Posted by: Chris | January 7, 2010

Manzibar

This used to be a comment, but it got long and the post was old, so I said, why not just make a new post.

Miles earlier objected to Jim Manzi’s argument that adopting the European trade-off of a diminished economy/world presence for stronger social cohesion.  Jon Chait makes a similar point (leaving aside his stupid nitpicky arguments about data, on which is thoroughly wrong) in arguing that it is more relevant to look at GDP/capita rather than a countries share of world GDP in measuring the success of macroeconomic policy.  Broadly, the question is should we focus on average living standards (GDP/capita) or international power (% world GDP), though Chait seems to prefer making partisan points over tackling the issue headon.  Jim Manzi has no such aversion, and, after thoroughly pwning Chait on the nitpicky issues, writes this:

Exactly as Mr. Chait indicates, GDP per capita would be a far better measure of prosperity – which is why I used that metric when discussing relative prosperity earlier in the piece. I used total GDP in the paragraph in question for the reasons I stated in the article. This was a description of the loss of European economic power to Asia. Ultimately, absolute size of an economy matters, because economic clout represents the latent capacity for military and cultural power. Not all large, successful economies become military powers, but many do. And per capita wealth will not protect a society from a large, aggressive military power. As an extreme illustration, annual GDP per capita is more than $40,000 in Hong Kong and more than $30,000 in Taiwan, but this did not allow Hong Kong to remain independent of PRC China, which has annual GDP per capita of about $6,000, and would not allow Taiwan to do so without the presence of the U.S Navy…

If we do consider per capita GDP, as noted in the piece, “economic output per person is now 20 to 25% higher in the U.S. than in Japan and the major European economies”. As Reihan Salam notes in his blog post on this, as of 1980 the consensus was that the U.S. and Europe should be converging on a reasonably common level of economic output per person. The roughly comparable growth rates in output per person over the past quarter century represent the unexpected maintenance of a U.S. lead.

He also restated the offending quote Miles linked to.   Be sure also to check out the comment section of the Manzi post, as he further expounds things with various commenters.  Before this post sinks below the fold, I want to again exhort JJ, Nick, and lurkers to read the Manzi article and the surrounding commentary.

Honestly, I am trying to come up with a better way of phrasing why America is not in a position to go the Europe-route (strategically, not from a road-to-serfdom socialism makes people worse off perspective) than the way Jim Manzi has, but it’s probably the most succinct way of describing it.

I’ll try though.  One of the reasons Europeans can afford a strong welfare state is that we foot their defense spending bill to a large degree.  If we were to take the same approach, no one would be there to spend money protecting us.  Then the question becomes, which I think is the heart of Miles’ objection, why spend unholy amounts of money on defense at all?  Who cares if China or India or whoever could beat us up if they wanted to, because, in all likelihood they won’t and we’d get to live idyllicly with both a roughly prosperous economy and a generous welfare state?

This is a legitimate question, but it misses the subtle role power plays in an anarchic world.  Being able to beat everyone up when the chips are down does not only come into play when the chips are down.  The mere capacity to do so allows us (and others with similar capacity) to tweak the world stage to bend to our benefit and push our own interests through when they clash with those of other states. 

I know this is all a bit wishy-washy, so let me try to firm it up with some recent examples.  Half the Western world would not be in Afghanistan right now if it weren’t for the prominence of the United States.  France and Britain necessarily go alone when they intervene military in states for their own interests (see, for example, the repeated French campaigns in West Africa).  The United States, by sheer dint of its prominence, always can count on an allied front in its wars.  For a more I-Law perspective, our power also lets us avoid signing treaties potentially against our interest (LoST, Kyoto, Landmines) that we would otherwise be strong-armed into signing, bend those we do sign to our interests (again, see LoST, or territorial claims), and flaunt agreements we have signed (torture, ICJ) without any repercussions.  And this capacity is not solely limited to the United States.  China has spent the last decade securing natural resource deals across the globe to ensure its capacity for continued growth in a way that Taiwan (to use Manzi’s analogy) could never do (they also have beaten the Taiwanese in the recognition wars for similar reasons).  The Chinese recently used their clout to kill the Copenhagen Summit because things were progressing against their interest, in a way that more prosperous but less powerful states could never do.

However, I think the best recent example of the subtle influence of American power came recently during the global recession.  A number of states simultaneously attempted to perform counter-cyclical deficit spending.  However, almost all the lenders immediately came to the United States first, because the size and centrality of the United States economy makes it the safest harbor in a storm.  This meant we could keep interest rates on treasury bonds at near-zero while doubling the deficit for the near future.  No other state could do that: pump up the economy artificially while simultaneously keeping a check on inflation and interest payments on our debts.  The rest of the world scrambled to find lenders.  The United Kingdom (until recently the greatest power in the world), for example, could not find sufficient buyers for their debt and had to do a combination of raise interest rates and seek money from the World Bank (which comes with a whole host of strings attached).  Britain now must make heavy cuts across the board in the next couple of years to remain financially secure.  The United State, by contrast, can keep borrowing money, propping up failing government agencies with fewer concerns about solvency, because we can get foreign credit cheap and plentifully and, if push comes to shove and it all becomes too much, we can default no problem.  What are our creditors going to do, invade?

I should also point out that other states have far higher deficits and national debts than the United States, which might facially suggest that we are not in such a unique position.  But these states, like Japan or Belgium, are financed largely by internal, private lenders, whose contributions do not substantially increase GDP or affect trade deficits.  They also require higher interest rates to sustain (and thus higher levels of inflation).  So the dilemma Manzi posits stands.  The United States has to figure out how to keep its power and position in the world while ameliorating internal dysfunctions and competing with Chindia.  This will not be an easy century.

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Responses

  1. […] All you have shown is that it is better for a state to have more than less international power. But (arguably) it is […]


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