We
recently learned that China is poised to replace the United States as
the No. 1 economic power in the world sometime later this year. Our
anemic quarterly growth rate of 0.1 percent certainly lends credence to
this speculation. We must seriously question those who say our nation is
not in decline. They are adopting the ostrich strategy and sticking
their heads in the sand
There is no question that America is the pinnacle nation of the
world and is likely to remain in that position for several years, given
our military strength and the depth and stability of our financial
infrastructure. However, overconfidence is the frequent companion of
catastrophic decline, as confirmed by numerous historical writings. If
we continue our fiscally irresponsible ways, coupled with our arrogance,
there exists no other possibility than self-ruination.
Our ability to print money is already in jeopardy, as other
nations have been making noise about altering the international reserve-currency system to emphasize multiple currencies, elevating their status and decreasing the strength of the U.S. dollar. Our ever-increasing national debt
would then place us on shaky ground. The Treasury securities we have
been offering to China and others would no longer hold the same appeal,
and all the borrowing we have done against the financial well-being of our progeny will come back to plague us and them.
Many who are responsible for putting us in this precarious
position would argue that we don't need to worry about countries such as
China replacing us, because they have too many structural problems.
China is far behind us in per-capita income, creating many social issues
and negatively impacting growth of the middle class, which is the most
effective growth engine.
Their paucity of appropriate environmental controls has led to
lethal industrial pollution, encouraging some of the intellectually
gifted and mobile citizens to leave the country. China also has a weak banking system, with too much government interference, which means their currency is unlikely to be accepted by the rest of the world as the reserve currency
for many years. They could, however, recognize and correct these
deficiencies more rapidly than expected, thereby enhancing their
position as a formidable challenger to the United States.
Even if these problems are rectified, China cannot expect continuation
of its recent economic expansion, which is already dissipating. If the
United States has the good sense to significantly lower its
corporate-tax rate, this dissipation will accelerate. Additionally, the
lack of intellectual private-property protection in China will prevent
it from generating the kind of innovation that usually accompanies
pinnacle-nation status.
When it comes to energy, China has large potential reserves of shale
gas, but lacks natural water in those areas, making extraction
difficult without new technology. We may be unable to exploit this
weakness because of self-imposed, shortsighted overregulation of the
energy sector in our country.
From these few examples, it can be seen that a combination of wise
moves by China and unwise moves by the U.S. in the next few years could
have very troubling implications for the future of our country
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