Stephen Archer, business analyst and director of Spring Partnerships, believes that the United States is declining rapidly as a superpower.
Is the US economy the next Ireland? To most people, particularly those in the US, this is an unthinkable concept. However, the similarities between the two countries are uncomfortably similar and the outlook for the US is little, if any, better.
The US is likely to lose its place as the global hyperpower within a short time, and certainly its place as the lead superpower. Given that 100 years ago the United Kingdom was the world superpower, should the US worry or is this just the macro waxing and waning of the world economy? The UK’s decline was precipitated by World War I, which was costly enough in itself. However, the decline of the United States is far more complex and has an uncertain end game.
Politically, in the international context, the US has been compromised since 1975 when the Vietnam war finally ended. Its authority as a global citizen has been weakened further in the past 15 years by wars in Iraq, Afghanistan and its very uncertain touch in matters including the current changes in the Middle East. Whereas the US was once seen as the cavalry—now it is viewed with far greater caution or even fear.
Confidence was once the mainstay of the United States, but since 9/11 this has been shaky and with the more recent economic debacle, its confidence has taken an even bigger knock.
Competition from the European Union (in combination, a bigger economy than the US) and from old adversaries like Japan, Korea and more recently, China, has meant that the seemingly natural pre-eminence of the US as an economic power is threatened. We all see that China will overtake the US in GDP terms, having already taken the number two position ahead of Japan. China will most likely overtake the US within a decade and India will follow suit placing the US in third position. At this point its hyperpower status will be lost and its superpower status will be questionable.
The US is BUST. If the United States was a business it would be underwater. Its deficit is running at $1.4trillion and its debt is ten times that, and heading for the same level as its GDP. Debt is rising at $1.5 billion a day. Think of the cost of interest... China owns 40 percent of the US debt and supplies 30 percent of US imports. But even China has cut its lending to the US, expressing fears about its ability to meet its obligations.
Wall Street is dragging down the international competitiveness of the US by its short term outlook and focus on revenue rather than value growth. Its regulations and legal frameworks are also reducing competitiveness. In addition, the country’s political structure, even the constitution, is also preventing its ability to fight back. A Presidential term of four years is too short and the stalemate between the two major parties is crippling.
The US business culture is outmoded, too. It is sluggish, bound by an ‘entitlement culture’ and ineffective leadership mechanisms in corporations. Too few businesses see themselves in the context of world markets. Its insularity is therefore at risk of starting to really damage it. Forty years ago the US saw the first signs that Japan would take a large slice of its automotive market, but it did not respond and make the required changes to take on the challenge.
The talent coming out of the US education system is now way behind many emerging nations, and this is proving a challenge to employers needing world class expertise. The US is 35th in the OECD world ranking for high school math competence. Its immigration position is loading up the social security cost obligations more than it is providing value from skilled resources.
Innovation, with a few notable exceptions, is not strong enough to take on the new world players and when Wall Street’s demand for quick fixes comes into play the most innovative (risky) R&D products often get parked. Twenty seven of the top global innovators are now businesses outside the United States. This number rose by 15 in 2010 alone.
Rather than focusing on organic growth, US growth is driven too much by M&As, 70 percent of which fail to meet key objectives. Without core organic growth the US cannot trade its way out of trouble.
This paints a bleak picture of the United States but it has the ability to turn itself around. It just has not recognised the shape of the issues and the scale of the Sputnik moment that President Obama alluded to. But while there is no doubt the US can turn around, I don’t think it will. Its cultural strengths have atrophied too much and the pain of the change will be too much for most to bear. But the alternative...
Stephen Archer is a business analyst and director of Spring Partnerships, a UK business consultancy that advises companies like Carlsberg, GE Healthcare, Disney and others about their leadership and corporate strategy. www.spring-partnerships.com www.stephenarcher.eu
The views expressed in this article are those of the author, and not necessarily the publisher. If you have any comments about this or any other material in this magazine, please email the editor, Martin Ashcroft, at mashcroft@bus-ex.com.
