In 1944, as second world war was raging, General De Gaulle visited USA for diplomatic talks with FDR. Part of the visit took him to New York City, and it was De Gaulle’s first visit to America where he was stunned by witnessing the wealth, Capital and industrial might of America. America by 1944 had established itself as the leading industrial superpower, the engine of global economic progress and symbol of affluent society. America remained industrial superpower for some decades after end of World War 2 as thereafter the economies of Europe and Japan started to get on their feet. Regardless US remained a dominant economic power.
The Economic power of America was represented in various aspects. First of course was its enormous industrial capacity including its defense sector which helped allies to win world war 2 and this defense industry would continue after the war ended (it would mold itself for cold war). Second was America’s public investment in infrastructure and social security which modernized America and raised living standards of its people (the New Deal era, the Great society project). Third was America becoming the financial center of the world which attracted global Capital. The wealth of America was on display when foreign leaders visited American cities thriving with urban development and opulent display of wealth.
By end of 1980s, the Soviet Union was a declining superpower which was plagued by political instability, economic stagnation and malaise in general. This malaise was commonly reflected in scarcity of essential public goods. Soviet Union (and its satellites), once great power, was now heavily dependent of foreign loans and critical imports like food grains. With Gorbachev’s initiative to lift iron curtain, the Soviet politicians were able to visit America in more cordial settings. One such visit was of Boris Yeltsin in 1989 (soon to be future President of Russia), who was shocked by witnessing the affluence of American life. At the time, Soviet Union was facing acute food shortages and out of stock food shelves was common sight in Russia. Yeltsin was astonished to see America supermarket stores loaded with abundance of food. And there were no long queues of people desperately trying to get food as was in Soviet Union at the time.
Yeltsin at American supermarket in 1989
America has been for a large part of 20th century - from second industrial revolution till great recession of 2008 - generally recognized as frontier of economic progress. But thereafter, things started to change. The change had actually began a lot earlier whose seeds can be traced in Reaganomics or even further back but the full reflection of the change actually came only in 2010s when stagnation and paralysis of America became clear. And of course, epitome of that is rise of Trump regime although I will not delve too much on Trump here. Now we get back to theme of article that I am trying to sketch - the abundance moment.
America impressed foreign leaders, intellectuals and everyone in general whoever visited America. It was not just America’s liberal values that attracted people but also its material display of power; its industry, infrastructure, glittering cities, automobiles, superstores, skyscrapers, public schools etc. America built stuff and mass produced things, and opulence of this materialism was extraordinary - this was called the affluent society. The abundance moment was impression which America made on foreign visitors who then idealized American society as pinnacle of economic progress. American affluence was something they wished to emulate in their home country.
Today the same level of opulence that impressed people is not so much in America today but instead in China. The enormous network of High speed Rail, the vast number of newly emerged urban cities & engineering marvels of top notch infrastructure, the skyscrapers, the extraordinary display of technology (self driving cars, sophisticated robots etc), the expansion of Chinese firms into cutting edge sectors like Chips & clean energy, the special economic zones etc. The rate of economic development of China is incredible considering that it was ravaged by second world war, got independence from Colonial powers in mid 20th century and even still remained a backward agrarian economy by the 1970s.
What about America? America - the great superpower who was among the victors of WW2 - today is a paralyzed nation with no direction and purpose. I am not just talking about Trump regime but America in general of last three decades or so. The infrastructure of American cities is crumbling - the water system, the railways, the schools, the ports, the bridges etc. There is great private healthcare like in Mayo Clinics while the rural hospitals are shutting down in America. America no longer builds stuff. The States like California & New York are the hubs of technology & finance but there’s no adequate housing for the people. The California high speed rail project is delayed by 20 years while a private corporation can get all State clearances to build Data center in two months. The once great industrial cities (like Rust belt) and the southern States are now the poorest regions of America riddled with high crime and social catastrophe (opioid crisis, falling family structures, incarcerations etc).
And how does America governs itself? The political process of America has become so dysfunctional that it can’t even pass spending bills without a bloodsport. The government shutdowns, debt ceiling brinkmanship and political paralysis over budget is now a routine affair. While American people suffer from this paralysis, the politicians however always manage to find bipartisan consensus to fund a Trillion dollar defense spending. Much of the American infrastructure was built around New Deal era & Golden age. Thereafter, it became a general political consensus that government has no business to be in business. When financial institutions failed, it’s the government’s business to deliver bailouts but not for broadly supporting the economy and to tackle unemployment. Such was American government’s attitude in post GFC era.
As government withdrew from its economic responsibility, the infrastructure dilapidated, inequalities skyrocketed, the wages stagnated, the living standards declined. All these things were left to be dealt by ‘markets’ which never provided any solutions. Rather they exacerbated the problems. And look at regions of America which are wealthy. Parts of California and New York which are center of finance and technology. They are cities full of billionaires but their infrastructure is mediocre & light year behind Chinese top tier cities like Shanghai & Shenzhen. New York is also known as Stinking City. And you can’t redevelop these cities because of NIMBYism which keeps raising housing prices. Home ownership rate in California is 55% (US overall has 65%) while China has home ownership rate of 90% - no match for US.
To be sure, America leads and will continue to lead for foreseeable future in terms of depth of its financial markets and preference of dollar as a reserve currency. Huge amount of Capital from across the world will continue to chase Wall Street. But Capital and depth of financial markets do not necessarily translate into growth and economic development. What is the depth of Chinese financial markets? Nothing compared to America. Yet China’s economic development is astonishing. America is still attractive and still impresses people but for different reasons; you can be enormously wealthy in America like the first Trillionaire Elon Musk. The prospects to make wealth in America are tremendous as evident from rise of centi-billionaires & oligarchs. But at the same time, there is little improvement in living standards and quality of lives of average people whose wages stagnate and inequality is skyrocketing. Today America is symbolic of wealth, not for economic development & progress.
Admittedly, China is not a panacea and it has many underlying issues - the demographic problems, suppression of domestic consumption, environmental concerns, labour conditions etc. A major shortcoming of China is political system that atomizes people and the lack of rule of law. China thinks in terms of aggregates - prioritizing national interest and disregarding people’s individual interest - which at times has been detrimental to China’s national interest itself (one child policy was perfect example of this). But there is one thing where China succeeds and America fails badly.
America believed in markets, and general principle that purpose of all policy is establishing a market economy - market economy is be all and end all of everything. Markets are believed to be the magical fountain - they would deliver growth, wealth, jobs, economic development, social progress etc. For China, establishing markets was not the goal in itself. Yes, China moved to market economy but government assign strategic objectives for national economy. You can call it Capitalism with Chinese characteristics or Socialism with Capitalist ingredients. Whatever you call it, there’s a very visible hand in China which guides market forces to achieve certain goals. And America? It’s economic policy discourse lost in idiotic debates about size of deficits, equilibrium, laissez-faire, demand & supply curves, supply side tax cuts to drive growth etc. By the way, some pundits cheered for industrial policy of America which wasn’t really the case.
So American economic policy drifts astray. And American politics? With Trump regime in power, nothing further needs to be explained on course of things in America. You already know it.