Saturday, September 3, 2011

american relative decline in blogs, academics, and policy

The stagnation of the American economy over the last few years (or as some would argue, even longer) has prompted a growing concern about the possibility of American "relative decline", echoing, in part, the discussions among policy and academic circles in the 1950s regarding British relative decline. And like those debates from the 1950s, people on both sides of the spectrum are weighing in.

From the center-right we have people like David Brooks (see here, "The Vigorous Virtues" NYT Op-Ed) and (from the further-right) Tyler Cowen, who argue that we have dried up a lot of our productive resources, largely from a sluggish public sector and a drift from "republican" virtues. In particular, Cowen's The Great Stagnation published earlier this year looks at median household income and some non-standard (if not thought-provoking) measures of technological growth to argue that American ingenuity is in serious jeopardy of a kind of "plateau".

Liberals, such as the further-left Dean Baker and liberal Dani Rodrik, argue against the view that America is on its way out. Baker in this piece ("Trade Arithmetic for David Brooks") concentrates on continuities, not breaks, in American policy since the 1970s regarding its attitudes towards organized labor as well as where a country's true strength's lie in its political economy. Baker gives a refreshing view of how America has always had an antagonistic view of what Brooks sees as the truly vital source of American productivity and prosperity -- the American worker. In other words, American economic policy is nothing new; it's simply exacerbated by other more important factors, including financialization.

Dani Rodrik looks at the issue on an international scale here (WSJ blog) and here (FT articles are gated, but you can get around the gate by Googling "don't expect china et al to save the world", the article's title, and clicking on the first link), arguing that unless emerging economies adopt a strict industrial policy allowing them to push out of manufacturing into higher-growth areas, relative decline is not likely to be the most important force in the international political economic landscape because developed countries will maintain an edge on the technological frontier.

Relative decline debates always seem to be instigated by conservatives who want to lament the passing of some better time when a country's citizens were more virtuous and hard-working, and "real" economy concerns were more important than finance. Marxists or Marxist-influenced scholars may join the fray by commenting on the labor politics involved, for example by arguing that a lack of a strong labor movement may hinder progress towards socialist revolution and thereby lead to economic/capitalist stagnation (Baker walks a fine line on this front, whereas Bill Lazonick is a solid example of this argument in the British decline debates).

Real progressives, on the other hand, see through the rhetoric most clearly by arguing that relative decline is a fiction manufactured by conservatives in order to skirt the main issues of capitalist development (I would place Rodrik in this camp). I have yet to encounter an explicitly Marxist take on the question and would be interested to hear if anyone has an article to recommend on it.

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