The Current Clash of Civilizations

From time to time I assess the state of play in the current civilizational clash between the West and the rest-- or should that be, the West and the East. Or else, in most minds, it’s America versus China for world hegemony.

And I have been known to suggest that we are not exactly doing a bang up job in this competition. After all, would you wager your life savings on a country that is being led by a demented fool, a man who remains in power because the nomenklatura understands that his vice president is a complete idiot. 

Whenever I do so, commenters on this blog-- bless them for taking the time and effort to contribute-- suggest that I have it all wrong. Or better than my sources have it wrong. In truth, they explain, America is ruling the world and it will continue to rule the world. We are still the biggest and baddest bloke on the field and no one will overtake us.

In part, this debate involves the status of the dollar, but it goes well beyond. But, if you are taking the long view, how well do you think that American schoolchildren will be able to compete in the world market if they are filled full of nonsense about race theory and do not know how to do algebra, to say nothing of multivariable calculus.

Anyway, my personal feeling is that our cheerleading squad, considerable as it is, is falling into the complacency trap. They have mistaken patriotism for complacency and imagine that every time someone suggests that we might be falling behind the Middle Kingdom, to say nothing of Asian democracies, it represents an insufficient love of country.

Of course, one can certainly love one’s country and despair at the fact that political power and influence is being wielded by a sanctimonious twit named Alexandria Ocasio-Cortez.

Anyway, on the anti-complacency front, we have recently read a bracing analysis by two foreign policy mavens, Fredrik Erixon and Dalibor Rohac. The first is the director of European Centre for International Political Economy in Brussels. The second is a senior fellow at the American Enterprise Institute in Washington DC. Their essay appeared in Quillette.

Some contrary souls will naturally take issue with their analysis, but that is not a reason not to share it.

The authors begin by explaining that our great Western world is suffering from anemic economic growth, and that, eventually, this is going to catch up with us:

Our ability to succeed, by projecting hard and soft power and by improving our resilience against autocratic aggression, requires economic resources. Yet, America is a low-growth region, and Europe even more so. Between 2000 and 2019, annual economic growth in the European Union averaged a miserable 1.4 percent. In Italy, real per capita incomes are lower today than they were in the mid-2000s. Public debt has soared, hovering at just below 100 percent of GDP in both Europe and the United States compared to 45 percent in China and less than 20 percent in Russia.

The great European Union, now leading the fight against Russia in Ukraine, has not been an economic powerhouse. How could it be, burdened as it is by bureaucratic red tape and environmentalist yearnings:

Despite its successive enlargements, the relative weight of the European Union in the global economy has fallen from a peak of around 25 percent of the world’s real economic output in the early 1990s to less than 15 percent at the present time. The US share of the global real output has followed a downward path from a peak in the late 1990s. By 2050, some forecasts suggest, China will command roughly the same share of the world output as the EU and the US combined.

But, you will retort, Europe has just decided to increase defense spending. The authors respond-- not so fast. Since the increase involves a percentage of economic output, if that output declines, then the spending will necessarily decrease:

 The vows of European leaders to increase defense spending above a fixed fraction of GDP—say two percent—are less meaningful if Europe’s real economic output continues to be stagnant or shrinks. The Biden administration’s proposed Pentagon budget—set at $773 billion, or just below four percent of US GDP—seems enormous but may still be inadequate relative to the security challenges America is likely to face in the coming years.

As it happens, the advent of socialistic policies has crushed economic growth throughout the West:

Since at least the 1970s, however, the same economies have experienced a slowdown in productivity rates, translated into lower income growth. At least some of the reasons for this sclerosis have to do with the growth of regulatory burden across Western economies, entrenchment of interest groups preventing entry into certain industries, and the proliferation of new barriers to economic mobility.

The Europeans have recognized this and declared their intention to remedy it in something called the Lisbon Strategy in the year 2000. It has not been a success. As they say in Texas, all hat and no cattle, or some such.

Europeans already recognized the problem in 2000, when the Lisbon Strategy sought to turn the European Union by 2010 into “the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion.” Alas, by 2010, per capita incomes in the EU, expressed in purchasing power parity terms, lagged a good third behind those in the United States.

And, let us not ignore the fact that Western education is falling apart. Some good schools still exist, especially when it comes to STEM subjects, even though nearly all of the students in these programs are of Asian origin. As for the EU, it has lost ground academically. This has been made more dire by Brexit-- since the best European universities are in Great Britain:

Higher education is a mess, too. Since the UK left the EU, there is no university from the EU in rankings of the top-25 universities in the world. Among the top 50 universities in the world, there are seven times as many universities in Asia than in the EU. Big economies like Germany are struggling to attract computer and AI engineers. In the early 1990s, the European Commission successfully wrestled member states—including large ones such as Italy or France—into an economic opening up, privatization, and end to wasteful forms of state aid to domestic companies. Since then, progress has stalled and to this day the EU lacks a functioning internal market in services.

In the meantime, the Lisbon Strategy failed and Europe offered up another agenda, Europe 2020. This does not involve competing in the world markets. It involves fighting the good fight against the weather, replacing fossil fuels and becoming more dependent on Russia.

Memory-holed by European institutions, the Lisbon Strategy itself was superseded in the 2010s by a less ambitious competitiveness agenda: Europe 2020. Today, the bloc finds itself without any explicit pro-growth agenda at all, having subsumed all questions of economic dynamism to its decarbonization and greening agenda. Although tackling climate change is a worthy goal, simply wishing that a reducing fossil fuel consumption will automatically create new economic opportunities and additional employment and raise productivity rates does not make it so.

The same problems bedevil the United States, though when Tom Friedman pointed it out, the long knives came out. As it happens the Biden administration is hellbent on making American less competitive, because it wants to save the planet:

In the United States, as the Biden administration is learning the hard way, it is extremely costly to build (or repair) American infrastructure. In per mile terms, it is five times as expensive to extend an existing subway line in New York City than it is in Paris. The reasons are manifold, but they include the National Environmental Protection Act, which has dramatically increased the number of veto points in a position to stop new infrastructure projects, with few gains in environmental quality.

And Europe, being awash in regulations, to the point that it is incapable of technological innovation, is decoupling from the world economy. It’s what happens when lawyers and bureaucrats are given more power:

Under the banners of “technological sovereignty” and “economic autonomy,” the EU is pursuing policies to decouple itself from the world economy—including from friendly allied economies. The EU’s new digital regulations damage the continent’s economic relation to America. The bloc’s carbon border adjustment mechanism (CBAM) will hurt trade with allies such as Turkey, Ukraine, and the United States. New trade agreements, such as the completed deal with Mercosur—an important partner region in the new geopolitics of trade—have been kicked into the long grass because of opposition from Paris and Vienna.

It is not good news:

The neglect of economic partnerships that could deepen and widen the West undercuts the rising imperative of “decoupling”—be it to address our dependence on Russian energy or from technological and other vulnerabilities related to our reliance on Chinese manufacturing. Decoupling does carry economic costs. If Western economic nationalism becomes the relevant alternative to the status quo, our incomes, economic power, and eventually our technological and military edge are bound to suffer.