Americans had just seen totalitarian powers conquer large swaths of the world, threatening free societies with a return to the Dark Ages. The nation had had to sacrifice mightily to reverse these conquests. The Cold War that followed imposed its own special form of discipline. If we flinched, we risked being overwhelmed by communism; if we became trigger-happy, we risked a nuclear war. For all these reasons, it was a serious, sober time.
Anybody Around Here Know How to Write a Telegram?
Then that wall in Berlin came down. And like flowers in spring, up sprouted a garden full of rosy American assumptions about the future. Is it any wonder? The outcome of the global conflict eliminated what had loomed for two generations as by far the most menacing challenge the country had faced: the economic, political, and military threat from the Soviet Union and international communism. Though no formal ceremony of surrender took place and there was no joyous ticker-tape parade for returning servicemen and women as after World War II, it felt like a huge military victory for the United States and its allies. In some ways, it was. Like Germany after the two world wars of the twentieth century, the losing power, the Soviet Union, gave up territory and changed its form of government to bring it in line with the governments of the victors. So, watching on CNN as people in the formerly communist states toppled statues of Lenin, it was natural for us to relax, to be less serious, and to assume that the need for urgent and sustained collective action had passed.
We could have used another Long Telegram. While the end of the Cold War was certainly a victory, it also presented us with a huge new challenge. But at the time we just didn’t see it.
By helping to destroy communism, we helped open the way for two billion more people to live like us: two billion more people with their own versions of the American dream, two billion more people practicing capitalism, two billion more people with half a century of pent-up aspirations to live like Americans and work like Americans and drive like Americans and consume like Americans. The rest of the world looked at the victors in the Cold War and said, “We want to live the way they do.” In this sense, the world we are now living in is a world that we invented.
The end of communism dramatically accelerated the process of globalization, which removed many of the barriers to economic competition. Globalization would turn out to be a blessing for international stability and global growth. But it enabled so many more of those “new Americans” to compete for capital and jobs with the Americans living in America. In economic terms, this meant that Americans had to run even faster—that is, work harder—just to stay in place. At the end of the Cold War, America resembled a cross-country runner who had won his national championship year after year, but this time the judge handed him the trophy and said, “Congratulations. You will never compete in our national championship again. From now on you will have to race in the Olympics, against the best in the world—every day, forever.”
We didn’t fully grasp what was happening, so we did not respond appropriately. Over time we relaxed, underinvested, and lived in the moment just when we needed to study harder, save more, rebuild our infrastructure, and make our country more open and attractive to foreign talent. Losing one’s primary competitor can be problematic. What would the New York Yankees be without the Boston Red Sox, or Alabama without Auburn? When the West won the Cold War, America lost the rival that had kept us sharp, outwardly focused, and serious about nation-building at home—because offering a successful alternative to communism for the whole world to see was crucial to our Cold War strategy.
In coastal China, India, and Brazil, meanwhile, the economic barriers had begun coming down a decade earlier. The Chinese were not like citizens of the old Soviet Union, where, as the saying went, the people pretended to work and the government pretended to pay them. No, they were like us. They had a powerful work ethic and huge pent-up aspirations for prosperity—like a champagne bottle that had been shaken for fifty years and now was about to have its cork removed. You didn’t want to be in the way of that cork. Moreover, in parallel with the end of the Cold War, technology was flattening the global economic playing field, reducing the advantages of the people in developed countries such as the United States, while empowering those in the developing ones. The pace of global change accelerated to a speed faster than any we had seen before. It took us Americans some time to appreciate that while many of our new competitors were low-wage, low-skilled workers, for the first time a growing number, particularly those in Asia, were low-wage, high-skilled workers. We knew all about cheap labor, but we had never had to deal with cheap genius—at scale. Our historical reference point had always been Europe. The failure to understand that we were living in a new world and to adapt to it was a colossal and costly American mistake.
To be sure, the two decades following the Cold War were an extraordinarily productive period for some Americans and some sectors of the American economy. This was the era of the revolution in information technology, which began in the United States and spread around the world. It made some Americans wealthy and gave all Americans greater access to information, entertainment, and one another—and to the rest of the world as well—than ever before. It really was revolutionary. But it posed a formidable challenge to Americans and contributed to our failure as a country to cope effectively with its consequences. That failure had its roots in what we can now see as American overconfidence.
“It was a totally lethal combination of cockiness and complacency,” Secretary of Education Arne Duncan told us. “We were the king of the world. But we lost our way. We rested on our laurels … we kept telling ourselves all about what we did yesterday and living in the past. We have been slumbering and living off our reputation. We are like the forty-year-old who keeps talking about what a great high school football player he was.” It is this dangerous complacency that produced the potholes, loose door handles, and protracted escalator outages of twenty-first-century America. Unfortunately, America’s difficulties with infrastructure are the least of our problems.
The Big Four
And that brings us to the core argument of this book. The end of the Cold War, in fact, ushered in a new era that poses four major challenges for America. These are: how to adapt to globalization, how to adjust to the information technology (IT) revolution, how to cope with the large and soaring budget deficits stemming from the growing demands on government at every level, and how to manage a world of both rising energy consumption and rising climate threats. These four challenges, and how we meet them, will define America’s future.
The essence of globalization is the free movement of people, goods, services, and capital across national borders. It expanded dramatically because of the remarkable economic success of the free-market economies of the West, states that traded and invested heavily among themselves. Other countries, observing this success, decided to follow the Western pattern. China, other countries in East and Southeast Asia, India, Latin America, and formerly communist Europe all entered the globalized economy. Americans did not fully grasp the implications of globalization becoming—if we can put it this way—even more global, in part because we thought we had seen it all before.
All the talk about China is likely to give any American over the age of forty a sense of déjà vu. After all, we faced a similar challenge from Japan in the 1980s. It ended with America still rising and Japan declining. It is tempting to believe that China today is just a big Japan.
Unfortunately for us, China and the expansion of globalization, to which its remarkable growth is partly due, are far more disruptive than that. Japan threatened one American city, Detroit, and two American industries: cars and consumer electronics. China—and globalization more broadly—challenges every town in America and every industry. China, India, Brazil, Israel, Singapore, Vietnam, Taiwan, Korea, Chile, and Switzerland (and the list could go on and on) pose a huge challenge to America because of the integration of computing, telecommunications, the World Wide Web, and free markets. Japan was a tornado that
blew through during the Cold War. China and globalization are a category-5 hurricane that will never move out to sea in the post–Cold War world.
Charles Vest, the former president of MIT, observed that back in the 1970s and 1980s, once we realized the formidable challenge posed by Japan, “we took the painful steps that were required to get back in the game. We analyzed, repositioned, persevered, and emerged stronger. We did it. In that case, the ‘we’ who achieved this was U.S. industry.” But now something much more comprehensive is required.
“This time around,” said Vest, “it requires a public awakening, establishment of political will, resetting of priorities, sacrifice for the future, and an alliance of governments, businesses, and citizens. It requires truth-telling, sensible investment, a rebirth of civility, and a cessation by both political and corporate leaders of pandering to our baser instincts. Engineering, education, science, and technology are clearly within the core of what has to be done. After all, this is the knowledge age. The United States cannot prosper based on low wages, geographic isolation, or military might. We can prosper only based on brainpower: properly prepared and properly applied brainpower.”
If globalization has put virtually every American job under pressure, the IT revolution has changed the composition of work—as computers, cell phones, the Internet, and all their social-media offshoots have spread. It has eliminated old jobs and spawned new ones—and whole new industries—faster than ever. Moreover, by making almost all work more complex and more demanding of critical-thinking skills, it requires every American to be better educated than ever to secure and keep a well-paying job. The days when you could go directly from high school to a job that supported a middle-class lifestyle, the era memorably depicted in two of the most popular of all American situation comedies—The Honeymooners of the 1950s, with Jackie Gleason as the bus driver Ralph Kramden, and All in the Family of the 1970s, starring Carroll O’Connor as Archie Bunker, the colorful denizen of Queens, New York—are long gone. The days when you could graduate from college and do the same job, with the same skills, for four decades before sliding into a comfortable retirement are disappearing as well. The IT revolution poses an educational challenge—to expand the analytical and innovative skills of Americans—that is no less profound than those created by the transition from plow horses to tractors or from sailing ships to steamships.
The third great challenge for America’s future is the rising national debt and annual deficits, which have both expanded to dangerous levels since the Cold War through our habit of not raising enough money through taxation to pay for what the federal government spends, and then borrowing to bridge the gap. The American government has been able to borrow several trillion dollars—a good chunk of it from China and other countries—because of confidence in the American economy and because of the special international role of the dollar, a role that dates from the days of American global economic supremacy.
In effect, America has its own version of oil wealth: dollar wealth. Because its currency became the world’s de facto currency after World War II, the United States can print money and issue debt to a degree that no other country can. Countries that are rich in oil tend to be fiscally undisciplined; a country that can essentially print its own dollar-denominated wealth can fall into the same trap. Sure enough, since the end of the Cold War, and particularly since 2001, America has suffered a greater loss of fiscal discipline than ever before in its history. And it has come at exactly the wrong time: just when the baby boomer generation is about to retire and draw on its promised entitlements of Social Security and Medicare.
The accumulation of annual deficits is the national debt, and here the widely cited numbers, hair-raising though they are, actually understate what is likely to be the extent of American taxpayers’ obligations. The figures do not take account of the huge and in some cases probably unpayable debts of states and cities. By one estimate, states have $3 trillion in unfunded pension-related obligations. The gaps between what New York, Illinois, and California in particular will owe in the coming years and the taxes their governments can reasonably expect to collect are very large indeed.
Vallejo, California, a city of about 117,000 people, which declared bankruptcy in May 2008, was devoting about 80 percent of its budget to salaries and benefits for its unionized policemen, firefighters, and other public safety officials. Tracy, California, made news when it announced in 2010 that citizens were henceforth being asked to pay for 911 emergency services—$48 per household per year, $36 for low-income households. The fee rises automatically to $300 if the household actually calls 911 and the first responder administers medical treatment. The federal government will surely be called upon to take responsibility for some of these obligations. It will also come under pressure to rescue some of the private pension plans that are essentially bankrupt. And most estimates assume that the country will have to pay only modest interest costs for the borrowing it undertakes to finance its budget deficits. Doubts about the U.S. government’s creditworthiness could, however, raise the interest rates the Treasury Department has to offer in order to find enough purchasers for its securities. This could increase the total debt significantly—depending on how high future interest rates are. In short, our overall fiscal condition is even worse than we think. There is a website that tracks the “Outstanding Public Debt of the United States,” and as of June 15, 2011, the national debt was $14,344,566,636,826.26. (Maybe China will forgive us the 26 cents?)
As for the fourth challenge, the threat of fossil fuels to the planet’s biosphere, it is a direct result of the surge in energy consumption, which, in turn, is a direct result of the growth that has come about through globalization and the adoption (especially in Asia) of free-market economics. If we do not find a new source of abundant, cheap, clean, and reliable energy to power the future of all these “new Americans,” we run the risk of burning up, choking up, heating up, and smoking up our planet far faster than even Al Gore predicted.
This means, however, that the technologies that can supply abundant, cheap, clean, and reliable energy will be the next new global industry. Energy technology—ET—will be the new IT. A country with a thriving ET industry will enjoy energy security, will enhance its own national security, and will contribute to global environmental security. It also will be home to innovative companies, because companies cannot make products greener without inventing smarter materials, smarter software, and smarter designs. It is hard to imagine how America will be able to sustain a rising standard of living if it does not have a leading role in this next great global industry.
What all four of these challenges have in common is that they require a collective response. They are too big to be addressed by one party alone, or by one segment of the public. Each is a national challenge; only the nation as a whole can deal adequately with it. Of course, a successful response in each case depends on individuals doing the right things. Workers must equip themselves with the skills to win the well-paying jobs, and entrepreneurs must create these jobs. Americans must spend less and save more and accept higher taxes. Individuals, firms, and industries must use less fossil fuel. But to produce the appropriate individual behavior in each case, we need to put in place the incentives, regulations, and institutions that will encourage it, and putting them in place is a collective task.
Because these are challenges that the nation as a whole must address, because addressing them will require exertion and sacrifice, and because they have an international dimension, it seems natural to discuss them in the language of international competition and conflict. The challenge that Kennan identified in his Long Telegram really was a war of sorts. The four major challenges the country confronts today have to be understood in a different framework. It seems to us that the appropriate framework is provided by the great engine of change in the natural world, evolution. The driving force of evolution is adaptation. Where Kennan was urging Americans to oppose a new enemy, we are calling on Americans to adapt to a new envir
onment.
Over hundreds of millions of years, many thousands of species (plants and animals, including humans) have survived when their biological features have allowed them to adapt to their environment—that is, allowed them to reproduce successfully and so perpetuate their genes. If gray-colored herons are better disguised from their predators than white ones, more and more grays and fewer and fewer whites will survive and reproduce in every generation until all herons are gray. (The phrase “survival of the fittest” that is often used to describe evolution means survival of the best adapted.)
Adaptation becomes particularly urgent when a species’ environment changes. Birds may fly to an island far from their previous habitat. Whether these birds survive will depend on how well adapted they happen to be to their new home, and whether the species as a whole survives there will depend on how successfully those adaptations are passed down to subsequent generations.
That Used to Be Us: How America Fell Behind in the World It Invented and How We Can Page 3
