vorpal: The US cannot afford the amount of oil it purchases because we are in a huge trade deficit. As the price goes up, we will be the first major industrial country to feel the bite. Germany and Japan, both wholly dependent on imported oil, are still in better shape because they have trade surpluses.
The US trade deficit is still a few percentage of GDP. Also if it is one thing that people should have learned from the 1980’s, is that deficit=bad, surplus=good is wrong. There are cases in which surpluses reflect defects in the underlying economy, which was the case in Japan-1980 and it is the case in China today. China is generating massive amounts of wealth which its financial system cannot invest well internally, and this is why there is such pressure to export money from China.
vorpal: The US has racked up a huge bill, and is dependent on more credit to get by.
And the reason people are willing to extend the US so much credit is that people still believe (I think correctly) that their money is better put in the US than anywhere else.
vorpal: Moreover, the cost of living is set to increase more rapidly as the price of scarce resources increases (Jeffrey Sachs has a recent article on this.)
Jeffrey Sachs has been wrong before (disastrously wrong in the case of his plans Russia). Personally, I think that technology will cause standards of living to go up faster than resources cause standards of living to go down. If this is correct, then the nations that will do well are those which have a track record of being able to develop technology rapidly, and the United States leads the world in this.
But it is not this country versus that country. The US is very good at coming up with new ideas. It’s much less good at implementing those ideas on industrial scales. Japan is better at that. It’s also much less good at actually producing the final widget using cheap labor. China is better at that. But asking what country is “better” is the wrong question. You set up your systems so that you put different functions in different countries, all playing to that countries strengths.
A lot of that involves finance and social organization. It’s not that US engineers are smarter or more creative than Japanese or Chinese ones, it’s that there are linkages between private equity, venture capital, and the research universities that exist in the United States that don’t quite exist elsewhere. (And even in the US, they exist only in a few cities.) China is trying to replicate Silicon Valley, but that will take about two or three decades.
vorpal: The US is most vulnerable. Because it depends on imports while it’s ability to pay for them has eroded. The true cost of the imports has been depressed, but it is impossible for this to continue forever.
But the US has some core strengths, which become more obvious if you look in the past and try to figure out why all of the previous the “US is doomed” predictions failed.
One is the structure of US university admissions. In the US, you are more likely to get admitted to a high ranking university if you are captain of the football team or president of the debating society whereas in Japan and China, it’s all about how well you score on tests. People who are football team captains tend to have the social and management skills necessary to start and run small/mid sized companies more so than someone that spends 100% of the time on tests.
The other is the way that the US sees itself. Part of the strength of the US university system is that it takes the brightest people from around the world and turns them into Americans. So China and India are producing upteen million engineers. The US can go through those upteen million engineers, and set things up so that the brightest, most motivated end up in the US.
This actually contributes to the American character. If you are quiet, obedient, and do what you are told, you are just not going to make it past the US immigration system. The people who get into the US, whether legally or illegally, are motivated passionate people who want to get rich. These are people who tend to start small businesses.
People say that the US is doomed because Americans are lazy and people are borrowing lots of money to buy useless stuff like McMansions and HDTV’s, but they are not looking at the big picture. This is how the US works.
You find an empty spot of land. Build a huge giant house with a pool and SUV. You fill it with HDTV’s, credit cards, citizenship papers, and a job that pays a huge amount of money for little work. You surround it with some immigration checkpoints, you broadcast it to the rest of the world and say “come and get this!!!!!” So what happens is that among the millions of scientists, engineers, shopkeepers, farmers etc., etc., all start running through loops to get the prize. They learn English, they figure out all of immigration tricks, etc. etc. Some of them make it. They enjoy the big house and the SUV, and you end up with some of the most motivated people in the world, ending up in the US, who then start the companies and come up with the ideas that pay for the house and SUV.
Of course, their grandkids and great grandkids are going to end up fat and lazy because they grew up in the nice house rather than having to fight their way in. No problem. Lots of empty space….. Build another house……
America, the world’s biggest reality game show…..