NY Times: A Power That May Not Stay So Super

A Power That May Not Stay So Super

By DAVID LEONHARDT
Published: October 11, 2008



AT the turn of the 20th century, toward the end of a brutal and surprisingly difficult victory in the Second Boer War, the people of Britain began to contemplate the possibility that theirs was a nation in decline. They worried that London’s big financial sector was draining resources from the industrial economy and wondered whether Britain’s schools were inadequate. In 1905, a new book — a fictional history, set in the year 2005 — appeared under the title, “The Decline and Fall of the British Empire.”

The crisis of confidence led to a sharp political reaction. In the 1906 election, the Liberals ousted the Conservatives in a landslide and ushered in an era of reform. But it did not stave off a slide from economic or political prominence. Within four decades, a much larger country, across an ocean to the west, would clearly supplant Britain as the world’s dominant power.

The United States of today and Britain of 1905 are certainly more different than they are similar. Yet the financial shocks of the past several weeks — coming on top of an already weak economy and an unpopular war — have created their own crisis of national confidence.

On Friday, as the stock market finished one of its worst weeks by falling yet again, to roughly half of its level just one year ago, the Gallup Poll reported that Americans were substantially more pessimistic about the economy than they have been in more than two decades of polling. Nearly 60 percent say the economy is in poor shape, and 90 percent say it’s still getting worse.

“One thing seems probable to me,” Peer Steinbrück, the German finance minister, said recently. “The U.S. will lose its status as the superpower of the global financial system.” At another time, that remark might have sounded like mere nationalist bluster. Right now, it doesn’t seem so ridiculous to ask whether 2008 will come to be seen as the first year of a distinctly non-American century. ..........(more)

The complete piece is at: http://www.nytimes.com/2008/10/12/weekinreview/12leonhardt.html?_r=1&oref=slogin

n/t

http://en.wikipedia.org/wiki/Long_Depression

Over investment in railroads and steamships, lowered transportation costs, led both to the inability of British farmers to compete with foodstuffs from the US, Argentina, Australia, etc. and to the inability of British manufacturers to compete with the United States and the newly unified Germany after 1870.

Overinvestment in the .com bubble, followed by the mortgage bubble, are having the same effect on the competitive position of the United States. We are unable to compete with East Asia in manufacturing and with South Asia in services.