The Facts About American 'Decline'


Apr 13, 2011

Messy pile of U.S. currency

Photo by Thinkstock

This commentary originally appeared in Wall Street Journal on April 13, 2011.

In absolute terms, the U.S. increased its GDP, population and military spending from 2000 to 2010. In relative terms, the story is not always as good, especially in GDP.

It's fashionable among academics and pundits to proclaim that the U.S. is in decline and no longer No. 1 in the world. The declinists say they are realists. In fact, their alarm is unrealistic.

Early declinists like Yale historian Paul Kennedy focused in the 1980s on the allegedly debilitating effects of America's "imperial overstretch." More recently, historians Niall Ferguson and Martin Jacques focus on the weakening of the economy. Among pundits, Paul Krugman and Michael Kinsley on the left and Mark Helprin on the right sound the alarm.

The debate involves issues of absolute versus relative decline and concepts like "resilience" and "passivity." Some issues are measurable, like gross domestic product (GDP), military power and demographics. Others are not measurable or less measurable.

In absolute terms, the U.S. enjoyed an incline this past decade. Between 2000 and 2010, U.S. GDP increased 21% in constant dollars, despite the shattering setbacks of the Great Recession in 2008-09 and the bursting of the dot-com bubble in 2001. In 2010, U.S. military spending ($697 billion) was 55% higher than in 2000. And in 2010, the U.S. population was 310 million, an increase of 10% since 2000.

The notion that demography is destiny may be a stretch, but demographics are important when, as in the U.S., population increase—due to higher birth and immigration rates than other developed countries—cushions the impact of an aging population.

But there were also some important declines relative to the rest of the world. In 2000, U.S. GDP was 61% of the combined GDPs of the other G-20 countries. By 2010, that number dropped to 42%. In 2000, U.S. GDP was slightly more than eight times that of China, but it fell to slightly less than three times in 2010. Japan is a contrasting case: U.S. GDP was twice as large as Japan's in 2000 but 2.6 times as large in 2010, before the tsunami and nuclear disasters of 2011.

Between the inclines and declines are other data to be considered.

U.S. military spending inclined substantially to more than twice that spent by all non-U.S. NATO members in 2010 from 1.7 times in 2000; to 17 times Russian spending in 2010 from six times in 2000; and to nine times Chinese spending in 2010 from seven times in 2000.

Demographically, the U.S. population in 2000 (282 million) was 4.6% of the global population; by 2010, the U.S. population (310 million) had risen to 4.9% of the global figure. The U.S. population was 59% as large as that of the 15-member European Union in 2000; that figure increased to 78% by 2010 (counting only 2000's 15 members) and 62% if we count the 12 new EU members added between 2004 and 2007.

The U.S. population grew by 10% more than that of Japan and 13% more than that of Russia between 2000 and 2010. Relative to the huge populations of China and India (1.3 billion and 1.2 billion, respectively), the U.S. population during the past decade increased slightly (0.16%) compared to China and decreased by a similar margin compared to India.

What matters more than absolute numbers is the population's composition of prime working-age people versus dependents. Compared to most developed economies and China, the U.S. demographic composition is relatively favorable.

So what do all these numbers tell us about decline or incline?

Despite the Great Recession, the three crude indicators—GDP, military spending and population growth—show that the U.S. inclined in absolute terms.

But in relative terms, the picture is more complicated. Although U.S. GDP grew substantially in real terms during the decade, relative to the G-20 countries as a group U.S. GDP declined by 19%. Relative to China, the U.S. decline was even larger.

As noted, military spending by the U.S. increased across the board relative to NATO, China and Russia. Whether this suggests the U.S. is allocating too much, or other countries too little, is not evident from numbers alone. And numbers also don't indicate whether high military outlays have a positive or negative effect on economic growth.

As for demography, there was a small U.S. increase relative to global population, a moderate increase relative to the EU, large increases relative to Japan and Russia, and slight and opposite changes relative to China and India.

And there you have it: Some numbers show inclines, some show declines and some numbers are mixed. What the numbers omit is as significant as what they convey. Omissions include the societal and systemic factors that stimulate or impede creativity, innovation, entrepreneurship and new ventures.

Numbers also ignore the effects of culture, property rights, law and political freedom in the near and long terms. Nor do the numbers foretell how China's so-called "Red Capitalism" will fare in long-term competition with the multi-hued U.S. prototype. As for comparing and forecasting the resilience of countries and regions, the numbers ignore more than they convey.

The overall picture is far more complex than the simple one portrayed by declinists. The real world is complicated, so a portrait in one dimension distorts rather than reflects reality.

Mr. Wolf holds the distinguished corporate chair in international economics at the RAND Corporation, and is a senior research fellow at Stanford University's Hoover Institution.

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