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How Weak is America, Really?

How Weak is America, Really?

Reports of the United States' demise are greatly exaggerated. Francis Fukuyama's latest blog post.

Francis Fukuyama

In my last post, I noted that polarization in the United States was one of the greatest weaknesses of American foreign policy today, a weakness that was being exploited by competitors like Russia and China. However, an overall assessment of where the United States stands relative to the rest of the world provides a more complex picture.

The first thing to say (echoing a recent piece in Noah Smith’s excellent blog) is that the U.S. economy is doing great right now, both relative to its past performance, and to other major economies around the world. Employment is at a high not seen in decades; inflation, while still elevated relative to what is was during the “great moderation” is down substantially from last year, and likely to go lower. This strong labor market has meant that wages at the bottom of the income distribution have been rising, reducing inequality. All of this has been occurring in a period when the Fed has been steadily raising interest rates. This rise took a toll on midsize banks and is making housing unaffordable for many people, but that’s what a tightening is supposed to do. And the long-feared Fed-induced recession has not happened; a soft landing seems entirely possible today.___STEADY_PAYWALL___

American GDP growth is outpacing that of Europe and East Asia. China in particular is currently mired in a double-dip recession, and its real rate of growth would seem almost certainly to be lower than the 3-4% officially claimed. China is mired in debt; most of its provinces and municipalities are broke despite the surplus held by the national government. More importantly, Chinese policymakers don’t seem to have a good plan for getting out of the current impasse. They keep throwing money at infrastructure investment when that sector is already overbuilt; the country faces a future much like Japan’s in the early 1990s after the bursting of its bubble. You can hear a good discussion of this from my Stanford colleague Andy Walder in this video:

The American innovation machine keeps running at high speed. The blockchain revolution is petering out because it was always a solution looking for a problem to solve. But a much more significant AI revolution is taking place. This has a lot of people scared given their experiences with other tech innovations of recent years. But it has a real upside to the degree that it will produce products that complement human skills rather than displacing them. There are good reasons why the Chinese system did not create products like generative AI first; political constraints will continue to affect their hi-tech sector.

I don’t need to speak much about Russia’s future. Just ask yourself, would you rather be the leader of Russia or of the United States today?

Finally, there are some reasons to hope that we’ve hit the high-water mark with regard to polarization. America’s justice system continues to work reliably, and Donald Trump is in serious trouble with two ongoing indictments and two more big ones likely to come in the coming months. While these do not seem to have dented his popularity with the MAGA crowd, they are not assets going into a general election campaign. We will be facing a weird primary season, with elections interspersed with a continuing stream of factual revelations about Trump’s misdeeds before and after January 6. In my view, Trump was a uniquely evil genius and he will not be easily replaceable. Ron DeSantis does not have any of the qualities that makes Trump likeable to his base, and his strategy of trying to outflank Trump to the right makes no sense going into a general election.

One of the big remaining uncertainties regards the outlook for the Ukraine war. The counteroffensive is going more slowly than many expected, but Ukraine has a clear strategy for making it a success as Phillips O'Brien has suggested. The discussion around Ukraine’s membership in NATO which I’ve written about previously heated up enormously in advance of the Vilnius Summit, and NATO members are gradually coming to understand its necessity.

The one curious thing is why America’s superior economic performance has not translated into greater support for President Biden. When inflation was low in the early 2000s, manufacturing jobs were being shipped overseas. Neoliberals replied that this wasn’t a big deal since prices were coming down at the local Walmart, a view that is widely derided today. We are now in the opposite situation, where manufacturing jobs are returning to the United States even as prices at the Walmart have increased, and yet people are still complaining. A lot of this has to do with irrational partisanship, media bubbles, and deliberately promulgated false narratives. It also has to do with the assessment by many Americans of Biden’s likely future performance in light of his age and the existing alternatives.  

We need a boost to our self-confidence, since many things are looking up in America right now.

Francis Fukuyama is chairman of the editorial board of American Purpose and Olivier Nomellini Senior Fellow and director of the Ford Dorsey Master’s in International Policy program at Stanford University’s Freeman Spogli Institute for International Studies.

Image: The Lincoln monument at dusk, Washington, D.C. (Flickr: John Brighenti)

EconomicsUnited States