The economy is going gangbusters. Gross domestic product grew 9.1 percent in the third quarter of 2011; the currency is strengthening; wages are going up; people’s standing of living is on the rise; and there’s actually a shortage of workers to fill all the new manufacturing jobs in the expanding industrial sector. Over a 20-year stretch, annual economic growth has averaged more than 10 percent. Millions are moving out of poverty into the middle class. It’s remarkable. Unfortunately, all this positive news is about the robust Chinese economy, not America’s.
On our side of the Pacific, unemployment as calculated by bureaucrats remains stuck at an awful 9.1 percent. When including those who have quit looking for a job out of despair and thus aren’t counted by government, the real unemployment rate is around 15 percent - about the same level as 1931, two years after the stock market crash of 1929 threw America headfirst into the Great Depression. Over the past decade, 50,000 U.S. factories have shut down at the expense of more than 6 million good-paying blue-collar jobs. The service industry is slipping, too. The housing bubble bursting exposed the dangers of trying to become the financiers of the world when bank portfolios are based on fraudulent valuations. Even the most optimistic forecasts predict our economy will only grow between 1 percent and 2 percent next year.
After years of fiscal indiscipline, the chickens are coming home to roost. For the first time ever, the United States has fallen behind the People’s Republic of China in four major indicators measuring economic performance. According to the Legatum Prosperity Index published on Tuesday, the Middle Kingdom has surpassed America in macroeconomic policies, economic satisfaction and expectations, foundations for growth, and financial sector efficiency. Out of 110 nations studied, the PRC ranks 10th on this economic ranking while America is tripping at No. 18. On overall wealth and quality of life factors, Americans are trailing Canadians, who under a new conservative government have been working to roll back their welfare state north of our border. Beijing owns more than $1.3 trillion in U.S. debt.
The Obama administration has tried to use the leviathan state to prop up employment, but paying people essentially to dig holes and fill them back in again robs important resources from the private sector, which could use the cash for productive long-term purposes such as investing in research and development and facilities expansion. There are severe consequences to increasing federal regulation, taxation and spending. “The decline in the Entrepreneurship & Opportunity sub-index is due to slightly higher start-up costs for businesses, uneven economic development and a decrease in research and development expenditures,” explains Jeffrey Gedmin, CEO of the Legatum Institute. “In the Governance sub-index, the U.S. lost ground due to a drop in citizens’ confidence in federal government, the honesty of elections and in the judicial system.”
In short, America is in decline, and China is rising to take our place as the world’s pre-eminent power. Welcome to the 21st century.
Brett M. Decker is editorial page editor of The Washington Times. He is coauthor of the new book “Bowing to Beijing” (Regnery, 2011).