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By Steve Kelman

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A U.S. decline?

U.S.-China conversation.  Shutterstock image.

While in Sweden during the government shutdown/debt ceiling fiasco, I blogged asking whether Americans realized the huge damage such events do to America's reputation abroad. I also noted  that, while some Americans react by saying "who cares?" they ignore two important facts.

First, that America's soft power -- the attractiveness of our society and culture -- is one of our big economic and security advantages. And second, that the dollar's status as a reserve currency -- and the willingness of foreigners to hold dollars -- dramatically eases our economic situation. 

Recently in Singapore for a few days teaching change management to senior government civil servants, I had the chance to dine with a very wise Singaporean observer of the international scene -- and someone who feels the United States is in significant decline in the world, with Asia (particularly China) rising. 

He began our discussion of this topic by noting that the United States invented globalization, but that our attitudes are far less global than those in many other countries. That will inevitably hurt our ability to compete in a global economy, he argued. He believes that leaders in Asian countries are looking with distress at many events in the United States, and asking themselves whether they should be continuing to hold so many U.S. assets. 

"The Chinese have a very long-term perspective," he added. "You see that each year they are slightly reducing their exposure to the U.S. dollar. Watch -- it will go down each year, and suddenly Americans will notice that Chinese are hardly holding any dollars any more." (He added that the Chinese renminbi has now catapulted to second place in the world as a currency used in world trade, up several places in just two years.)

He followed with a clincher: "America is going in the direction of Brazil." A big country, not unimportant, but marginal in the big scheme of things. 

At this point, I objected. The United States still retains an enormous mind share in the world. I don't understand very much when I watch Chinese (or Chinese-language Hong Kong) TV, but I can understand enough to hear how often in daily news broadcasts the word "America" is used. Despite increasing interest in China in the United States, I would estimate the word "America" appears easily 10 times as often on Chinese TV news as "China" does on U.S. news. Partly this may reflect my friend's point about Americans' insufficiently global thinking, but mostly it reflects the reality of U.S. influence on the world stage. Let's just say you don't hear the word "Brazil" very often on Chinese television. 

After we had dinner, I was watching Chinese-language TV from Hong Kong in my Singapore hotel room shortly after the death of Nelson Mandela. I was struck by how quickly the station went to Washington for President Barack Obama's statement on Mandela's death.  That segment was broadcast before any reactions from China. And on the plane coming home from Singapore, I read in Hong Kong's South China Morning Post a story about 10,000 Chinese high school students trekking to Hong Kong to take the Scholastic Aptitude Test so they could apply to U.S. universities.  The article noted that at the most-prestigious high schools in Beijing, a third of the students take SATs.  

I still fear we are screwing up these advantages by some of our behavior. But for now, they still exist -- and Americans need to understand that if we squander our many advantages as a force in the world, it will be a self-inflicted wound.

Posted by Steve Kelman on Dec 10, 2013 at 7:25 AM

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Reader comments

Wed, Dec 11, 2013 Jeff Myers Washington

Steve, I wonder if there is any research on the key policy aspects of America's success and/or appeal, and how persistent they are? For example, I perceive that the top 4-5 things that give America a competitive advantage and appeal are: 1. strong intellectual property protections so that inventors get to profit from their creativity, 2. easy access to capital via venture capital and stock markets, so you don't have to have wealth to pursue a good idea, 3. academic freedom, which brings great faculty, great universities and great students, 4. feasible immigration that allows brilliant and motivated foreigners to come and stay, 5. willingness to invest in public goods like infrastructure, basic research, public safety, and health, so that people can focus on being individually productive in a helpful, safe environment, and 6. natural resources that meet the needs of most of our people without excessive need to import. If this were all correct, I would say that 4 and 5 are faltering a bit, but the US is still in pretty good shape overall, and probably in much better shape than China along the lines of these factors.

Tue, Dec 10, 2013

The author brings up many good points about the problems the United States has in terms of global economy, however offers no possible solutions to these problems. I would love to have heard what the "very wise Singaporean observer" would have to say when asked, "So, what can the U.S. do about these problems?". Most Americans know and DO care about these problems but have no voice to express possible solutions. We have developed a, "let the government handle it" attitude. Let's get into a mindset of finding solutions instead of just rehashing problems we already know exist. We need to promote manufacturing initiatives, innovation, and make it easier for small businesses to create markets and grow those markets. Our government has other adgendas. Maybe the first step to solving these problems is to hire (vote in) a business-minded government.

Tue, Dec 10, 2013 Al

Why is the Chinese Government limiting exposure to the US Dollar? Is it related to the shutdown/debt ceiling, or the actual debt? My hunch is the latter, but I'm just curious what you dinner partner thought.

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