Sat, Apr 03, 2004 page9

• Five good reasons why the decline of the United States is nigh

  • By Jeffrey Sachs
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  The first anniversary of the war in Iraq has arrived, and America's reputation continues to sink. One year ago, the US tried to bully the world into supporting an unprovoked war, claiming that anybody who did not believe in Iraq's weapons of mass destruction was either a fool or an accomplice of terrorists.

  Now we know that the US government and its few allies were themselves either fools or liars.

  But this has not stopped the Bush administration's thuggish behavior.

  The US could be a great force for good. Studies like one by the World Health Organization's Commission on Macroeconomics and Health show that with an US$11-trillion annual national income, the US could finance the control of AIDS, malaria, tuberculosis, and many other killer diseases for a small fraction of the money it wastes in Iraq.

  Instead, US financial assistance to the world's poverty-stricken countries as a share of national income is the lowest of any donor country.

  The US can also be a force for great ill. Its military budget is

  currently about US$450 billion, roughly equal to the rest of the world's combined military spending. The Bush administration believes that military power buys security, even though terrorism has increased since the Iraq War.

  But despite its wealth and military might, America's ability to project political power -- for good or ill -- will decline in future years, for at least five reasons:

  America's budget is in crisis. Thanks to Bush's tax cuts and military spending, which have contributed to budget deficits of US$500 billion per year, the US will have to raise taxes and limit budget spending, whether or not Bush is re-elected. The annual military budget, which has increased by US$150 billion since Bush took office, will need to be cut in coming years to get the budget under control.

  The US is borrowing massively from abroad. Asia's central banks have bought hundreds of billions of dollars in US securities. Japan alone has foreign exchange reserves of around US$750 billion, much of that in US treasury bills. China, Hong Kong, India, Korea, Singapore and Taiwan together have another US$1.1 trillion or

  so in reported foreign exchange reserves. In short, the US is in deep and growing debt to Asia. Only massive buying of treasury bills by Asian central banks has prevented the dollar from falling even more precipitously than it has.

  The rest of the world is catching up. America's big technological lead will narrow relative to Brazil, China, India and other major economic regions of the developing world. China will have an economy larger than the US economy within 25 years -- potentially 50 percent larger by 2050. India, considerably poorer on average than China, will also close the wealth gap. By 2050, India will conceivably have an economy the size of America's, with four times the population and roughly one-fourth of the average income level per person.

  A narrower economic gap will reduce America's relative geo-political power. China and India, which together account for about 40 percent of the world's population, will begin to play much larger roles on the world scene. The current xenophobic reactions to "outsourcing" of jobs to India's software engineers -- a hot political issue in the US -- reflects the underlying anxiety of a US population that wants to stay in the economic vanguard. With or without US protectionism, Asia's technological capacities and incomes will grow. This will be good for the world because prosperity will be more widely spread, even if America's ego gets hurt in the process.

  Demographics will weaken America's militaristic approach to the world. Much of Bush's support comes from white fundamentalist Christian men. This, in my opinion, is a social group that is fighting a rearguard battle against the growing social power of women, immigrants and other religions. It is also fighting against secularism, such as the teaching of modern biology and evolutionary theory. The religious right's backward-looking agenda -- and the Manichean worldview that underlies it -- is doomed. The US Census Bureau recently predicted that by 2050, the non-Hispanic white population of the US is likely to be only half of the total US population, down from 69 percent currently. By 2050, 24 percent of the population will be Hispanic, 14 percent will be Black, and 8 percent Asian. The US will look more like the world, especially Latin America.

  In the face of these five factors, the dream of global empire held by many US right-wingers will most likely fade.

  This may happen sooner rather than later if Bush loses this November in an election that is certain to be very close.

  But whatever the outcome, the US cannot postpone forever its inevitable decline relative to the rest of the world.

  Jeffrey Sachs is professor of economics and director of the Earth Institute at Columbia University.

  Copyright: Project Syndicate.
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