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The American Century

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Reports of America’s demise have been greatly exaggerated. For years now, the pundits have been predicting with either glee or fear (depending on which side of the Atlantic they were on), the “rise of China” and the end of the American unipolar world.

Certainly there has been an enormous, and welcome, growth in Chinese economic power. The same goes for many other Asian economies, but only China has the masses to make the world tilt on its axis. That economic growth has recently been matched by a growth in Chinese military power. The People’s Liberation Army has always been enormous – the largest land force on earth – but China has invested heavily in newer technologies to modernize the force and to counter some of the most obvious strengths of the United States, especially the US Navy.

Meanwhile, the US is seen to be bumbling and stumbling. The 2007-2008 financial crisis brought the Washington Consensus into disrepute and revealed serious gaps in the financial regulatory framework. The slow recovery of the economy has been taken for proof positive that the US was “on its last legs” and declining rapidly into inevitable obsolescence.

We’ve heard all that before.

 

Demography Rules All

It is true that the United States is not able to impose its will across the world: but that has always been true. The collapse of the Soviet Union only seemed to remove the constraints to US power, but geography, ideology and economics still placed severe limitations on the US ability to act unilaterally. The Second Gulf War brought those limitations into stark relief, but it did not create them.

The rise of China is also real, but the People’s Republic faces difficult, and perhaps insurmountable, challenges of its own. These are significant enough for me to disbelieve any reasonable scenario where China replaces the United States as the world’s premiere hyperpower. Geography, history, and economics all play a role, but the most significant one is demographics.

Demography has always been on China’s side. Since antiquity, the bulk of humanity has lived in Asia, and a significant proportion of that population has resided in the Middle Kingdom. The potential to raise a vast army has allowed China to conquer and control its outlying regions through most of its long history, and to resist almost any invasion. China wa conquered from the outside only once, by Kublai Khan, and the Chinese ended up conquering their conquerors culturally. The Yuan Dynasty lasted only a century.

In modern times, however, demography is working against China. Chinese industry benefits from cheap labor to be the factory of the world, but the economy has to grow at 8% per year to find jobs for the 100 million new urban workers that arrive every year from the countryside. Anything less leads could lead to more social unrest.

An even bigger challenge is the population pyramid. This is the distribution of people in a country across the different age groups, and it has a fundamental impact on the economy. “Young” nations need to worry about job creation and investment in education and high savings for eventual pensions and health care; “old” nations have to draw down savings to pay for pensions and health care. Unless properly structured, national pension and health care schemes can prove both fiscally unaffordable and politically untouchable.

Let’s compare four population pyramids: the United States, China, the European Union and India.

  • The United States[1]The United States is currently going through a “rough patch” as the baby boom generation nears retirement. This is driving up health care costs at a rate significantly above the rate of inflation, as well as posing a problem for the Social Security fund. However, internal growth rates and, more importantly, immigration, will maintain a very healthy ratio of workers to dependents through 2050. In fact, the demographic picture for the US is the best of any developed economy in the world.

 

  • China[2]– The young, dynamic workforce of today which has made China the manufacturer for the world is rapidly aging and the fertility rate is far below the replacement rate. This is a deliberate policy of the Chinese government since the days of “One Child”; however, the offshoot of this is that by 2050, China will have one of the oldest populations in the world and is unlikely to be wealthy enough to afford it (unlike Japan and Europe). China is remains a source of emigration, not immigration.This is the huge demographic trap facing the PRC – who is going to work the factories to pay for the hundreds of millions of retirees demanding good health care and decent pensions by 2050??China is also has a marked imbalance in the male-to-female ratio at almost every age cadre. Another legacy of “One Child” and Chinese culture, which valued male children to the point of murder. What the sociological effect on males is of not being able to find long-term mates has never been studied, but I assume that they are not conducive to social stability.

 

  • The European Union[3]It is almost unnecessary to belabor the point as far as the EU is concerned. Everyone knows that Europe is a socialist paradise with iron clad health and retirement benefits, an ultra-low birth rate, and a looming retirement crisis. Every single major economy in Europe is affected by this trend, with only Eastern Europe providing the mass of young workers to partially compensate for it.The effect of this population aging is an ever slowing rate of growth in the European economy, as national governments absorb ever greater portions of the national wealth to pay for excessively generous social benefits to retirees. In some countries, these begin as early as age 60, which is unsustainable given the average European life expectancy of 80 years.Europe is an important immigration destination, but not as important as the United States (by a factor of 2-to-1)[4]. Unless Europe opens the doors to new immigrants very significantly – and soon – it is hard to see how they can avoid the demographic trap. This seems highly unlikely given the poor and worsening economic performance of the region and the already significant rise of anti-immigrant rightist parties.

 

  • India[5]The population of India is still one of the youngest in the world and does not have any of the imbalances that mark the Chinese population pyramid thanks to the heavy hand of government intervention. India nevertheless shares an adverse male-to-female ratio with China, especially in the youngest cadres. This could create instability over the next decades.Nevertheless, by 2050, India will have a relatively well-balanced population profile, with only a slight “bulge” in the male population from 30 to 50 years old. Health care and retirement benefits should remain affordable based on the worker-to-dependents ratio.

 

And the Winner In Asia Is: India

With a population that is rapidly catching up to China’s, a vibrant economy and a long tradition of parliamentary democracy, India is the Asian nation that looks most likely to “challenge” the United States as a world power. This is all to the good. Relations between our nation and India are excellent; the United States has the second largest Indian diaspora in the world[6]. Without any significant conflicts of interest, the US should welcome the “rise of India” as a counterweight and ally to a more totalitarian China.

Yet India too faces sever challenges: extreme poverty for most of the population and high income inequality, underdeveloped infrastructure, a population that is highly fragmented along ethnic, cultural, religious and linguistic lines, widespread corruption and over-bureaucratization in government, just to name a few. India will continue to grow, but it is difficult to believe that they will overcome so many large and diverse challenges in a short space of time.

America The Remote

Demographics is one of the most important long-term factors that determines the success of any given nation. Geography is the only permanent one (except in the really long-term). And to our benefit, geography has been very good to the United States.

We are thousands of miles across two large and turbulent seas from any serious economic or military competitor. We have only two land neighbors, both allies, and both far too weak to require a significant investment in permanent military defense. Our nation spans numerous climatic zones that are both benign for human health and ideal for the production of a wide variety of crops and animals. We have numerous large rivers that traverse vast areas of our interior and ending in useful anchorages suitable for ports, reducing transportation costs for industry and agriculture. We have long, well-populated and well-developed coasts that communicate easily with the most important world markets and population centers, except those in the Middle East.

Neither China, India, nor Europe enjoy all of these advantages.

China is strategically isolated from the rest of Asia by the Himalayas, Gobi Desert and Mongolia steppe, all difficult and expensive to traverse. This makes invading China difficult, but conversely limits China’s power projection capabilities. China’s population resides mainly on the coastal plains, and along the confluence of her two major rivers, the Yangtze and Yellow. China depends utterly on the sea both to export the production of her factories to her principal customers, and to import the raw materials and energy she lacks domestically.

Yet the sea approaches to China are constricted by the islands and peninsulas that surround her. All sea traffic must pass through relatively narrow choke points: the Straits of Johore and Malacca, the Luzon Strait between Luzon and Taiwan, or the Ryukyu Islands between Taiwan and Kyushu. It so happens that almost all the nations bordering the South and East China Seas are long-term US allies, posing a vast and permanent strategic dilemma to China.

For China to replace the United States as the world’s foremost power, it would have to find a way to overcome its geography, either by “Finlandizing” her neighbors or by developing a sufficiently large and powerful navy to challenge US command of the sea. In fact, it will be necessary to accomplish both.

 

The American Century

The United States will continue to enjoy the advantages of a favorable geography, a balanced demography and a highly diverse, productive and competitive economy well into the XXIst century. The challenges we face are mostly of our own doing and not as intractable as those of our main competitors.

Despite the continuing challenge to American industry posed by the development of China and India, I believe that the worst is behind us. The United States remains the nation most open to immigration in the world[7] and the preferred destination of both Chinese and Indian entrepreneurs[8]. We remain the wealthiest nation on earth and well able to afford the necessary investments and social spending to stay competitive and politically stable.

Unless we tear ourselves apart through political intolerance – as we did once before – there is every prospect that this century will truly be the American century.



Sources and Notes:

[1] U.S. Bureau of the Census, International Programs, International Data Base, World Population Data
[2] Ibid
[3] Ibid
[4] Ibid
[5] Ibid
[6] Behind Myanmar and just ahead of Malaysia. Naujouks, Daniel, “Emigration, Immigration and Diaspora Relations in India,” October 2009.

 [7] Jeffrey, Terence P., “Still the Land of Dreams: 150 Million Want to Immigrate to US,” CNS News, 20 April 2012
[8] Mourdoukoutas, Panos, “Why China’s Rich Want To Immigrate To America,” Forbes, 11 September 2011

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