Read Online The Price of Civilization: Reawakening American Virtue and Prosperity by Jeffrey D. Sachs - Free Book Online Page A
Authors: Jeffrey D. Sachs
Tags: United States, Social Science, History, Business & Economics, 21st Century, Economic Conditions, Poverty & Homelessness
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and roughly 19 percent of the value added (output minus inputs) of U.S. manufacturing. U.S. exports had also increased substantially, to $69.5 billion. China’s merchandise exports to the United States are overwhelmingly manufactured goods (around 98 percent) and span a remarkable breadth of sectors. 5 More than half, however, are concentrated in a few key sectors: computers, telecommunications equipment, television sets, other electronics, textiles, apparel, footwear, furniture, and toys. The United States lost around 2 million jobs in those sectors between 1998 and 2009. 6
The new globalization is fundamentally changing the world economy and global politics. In 2010, China overtook Japan as the second largest economy in the world, when converting both countries’ national incomes into a common currency using market exchange rates. (If we compare national incomes according to purchasing power rather than market exchange rates, China overtook Japan as early as 2001.) Most likely, China will overtake the United States within the next two decades and perhaps by 2020 using purchasing-power-adjusted measurements. This is, of course, changing not only trade and investment patterns but geopolitical patterns as well. China is looming ever larger in global diplomacy, as more and more countries in the world see China as their major trade and financial partner. It’s fair to say that more than two hundred years of North Atlantic dominance of global politics is coming to an end as power shifts from the Atlantic to the Pacific and Indian oceans. China is also looming ever larger as a voracious importer of the world’s natural resources, such as oil, coal, copper, and soybeans,and has also recently overtaken the United States as the largest emitter of climate-changing greenhouse gases.
The Tendency to Underestimate the New Globalization
Despite this economic drama, the greatest of our time, America’s politicians and even academics have consistently underestimated the effects of globalization, looking inward for explanations of events when the major drivers are global. America is so used to being the center of attention, the “number one country,” that it hasn’t been able to fathom the magnitude of global changes taking place around it.
The underestimation goes back to the 1970s, when the United States first started to slip from its post–World War II preeminence. The 1970s were a repeated international comeuppance to the United States. First, the U.S.-centered international monetary system collapsed in 1971 as the nation abandoned its pledge to convert foreign-owned dollars into gold at the fixed price of $35 per ounce. Two years later, oil prices began to soar, both because of the newly organized power of Middle East producers and because global economic growth began to hit up against the depletion of traditional petroleum supplies. Then, in 1975, the United States lost the war in Vietnam, putting into perspective the limits of U.S. conventional military power. Fourth, in the second half of the 1970s, Japan began to penetrate U.S. consumer markets in automobiles and electronic appliances, showing dramatically that America’s vaunted technological leadership could be rapidly overcome through technology transfers to Asian industries combined with Asian-based innovations.
These international realities should have become the focus of U.S. politics by the end of the 1970s. They did not. The U.S. debate turned almost entirely on domestic issues. Rather than focusing on the various new international dimensions of the U.S. economic crisis of the 1970s—monetary policy, resource scarcity, foreign competition—the Reagan “diagnosis” put all of the focus on cuttingthe size of the federal government, as if this were in the least responsive to the challenges of rising competition from abroad.
How Alan Greenspan Misjudged Globalization
As Federal Reserve chairman from 1987 to 2006, Alan Greenspan presided at the Fed during the
The new globalization is fundamentally changing the world economy and global politics. In 2010, China overtook Japan as the second largest economy in the world, when converting both countries’ national incomes into a common currency using market exchange rates. (If we compare national incomes according to purchasing power rather than market exchange rates, China overtook Japan as early as 2001.) Most likely, China will overtake the United States within the next two decades and perhaps by 2020 using purchasing-power-adjusted measurements. This is, of course, changing not only trade and investment patterns but geopolitical patterns as well. China is looming ever larger in global diplomacy, as more and more countries in the world see China as their major trade and financial partner. It’s fair to say that more than two hundred years of North Atlantic dominance of global politics is coming to an end as power shifts from the Atlantic to the Pacific and Indian oceans. China is also looming ever larger as a voracious importer of the world’s natural resources, such as oil, coal, copper, and soybeans,and has also recently overtaken the United States as the largest emitter of climate-changing greenhouse gases.
The Tendency to Underestimate the New Globalization
Despite this economic drama, the greatest of our time, America’s politicians and even academics have consistently underestimated the effects of globalization, looking inward for explanations of events when the major drivers are global. America is so used to being the center of attention, the “number one country,” that it hasn’t been able to fathom the magnitude of global changes taking place around it.
The underestimation goes back to the 1970s, when the United States first started to slip from its post–World War II preeminence. The 1970s were a repeated international comeuppance to the United States. First, the U.S.-centered international monetary system collapsed in 1971 as the nation abandoned its pledge to convert foreign-owned dollars into gold at the fixed price of $35 per ounce. Two years later, oil prices began to soar, both because of the newly organized power of Middle East producers and because global economic growth began to hit up against the depletion of traditional petroleum supplies. Then, in 1975, the United States lost the war in Vietnam, putting into perspective the limits of U.S. conventional military power. Fourth, in the second half of the 1970s, Japan began to penetrate U.S. consumer markets in automobiles and electronic appliances, showing dramatically that America’s vaunted technological leadership could be rapidly overcome through technology transfers to Asian industries combined with Asian-based innovations.
These international realities should have become the focus of U.S. politics by the end of the 1970s. They did not. The U.S. debate turned almost entirely on domestic issues. Rather than focusing on the various new international dimensions of the U.S. economic crisis of the 1970s—monetary policy, resource scarcity, foreign competition—the Reagan “diagnosis” put all of the focus on cuttingthe size of the federal government, as if this were in the least responsive to the challenges of rising competition from abroad.
How Alan Greenspan Misjudged Globalization
As Federal Reserve chairman from 1987 to 2006, Alan Greenspan presided at the Fed during the
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