The American way of suicide

With an almost audible sigh of relief, the media are reporting the new Congressional-White House deal on reducing long term U.S. debt as a last minute solution to the crisis of a possible breach of the U.S. debt ceiling and a consequent default on U.S. sovereign debt.

From here in Singapore, where I’ve been meeting with leaders for the past few days, the deal looks less like a solution than a suicide being performed in public on a global stage.

Suicide is always tragic and ugly. The suicide of a great nation is even more tragic and ugly. When that nation is the greatest power the world has ever known, the scene is uniquely tragic and ugly. It has been particularly painful for me to watch this tragedy, which has parallels with China’s 15th-century withdrawal from the world.

When I first came to Singapore, it was one of the world’s poorer countries with a dilapidated infrastructure, insufficient broken down housing, high unemployment, no resources beyond a good natural port and low skill and low wage workers, ethnic tension, and a weak currency. The United States, in contrast, was the richest, most powerful country the world had ever seen with abundant resources, highly educated and skilled workers, the most modern infrastructure, overwhelmingly dominant military and diplomatic power, and a dollar that was widely considered to be not only as good as but better than gold.

Now, nearly forty years later, the picture has reversed. In Singapore, things work. In America nothing seems to work. Indeed, if Congress doesn’t act soon to fund the Federal Aviation Administration (FAA), I may have to stay in Singapore because I won’t be able to fly into the United States for lack of air traffic controllers. Singapore has become one of the world’s richest nations with virtually no unemployment, some of the best education systems and highest levels of educational achievement in the world, ethnic peace, a diversified economy with a strong manufacturing base that is thriving despite high wages, a growing and sophisticated finance and services sector that is rapidly making Singapore into an alternative to Switzerland, one of the world’s strongest currencies (like Switzerland), and global influence wholly disproportionate to its tiny population of less than four million people.

The United States, by contrast, suffers from stubbornly high unemployment, stagnating economic growth, shrinkage and decline of even its leading educational institutions, crumbling and out-of-date infrastructure, loss of manufacturing and economic diversification, stagnating wages and declining living standards, increasing social division and tension, and dramatic erosion of its global power and influence.

Moreover, it would be a mistake to think that, once the U.S. debt limit is raised and government expenditures and revenues brought more closely into balance, all will be well. The opposite trajectories of Singapore and the United States took a long time to develop and are about much more than taxes and government expenditures. Consider that Singapore was hit even harder in terms of decline in GDP than the United States during the recent economic crisis. Yet Singapore has come roaring back, while the U.S. recovery has stalled and threatens to go into a death spiral. Consider also a recent International Monetary Fund (IMF) report showing successively less robust U.S. recoveries from economic crises over the past forty years. Behind these phenomena stands the fact that the economies of Singapore and most other countries in Asia, along with Germany, the Netherlands, and Scandinavia, have increased or maintained diversification that includes a substantial manufacturing sector. The U.S. economy, on the other hand, has become less diversified and more concentrated in retail, wholesale, and financial services. It is thus less able than other economies to respond to resurgent demand because it produces relatively less with which to satisfy the demand. The long-term implications are for stubbornly high long-term unemployment and stagnating or declining living standards along with global influence.

Another aspect of the U.S. situation is illustrated by the saga of the F-35. Meant to be an affordable replacement for several older-generation U.S. fighters, it is now six years behind schedule and more than 50 percent over budget, and it has become the most expensive military-industrial project in history. It is further expected that operating and supporting the planes will cost over $1 trillion. Even its supporters agree that it will be the last manned strike fighter built in the West. But the facts that inexpensive drones can do more better with no risk to pilots and that the United States faces no serious challenge to its present air power raise the obvious question of why development of the F-35 is proceeding in the face of current pressures for federal budget restraint.

Or take the current, noted above, of the FAA. Failure to fund it has been a result of the unresolved issue of raising the federal debt limit. Because it is not being funded, the future of the whole air traffic control system is up in the air, airports cannot proceed with improvements aimed at accommodating the latest version of Boeing’s 747, and as a result, Boeing may not be able to proceed with its original production schedule and will have to reduce its work force or at least not expand it as rapidly as initially planned.

The debate in Washington is being presented as a titanic struggle over big versus small government. But this is, in fact, not at all the real question. Singapore’s government is small in terms of its budget as a percent of GDP while the German government’s budget is nearly 50 percent of GDP. But neither of these governments would neglect to fund their equivalents of the FAA without a careful consideration of related consequences. Nor would either of them pour endless resources into white-elephant military projects for which there was no pressing need in the absence of any significant threat and in the face of an urgent need for economic reform and revitalization.

The real issue is not small versus big government. It is smart versus dumb government. Germany and Singapore both have smart governments. The United States, alas, has a dumb government that now seems also to have a death wish.