United States - A superpower in decline - Term Paper Example

? 4 November United s – A Superpower in Decline The United s has always been a symbol of authority and has enjoyed a well-revered position owing to both its economic and military power. The twentieth century brought in a number of blows, including the unforgettable Great Depression, most of which are still afflicting the nation today. Perhaps the days of being a superpower are over for the US, as is evidenced by the current state of affairs in the US economy. Global media is abuzz with news, opinions and predictions on the decline of the US, and there are innumerable ‘foretellers’ assuming the rise of other would-be superpowers, especially China. Theories of world domination by emerging economies have always been around, however, it is yet to be seen if the superpower status of the US actually caves in. Are US powers really declining? The answers to this question are extremely elusive especially in light of the fact that even after severe economic crises in the past, the US has successfully bounced back to stable conditions, retaining its economic and political dominance. This paper attempts to analyze the current status of economic and military power of the US, in order to investigate the ‘assumed’ decline of the power of this nation. 1. Background The present economic situation in the US, the extreme debt crisis topped with public protests such as Occupy Wall Street demonstrate the gravity of the U.S situation. Most economists worldwide have even gone to the extent of analogizing it to the Great Depression. It is believed that the present crisis will consume the nation and that it is a harbinger of the US downfall from power. Although the US economy is currently under recovery, the percentage decline in median annual household income is greater than it was during the previous recession. The decline in income during the period of recession from 2007 – 2009 was 3.2%, which increased to 6.7% by June 2011 (Berman). Lack of growth in income coupled with the sluggish job growth has marred the U.S’s once enviable job market. It is in fact feared that the US will trip back into another recession. In another major drawback, the US lost its AAA credit rating, downgrading it to AA+ status. As the dollar is under threat and the US debt burden mounts up, it is speculated that within a decade or so, China, with a GDP growth rate of 9.8% as of 2010, will outgrow the US, whose GDP growth rate is only 3.10% (World Bank). The Chinese Yuan may replace the US dollar as the world’s reserve currency. This scenario reminds of earlier predictions in the 1980s when it was foretold that Japan would be a superpower, which however did not come true. This proves the inconsistency and fallibility of such predictions. However, the avowal that the US economic and military power is in decline, stands true, as will be discussed in the following sections. 2. The US Economy Economy is a major determinant of world power and the size of the economy influences its position in the world market. The US economy is analyzed here, in terms of growth, export, import, innovation, natural resources and trade. 2.1 Growth The annual Gross Domestic Product (GDP) growth rate is a major indicator of economic growth. The US economy is the largest in the world, followed by China and Japan. The GDP growth rate of the US was documented as 1.6% in the third quarter of 2011 (tradingeconomics.com). The GDP growth rate of China is far higher, at 9.1%. The GDP growth rates of other major economies of the world, such as India, Germany, Canada, France, Australia, UK and Japan were 7.7%, 2.7%, 2.2%, 1.6%, 1.1%, 0.5% and -1%, respectively, in the third quarter of 2011. As is evident, China has the highest GDP growth rate and India is not far behind. The US GDP growth rate is despairingly low, falling from 3.10 to 1.6%. Therefore, in terms of economic growth, the economy of the US is seemingly in decline. As for the prediction that the Chinese economy will soon become the world’s largest economy, replacing the US, opinions differ. Although a majority of economists believe otherwise, Nye refutes the idea that China will replace the US as a world superpower. According to Nye, in spite of its high GDP growth rate, “China will not equal the US for decades” even if its GDP surpasses that of the US. He argues that mere GDP growth does not determine power and that the US military power, soft-power advantages and China’s “geopolitical disadvantages” are often ignored while making such predictions. He further states that other countries such as India and Japan will outbalance China’s power by welcoming the US. The China-US superpower debate is difficult to resolve, however, the one thing that is now clear is that US’s present status as the world’s largest economy is certainly under threat, if not by China, then by other emerging economies such as India, Russia, Japan and Germany. 2.2 Innovation The US ranks number one in innovation. Moreover, it is the topmost investor in R&D. As per projected statistics released by the Battelle R&D magazine, the US R&D will increase by 2.4% in 2011, and will amount to 405.3 billion dollars (battelle.org). The US funds one-third of the global R&D, followed by China. While the US has always remained the highest contributor towards global R&D, its position is yet again threatened by other countries. The increase in global R&D investment rates by other countries such as China, India, Korea, Brazil and Russia is far greater than that of the US, which makes it possible for these countries to overtake the US global R&D investment in the future (battelle.org). Increase in R&D investments by other emerging economies challenges the innovation capabilities of the US. However, as of now, the US remains a leader in development of technologies and innovations in software and life sciences. It boasts of the highest number of Nobel Laureates, and a vast majority of world-changing discoveries and inventions has actually originated in this country. Google, a company of US origin, is fast acquiring global web domination. Apple, another US based company, has dominated the Smartphone and the tablet market. Microsoft, the world’s most used computer operating system, also belongs to the US. With growth in technology, and huge demands world over for consumer electronics and computer products, US products will continue to dominate the globe. The US biotechnology, nanotechnology and pharmaceutical sectors are also world leaders, both in terms of innovations as well as accessibility. China and Japan too have managed to maintain a consistent position in the global electronics market. However, as far as innovation and R&D expenditure is concerned, the US will continue to remain the global leader for quite a while. 2.3 Export and Import The US trade deficit increased to 40.2 billion dollars by February 2010, compared to 36.4 billion dollars in November 2009 (Evans). The US trade deficit amounted to 500 billion dollars by the end of 2010, increasing by 33% over the previous year (Erwin). The rate of growth in trade deficit is a negative indicator of economic progress. The US has a higher magnitude of imports as compared to exports. In 2010, US exports increased by 17% over the previous year, and amounted to 265 billion dollars worth of goods and 43 billion dollars worth of services. The growth in imports was much higher, at 20%. The imports rose by 360 billion dollars worth of goods and 25 billion dollars worth of services (Prestowitz; U.S. Census Bureau). It is clear that the imports were 120 billion dollars higher than the exports, adding to the US’s already high international debt. As a tool for ensuring economic recovery, most nations opt for export-led growth. President Barack Obama has thus taken measures for doubling the US exports in the next five years (Evans). This would help in reducing the trade deficit and in enhancing economic progress. A step in that direction would be to weaken the dollar. However, the US dollar index is rising steadily, making it difficult to achieve the intended export target. China on the other hand, is currently the world’s largest exporter owing to its weaker currency. Therefore, China is at a great advantage through export-led growth. However, China experienced its first trade deficit in the first quarter of 2011, its first in six years (Xiuping). This trade deficit is attributed to increasing imports and inflation. China’s exports increased by 26.5% as opposed to imports that increased by 32.6%, spurring the trade deficit. However, compared to the US, China is still in a better position. Of the 500 billion dollar trade deficit of the US in 2010, about 273 billion dollars of its trade deficit was with China alone, which is the “biggest trade deficit a country ever had” with another country (Erwin). Apart from hampering economic growth, the US trade deficit is also affecting job growth. As long as the US continues to increase or maintain its present import rate, its economy and job growth will continue to decline. 2.4 Accessibility to Natural Resources Economic growth depends largely on a nation’s natural resources. Population explosion is a major strain on natural resources, especially energy and water. The US is experiencing depletion in groundwater, oil and other natural resources. The gasoline prices in the US amount to 3.511 dollars per gallon as of November 2011 (American Petroleum Institute). Rising gasoline prices have affected economic growth. Under the Obama administration, the domestic energy production is said to have decreased, although oil production rose in 2010 to the highest level ever since 2003 (Hastings). Projections of fuel production in the future indicate a decrease, while fuel imports are expected to increase. According to data published by the U.S. Energy Information Administration (EIA), the Commercial crude oil inventory levels in the US have declined by 26 million barrels from the previous year (EIA). The EIA further projects higher costs of crude oil by 2012. Domestic crude oil production is projected to increase by 180 thousand bbl/d in 2011 and by 70 thousand bbl/d in 2012 (EIA). There is a decrease in current fuel imports after the economic downturn in the US. The average oil consumption has also declined. However, gasoline prices remain high. Because of the increased production of natural gas, there is currently an increase in fuel exports and decrease in fuel imports, which may have a positive effect on the economy, as oil import is a major contributor to the US trade deficit. 2.5 Trade Agreements, Investments and Monetary Policies In an attempt to generate more jobs and revive the declining economy, the US has signed several free trade agreements. Free trade agreements are believed to improve the economy by ensuring export based jobs and services. The free trade agreement between the US and Korea, the largest one by far, is expected to increase the US economic output by more than the combined effect of the US’s last nine free trade agreements (Craft). Such agreements expose the economy to newer markets and ensure an increase in the number of jobs. The US-Korea free trade agreement is expected to increase exports by 10 million dollars and support about 70,000 jobs. The US has signed several other trade agreements with several other emerging economies. However, many believe that such free trade agreements have adverse effects on the US economy. Such agreements cause job outsourcing to other developing countries where production costs are fairly lower and average wages are far below those in the US. Job outsourcing has thus affected the US job market, leaving most of the citizens jobless. Moreover, companies that were originally based in the US are shifting to other countries such as China, where there are lesser regulations and production costs. For instance, Evergreen Solar, the third largest manufacturer of solar panels in the world, is shifting to China from its original base at Massachusetts (Bradsher). This is because of the extremely high subsidies offered by China towards production costs. Another cause of concern is the free trade agreements between other competitor countries, which keep US out of the loop. For instance, agreements such as the MERCOSUR – Columbia free trade agreement, ASEAN-Australia and ASEAN-China agreements pose stiff competition for US manufacturers (Wainio et al). Because of the MERCOSUR – Columbia free trade agreement, US agricultural exports to Columbia have reduced due to the low tariffs it grants to MERCOSUR exporters. Therefore, the US faces a dual problem of job creation and export competition. However, this is not the only cause of concern. There has been an increasing shortfall in investments, worsening the present economic situation even further. There is a decrease in foreign investments owing to the debt limit and economic stagnation. The US investments in China have declined by 28%, although it is expected that China will provide “increased investment opportunities in the future” (Qingfen). Moreover, economists also point out that the US’s monetary policy is “flooding the world with liquidity”, thereby increasing prices of commodities and assets (Mason). It is being argued that increased government spending and credit inflation is required for the generation of more jobs and to increase economic prosperity. Until then, the US economy and job market may continue to decline. 2.6 Decline in Economic Power? Is the US economic power declining? After analyzing the current economic scenario, projections on import, export, trade deficit, GDP growth rate, trade and investment, it can be concluded with a carefully guarded ‘yes’ that American economic power is certainly under decline, and may soon be overpowered by rising powers such as China, India and even Japan. According to data released by the TIME magazine, the middle class of the US is being “hollowed out” as more and more citizens are becoming unemployed, inequality is rising with the rich becoming richer and the poor becoming poorer, health care costs are steadily increasing and the relative income mobility of one generation over the previous one is also falling steadily (Autor qtd in Time, U.S.). Therefore, it is stated that the US is no longer the “land of opportunity it once was” (Autor qtd in Time, U.S.). Many disregard the possibility that China will outdo the US in the near future and would establish itself as the world superpower, citing that such forecasts about Japan and the Soviet Union in the 20th century did not come true. However, Rachman argues that this time, the predictions will prove to be true. According to Rachman, the Soviet Union did not succeed because of its weak and inefficient economic structure, and Japan, being a small country compared to the US, did not make it to being a superpower. In case of China, matters are different. China enjoys a strong economic system, with 9-10% growth rate a year, apart from being the world’s largest manufacturer and exporter and having foreign reserves of more than 2.5 trillion dollars (Rachman). Its population is four times that of the US. Therefore, it can be safely assumed that China may replace the US as a superpower, while the US economy undergoes a steady decline. 3. The US Military Apart from economy, military size and strength determine a country’s power in the global arena. The US military strength is discussed here, in terms of size and technology, and an attempt is made to ascertain whether the US military power is also declining, as is its economic power. 3.1 Military Size and Technology Among global military powers, the US is estimated to be the most powerful, followed by Russia, China, India and UK (US Library of Congress, Central Intelligence Agency qtd in GFP). However, the recent economic crises and mounting debts have taken their toll even on the defense department of the US. As the US attempts to cut budgets to help recuperate from the economic crisis, it cannot assign a budget of more than 700 billion dollars on defense (Dreyfuss). The US navy is currently the smallest than it was in the past 50 years, declining from 1000 to 286 principal combatants (Helprin). The number of the active military personnel of the US is currently 1,477,896, while that of Russia, China, India and UK is 1,200,000, 2,285,000, 1,325,000 and 224,500 respectively (US Library of Congress, Central Intelligence Agency qtd in GFP). The current defense budget of the US is the highest, at 692,000,000,000 dollars, compared to $56,000,000,000, $100,000,000,000, $36,030,000,000, and $73,746,170,000 of Russia, China, India and UK. Therefore, it is clear that in terms of size and spending, the US is still the highest (US Library of Congress, Central Intelligence Agency qtd in GFP). The US has several cutting-edge technologies especially for unmanned warfare (AIDemocracy). It has about 7000 unmanned vehicles such as weaponized drones. However, the pace at which the US military is developing is very slow compared to other countries. While the US defense department is under budget cuts owing to the debts crisis and recession, China has been developing ASAT, anti-satellite weapon technology (“Assessing the Strategic Readiness”). The operational capability of Chinese anti-ship ballistic missiles challenges the safety of US aircraft carriers. In a visit to China, Robert Gates, former Secretary of Defense, was shown a test flight of the Chinese Chengdu J-20 stealth fighter (“Assessing the Strategic Readiness”). Returning from the visit, Gates stated that the Chinese were “further ahead in the development of that aircraft than our intelligence had earlier predicted” (qtd in “Assessing the Strategic Readiness”). Russia too has developed stealth fighter aircrafts apart from other advanced equipment. It is even selling its fourth-generation modern aircrafts to other militaries. Meanwhile, the US has stagnated its ambitious military programs such as the F-22 Raptor, the AF-1 airborne laser and the Army's Future Combat System (Dunn). The continued budget cuts and lowered defense investments have shrunk US military’s technological advancement in comparison to the rest of the world. The US submarine fleet is expected to reduce to about 41 by 2028, which is far below the Navy’s requirements. Meanwhile, China has been developing sophisticated submarines, underwater mines and other warfare equipment against which the US Navy may not possess enough power (“S.O.S”). It is also estimated that the number of Air Force fighter aircraft will fall by 800 planes below the required number within a decade, whereas, China and Russia are developing futuristic aircraft (“S.O.S”). 3.2 Decline in Military Power? Although the US has been the front-runner in military technology, financial crises and budget cuts in military expenditure are tipping the balance of military power from the US to Russia and China. What the US lacks is sufficient modernization in military equipment. According to data published by the Heritage foundation, the part of the defense budget allotted for military modernization was just a little more than 30%, the lowest rate ever (“The State of the U.S. Military”). What is more disturbing is the fact that a majority of the systems used by the US military today was built in the 1980s and has to be replaced. In addition, due to lack of funds for modernization of the military, the recapitalization rates have also fallen. For instance, while 338 tactical fighter jets were made in 1985, only 56 were made in 2008 (“The State of the U.S. Military”). It is thus obvious that until the economic crisis subsides and the US gains back its economic power, its military power will also continue to decline. 5. The Bottom-line— US Decline and how it compares with rising Powers From the preceding analysis of the US’s economic and military powers, it can be assumed that the US powers are certainly under decline. As compared to other emerging economies, especially China, India, and Russia, the US economic progress and military development is under a steady downfall. As to whether China will replace the US as a world superpower is yet to be seen. However, it can be predicted that China will soon be fully equipped to challenge the US domination of the world. While the US has been the seat of globalization, it is still yet to be ascertained if it will overcome the current economic and military decline to regain its status as a world power. It is thus concluded that the US economic and military power are continuing to decline. 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