“In 1500 the average Chinese was richer than the average North American.” But by the late 1970s the average American was more than 20 times richer than the Chinese.”
In “the early 20th century, just a dozen Western empires, including the United States, controlled 58% of the world’s land surface and population, and a staggering 74% of the global economy.”
No more. Soon, China’s economy will be over $100 trillion, far bigger than America’s. Ferguson warns: There is one main “insidious cause” of the decline of the West: “The tendency of Western societies to delete their own killer apps.” Our success bred hubris, arrogance making America its own worst enemy. Now Americans are undermining the very capitalism that made us the world’s leading superpower and the greatest economy in history, till these six killer apps backfired:
1. The Scientific Revolution
Ferguson says “all the major 17th-century breakthroughs in mathematics, astronomy, physics, chemistry and biology happened in Western Europe.” But today, we’re falling behind. “Mathematical literacy” surveys reveal a huge gap. Many nations rank higher.
2. Revolution in medicine
“Nearly all the major 19th- and 20th-century breakthroughs in health care were made” by the West in “germ theory, antibiotics and anesthesia,” says Ferguson. Today America “spends twice what Japan spends on health care and more than three times what China spends.” Yet both beat us with huge increases in life expectancy the last generation.
3. Democracy and ‘rule of law’
Ferguson says “an optimal system of social and political order emerged in the English-speaking world.” Today, however, in the World Economic Forum (WEF) measures of “issues relating to property rights and governance,” America’s “shockingly bad,” we’re “50th for public trust in the ethics of politicians, 42nd for various forms of bribery,” etc.
4. Competition: domestic and worldwide
“Europe was politically fragmented into multiple monarchies and republics,” says Ferguson, “internally divided into competing corporate entities.” Today our advantage is gone: America is in “one of the steepest declines among developed economies.” At home “extraordinary social polarization,” inequality and a new “superrich elite” that’s “dangerously divorced from the rest of society” is killing America’s edge.
5. Global consumer economy
The Industrial Revolution “took place where there was both a supply of productivity-enhancing technologies and a demand for more, better and cheaper goods,” says Ferguson. Today, 26 of the 30 world’s biggest shopping malls are in emerging markets. Only three here.
6. America’s work ethic
The West was first “to combine more extensive and intensive labor with higher savings rates, permitting sustained capital accumulation.” But “who’s got the work ethic now?” asks Ferguson. “The average South Korean works about 39% more hours per week than the average American. Their school year is 40 days longer.” And in U.S. universities, we “know which students really drive themselves: the Asians and Asian-Americans.”
Ferguson says “most Americans remain instinctively loyal to the killer applications of Western ascendancy, from competition all the way through to the work ethic. They know the country has the right software. They just can’t understand why it’s running so damn slowly.”
His solution echoes America’s new Twitter mind-set: “Delete the viruses that have crept into our system,” destroying America from within.These self-destruct viruses include “the anticompetitive quasi monopolies that blight everything from banking to public education; the politically correct pseudo-sciences and soft subjects that deflect good students away from hard science; the lobbyists who subvert the rule of law for the sake of the special interests they represent, to say nothing of our crazily dysfunctional system of health care, our overleveraged personal finances and our newfound unemployment ethic.”
Capitalism is a self-destructive virus metastasizing in our political economy
Delete viruses? Never happen. Who caves first? ExxonMobil? Big Pharma? Koch brothers? Paul Ryan, Ted Cruz and a do-nothing GOP guided by patron saint Ayn Rand and her extreme “mutant capitalism” ideology? No, America is at war with itself, Adam Smith and the America Dream versus a self-destructive rigid conservative ideology. Unfortunately, there are no winners in this game. Ferguson knows it. You know it.
Worse, we all know the inevitable ending, we know few ever learn the lessons of history in time prevent a collapse. It repeats. Only a deadly catastrophic event will wake up America’s myopic, self-centered, superrich, our clueless politicians, lobbyists, corporate insiders.
Ferguson went on the attack in Foreign Affairs: “Civilizations don’t rise, fall, and then gently decline, as inevitably and predictably as the four seasons.” It’s “more like an exponentially steepening slope that quite suddenly drops off like a cliff.” We’re so blind and the plot’s so predictable: “In the realm of power … you’re fine until you’re not fine, and when you’re not fine, you’re suddenly in a terrifying death spiral,” the crash you’ll never hear coming.
Mutant capitalism virus splits: 6 new killer apps will crash GDP
Economist Robert J. Gordon’s challenging NBER paper “Is U.S. Economic Growth Over?” is a must-read. From 1993 to 2008, the average growth in household income for all America was 1.3%. The bottom 99% only saw 0.75% growth. However, the top 1%, the superrich, captured 52% of the total income gains during that 15-year period. Get it? Inequality is accelerating, making the superrich richer, as the new killer apps destroy their host, capitalism.
Gordon’s forecast begins with America’s actual average GDP growth rate of 1.8% from 1987-2007. From there, Gordon’s forecast is an “exercise in subtraction” with each of the following six “headwinds,” new “killer apps” to use Ferguson’s term, each reducing our GDP growth further, ultimately driving America’s future GDP down to 0.2% by 2100.
Yes, back to where America’s economic growth rate was before the start of the Industrial Revolution around 1750. Here’s a summary of Gordon’s NBER paper from Bloomberg Markets, the six headwinds, six new killer apps that define the grand historic rise and fall of capitalism, from the dawn of the revolution to the end of the great American capitalist economy:
1. Out-of-control demographics: “As more baby boomers retire, the number of hours worked per person declines, and so does the growth in GDP per capita.” (GDP drops to 1.6%.)
2. Lagging educational achievements: “The U.S lags behind other advanced industrial economies in reading, math and science.” (GDP growth drops to 1.4%.)
3. Widening economic inequality gap: “From 1993 to 2008, the wealthiest 1% captured 52% of inflation-adjusted income gains.” (GDP falls to 0.9%.)
4. Globalization, automation, jobs: “More and more skilled jobs in the U.S. are being automated or are shifting to low-wage countries. (Down to 0.7% GDP.)
5. Energy demands vs. climate change: “Possible U.S. efforts to combat global warming, such as a carbon tax, act as a drag on economic growth.” (GDP reduced to 0.5%.)
6. Excess personal and government debt: “Spending money on debt repayments reduces funds available for productive economic activity. (GDP crashes at 0.2%.)
Unfortunately we can only watch this classic tragedy play out on stage. Yes, over the centuries history keeps repeating the same plot, scenes, climax. Ferguson’s six killer apps capture the exciting rise of Adam Smith’s pure capitalism, the great American Dream, and freedoms that made us the greatest global power in history.
Then capitalism mutated. Gordon’s six new killer apps kicked in, the dream slowly dies, the miracle of our collective conscience fragments, and a win-win game becomes a loser’s game for everyone. We are watching another Shakespearian tragedy, blind leaders like King Lear, trapped in their narrow ideological egos, like children, unwilling, unable to act, until it’s too late.