The Upside of Down

        Preface

IMAGINE YOU WERE ABOUT TO BE BORN. And somehow, you got the choice as to where you’d be born. Would you choose Asia, or Africa, or Europe, or the Americas? If you had any sense, you’d be likely to choose one of the countries of North America or Europe—or another safely developed country, like Australia, New Zealand, Japan, or Singapore—not least because your chance of surviving the first years of life would be higher there than anywhere else. When you reached an age to appreciate such things, you’d probably also be richer, better educated, safer, and more secure in your rights. You’d be more likely to have an interesting job and a long and enjoyable retirement. All in all, by whatever measure, your quality of life would almost certainly be higher.

Of course, you might draw the short straw—poverty in the West can be soul-crushing and life-shortening just as wealth in India or Africa can afford all the luxuries the world has to offer. But on average, the advantages of being born in the West are clear.

Now imagine that the choice you are given is not where to be born, but when—anytime between the dawn of Homo sapiens and today. Again, your choice would be clear—in fact, it would be even more specific. Today is the time to be born, whether your priority is a long, healthy life, or opportunities to learn, or options in what to do and consume, or freedom to live as you choose. Whether you will live in Africa or Asia or Europe or the Americas, no time has been as good a time to be alive as now.

There remain, again, millions of horrible exceptions—lives cut short by disease, poverty, violence, or neglect. But those exceptions are rarer today than ever.

Put those two choices together. Being born today in the West is like winning the birth lottery for the human species. And nothing that has happened over the last few years—the global recession, tensions between the United States and Iran or North Korea—has changed that.

There are fears, however, that the quality of life in the West has reached a peak. That China or India will soon overtake Europe and America, leaving them in decline. Or that global progress will be reversed by shortages—of oil, or copper, or water, or cooler air. This book addresses those fears. It suggests that the only thing better than being born today in America or Europe will be the chance to be born tomorrow in those very same places. And it suggests that the rise of “the Rest” is one big reason why that is true.

There is surely much to argue with in the pages that follow. I believe that my statements about the past—about things like the impact of trade and migration, or the mortality risk of terror, or the rate of progress in developing countries—are made on the basis of the best academic literature. Of course, that is a judgment call, and I do not always fully summarize the arguments on both sides. And when it comes to forecasts of the future, these are necessarily best guesses. Perhaps the developing world will sink back into the morass of low growth—and perhaps young people in the West will turn their backs on it.

But the reason predictions about the future of humans are necessarily imperfect is that we can change that future. And I hope that enlightened self-interest in the West about the benefits of the rising Rest is one of the forces that can help push the future in a positive direction.

I say all that writing as a Westerner. I am lucky enough to have been born to a European father and an American mother, to have been brought up in the United Kingdom, and to have lived my adult life in the United States. My family and my wife’s family are made up of two generations of intercontinental marriages—five of them, all but one transatlantic. So when I write about what global changes mean for Europe and America, or what Europe and the United States should do about them, I am writing about “us” and about “our” response.

But I have been focused on (and sometimes lived in) Asian, Latin American, and African countries for most of my career. I’m a proud uncle of a niece born in China, daughter to my brother and sister-in-law, who met while working in Hong Kong. My father-in-law was born, raised, and worked in Argentina, and my wife spent her first years in that country. So while I think of myself as Western, I speak from considerable personal experience when I say there is much that the Rest can offer people in the United States and Europe. My closest family and I have benefited immeasurably from a world of closer connections and expanding opportunities—to explore, to make a living, to fall in love, to raise a family.

And I hope my children, nieces, and any future nephews will benefit even more. If the Rest gets wealthier, healthier, more educated, more democratic, and more peaceful, it will have even more to offer. So while the West will remain the best place to live in the world for most people for most of the foreseeable future, reaching out to the Rest will make our lives far richer, more interesting—and even happier.

CHAPTER ONE

        Losing an Empire and Finding a Role

AS AMERICA’S RECOVERY FROM the global recession that began in 2007–2008 staggers on, undocumented immigrants in the country are heading back home in search of a better life. Two US-led wars in the last decade have dragged toward an end charitably described as “mission not completely failed.” That the country could avoid default a couple of years ago only by stopping pretty much all of the other business of government bar naming post offices for a few weeks is reminiscent of the last days of the Roman Republic. Meanwhile, across the Atlantic, the Euro Zone, so obviously an ill-matched patchwork, is held together by fraying threads. Ninety percent of the French population reckons their kids will be poorer than they are. What a grim time to be from the West.

In fact, argument already rages over whether the United States—the anchor player for Team West—is still even the largest world economy. Writing in his book Eclipse: Living in the Shadow of China’s Economic Dominance, former International Monetary Fund (IMF) economist Arvind Subramanian suggests that China has already overtaken the United States as the largest economy in terms of purchasing power parity (which adjusts exchange rates to account for the different prices people pay for goods and services across countries). The World Bank’s statistics suggest that the US economy is still larger, perhaps by as much as 45 percent. But even China pessimists agree that it is only a matter of a few years until the Middle Kingdom’s 1.3 billion people produce more than do the 310 million living in America. Subramanian concludes that “the economic dominance of China relative to the United States is more imminent (it may have already begun), will be more broad-based and could be as large in magnitude in the next 20 years as that of the United Kingdom in the halcyon days of empire or the United States in the aftermath of World War II.”¹

And China is only one part (if a large part) of a global transformation in the fortunes of the world’s developing countries. India, like China, more than doubled the size of its economy over the first decade of the twenty-first century. It may well overtake the United States by midcentury. Other developing countries—Brazil and Indonesia, Nigeria and Vietnam—are also likely to see rapid growth. In total, suggests Subramanian, the countries of the developing world will control about two-thirds of global gross domestic product (GDP) as soon as 2030.

This all raises the question: is the United States the next China?

That would be China in the 1850s. A country that crashed from the heights of global economic dominance in a century-long disaster of famine, war, and strife. In the 1850s, China had the largest GDP of any single economy on the planet—a spot it had held for much of the previous four hundred years. The combined wealth of the British Empire had grown considerably larger, however, and it was the British who forced the former top nation into a humiliating series of treaties in the 1860s that made it open its borders to foreign goods—including opium from British India. This was the start of a very bad century for the Far Eastern giant that included civil war, invasion, and mass starvation, all on a colossal scale.

To be fair, even the most depressed pre-mourners for American global power are not quite as gloomy as to predict a resurgence of the Confederacy and civil war, but they do see in China’s return to the top spot the risk of US humiliation—forced out of markets and security agreements abroad, in debt bondage to the new superpower at home, the rusting decay of Detroit spreading nationwide. “This time it’s different,” warned Financial Times columnist Gideon Rachman in Foreign Policy: “Americans can be forgiven if they greet talk of a new challenge from China as just another case of the boy who cried wolf. But a frequently overlooked fact about that fable is that the boy was eventually proved right. The wolf did arrive—and China is the wolf. China’s economic prowess is already allowing Beijing to challenge American influence all over the world.”²

THERE IS A MORE OPTIMISTIC alternative. Imagine an America that enjoys its post-imperial might—a retired colossus easing into a big bath of Epsom salts to emerge revived and content. That is the model that Britain followed nine decades after China lost the top spot—when the United Kingdom in turn lost out in heavyweight contention to the United States.

The United States could learn a lot from Britain’s experience. Pretending it was still a global power by trying to occupy the Suez Canal in 1957 topped one of the country’s grimmest-ever decades—food was still rationed in Britain until 1954, after all. But it was only a year after the Suez Crisis signaled to the world the end of Britain’s imperial ambitions that Prime Minister Harold Macmillan declared that his countrymen had “never had it so good.” Certainly, they had never been richer, healthier, or more educated. And after Britain gave up on trying to run an empire and decolonized across Africa and Asia in the early 1960s, it got The Beatles, the mini, and free love. Contrast the Ugly American with Austin Powers—really, who was having more fun?

Nowadays the United Kingdom still goes on about “punching above its weight” in international affairs, while the anachronistic jollity of its royal family ensures frequent spots on CNN and Star TV. It keeps too many of the trappings of former great-power status, like a seat on the UN Security Council and a small flotilla of nuclear submarines. But freed from the burdens of colonial oversight and global leadership, Britain could now retire the two-ocean navy and devalue the pound without the world coming to an end. And Britain could also take an active part in team activities—joining the European Union or signing the Kyoto Accords, for example—without feeling that demeaned its status as above equals. Even better, now that it has managed to import some decent cooking from the bits of the map that used to be pink, the culinary height of a meal out is no longer toad in the hole or spotted dick.

Although the United States shares with Britain and nineteenth-century China the fact that there is little it can do to reverse or even slow its relative global decline, it starts a period of global power transition in a situation far more akin to that of the United Kingdom in the twentieth century than of China in the nineteenth. Not least, it is a relatively rich, democratic, and stable country. In fact, it is considerably better off than the United Kingdom was by 1960. It has not exhausted itself in a world war, nor has the economic underpinning of a global empire been dramatically stripped away. And in a good many parts of the United States, it is already possible to find any number of quality restaurants.

NONETHELESS, THE UNITED STATES faces some choices in the decades ahead as to how it is going to act in a new global reality, including how it interacts with the rest of the world. China collapsed too fast in the nineteenth century to have much choice in what followed, but it is fair to say that greater global engagement wasn’t part of the strategy. Britain, by contrast, after a rocky start—including a patronizing disdain for Europe that the country could ill afford—embraced its role as a B-list world power with all the enthusiasm of a David Hasselhoff or Paris Hilton. The widespread recognition that Britannia was unlikely ever again to rule more than a few waves and the odd duck pond allowed the country to focus on other things, such as universal health care and Monty Python—much to the benefit of both a domestic population that had paid mightily for its leadership’s imperial ambitions and the rest of the world. Britain has emerged as an essential global citizen in areas from development to the environment to peacekeeping.

Again, Europe as a whole, even in the midst of an economic funk, is just an incredibly better place to live and work than it was a half-century ago. Sure, the continent’s ability to force its opinions on peoples across the globe has disappeared, and its relative economic weight has been seriously diminished. But choose any measure of the quality of life—health, education, freedom, the quality of public toilets—and things are just so much better than they used to be. Decline and endurance can coexist. In fact, countries in Europe still regularly top the global list in terms of life expectancy, learning, the length of holidays, happiness, innovation, the quality of medieval architecture, siesta length, and all-around wonderfulness. Although Europe may be relegated to a backwater appendage at the left end of the continent that really matters, it could still be in for the time of its life.

And the United States could enjoy exactly the same “decline”—which is in fact an immense upside from dropping down the absolute output rankings. But in order to discover the range of sensible responses the West could have to a changing world economic order, we need to understand the opportunities presented by decline. And that cannot be done without tackling the pessimists’ creed as to why the future is going to be grim.

FOUR UNQUESTIONED ASSUMPTIONS lie behind the declinists’ predictions of misery to come: first, the West is to blame for its own decline; second, biggest is best; third, the rise of the Rest is bad for the West; and finally, fortress America (or fortress Europe) is our only surety. Thus, Charles Krauthammer declares in The Weekly Standard that “decline is not a condition. Decline is a choice.” He warns that “the international arena remains a Hobbesian state of nature in which countries naturally strive for power,” and so, “if we voluntarily renounce much of ours, others will not follow suit. They will fill the vacuum. Inevitably, an inversion of power relations will occur.”³ But it isn’t just thinkers from the right who buy into at least some of the declinist agenda. Take Joseph Nye, declaiming from the liberal ramparts of Harvard that “while the ‘rise of the rest’ means that America will be less dominant than it once was, this does not mean that China will necessarily replace the US as the world’s leading power”⁴—as long as the country raises taxes, cuts expenditures, and improves secondary education.

The declinists’ prescriptions for Washington or Brussels that follow from these four assumptions are positively harmful for us—and everyone else. Yet despite their support from both left and right, all four assumptions are wrong.

In turn, the first declinist assumption is that our decline is the result of too little investment in education (or roads, or corporate subsidies), or taxation that is too high (or not high enough), or youth who are too addled by television (or fattened by fast food), or old folks who are too coddled by expensive doctors (or financed by federal debt)—name your poison.

But there’s good news—this time it really isn’t our fault. Chapter 2 lays out the case. The US economy has had some tough years of late, but as a rule it chugs along at a growth rate a little above 2 percent—and has done so ever since hardly anyone went to college, no federal highway system had been built, there were only three channels on TV, and obesity and old folks were both very rare indeed. The heady days of the tech boom at the end of the 1990s saw growth rates maybe half a percent faster than this average. The story is similar for Europe.

Meanwhile, China and India each grew 10 percent in 2011—more than four times our long-term growth rate. The developing world as a whole has an easier time growing fast, because we have invented a lot of technologies they can use to catch up to our levels of wealth. The world is returning to an era when economic dominance is largely a function of population—the default state for humanity for most of history, barring the industrial revolution. So we can stop blaming Washington, or Eurocrats, or kids today, or wastrel boomers for the decline of the West. However annoying they surely are, they are not to blame for China getting bigger than we are. There’s one simple reason for that: China has a lot more people than the United States or Europe.

The second verse of the declinist creed praises the benefits of being big. And of course, the United States in particular is a country that thrives on big. From the most powerful military to the largest medal haul at the Olympics, global dominance is part of the American national psyche. So the idea of not being the biggest economy really hurts. Surely the end of economic heavyweight status means even more rapid decline, ever-greater threats to our national security, and a world turned against us.

But big isn’t always better—think about the West’s own growing problem with obesity. In fact, as Chapter 3 argues, the benefits of being big are much oversold. For a start, being big didn’t stop the United States from sliding into recession in 2008, or from sliding down the global league tables—in areas from health to wealth, leisure to liberties, or corruption to incarceration—over the past forty years. And the advantages of brute size in areas from trade to finance to military power are not what they used to be. The World Trade Organization (WTO) constrains trade policy, global financial connections reduce the power of reserve currency status, and imperial adventures are bound by a limited domestic appetite to bear the costs of fighting, combined with a growing global antipathy to wars of conquest. Take the wars in Afghanistan and Iraq, both of which had to be justified as defensive wars to preserve global stability and the public good. There was never any question that the planet’s undoubted military hegemon would eventually leave both countries to their own devices. Even better, because those same constraints apply to China, the threat presented to the world by its rising economic hegemony may be limited.

Third up in the declinist litany: pessimists in the West see the rise of the Rest, just like the earlier rise of Japan, as a terrible thing. If the rest of the world gets richer, that means somehow that we in the West must be poorer. One more manufacturing job for China is one less for Louisiana. One more call center employee in Bangalore is one less receptionist in Poughkeepsie. Others fear the rise of the Rest because rich people elsewhere will consume resources as we do—or at least they’ll do that until none are left. Having seen the world so recently come off a bubble and plunge into a recession, many find it easy to picture the entire planet ending a resources binge with environmental and economic collapse.

As Chapter 4 suggests, the future is considerably brighter than that. It takes only a few moments’ reflection to realize that the concern over economic competition must be, at the very least, overly simplistic, if not completely wrong. If more global wealth really meant a West that is worse off, the United States and Europe would never have been poorer than they are today—because the rest of the world has never been richer. In fact, growing economies overseas are a destination for our exports, a place to invest and a source of investment, and an ever-expanding font of new ideas, technologies, and products that improve the quality of life everywhere. Sure, new industries abroad compete with entrenched interests at home, but they create opportunities for entrepreneurs as well—think of Apple, KFC, and Starbucks selling to all of those newly wealthy Chinese consumers. As long as we help people and companies manage change, global prosperity is great news for the West. And a more peaceful, more cosmopolitan world will be a nicer one to visit, barter with, and live in as well.

But what of concerns about sustainability? Do we have an atmosphere robust enough, or oil wells deep enough, or copper veins broad enough to support a growing global population and its ever-expanding wealth? Will a hotter, more crowded, and massively consuming planet lead to war over resources and environmental collapse? Chapter 5 argues that the challenges are both different and more manageable than this millenarian vision suggests. When it comes to mineral resources in particular, the challenge to the global economy comes not from growing scarcity, but from abundance too great for sustainable use. If we pumped all of the oil out of Canada’s tar sands and the rest of the new fossil fuel finds worldwide, we’d toast the planet. Luckily, poor countries are already following a much more sustainable path to wealth than rich countries did in the past.

Again, global prosperity will increase resilience to resource depletion—technology advance creates access to new resources as well as products that require fewer of them. Wealth creates more options for responding to increases in resource prices. There is an undoubted need for an urgent response to the global use of nonrenewables, but the possibility that we will manage to move onto a sustainable growth trajectory is real.

And turning to the final element of the declinist creed, it is not surprising that a nation bruised by two equivocal wars and battered by recession would show signs of surrendering to isolationist tendencies. If the world has no gratitude for American leadership, if the only thing that trade has done for the United States is pile up IOUs to China, if open borders lead only to Mexicans taking our jobs and terrorists and new diseases threatening our lives, it is pretty clear that the rational response is to close the gates and hope the world just goes away.

Except for the fact that the West needs the rest of the world more than ever, as Chapter 6 demonstrates. In an earlier era—sometime before the 1970s—American isolationism might have prolonged the country’s status as the largest economy. Today closing off trade, investment, and the flow of people between us and the rest of the world would do harm to them—but more to ourselves.

Take migration: it is all very well to shut the borders, but who’s going to pick the fruit and paint the fences? As the West ages, there will be fewer and fewer young, locally born people around to do the heavy lifting. We need to import labor. Meanwhile, the United States in particular could benefit mightily from exporting people—the young to get educated at wholesale prices abroad, adults to find jobs and investment opportunities, and the old to retire in greater comfort with cheaper health care.

Finally, America won’t suffer first and it won’t suffer the worst from climate change. But when Atlanta in the summer has all the charm of an easy-bake oven and Venice Beach has been renamed Venice Levee, it will be clear why the United States needs to follow Europe and be part of a global solution to environmental concerns. That’s just one on a long list of planetary issues that we have to respond to in partnership, because we can’t tackle them alone.

NOT ONLY ARE THE FOUR ignoble untruths of declinist belief wrong, but the fact that they are wrong has consequences. On the grounding of this confused worldview is built a set of disastrous policy prescriptions. The idea that we can reverse our decline by ourselves leads to policies that are little more than sandbags against a tsunami of change—and distract us from preparing for a new world. The idea that we’ll suffer from the rise of the Rest provokes calls for protection and corporate safety nets that further gum up our economy. The fear of not being biggest encourages outlandish expenditure on maintaining the semblance of leadership—including a US military budget that hides the country’s sagging influence as well as a cut-price facelift. And the idea that fortress America or fortress Europe is our only defense impoverishes the West and does considerable harm to the rest of the world. Not least, absent some keen young immigrants, retirement could be a real disappointment for many of us—crabgrass will invade the golf courses and our stock portfolios will shrivel as companies founder for lack of workers.

So how can people in the “old rich” countries benefit from the age of global prosperity by tapping into the greater dynamism of the developing world and ensuring their continued progress? Chapter 7 starts with the opportunities presented by stronger developing economies for individuals in the West. Schooling, work, health care, and retirement opportunities the world over will make it possible for Americans and Europeans, both rich and poor, to enjoy a higher quality of life for less—and to make more money at the same time. While the majority will stay home and do fine despite that, the next thirty years will see the rise of the “global nomad”—born in one country, educated in a second, working in a third, founding a company in a fourth, retiring in a fifth. Here’s hoping that, at one point or another in these stages of life, a lot of the new nomads are American and European.