Americans, hit first by outsourcing and then a recession, are becoming deeply pessimistic about their country’s ability to maintain its economic leadership. America’s Aristophanes, Jon Stewart, commented during a recent interview with the author of "India Calling," Anand Giridhardas: "The American dream is still alive — it’s just alive in India." Likewise, 20 percent of Americans in a December National Journal poll believed the U.S. economy was no longer the strongest. Nearly half picked China instead.
But there are at least five reasons why neither India nor China will knock America off its economic perch anytime soon, at least not by the only measure that matters: Offering the best life to the most people.
America wastes no talent
Conventional wisdom holds that America’s global competitiveness is driven by geniuses flocking to its shores and producing breathtaking inventions. But America’s real genius lies not in tapping just genius — but every scrap of talent up and down the scale.
A 2005 World Bank study found that the bulk of a people’s wealth comes not from tangible capital like raw resources and infrastructure. It comes from intangible wealth: effective government, secure property rights, a functioning judiciary. Such intangible factors put the equivalent of $418,000 at the disposal of every American resident. In India and China, it's $3,738 and $4,208, respectively.
America’s vast intangible wealth makes everyone more productive and successful. Personal attributes — talent, looks, smarts — matter only on the margins. Having witnessed the life trajectory of many Indian immigrants, what’s striking to me is that, with some exceptions, it doesn’t matter whether they are the best or mediocre in their profession in India: They all end up with similar standards of living here.
America does not have India’s infrastructure deficit or China’s civil society deficit
India’s gap with America extends not just to intangible capital but tangible capital as well. Basic facilities in India — roads, water, sewage — remain primitive. For example, a 2010 McKinsey Global Institute report found that India treats 30 percent of raw sewage, whereas the international norm is 100 percent. It needs to spend twice the slated expenditures over the next 10 years to deliver basic services.
China, meanwhile, has a major civil society problem. Its one-child policy has decimated the natural safety net that old people rely on in traditional societies. And China offers no public safety net to the vast majority born in villages. Worse, many Chinese have invested their nest eggs is various asset bubbles that will wipe out their only means of subsistence if they burst.
America does not have grinding poverty
Despite all the recent hoopla about China becoming the world’s second-biggest economy and India hoping to follow suit, the reality is that the per-capita GDP — even measured by purchasing power parity — in both is pathetic. America’s is about $47,000, China’s $7,500 and India’s $3,290.
Worse, both still harbor medieval levels of poverty, with 300 million people in each living on less than $1.25 a day. India’s IT boom gets big press, but it — along with all the tertiary industries it has spawned — employs 2.3 million people, or 0.2 percent of the population.
American education is vastly superior to India’s or China’s
President Obama claims America is in an "education arms race" with India and China. Rubbish.
Despite all the horror stories about American kids underperforming on standardized tests, things are worse in India and China. India’s literacy rate is 66 percent. China puts its at 93 percent, but between 2000 and 2005, China’s illiterate population grew by 30 million. The same may happen in India, thanks to last year’s Right to Education Act, the regulations of which will cripple India’s private school market. The fundamental problem is that both countries put their resources into educating elite kids — and ignoring the rest.
Unless more Indian and Chinese kids get access to a quality education, their countries won’t be able to actualize their human potential, precisely what America does so well.
America doesn’t have a culture of hype
An important reason U.S. gloom-and-doom is unjustified is that there is so much gloom-and-doom. Indians and Chinese, by contrast, have drunk their own Kool-Aid. Their moribund economies have barely kicked into action and they are entertaining dreams of being the next economic superpowers. That bespeaks a profound megalomania. There is not a culture of hope in these countries, as Giridhardas told Stewart, but a culture of hype.
By contrast, when America’s government responds ineffectually to the recession, Americans go into panic mode. Grassroots movements like the Tea Party emerge to rein in the government. Pay Pal founder Peter Theil has even given $850,000 to the Seasteading Institute to establish new countries on the sea to experiment with government. This might be wacky, but it puts an outside limit on how out-of-whack Americans will let their institutions get before they start fixing them.
This, ultimately, is the biggest reason to believe that the American dream is and will stay alive — in America.
But there are at least five reasons why neither India nor China will knock America off its economic perch anytime soon, at least not by the only measure that matters: Offering the best life to the most people.
America wastes no talent
Conventional wisdom holds that America’s global competitiveness is driven by geniuses flocking to its shores and producing breathtaking inventions. But America’s real genius lies not in tapping just genius — but every scrap of talent up and down the scale.
A 2005 World Bank study found that the bulk of a people’s wealth comes not from tangible capital like raw resources and infrastructure. It comes from intangible wealth: effective government, secure property rights, a functioning judiciary. Such intangible factors put the equivalent of $418,000 at the disposal of every American resident. In India and China, it's $3,738 and $4,208, respectively.
America’s vast intangible wealth makes everyone more productive and successful. Personal attributes — talent, looks, smarts — matter only on the margins. Having witnessed the life trajectory of many Indian immigrants, what’s striking to me is that, with some exceptions, it doesn’t matter whether they are the best or mediocre in their profession in India: They all end up with similar standards of living here.
America does not have India’s infrastructure deficit or China’s civil society deficit
India’s gap with America extends not just to intangible capital but tangible capital as well. Basic facilities in India — roads, water, sewage — remain primitive. For example, a 2010 McKinsey Global Institute report found that India treats 30 percent of raw sewage, whereas the international norm is 100 percent. It needs to spend twice the slated expenditures over the next 10 years to deliver basic services.
China, meanwhile, has a major civil society problem. Its one-child policy has decimated the natural safety net that old people rely on in traditional societies. And China offers no public safety net to the vast majority born in villages. Worse, many Chinese have invested their nest eggs is various asset bubbles that will wipe out their only means of subsistence if they burst.
America does not have grinding poverty
Despite all the recent hoopla about China becoming the world’s second-biggest economy and India hoping to follow suit, the reality is that the per-capita GDP — even measured by purchasing power parity — in both is pathetic. America’s is about $47,000, China’s $7,500 and India’s $3,290.
Worse, both still harbor medieval levels of poverty, with 300 million people in each living on less than $1.25 a day. India’s IT boom gets big press, but it — along with all the tertiary industries it has spawned — employs 2.3 million people, or 0.2 percent of the population.
American education is vastly superior to India’s or China’s
President Obama claims America is in an "education arms race" with India and China. Rubbish.
Despite all the horror stories about American kids underperforming on standardized tests, things are worse in India and China. India’s literacy rate is 66 percent. China puts its at 93 percent, but between 2000 and 2005, China’s illiterate population grew by 30 million. The same may happen in India, thanks to last year’s Right to Education Act, the regulations of which will cripple India’s private school market. The fundamental problem is that both countries put their resources into educating elite kids — and ignoring the rest.
Unless more Indian and Chinese kids get access to a quality education, their countries won’t be able to actualize their human potential, precisely what America does so well.
America doesn’t have a culture of hype
An important reason U.S. gloom-and-doom is unjustified is that there is so much gloom-and-doom. Indians and Chinese, by contrast, have drunk their own Kool-Aid. Their moribund economies have barely kicked into action and they are entertaining dreams of being the next economic superpowers. That bespeaks a profound megalomania. There is not a culture of hope in these countries, as Giridhardas told Stewart, but a culture of hype.
By contrast, when America’s government responds ineffectually to the recession, Americans go into panic mode. Grassroots movements like the Tea Party emerge to rein in the government. Pay Pal founder Peter Theil has even given $850,000 to the Seasteading Institute to establish new countries on the sea to experiment with government. This might be wacky, but it puts an outside limit on how out-of-whack Americans will let their institutions get before they start fixing them.
This, ultimately, is the biggest reason to believe that the American dream is and will stay alive — in America.