for the stability of the €uro. It is under debate whether it may be a little too rigid for a global situation as difficult as it is now; But I still fully agree with the principle of fiscal discipline and the goal of massive debt reduction (even though european debt levels are still almost ridiculously low compared to the american one).


N79969: I am glad the dollar is declining. That should make our exports cheaper for now. That could be a valuable stimulus for the slow economy.

The trouble is that it also exacerbates the trade deficit: The capital influx to pay for it just isn´t there any more. We´ll see how it´ll play out and which side of the coin will ultimately outweigh the other.


N79969: I am not too worried about capital flight. It is really not a problem for the US right now.

It may be getting there... Especially with the mid-east countries increasingly shifting their imports towards Europe (not entirely unconnected to the political situation), the temptation is growing to link the oil price to the €uro instead of the US $, which could potentially create a whole new world of problems for the US economy. Combined with the worldwide shifting of assets towards the €uro that´s ongoing anyway (just due to its introduction as a new major currency, but partially also in order to take advantage of the existing dynamic), things are getting more complicated by the hour.

Under normal political circumstances, all the participating powers would closely cooperate to limit the impact of such a dynamic; But under the new "war rules" imposed from Washington, several of those controlling mechanisms have been unhinged.

And that is why the political level is important in my opinion. I have no desire for a Europe that dominates a decrepit America (and I don´t think it´ll quite come to that) any more than the other way around. What we need is renewed cooperation across the pond(s).

I don´t claim to know for sure that the dangers described above will outweigh the stabilizing factors; But simply disregarding the warning signs in the kind of hubris we´ve witnessed through the past two years ("We´re so fantastic - what in the world could possibly stop us!?") is just begging for an answer that can´t be welcome.
 
matt777
Posts: 476
Joined: Wed Oct 24, 2001 8:55 am

RE: How Can An Economic Superpower Fall?

Wed May 14, 2003 7:12 am

Argentina Superpower 2100  Big thumbs up
 
FlyBoeing
Posts: 835
Joined: Fri May 05, 2000 2:08 am

RE: How Can An Economic Superpower Fall?

Wed May 14, 2003 2:35 pm

Hey Klaus:

GO TO AN ECONOMICS CLASS!!!

According to my Economist Intelligence Unit figures, the U.S has not coasted along on its dollar mastery any more than Euro countries have. Their government debt/GDP ratio is about 74% versus about 67% for the U.S.

If the U.S was coasting along on its dollar mastery, it would have gigantic trade deficits. That's true. But the fact that the dollar is the lingua franca of the fiscal world would have no effect on U.S growth since gigantic trade deficits get subtracted from economic growth.

And we've grown historically faster than the Euro zone countries. The EIU predicts growth of about 2% for the Euro zone for the next five years and 3% for the U.S in the next five years.

Europe got into debt spending on gigantic wasteful social programs which depressed growth and made a lot of cheap imports available for the U.S to buy. The U.S got into debt spending on gigantic wasteful defense programs. The difference is that one advances the state of the art, funds education through the G.I Bill, and allows us to influence other countries' foreign policy.

The other social model has gotten its progenitors into the position where their labor costs are consistently 1% higher yet unemployment is consistently 2% higher.

The U.S has a higher deficit/GDP ratio than the Euro zone economies, but it's only by 1% of GDP. Euro zone economies average to 2.7% of GDP. But bear in mind that historically the case is that the U.S has a higher level of fiscal conservatism; U.S budget deficits were lower than Europeans for most of the 1990s. Bush's tax cuts will have an effect on public monies but he could just as easily lay off government workers and cut government expenditures, something that's a heck of a lot easier in the U.S than it is in Europe. Euro zone economies have average government spending of 45% of GDP where the U.S spends 20% of its GDP on government.

Once the U.S economy picks up - and most reliable indicators indicate that it is doing so far in advance of Euro Zone economies - the U.S should resume its normal position and the Euro zone economies will assume their normal positions.

BTW, the U.S per capita income is about $37,500 whereas Euro area per capita income is about $25,596 per head at purchasing power parity. At these historic interest rates - 4% yields on the 10 year bills - that financing a 1% one-time additional cost works out to be about $26 per American.

Out of the marginal income that the American makes over the Euro, he's paying .22% to support Bush's war. I think that's a fair investment.
 
N79969
Posts: 6605
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RE: How Can An Economic Superpower Fall?

Fri May 16, 2003 11:21 am

Klaus,

Your response was way too long and after a few days it has become even harder to read. Let's keep our remarks short whenever possible. First, the US is not pulling out every 'supra'-national organization. President Bush is undoing some of President Clinton's work. I don't agree with much of this but it is not a sea change. I think you are overreacting because of your personal dislike for Bush.

Anyway, it looks like the German, Dutch, and Italian economies are actually shrinking. The US economy is growing at a slow rate that is not creating jobs. I hope things turn around on both sides of the Atlantic.

http://www.nytimes.com/2003/05/16/business/worldbusiness/16EURO.html
 
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yyz717
Posts: 15689
Joined: Mon Sep 10, 2001 12:26 pm

RE: How Can An Economic Superpower Fall?

Fri May 16, 2003 1:48 pm

Klaus,

Your response was way too long and after a few days it has become even harder to read.


Exactly. Let's keep the commentary brief or we all lose interest.

N
I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.

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