We recently learned that China is poised to replace the United States as the No. 1 economic power in the world sometime later this year. Our anemic quarterly growth rate of 0.1 percent certainly lends credence to this speculation. We must seriously question those who say our nation is not in decline. They are adopting the ostrich strategy and sticking their heads in the sand.
There is no question that America is the pinnacle nation of the world currently and is likely to remain in that position for several years, given our military strength and the depth and stability of our financial infrastructure. However, overconfidence is the frequent companion of catastrophic decline, as confirmed by numerous historical writings. If we continue our fiscally irresponsible ways, coupled with our arrogance, there exists no other possibility than self-ruination.
Our ability to print money is already in jeopardy as some other nations have begun making noises about altering the international reserve-currency system to emphasize multiple currencies, elevating their status and decreasing the strength of the U.S. dollar. Our ever-increasing national debt would then place us on shaky ground. The Treasury securities we have been offering to China and others would no longer hold the same appeal, and all the borrowing we have done against the financial well-being of our progeny will come back to plague us and them.
Many who are responsible for putting us in this precarious position would argue that we really don’t need to worry about countries such as China replacing us as the pinnacle nation in the world, because they have too many structural problems. For instance, China is far behind us in per-capita income, creating many social issues and negatively impacting growth of the middle class, which is the most effective growth engine.
Their paucity of appropriate environmental controls has led to lethal industrial pollution, encouraging some of the intellectually gifted and mobile citizens to leave the country. China also has a very weak banking system, with too much government interference, which means their currency is unlikely to be accepted by the rest of the world as the reserve currency for many years. They could, however, recognize and correct these deficiencies more rapidly than expected, thereby enhancing their position as a formidable challenger to the United States.
Even if the these problems are rectified, China cannot expect continuation of the kind of economic expansion we have recently witnessed but is now rapidly dissipating. If the United States has the good sense to significantly lower its corporate-tax rate, this dissipation will accelerate. Additionally, the lack of intellectual-private-property protection in China will prevent it from generating the kind of innovation that usually accompanies pinnacle-nation status.
When it comes to energy, China has large potential reserves of shale gas, but natural water is largely lacking in those areas, making extraction difficult without new technology. We may be unable to exploit this weakness because of self-imposed, shortsighted overregulation of the energy sector in our country.
From these few examples, it can be seen that a combination of wise moves by China and unwise moves by the United States in the next few years could have very troubling implications for the future of our country.
If there is a sudden, cataclysmic debt-engendered financial crisis in the United States, China is only one of a number of possible successors to our pinnacle position. Perhaps our energy should be expended on figuring out how to not only avoid financial collapse, but also how to invigorate the most powerful economic engine the world has ever known. We should take advantage of the great laboratory of ideas; namely, successful states that have gone from severe budgetary deficits to significant surpluses through actions of wise governors and legislative bodies. Let’s look at their taxation policies and the business conditions they created that stimulated economic activity. There is nothing partisan about this approach; rather, it would be a manifestation of common sense, which should know no political affiliation.
The economic problems we are experiencing in this country, fortunately, are induced by our own ineptitude. I say fortunately, because it is within our own power to alter our course. We do not have to depend on the good will of someone else. When we are able to work together, as was the case with the Simpson-Bowles commission on fiscal responsibility, which was not perfect, but better than nothing, excellent ideas can be generated that can move us along the path of economic recovery.
There is general agreement that our system of federal taxation makes little sense and is overly complicated, yet we have failed to do anything about it. We also continue to thrust the heavy foot of the government on to the necks of both small and large businesses, stifling growth and innovation. Energy policies actually aimed at energy production could be a tremendous boost to our financial bottom line. Restoration of trust in a shrinking, rather than an ever-growing, government that actually tries to facilitate the freedom and well-being of all of its citizens and not control their lives, would most probably lead to a rapid expansion of economic growth in America, which is the best way to tackle our debt. As was the case with the Roman Empire, our fate is in our own hands.
Ben S. Carson is professor emeritus of neurosurgery at Johns Hopkins University and author of the forthcoming “One Nation” (Sentinel, May 20).