Imagine yourself going ahead in time—60 years ahead. Imagine yourself in the People’s Republic of North America, in the year 2050.
In discussing the rise and fall of the American civilization, it will be necessary to examine the situation at the last time when historians felt this society could have saved itself from disintegration. Consequently, I will use statistics from the early 1980’s. Now nearly 70 years old, these figures remain extremely important, because they prove that even though the warning signals of an empire in liquidation were flashing all around, few did anything to retard the unraveling of this once-marvelous civilization.
Like all other great civilizations that disintegrated, the United States of America let its economy stagnate. In 1955 the United States had 44 percent of the world’s economic product, an economy eight times larger than Japan’s, the world’s highest productivity rate, an educational system that was second to none, and a constant string of trade surpluses.
By 1985 the generation in charge of America in the 60’s and 70’s had run up a $2 trillion debt, and the US slipped to the lowest rate of productivity growth of any in the industrialized world. It had the highest percentage of obsolete plants, the lowest percentage of capital investment, and the highest number of functional illiterates in the industrialized world. What happened?
The wealth of a nation lies in its productivity growth—in its people. In the early 1970’s the United States went from the highest rate of productivity growth in the industrialized world to the lowest. Its productivity was one-half the German rate, one-third the French rate, one-fourth the Japanese rate. From the first oil shock to 1983, increases in annual productivity in the United States were roughly one-seventh of those of its major trading partners.
Second of all, it let its federal debt get out of control. Neither political party was able to say no. The Democrats couldn’t say no to social problems, and the Republicans couldn’t say no to military spending. The debt was not considered an economic problem, it was considered a political problem.
So by 1986, the federal debt for just that year was greater than the gross national product of 158 of the 167 countries in the world. Just to pay the interest on the federal debt cost $458 million a day, and it took the individual income tax from everybody living west of the Mississippi River just to pay the interest on the federal debt. The interest payments on the federal debt took 70 to 80 percent of the nation’s savings pool. Christmas is an occasion when children tell Santa Claus what they want and adults pay for it; debt is an occasion when adults tell the government what they want and the kids pay for it.
The next disabling factor was the trade deficit, which was at least partly caused by the overvalued dollar, which was in turn caused by the federal debt. In 1983 the United States ran up the largest trade deficit that history had ever seen. The following year it doubled. In 1985 the United States became a debtor nation and in 1986 it became the world’s largest debtor nation—owing more than Argentina, Brazil, and Venezuela put together. In the decade leading up to 1986 the United States bought almost one-half trillion dollars more in goods from abroad than it sold abroad.
Why did this happen? First, other countries blocked United States entry into their markets and dumped many of their goods at subsidized rates on the American marketplace. In a marketplace that was really not free, even the genius of the American free enterprise system could not compete with large subsidies.
Second, the United States did not adequately invest in new plants and equipment. Back in the 1970’s and 80’s, the crucial turning time of the trade imbalance, Japan invested 10 percent of its gross national product in new plants and equipment while America was investing 3 percent. By the early 1980’s, the United States had the highest percentage of obsolete plants, lowest percentage of capital investment, and lowest growth in savings of any major industrialized country. The nations with new plants and new machines, those that maintained high productivity and high quality, dominated both the new and old markets. This inevitably undercut the United States’ ability to adequately fund its future needs.
Next, America got a reputation for shoddy goods. With an irony that defies description, the United States and Japan, in 40 years, traded reputations. Japan’s reputation used to be an international joke. But by the 1980’s, American rental companies reported that cars made in the United States required two or three times more servicing than comparable Japanese cars. A Harvard Business School study showed that an average of 70 defects showed up on American assembly line products for every one on a Japanese assembly line.
In Japan the issuance of new patents during the crucial 1970’s and 80’s rose more than 350 percent; meanwhile, in the United States, it fell by 10 percent.
Americans ceased to be hard-minded Yankee traders. Japan and other countries had been taking economic advantage of the United States for years. Japanese nontariff barriers cheated America, and Japanese custom procedures had been outrageously time-consuming. For example, the United States inspected Japanese cars by the fleet, while the Japanese inspected American cars one at a time.
America’s top ten exports in 1985 contained only one manufacturing item—airplane engines. America’s top ten imports were all high value-added manufacturing items—all from Japan or Germany.
Forty short years after winning World War II, the United States was in many ways subservient to Japan—serving as its natural resource colony.
We became equally inefficient in other ways. The legal system clearly contributed to the United States’ uncompetitiveness. While Japan trained engineers and scientists, the United States trained lawyers and accountants. One in 400 Americans were lawyers, while one in 10,000 Japanese were lawyers. Japan trained 1,000 engineers for every 100 lawyers. The United States trained 1,000 lawyers for every 100 engineers. Forty percent of American Rhodes scholars went to law school. It should surprise no one what happened. The US became the most litigious nation on earth; and by 1985 an insurance crisis of unbelievable proportions affected everyone from the owners of neighborhood pubs, to physicians, to local and state governments. The United States didn’t invest its educational resources any better than it invested its industrial resources.
The doctors became as much a part of the problem as the lawyers. The health care system grew bloated and inefficient, taking more of the gross national product and representing a greater share of the overhead of American goods. In 1985 the US spent $1,500 per capita on health care. Great Britain spent $400 per capita on health care, and Singapore spent $200 on health care, yet we all had approximately the same results. When the health care system took 11 cents out of every dollar spent in America, it was obviously adding a component to overhead that made American goods increasingly uncompetitive. The US manufactured artificial hearts but closed its steel mills.
Untold resources were spent in the campaign against death. American history became the story of the prodigal parents. Failure to reform Social Security and other pension systems in preparation for the retirement of what was called the baby-boom generation (a generation whose numbers vastly exceeded those of its parents) led to the collapse. The time-honored intergenerational contract by which the working young cared for retired parents broke down. The children of the baby-boomer adults simply could not afford the burden, so they refused to shoulder it. The writing on the wall was clear. In the 1980’s, demographic projections revealed beyond doubt that the ratio of workers to retirees would be less than 2:1 in the year 2050. Yet no action was taken.
The average enlisted man in the military retired at age 39; the average officer at 43. All received immediate pensions, all indexed, and all came with health benefits. Twenty-six percent of the people who retired from the military retired while they were still in their 30’s. In 1984, the average career soldier received $228,000 for retirement payments during his lifetime, plus free medical care. This would compare with the retirement payments to a pensioner in the private sector which were closer to $37,000.
Federal civil service employees were able to retire at age 5 5 with no reduction in pension. Four out of five federal workers ultimately got two pension checks—a federal civil service pension, and a second from the private sector—in addition to the Social Security that many received. In 1984, the federal government spent more on the retirement of its employees than it did on all the programs for the elderly and needy put together. In 1982, the civil service retirement program cost $31.4 billion, while the combined total of food stamps, housing assistance, and welfare was only $26.9 billion.
These pension systems in effect pushed individuals into early retirement—at the very same time that the cost of supporting many of these healthy individuals was pushing the federal government toward economic disaster. Other undisciplined systems, such as Medicare, certainly contributed to the fiscal insanity of the time. The actuarial Medicare benefits that were granted to an eligible retiree were 28.6 times the amount paid in by that individual. Medicare ran a $300 billion deficit by the year 1992, and contributed to the eventual collapse of the American credit system.
While pampering the elderly, the nation turned its back on the young. The United States let its system of education deteriorate into a “rising tide of mediocrity.” All international studies showed that American students were not in the top third, were not in the top two-thirds, but were always in the lower third. In mathematics American students were the lowest of all nations tested. An eighth grader in Japan knew more math than an MBA in the United States. A Swedish seventeen-year-old knew twice as much mathematics as an American seventeen-year-old. Japanese and Taiwanese students were ahead of American students from the first day they entered school, and by the time a Japanese student graduated he had 11 IQ points more than an American student, and had the equivalent in classroom time of an American college graduate. In 1985 Japan graduated 95 percent of its students from high schools, while the United States graduated less than 75 percent.
At the same time, America had the largest number of functional illiterates of any industrialized nation. Twenty-three million American adults were functionally illiterate. As many as one in five American workers were functionally illiterate. Between 40 and 50 percent of all urban students were estimated to have serious reading problems.
America’s ability to compete in the world was also affected by its high rates of violent crime. By 1985 it had five times more homicides, ten times more rapes, and 17 times more robberies than Japan. New York City had twice as many homicides as in all of Japan. In the five years of the early 1980’s, United States business had to hire 602,000 security officers just to keep people from ripping them off. This crime wave was costly both to the citizens’ psyche and to the efficiency of the economy.
By 1986 Japan’s taxpayers supported 50,000 inmates, including pretrial detention inmates, while the United States supported 580,000 adult prisoners. If you were to take all the prisoners in the United States in 1986 and put them in one place, it would have been a city larger than Detroit. That city had two suburbs—West Probation and East Parole—that contained another 3.7 million people. One out of 35 American males in 1986 was on probation or on parole. Such figures were hardly conducive to quality products.
The United States spent 7 percent of its gross national product on defense, whereas its international competitors spent far less. A nation with minimal defense spending can afford to concentrate its public and private capital on international competitiveness. Seventy percent of US research and development testing and evaluation programs in the 1980’s went to the defense industry. About 40 percent of all their engineers and scientists were involved in military projects, while virtually all their competitor scientists and engineers were engaged in bolstering their domestic economy. The United States spent proportionally less of its economy on nonmilitary research and development, and gradually all the radios, the television sets, the video recorders, the automobiles, the textiles, the steel—virtually everything except military products—were made abroad.
By 1986, of the 17 Western industrialized democracies, the United States ranked first in military spending as a percentage of gross national product but last in productivity growth, last in manufacturing growth, and last in fixed investments as the share of gross national product. By skewing its economy toward the military and away from the domestic economy, it weakened its ability to compete internationally.
While devoting so much of its energies to military hardware, the United States neglected more vital aspects of its defense. As Daniel Patrick Moynihan observed in 1965:
From the wild Irish slums of the 19th century Eastern seaboard to the riot torn suburbs of Los Angeles, there is one unmistakable lesson in American history: a community that allows a large number of young men (and women) to grow up in broken families, dominated by women, never acquiring any stable relationship to male authority, never acquiring any set of rational expectations about the future . . . that community asks for and gets chaos.
There was a terrible breakdown in the American family. The United States had a divorce rate 25 times that of Japan. Fifty percent of all black births were illegitimate. Fifty percent of all Hispanic youth never finished high school. These numbers were a social time bomb. America soon had two jealous, angry, underutilized, undereducated, frustrated, and volatile minority groups existing unassimilated and unintegrated within its borders. Large numbers of these people were largely outside the mainstream economy and the world of jobs.
To make matters worse, the United States refused to control its borders. It persisted in the naive illusion it could accept all the “huddled masses yearning to breathe free.” That was demographic insanity. By 1986 one out of ten people in Los Angeles was an illegal immigrant and 67 percent of all births in Los Angeles County hospitals were children of illegal immigrants. Large concentrations of Spanish-speaking people refusing to learn English grew up in various parts of the United States. Linguistic ghettos developed in most of the big cities. Demands for cultural parity and a bilingual, bicultural society arose, further adding incredible divisiveness to a country already rent by a myriad of social problems. By 1986 a large, underdeveloped country of some 40 million people existed within American borders.
The pressures from outside the United States were immense. In 1984, Mexico with 76 million people had 300,000 more babies than the US had with 240 million people. Massive numbers of illegal immigrants from Mexico, the Caribbean, and Latin America came to the United States.
Shortly after the year 2000, California became the United States’ first Third World state. People who had their origin in Third World countries became a majority there.
A de facto system of apartheid developed in California, Texas, and Arizona. In California Anglos and Asians owned most of the property, had the good jobs, good education, and spoke English. The blacks and Hispanics had the poor jobs, lacked education, owned little property, spoke mostly Spanish, and were largely unassimilated. Diversity became division.
In short, the United States of America simply lost too much of its ability to work hard, to sacrifice. Like earlier civilizations, it was seduced by luxury.
In the end, more than they wanted freedom they wanted security. They wanted a comfortable life and they lost it all—security, comfort, and freedom. When the Athenians finally wanted not to give to society, but for society to give to them; when the freedom they wished for most was the freedom from responsibility, then Athens ceased to be free.
Gibbon’s description of Athens might have been a prophecy of the American decline. Perhaps it is one of the constant dilemmas of democracy.
As Henry Grunwald reminds us, we want the fullest kind of freedom in democracy. But does freedom destroy the inner disciplines that alone make freedom possible? For freedom to be workable as a political and social system, strong internal controls and a powerful moral compass are necessities. But Americans lost the work ethic, discipline, organization, and creative drive that had been responsible for their success. As Juvenal put it, “Luxury is more ruthless than war.”