Unwarranted optimism from Foreign Affairs

In the last issue of Foreign Affairs, David Levey, a former director at Moody's, and Stuart Brown, an economics professor at Syracuse, argue that people's fears that the United States will collapse under the weight of its debt is unfounded. Their thesis is a follows:

Despite the persistence and pervasiveness of this doomsday prophecy, U.S. hegemony is in reality solidly grounded: it rests on an economy that is continually extending its lead in the innovation and application of new technology, ensuring its continued appeal for foreign central banks and private investors. The dollar's role as the global monetary standard is not threatened, and the risk to U.S. financial stability posed by large foreign liabilities has been exaggerated. To be sure, the economy will at some point have to adjust to a decline in the dollar and a rise in interest rates. But these trends will at worst slow the growth of U.S. consumers' standard of living, not undermine the United States' role as global pacesetter. If anything, the world's appetite for U.S. assets bolsters U.S. predominance rather than undermines it.

There are two glaring problems with their argument. First, the United States may be leading in technology today, but we are not poised to maintain that lead. For one, bio-med scientists are fleeing the country to work in Europe as a result of the Bush Administration's stance on stem cells.

Along with "brain drain," America's students ar falling behind in the sciences. According to Ted Fishman, who wrote a masterful New York Times Magazine piece titled The Chinese Century and is the author of China Inc., "China will produce 325,000 engineers this year. That's five times as many as in the U.S., where the number of engineering graduates has been declining since the early 1980's."

China is the second problem. The United States economy and strengh will wane at worst, but will not be undermined, claim Levey and Stuart. This may be true, but the authors appear to be writing in a vacuum. It is one thing to lose power and still remain number one. But that is highly unlikely today. Every inch the United States loses, China gains. Look around. In ten short years, China has gone from making toys to CT-Scans. Japan, the world's second largest economy, now trades more with China than with the United States. And China is stretching out across the world, building relationships with counrties in our backyard, mainly Venezuela and Brazil. And worst of all, the European Union, tired of US hegemony, is playing China against the United States, as witnessed by their failed attempt to sell weapons to China.

So, yes, we are leading the world in innovation today, but will probably not tomorrow. And every inch lost is an inch gained by China.