In Defense of America (6 page)

We should regret that. It is true that the advantages of being a large country are less than they were, now that open capital markets and free-trading zones are available to smaller nations. But there is no substitute for size when it comes to defense; the United States is entirely justified in its lament that Europe does not shoulder its share of the burden, but it is mounting a futile campaign —small countries are simply not going to fill that gap. And concern about defense is merely a practical objection to the spread of microstates. The greater loss would be to have let slip America’s ambitious ideal of democracy writ large.

America is not alone as a giant democracy, of course; India enjoys its status as the world’s largest democracy, and its achievement has been a subversive inspiration. One Saudi diplomat told me of the shock in his country at the Indian elections of 1996, when the Hindu nationalist BJP turfed out the old-establishment Congress Party. Indians have a low social status in the Gulf, “but here they were, running an election of hundreds of millions of people, and changing their government without killing everyone. People here started thinking that if they can do it, why can’t we?”
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But India’s experience does not make democracy look easy. As Ramachandra Guha put it in his exhilarating history
India After Gandhi,
the country has been tormented by prophesies that each election was its last, and that it was about to shake itself apart into different shards of religion, language, and caste.
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You cannot fault India on idealism; its constitution of 1950, the longest of any independent nation, with 395 articles, borrows heavily from the founding texts of the United States, including the Bill of Rights. It sets out a federal structure for government, an independent judiciary, and, inspired by the prescriptions of Mohandas Gandhi, its founding father, includes many clauses on social justice and affirmative action for the poorest. But it has shockingly failed to enforce its principles of equality, and rural areas are in effect another country, imprisoned by caste to a degree an outsider can only glimpse. All the same, the ideal remains inspiring, even if the troubled reality is a reminder of the United States’ astounding achievement.

I shall look at the problems in America’s promotion of democracy in chapter 5, on foreign policy. But it would be a deeply unfortunate consequence of Iraq if America became inhibited in advocating its own values and its own system of government. Apart from anything else, they have produced the world’s greatest economic success, the subject of the next chapter.

Chapter 4

FOR RICHER, FOR POORER

Wounded giant” was the label, overdefinite and full of schadenfreude, slapped on the United States in early 2008 by commentators at Davos, the yearly gathering of world leaders and business chiefs in a small town in the eastern Swiss Alps. Anti-globalization protesters had splattered the back of one auditorium with red paint in their decade-old tradition, but overt hostility against the United States was much more muted than in past years, even if the subject of American dominance itself led the agenda.

The reasons for the change were inescapable to any reader of the world’s newspapers, never mind to this gathering of excessive financial literacy. The dollar was sliding against the euro and the yen. China, Russia, and the Gulf Arab countries, buoyed up by five years of oil rising to nearly $100 a barrel, were circling, looking for a home for their cash and American assets to buy, and bailing out Wall Street banks. George Soros, the financier, called it “the worst market crisis in sixty years.”
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But prophecies of the United States’ decline can easily be exaggerated, as portraits of its dominance in recent decades also have been. The arena of economy, corporations, and culture elicits more strongly than any other a troubling mixture of feelings toward America: envy, admiration, desire, resentment, revulsion, and misunderstanding. It touches ordinary people in other countries where American foreign policy may not, and their resentment is often expressed as a sense of powerlessness at keeping the American giant at bay.

Some of that is entirely understandable. The unraveling of the Soviet Union was license for economic triumphalism in the United States —a conviction that it had perfected the system of economic relations between people. “The U.S. is now leading the way with a new economic paradigm,” declared the National Economic Council, which advises the president, in June 1997 at the gathering in Denver of the world’s most powerful democracies, an exercise in boasting so unashamed that it brought blunt, formal complaints from European, Japanese, and Canadian delegates. America scarcely needed support from the disintegration of its rival, however, given the evidence from its own citizens’ standard of living (outstripped only in Liechtenstein and Luxembourg) and the military power its economic strength supported.

Some found this triumphalism unbearably provocative. The anti-globalization movement of the past decade, a curious tangle of antipoverty campaigners, environmentalists, and self-described anarchists as well as union workers and those who would directly suffer from the fall of trade barriers, seized on the United States and its best-known international companies as its prime target. Their arguments were deeply confused about the supposed damage caused by economic growth, but their attack meshed well with the antagonism people in many countries felt about the intrusion of American culture. The “No Logo” movement railed against McDonald’s, Coca-Cola, Starbucks, Hollywood, and other footprints left by the American giant.

But these critics, whether out of idealism or self-interest, give only cursory acknowledgment to the contribution America has made to world growth and living standards elsewhere —or dispute it altogether. They skate over the efforts the United States has made to open up trade or argue that these efforts have hurt the world’s poorest, denying any benefit to their own countries of American trade policies. They ignore the United States’ historic contribution in the development of corporations and capital markets, and in the promotion of competition.

The resentment also caricatures America as a model of pure free-market capitalism. This portrait of the ruthless pursuit of profit does not allow for the United States’ high degree of regulation and intervention in its own markets, as the financial turmoil of early 2008 showed. It also exaggerates America’s proficiency (something America itself is not beyond doing). It does not allow for the way that the United States, despite its image of being on the leading edge of modernity, has often lagged behind other countries in such modern skills as banking and telecommunications, the price it pays for its own federalism and antitrust rules. Indeed, it was a comedy for decades that in the heart of world capitalism you could not use a checkbook across state borders; that cell phones were far less common (and reliable) than in Japan or Europe; and that the use of broadband lagged (and still lags) well behind other nations.

The United States’ share of the world economy, which has held steady at about 27 percent for a decade, is now slowly beginning to fall as others overtake it. But it still remains the world’s most astonishing success story of the pursuit of prosperity and well-being. The record of the twentieth century —the “American Century” —underpins the United States’ claim to have demonstrated the unrivaled success of the liberal market economy, based on an individual’s right to own property, respect for the rule of law, and allowing private investment and innovation a free hand. It would be a pity not to draw the right lessons from this, although it is remarkable how many resist doing just that.

Giant

The United States overtook Britain as the world’s largest economy during the 1880s, the start of three decades of international economic integration and liberalization which were seen, at that point, as all but irreversible until they were halted in the disaster of the First World War. America was Europe’s banker in the recovery from that catastrophe and in the reconstruction after the Second World War.

In the past century, the United States set the rules and helped establish the institutions which shaped the West’s economic organization. These included the 1944 Bretton Woods Agreements to govern financial relations between the main industrial countries, and the World Bank and the International Monetary Fund, both of which began operating in 1946. Domestic policy had international impact as well. The Sherman Antitrust Act of 1890, along with the Clayton Antitrust and Federal Trade Commission Acts of 1914, laid the framework of modern American business regulation, restraining the creation of monopolies or other moves that would undermine competition, and they heavily influenced international corporate regulation as it developed.

The World’s Most Famous Brands

It is easy to see why so many have found provocation in the ubiquity of American brands. United States companies are among the world’s largest and most famous. Coca-Cola, sold in the United States since 1886, is now found in more than two hundred countries,
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and McDonald’s reported 31,000 restaurants worldwide in 2006. Hollywood, after several decades of aggressive expansion outside the United States, now earns 60 percent of its revenues from other countries. And a Fortune 500 survey in 2007 which ranked the world’s biggest companies by revenue put Wal-Mart in first place, with revenues of $351 billion, unimpeded, it seems, by a reputation in Europe for controversial employment practices and for selling guns (in the United States) cheaply and easily.
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This reach and level of recognition around the world is not always matched by financial success or by future prospects of growth. Wal-Mart’s profits, while hardly nothing at $11 billion, were less than a third of ExxonMobil’s, in second place. And while General Motors made fifth place and General Electric eleventh, the list was dominated by oil companies, the result of oil at nearly $100 a barrel.

But still, there are enough superlatives to rub home the lecture on American exceptionalism. The one that stings most, for many countries, is the annual tally of Nobel laureates in the sciences. These are prizes —devoid of ideology, representing intellectual achievement and the promise of future technological wealth —that no leader would turn down except those sitting in Waziristan caves plotting the replacement of the West with an Islamic caliphate. Researchers from the United States won all the science prizes in 2006; in most years, American-based scientists will win half or two-thirds. Gunnar Öquist, the permanent secretary for the Royal Swedish Academy of Sciences, which oversees the science Nobel Prizes, said after the American clean sweep of 2006 that Europe had simply fallen behind America when it came to funding and ambition.
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Resentment

This reach of American economy and culture across the globe is often called “soft power,” a term coined by Professor Joseph Nye of Harvard University’s John F. Kennedy School of Government. It has become a ubiquitous phrase to describe American influence that is not the result of conscious diplomacy and military power. But “soft power” is an awkward metaphor, deployed to do too much work, from measuring America’s moral authority and ability to persuade other countries to do what it wants to simply describing the reach of American culture across the world. Above all, the term does not take into account the very mixed feelings —or outright resentment —the American presence may provoke.

That resentment can trigger opposition to American capitalism —to its opponents’ view, the free market at its harshest. An analysis by Stefan Theil,
Newsweek
’s European economics editor, in a study for the German Marshall Fund, noted that in a 2005 poll, just 36 percent of French said that they supported a market economy, and that European school textbooks can be openly hostile to the notion. “Economic growth imposes a hectic form of life, producing overwork, stress, nervous depression, cardiovascular disease, and, according to some, even the development of cancer,” declared the
Histoire du XXe Siècle,
a text for high school students preparing for university. Another paper discussed whether technological progress reduces jobs. Theil cited a German social studies text called
FAKT
which blames unemployment on computers and robots, and tells the jobless how to join antireform protest groups “in the tradition of the East German Monday demonstrations,” which in 1989 helped begin the process that resulted in a toppling of the Communist government the next year. “It is no surprise that the Continent’s schools teach through a left-of-center lens,” Theil concluded. “The surprise is the intensity of the antimarket bias.”
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After a single trader’s fraudulent dealing brought huge losses to French bank Société Générale in January 2008, earning him the tag of the “Che Guevara of finance” and a “modern hero” in the French press, the
Economist
magazine noted the “contradictions of France’s attitude to capitalism: on the one hand, there is widespread suspicion of the markets; on the other, world-class financial skills.”
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It added, too, that the suspicion could be detected as far back as Honoré de Balzac, the nineteenth-century novelist who wrote, “Behind every great fortune lies a forgotten crime.”

That reflex —recoiling from free-market principles as too harsh, as contrary to the principles of European social democracy —has persisted even though the United States’ economy has grown faster than most European economies (including those of France and Germany) for the past fifteen years, raising its citizens’ living standards and cutting unemployment in ways those European countries would love to emulate.

In recent years, Nicolas Sarkozy, in campaigning to become president of France, and Angela Merkel, in becoming German chancellor, proposed reforms to take their countries toward the “Anglo-Saxon” model, making it easier to hire and fire people, and encouraging competition. Sarkozy was stirred up by a deep sense of national gloom at the stubbornness of unemployment, dragged back below 10 percent only with great pain. In Merkel’s case, the motivation came partly from her roots in East Germany, her opposition to socialism and her natural pro-American bent, and an acute consciousness of the struggles for her old compatriots in finding work in a united Germany.