Things Aren't That Bad

Crossposted at Right Minds

As the year 2008 draws to a close, many are predicting dire things for the years ahead. This line of thought sees this decade as the final period of American hegemony, and as the end of the world as we know it. The American financial system will collapse, the environment will finally get its revenge for years of abuse, and American military dominance will end. Basically, many believe that America faces a Soviet Union-style bust, in which the U.S. loses its superpower status. Granted, the Soviet Union lost a great deal more than its superpower status, but the idea is the same—in a few decades, America’s role in the world will be fundamentally changed.

Things really don’t look good in the short term. The U.S. faces a recession, and probably a long and difficult one. The job market looks bleak, and much of the American auto industry is, in its present form, ruined. Barack Obama’s best hope for recovery is a massive stimulus package, and if it doesn’t work, and it probably won’t because stimulus packages rarely do, then the road to recovery will be very difficult.

So the short-term doesn’t look good. But the long-term looks, if not good, at least not bad. John McCain was right—the fundamentals—the deepest fundamentals—of our economy, and of our country, are still strong. (Although I doubt that McCain carefully considered the health of America’s economic essentials before making that statement; rather, it was probably an attempt at Churchillian confidence that backfired). 

Before considering the economy, it’s worth disposing of the idea that climate change will ravage the world, at least in the short term. It’s easy to think of awful natural disasters—Katrina, Gustav, California wildfires, drought, blizzards, and tempting to try to explain them away by citing global warming. (If they are caused by global warming, at least we can do something). Maybe they are, to some degree, but the real reason for the devastation probably lies in the fact that our fastest-growing population centers are locating squarely in prime natural disaster zones. Florida (hurricanes), the Southwest (drought), and California (earthquakes and wildfires) have growing populations; North Dakota and Wyoming do not. But if the situations were reversed, the devastation caused by natural disasters would be much less.

The economy looks much more dire than the environment—after all, natural disasters usually happen to someone else, but a bad economy affects everybody. But while the short-term economy will be rocky, it doesn’t look that bad in the long term. Is doesn’t look particularly good either, but there’s no reason to think that America will lose its status as the world’s preeminent economy.

For one thing, who would replace it? China? Their economy is based, in large part, on making stuff for the United States and Europe. And if demand from the United States ceases, where will they sell their products? The Chinese economy is linked to America’s—if we collapse, so do they.

India? It faces the same obstacles as China, except India must also deal with an unfriendly Pakistan, and social unrest.

Europe? It can’t even reproduce itself, and faces massive unemployment and incredible public debt.

The United States has four percent of the world’s population. It consumes 25 percent of the world’s resources. And the world had better hope it keeps doing so, or the world economy will collapse from lack of demand. For better or worse, the United States still controls the destiny of the world economy, and probably will for the foreseeable future.

Two years ago, the U.S. economy was booming with no end in sight. Now it’s not. Such swings are part of free-market capitalism. There is no reason to think that the U.S. can’t recover from this recession.

Armageddon is not near. The economy will recover (probably; nothing is certain in economics), and we will continue to recover from natural disasters. There will, of course, come a time when the American hegemony will fall—but there is nothing to suggest that this is that time.