Fareed Zakaria at PostGlobal

Fareed Zakaria

Editor of Newsweek International, columnist

PostGlobal co-moderator Fareed Zakaria is editor of Newsweek International, overseeing all Newsweek's editions abroad. He writes a regular column for Newsweek, which also appears in Newsweek International and often The Washington Post. He is a member of the roundtable of ABC News' "This Week with George Stephanapoulos" as well as an analyst for ABC News. And he is the host of a new weekly PBS show, "Foreign Exchange" which focuses on international affairs. His most recent book, "The Future of Freedom," was published in the spring of 2003 and was a New York Times bestseller and is being translated into eighteen languages. He is also the author of "From Wealth to Power: The Unusual Origins of America's World Role" (Princeton University Press), and co-editor of "The American Encounter: The United States and the Making of the Modern World" (Basic Books). Close.

Fareed Zakaria

Editor of Newsweek International, columnist

PostGlobal co-moderator Fareed Zakaria is editor of Newsweek International, overseeing all Newsweek's editions abroad. He writes a regular column for Newsweek, which also appears in Newsweek International and often The Washington Post. more »

Main Page | Fareed Zakaria Archives | PostGlobal Archives


Our Gloomy Financial Future

The American economy might surprise us by the year-end. Many economists and businessmen believe that although the current slowdown could turn into a recession, a financial collapse is now highly unlikely. Bruce Kasman, the chief economist at JPMorgan, is an optimist. He believes that even though the economy has been hit by some big problems, it also has strengths that will encourage recovery. (American exports, which now account for most of the country’s economic growth, are booming.) But Kasman is a short-term optimist; he has a much gloomier view of the longer term.

For the past 15 years, the U.S. economy has outperformed all other rich countries, averaging real GDP growth of 3.2 percent and monthly job gains of 150,000. This remarkable economic run, which took place as Japan slumped and Europe staggered, has been critical to the country’s economic vitality and to the pre-eminent role Washington has played in the world. Kasman argues—with careful research to back him up—that this period of high productivity and GDP growth has ended. “U.S. growth rates for the next decade or more are going to look more like those in Europe and Japan,” he says. Current projections suggest that the long-term growth rate will fall to 2.5 percent at best. If so, that will have huge implications for jobs, incomes and America’s general well-being.

Why is this happening? The biggest reason is that there are now fewer workers in the American economy. The baby boomers are beginning to retire, the entry of women into the work force—a phenomenon that boomed in the 1990s—has slowed down and, since 9/11, immigrants, particularly skilled ones, are coming to America at lower rates. In addition, the productivity gains from technology have dwindled; business has gotten the bulk of the benefits of the information revolution.

Capital spending has slowed. Companies are no longer confident that new investments in plants and equipment will produce profits, and despite having large piles of cash, they are not investing much in either. In fact, after the tech boom ended in 2001, capital spending dropped more sharply than at any point since the Great Depression, and still remains abnormally low. Also, money that used to surge into the United States is now going to emerging markets like China, India and Brazil, where the returns on investment are higher. Add to these facts the sky-high prices for oil and commodities, and you have the recipe for a long, 1970s-style slowdown (which may or may not be accompanied by inflation).

The policy debate in Washington is focused on the wrong question: how to spark a short-term, cyclical recovery. Congress has already passed a fiscal stimulus bill, and the Federal Reserve has cut interest rates. All we can do now is wait for these policies to have their effect, which they will. The real debate should be about how to move the American economy back onto a high-growth trajectory. It can be done, but it would require large-scale and smart government policies across a whole range of issues.

The problems are obvious. The retirement of the baby boomers is going to have a crippling effect on all government budgets—federal, state and local. Unless entitlements are trimmed substantially, America is headed for fiscal bankruptcy. Immigration policy needs reform, most urgently so that the United States can once again attract the world’s most talented people. Spending on research, technology and infrastructure needs a big boost. (U.S. spending on infrastructure as a percentage of GDP is the lowest in the industrialized world today.) Energy policy needs to be overhauled. Trade policy needs to be revitalized. Tax and regulatory codes need to be simplified in order to keep America a competitive place to do business.

In most of these areas, the solution involves some short-term pain in exchange for long-term gain. But Washington has become incapable of that. Passing a pork-laden bill takes no time. Trimming subsidies, raising taxes or making strategic investments are near impossible.

During the 1980s, the United States tackled many of the problems it faced through bipartisan compromises. The government passed a massive tax reform, with Ronald Reagan and Democrat Dan Rostenkowski championing the bill. It revamped Social Security and passed immigration reform, as well as a series of trade deals—all with strong bipartisan support. These policies were crucial in setting the stage for two decades of strong economic growth. The contrast with today is stark. Now Washington can argue about everything and solve nothing. A can-do country has been saddled with a do-nothing political system.

“With the end of the cold war, we saw a new, destructive kind of partisanship,” says David Gergen, who has worked in Republican and Democratic White Houses. “And for much of the past decade, we’ve kicked the can down the road on our big problems.” Some of this is because of the narrowcasting of American politics, a process in which the extreme ends of the spectrum have been magnified and the center gets lost. Part of it, Gergen argues, is generational. “I have a distinct memory that the World War II generation really put country ahead of party. That is simply not the case with the generation in power now.”

Compromise is hard. No one gets all or even most of what they want. But in a vast, continental land of 300 million, people are going to disagree. No compromise means nothing will get done. And America will slowly drift down in the roll of nations.

Comments (37)

Shalom Freedman:

There is one point which many commentators on the future of the American economy seem unanimous about i.e. This regards immigration policy in regard to graduate- students from overseas studying in American universities. Instead of making them go home those in Science, Technology, Engineering, Mathematics should be encouraged to stay. i.e. This may not be a major answer but it is one way of improving the U.S. economic situation in the future.

Ray:

I read with great interest Dr. Zakaria's article today.. He has been a breath of fresh air in the neocon and right-wing dominated media in the USA.. I have following comments wrt why USA is on a steady decline since the 90's:
1) Wall St money-changers have transformed how US used to generate wealth: with a robust R&D and a large manf base that produced products nobody else had.. It has been changed to finincial engineering where they fooled us into thinking that wealth is generated by moving money around (hedge-funds, commodity speculation, artificial asset bubbles like what happened in the sub-prime shell-game). It only works for the crooks and the rest of us are left with huge debt and declining standard of living.
2) Hijacking of US foriegn policy by neocons since the Reagan years so that we were brain-washed to believe that US mideast policy means only one thing: uncondintional support for Isreal and its 40 year occupation of Arab lands. If you don't believe that just consider why unconditional support for Israel has become a litmus test for both Presidential candidates in this election cycle. Is that the major foriegn policy challenge facing USA today?
3)Derived from 2, a fixation on mideast and phony threats from Iaq/Iran etc by the Bush-Cheney regime which has resulted in a total disconnect from what has been happening in the rest of the world: the rise of India and China as global players which has increased demands for fossil-fuels and other industrial commodity, and food supply; reemergence of Russia under a strong and nationalist leader (helped by increased demand of oil/gas), and latin America (again helped by demand for oil and food) slowly but surely getting decoupled from USA as the only source of demand and (provider of general security)..
How is it going to play out: if the voting public is fooled one more time by the big-business and necon controlled media to elect McCain as the next President, it will accelarate our decline; if we are prudent enough to elect Obama, it will slow our decline, and may even reverse it if the people finally demand fundamental changes in both our economic and foreign policies..

Ray:

I read with great interest Dr. Zakaria's article today.. He has been a breath of fresh air in the neocon and right-wing dominated media in the USA.. I have following comments wrt why USA is on a steady decline since the 90's:
1) Wall St money-changers have transformed how US used to generate wealth: with a robust R&D and a large manf base that produced products nobody else had.. It has been changed to finincial engineering where they fooled us into thinking that wealth is generated by moving money around (hedge-funds, commodity speculation, artificial asset bubbles like what happened in the sub-prime shell-game). It only works for the crooks and the rest of us are left with huge debt and declining standard of living.
2) Hijacking of US foriegn policy by neocons since the Reagan years so that we were brain-washed to believe that US mideast policy means only one thing: uncondintional support for Isreal and its 40 year occupation of Arab lands. If you don't believe that just consider why unconditional support for Israel has become a litmus test for both Presidential candidates in this election cycle. Is that the major foriegn policy challenge facing USA today?
3)Derived from 2, a fixation on mideast and phony threats from Iaq/Iran etc by the Bush-Cheney regime which has resulted in a total disconnect from what has been happening in the rest of the world: the rise of India and China as global players which has increased demands for fossil-fuels and other industrial commodity, and food supply; reemergence of Russia under a strong and nationalist leader (helped by increased demand of oil/gas), and latin America (again helped by demand for oil and food) slowly but surely getting decoupled from USA as the only source of demand and (provider of general security)..
How is it going to play out: if the voting public is fooled one more time by the big-business and necon controlled media to elect McCain as the next President, it will accelarate our decline; if we are prudent enough to elect Obama, it will slow our decline, and may even reverse it if the people finally demand fundamental changes in both our economic and foreign policies..

Bill R:

America's Oil Dependency in the face of peak oil in the next decade will be far more debilitating to our economy than the brief mention you give energy in your article.

Energy is truly the bottom-line currency of modern industrial civilization and the USA is not well positioned in the future decades of oil-nationalism. We are also saddled with a built landscape of suburbs and highways that will be a longer term fix than just adding plug-in hybrids. Our divorce with the automobile will be protracted and painful.

Mauricio Botero:

As a physician i would like to comment on the effect of the cost of healthcare on the economic future of the united states. the US currently spends the most in terms of percent of gdp in healthcare of industrialized countries, and about 50% or close of these resources are spent in the last year of life of the users of healthcare. Unless we start rationing healthcare at the end of life and pass efficient futility laws, some states have, others, like Florida do not, we will be wasting the resources needed for the education and health of the young on the hopelessly sick.

Rich:

Actually, America has a bright future ahead as a European style social democracy once we get beyond the kind of unthinking pro-capitalist stereotypes Zakaria is encrusted in. The way of the future is not "reducing entitlements", i.e., starving grandma and grandpa and refusing them medical treatment, but rather expanding all areas of the public sector. We need to become a society where we willingly apply funding to Social Security, a national health insurance program, schools and universities and hospitals, infrastructure, etc., and by doing so create jobs like nurses, engineers, administrators, teachers, etc., who pay taxes back into the economy to keep it all going. We would end up with a steady-state sustainable economy, not the unsustainable high-growth mirage that Zakaria and capitalists in general assume as our birthright. Europe long ago refuted the stereotype American right-wingers tried to plant on them of being stagnant state-controlled societies; nobody can make such an accusation of any EU country today, and they all have better health, higher levels of education, and a higher quality of life than we do. It's an example we can emulate and the public is well nigh ready to give it a try since anti-government business-biased policies have utterly failed those not already prosperous...

Anju Chandel, India:

Mr. Zakaria,

Your analysis is normally perfect but in this article you seem to have missed out on many crucial points. The economic ills currently plaguing America are primarily due to certain inherent characteristics – perhaps acquired not-so-long ago – of its people: credit card culture, living beyond one’s means, very low savings, declining importance of professional education, crumbling family support system, to name a few. These are besides the ones mentioned by you, of course. All these could become a habit with the American people because of faulty policy decisions of the government and its financial institutions and absence of any credible regulatory mechanism.

Then, of course, the inevitable plateau-forming phase followed by decline in the economic life-cycle of any country cannot be overlooked. The US is on the downward slope of the economic trajectory and it will be a while before it can bounce back.

It is time the US politicians – and people - spent time in introspection and took long-term economically viable decisions. Because the American problem is socio-economic-political.

paul taylor:

What is the problem?

Our population may be aging. But we are younger in our 60's than any previous generation; and many of us intend to keep working rather than retire. And the work force does not just lack skilled workers. We also lack unskilled labor.

Under President Bush, this nation has gone into isolationist, xenophobic mode. Most of the new jobs are about unskilled, lower paying jobs. But we are building a fortress around the U.S. to keep this kind of labor out. We are even discouraging skilled, technical help. It is difficult for foreigners to come to the U.S. now, for any reason: work, education, business or recreation. All this is destructive to our economy.

President Bush has no real program for the nation. His philosophy is to let things run themselves. He supplies tax cuts and rebates for the affluent, who don't need them; and he offers limited incentives, including relaxing government regulations on business and industry, which have been more detrimental than helpful to the nation.

Where a real leader would inspire the nation to greater achievement, Bush depresses us with fears, suspicions, political and social divisiveness.

Bush is the problem. His philosophy, his agenda, his war, his unfocused, morose, hostile and arrogant style of leadership, have squeezed the spirit and the creativity from this nation.

Deb Chatterjee:

Unfortunately, the gung-ho opponents of Zakaria are blinded by their gorilla patriotism.

It is true that what USA used to be 25 years ago, is really no more. That is, USA isn't an attraction for high-skilled folks from overseas. For example, from my country of birth India, I do see fewer and fewer good students from *reputed* universities/schools like IITs and IIMs coming to USA for graduate studies. They are mostly staying back because the "globalization" has given them a safe and comfy life which they could only dream once upon a time about USA. The salary of a freshie from IIT Kharagpur (my alumnus) in Bangalore (The "Oriental" Silicon Valley) is on the average Rs. 50,000 (Indian Ruppes) per month. That buys a lot even in these trying economic times. Why should such persons colme to USA, when standards of graduate education are on the decline, getting a decent and stable job in USA upon graduation is really vedry hard, and then it is a long struggle.

During my recent visit to India in December 2007, and to IIT Kharagpur, I entered into a conversation with a faculty at IIT, who summarized the problem: why would a IIT graduate go through the same level of struggle to establish himself or herself in USA almost like an illegal immigrant ? (This was not the case when we came to USA/North America 25 years earlier.) Should it be unfair, the faculty then mused, for such a highly qualified person not to expect some "discrimination" ? Finally that faculty contended that Canada, Australia are becoming better choices for such highly skilled or educated persons, because of the "preferential" treatment. Post 9/11 restrictions (and some of them are unpleasant but do have validity) could also contribute to this growing disenchantment.

However, in the final scheme of things, USA's investment in infrastructure (research, education) is abysmally low, and lowest amongst all industrialized nations in terms of the GDP. This was observed by Zakaria and earlier by Thomas Friedman (The World is Flat). So, how can growth be happening ? Look at what happened: just for the sake of "free market economy/capitalism", AT&T was broken up. Waters flowed, and now that company has regrouped, and sending panic to all other junk competitor companies like Sprint, Comcast etc. and etc. Infrastructure investment and realizing the resulting benefit therefrom requires some form of stability. If a company like AT&T (which once had the world famous Bell Labs at Murray Hill, New Jersey), is under constant fear that its stakeholders might pull out their investment because immediate profits are not on the billboard, then what will ultimately happen is mediocre/average output. It is ugly corporate greed, that weakens the infrastructure with the ultimate consequence that AT&T, IBM, Intel, GM, Honeywell are all opening up shop in India/China. The companies surely have a eye on profits but it is also true that they cannot find home-grown, qualified talent.

Coupled with all the above, is the sense of invincibility and complacency that has gripped Americans. The post 9/11 may act as a bellwether: hopefully we might see a turnaround, because still USA has the best infrastructure which no other country has. Some sensible and accountable investment can help a long term turnaround as Zakaria suggests - with the benefit that the dollar can eventually beat the Euro and remain at the top. It's tied to the consumer confidence, which in turn factors in the optimism that is lacking now.

I do disagree with Zakaria in his earlier columns on how USA should shape its diplomatic ties, especially with the Muslim countries, but as in this article his views are really candid and makes a lot of sense.

DofG:

The funny thing about life in our cultural universe is that the solution to socio-economic problems is relatively simple, but dogmatic ideology, substantiated by the misguided will of the human ego, makes a simple solution impossible. So, what we do is tinker around the edges of a potential global catastrophe with the "easy date" that brought us to the party-untempered competition! But untempered competition, and its progeny-war, though a natural animalistic response of survival, has become increasingly caustic to our cultural harmony with exploding populations, technology without wisdom, and greed-motivated-imposed-inequity!

The reason for this is very simple. We are, philosophically, very good at the more accessible material driven equations of phenomena. However, at our own peril, we fail to realize, and even ignore the less accessible equations of the immaterial, which are in fact, MATERIAL, but material detectible only at a higher frequency response! So we can keep playing these empirical games to indemnify our delusions. But Natural Law, is the ultimate-unbiased-arbiter of its applications, misapplications and outcomes, for all is One.

The question for those who believe in economic obesity, as an aspiration, is whether "true and lasting wealth", derives from the mere platform of material, or the infinite potential of human development? But if we decide that wealth is fundamentally material, then, "practicality" may continue to be the jailer of our higher order of thought, that could liberate us from competition as the only mode of progress.

Citizen of the post-American world:

Mr. Zakaria, I have just finished reading your “The Post-American World” and the above. I find your love of this country admirable, some of your suggestions interesting and most valuable. Yet I remain unconvinced as to how you picture the non-Western world we have now entered, which leaves me all the more surprised that so many commentators here, even considering the depth of the current multifaceted crisis (American first, international as a consequence), readily conclude that you are overcritical, and your assessments too gloomy!

It may be indeed difficult to imagine this developing post-American World Washington can no longer dominate, let alone control. Now surely something should be clear though: that non-Western world cannot possibly be just more of the same “rules, practices and values”, so that we continue to “live within the framework of the current international system”. The new world can only imply a radically new world order, with radically new rules, practices and values. In other words, this world is currently moving forward on a one way road; there is no going back to “the good ol ‘ days”, “those good ol’ ways of doing things” as “since 1991, under an American imperium, (in) a unique, unipolar” setting… That means there is no going back to “growth”… “onto a high-growth trajectory” for overdeveloped countries either. That is precisely part of the new challenge, more particularly for the U.S. That is what the rise of the non-Western world, within the framework of the current international system, brings necessarily along.

Contrary to what many other readers have said, I believe that at this critical turning point, you minimize American dependencies, weaknesses and vulnerabilities. Those are all the more serious, now that a multifaceted crisis rages on, threatening us on so many fronts: climate, environment, oil and energy in general, natural resources, food, housing, jobs, transportation, etc., not to mention security… The extent of that crisis is such, after decades upon decades of neglect, that it cannot possibly be solved in the short term, at the minimal cost of “some short-term pain in exchange for long-term gain”. It is my opinion that we lack what we need most: 1. the vision of a real, genuine (non-Western, post-American) world with a sustainable future, 2. decisive national leadership towards building that world together with the whole community of nations. That world will come about with us or without us.

The day may soon come when it will be evident this country will not survive as we know it, short of all its resources being mobilized behind such an effort one might call “Project American Revival” (in a non-Western world). It is most ironic that this very day, it is China that urges the U.S. to stabilize the dollar and Chinese energy officials who rightly attribute surging oil prices to speculation… In the long term, such a situation cannot perpetuate itself without extremely detrimental, unintended consequences, for this country.

Mohamed MALLECK,Swift Current, Canada:

DON WILLIAMS,

I am too honest an occasional participant on this blog not to react to your comment.

The FACTS you mention about Fareed, and quite likely the interpretation, are correct.

However, the motivation you are imputing to Fareed is the exact opposite of what the gentleman that he is intended. You write " In my opinion, Fareed's most obvious lie was his claim in 2002 that Bush/Cheney were not going into Iraq for the oil." With you, I find it hard to believe that Fareed (or anyone else for that matter) could have been so naive as not to have immediately seen as oil-thievery the utterly insane objective of Bush/Cheney when they decided to invade Iraq. But to construe that incredible stupidity as deception is to go too far in imputing evil intentions to Fareed -- or to David Ignatius for that matter ( but, I can't bring myself to absolving Francis Fukuyama or Colin Powell from art least ambition-driven wilful blindness).

Your interpretation of Fareed's motivation would parallel a possible interpretation by Fareed that my comment here is, in some way, tantamount to my 'stabbing him in the back'. Dar from it : I have great respect for both Fareed and David. I repeat what I had once said about David, who, responding to an argument I had made on one of Mr Rami Khouri's comment about Iraq that the country needed a 'Son of Saddam' to stabilize post-invasion Iraq, hen he proposed that what we really needed was a 'Son of Mandela'. I said that I had, on that occasion wanted to tell David that you would want us to have a 'Son of Mandela' so that America can have a 'Son of Wouter Basson'. ( Wouter Basson, nicknamed Dr Death, was the apartheid era Medical Doctor who was responsible for the killing, by lethal injection, of the apartheid regime's opponents and the dumping of 200 of theur bodies from a ,ilitary helicopter into the Atlantic). But I refrained from telling him that because I know that he is a respectable, well-intentioned person, but with a perspective different from mine.

You and I, Don Williams, are on the same wavelength -- with only a very minor dissonance.

paul taylor:

Dr. Zakaria is making a little too much, too early, about the changing balance of wealth in the world today. True, China and India are producing wealth hand over fist, but you cannot yet write of the United States in their formula for success.

While it may be true that the U.S. economy is being buoyed up right now by foreign investment, holding off severe recession in the U.S., this will come to an end soon. Discretionary spending is beginning to fall fast in the U.S. Our real economic woes are ahead of us. And we will see that the wealth of China and India both depend greatly on the freehanded spending culture of the U.S., more than any other nation on earth.

I don't wish to diminish the message that the world is changing, and that the U.S. will have to adjust to that fact, and maybe lower expectations. But that change is far from complete.

Boyd:

Limit ourselves to one vehicle and one TV per person, and ZPG

Joe de Snapper:

Perhaps things could be turned around and we could see an American revival, if money was diverted from nonproductive empire-building adventures and subsidies to the most affluent, to universal and comprehensive education, free through college and even grad school. We could open our doors to immigration to get an influx of workers/taxpayers, as America has done through history, and build a tax base to support our aging baby boomer generation. America is still the land of opportunity, if only we would shed our fears and prejudices. The inscription on the Statue of Liberty still says, "I hold my torch before the golden door!"

brucerealtor:

The problems are obvious. The retirement of the baby boomers is going to have a crippling effect on all government budgets—federal, state and local. Unless entitlements are trimmed substantially, America is headed for fiscal bankruptcy. Immigration policy needs reform, most urgently so that the United States can once again attract the world’s most talented people. Spending on research, technology and infrastructure needs a big boost. (U.S. spending on infrastructure as a percentage of GDP is the lowest in the industrialized world today.) Energy policy needs to be overhauled. Trade policy needs to be revitalized. Tax and regulatory codes need to be simplified in order to keep America a competitive place to do business.

In most of these areas, the solution involves some short-term pain in exchange for long-term gain. But Washington has become incapable of that. Passing a pork-laden bill takes no time. Trimming subsidies, raising taxes or making strategic investments are near impossible.
----------------------------------------
YES THE PROBLEMS ARE OBVIOUS, BUT JUST WHICH ENTITLEMENTS DO YOU PLAN TO CUT?

Aid to veterans ???

Universal [sic] health care ???

Or will it come to imposing a tax on 'recreational drugs' as the only possible stopgap left available ???

What about reparations from Iraq's oil fields ???

OR SHOULD WE JUST LET NARCOTERRORISTS CONTINUE TO DESTROY WHAT REMAINS OF OUR ECONOMY ???

HARD CHOICES -- YES, BUT HOPEFULLY ALSO DO-ABLE AND SANE ONES, THE TIMES CONSIDERED.

Anonymous:

Can't we just get along by, say, drawing a cash advance from the MasterCard to pay the interest on the Visa bill and tell Amex to wait? As you know, it is tough to break the habit of borrowing fresh cash to pay the interest on the last round!

The next president of USA will have no choice but to impose a national sales tax or a value-added tax or a series of consumption taxes to patch the fiscal hole. That is the guarantor of a slowdown....also see France in 1970s, UK and Italy and Spain and Germany in late 1970s and early 1980s....

Hans B:

The metric of economic growth should be abandoned. When parents have to work such long hours that they have to pay someone else to care for their kids, that increases GDP and decreases happiness. When a retiree loses his/her vegetable garden and has to buy tomatoes instead of growing them, that increases GDP and decreases happiness. When the air is so polluted that many people need costly asthma treatment, that increases GDP and decreases happiness. And even when a terrorist flies an airplane into a building, requiring new investment in construction, that too increases GDP.

The economy should exist for people, not the other way around. Many of our problems would be solved if people could work less and also consumed less. But that would be terrible for "economic growth", wouldn't it.

Mariano Patalinjug:

Yonkers, New York
10 June 2008

If Fareed Zakaria's gloomy assessment of the U.S.'s long-term prospects should prove wrong, it won't be the first time.

So-called "experts" and "pundits" are in general very good at the business of predicting, using loads of statistics and anecdotal evidence to support their oracular incantations.

Then, surprisingly, in many instances, their predictions not only turn out wrong; the reality turns out to be exactly the opposite of what they predicted would happen.

Why is this so?

The reality is that predicting is a very hazardous enterprise, particularly when it comes to predicting a country's financial, economic and social prospects over a period in excess of one year. There are millions of "variables" that need to be factored in, and it happens that the best and the brightest of so-called "experts" and "pundits" are in practical terms able to factor in (at best) only a few hundreds of these critical variables.

Consequently, again as a general proposition, predictions that are so flawed turn out wrong.

Mariano Patalinjug
MarPatalinjug@aol.com

Patrick:

America is in its sclerotic, post-imperial dotage and can't be saved. Only its inevitable Soviet-Union-style death and rebirth as something else lies in its future.

Smart individuals have abandoned old America with its debilitating infatuations with past glories and self-destructive social dynamics and are living abroad, awaiting its inevitable death and rebirth from afar so as to not be destroyed by it.

Kevin Morgan:

Debt

artistkvip:

in my opinion either you do not understand the true dynamics of global and national economic forces and consequenses or you have been bought out and paid for an opinion to cloud the real issues. business first and foremostst deals with real products, real goods , not fake comodaties and speculation and so called venture capital. i ran a milion dollar a year busyness successflly...i know cash journalnal pro forma p and L, i know how to use mathematics to actually crunch business numbers and interpret them whther dealing with advertising and local store marketing to food cost and liability protection. i also trained managers successfully. so maybe i have a fairly good base of knowledge and actual experience to draw on. i leave these misspelling so maybe you can use them as a way to disregard the message i say. the problem with the world economy is that there are a few social preditors who masquerade as honest business people. what they do is lie cheat and steal and try to obscure what they are actually doing by pretending its so complicated you cant understand it. well the bait and switch and snake oil salesmen have been here fore ever and ther is nothing complicated about what they do. they try to bribe you bully you bury you everything but conduct an honest business in an honest manner. profit is bnot a dirty word but obscene contrived, manipulated profit is a dirty word as is buying influence in government and pretending to be represetatives. our economy will staiten out when we get the money back from the crooks who stoled it from decent hardworking honest people. who are not amused by the charades and puppet shows that are put on by people of little or no moral charictar.. i smell tar and i can feel the downy silkynes of the feathers and amtrak may have a very noble job to do for the american people and the world....but please check 4 truth i'm just a dyslexic artist and the son of a son of a blueridgemountain hillbillyy...

Wise words, and absolutely correct.

However, I've read variations of the same wisdom 30 gazillion times in the last 15 years. But such rational, reasoned arguments have had no effect.

It has been oft-noted that drastic change only comes after great crisis, when looming disaster puts a gun to everyone's self-interest. While I am more hopeful about the future of the US than I have been in a long time, thanks to the widely anticipated defeat of porkbill Republicans with their tax giveaways, I sadly think that things will have to get worse before they get better.

But keep writing your wise words. Americans are not stupid, but we are slow.

RJL:

why is it that these globalists tell us that we must cut "entitlements" because we'll face bankruptcy, otherwise, but never mention getting out of Iraq? After all, the Iraq war is costing $3 trillion dollars, but I guess that's just ok.

But whatever we do, let's don't give Americans their Social Security checks.

Anyone know why Newsweek would make this guy an editor?

phoenixresearch:

Why has no one factored overpopulation into this discussion?

It's the proverbial 800-lb gorilla in the room, driving ALL current problems, yet no one speaks to it.

Just incredible.

Observer:

Mr. Z.

Interesting points and the comments by others are also interesting - not unexpectedly, there is a lot of truth in all its facets.

As one looks at the past 10 years or so, it must be kept in mind that we as a country have exported an enormous quantity of dollars overseas. Many economists speak of this as living on borrowed money or credit provided by China, etc.

It is more useful, IMHO, to think of these outflows as a dissipation of national wealth.

While it is true that a weaker dollar helps some companies with exports, the benefits are quite limited.

Aside from imports from China, we have exported trillions of dollars for oil and spent anywhere from $550 billion to $5 trillion on the war in Iraq - which number is valid, depends on how you count. We have lost a large number of aircraft, helicopters, vehicles, etc. and shot off a vast quantity of bombs, missiles, etc. which will have to be replaced.

No economy, not even a $13 trillion economy can sustain that kind of major outflow in so short a time and not feel the pinch.

A final point to be kept in mind is that if the price of gas keeps exploding, the price of living in the suburbs or in rural America will outpace that of living in the city. While this may bode well for cities in terms of prices of existing housing stock, it will produce a sea change in the the quintessential AMERICAN way of life.

Jerry Spiegler:

The critical issue is research and development into more than just advanced weapons systems, telecommunications, and biomedical. The federal government must stimulate new R&D through forward-thinking programs like the NASA moon-landing project which spawned the prior growth period to which you referred. Those respondents who cited xenophobia and an American siege mentality are absolutely correct. Solutions can be found in a return to progressive taxation policies and a clearly articulated national purpose that spurs a moribund nation out of it's self-protection and focus on maintaining a status quo that pampers elites at the expense of the general citizenry. Wall Street is about making money today. Their analysts cannot predict the future nor do they care about anyone except the wealthy investors whose fees line their pockets. You've looked in the wrong place.

Kim:

Dr. Zakaria,

Have been in the IT business for more than 35 years. While you raise many good points in your article, your statement that businesses have already realized the bulk of IT benefits parallels a statement made by others in the early days of computers -- that there might be a few government organizations for which they might be useful.

IT is more exciting and more powerful than ever. Enterprises are just beginning to realize the productivity benefits it offers. Knowledge-based systems and artificial intelligence will revolutionize administrative processing systems even more dramatically than the industrial revolution transformed manual labor. This revolution, now in its nascent stages, will truly enhance productivity and improve the quality of life for everyone. It will free many hundreds of millions of paperpushers to do more beneficial work for society.

Dr. Kim

Rev. Dave:

Where to begin?

Lots of false assumptions regarding the effects of recent fiscal and monetary policy. For example FZ wrote, "Congress has already passed a fiscal stimulus bill, and the Federal Reserve has cut interest rates. All we can do now is wait for these policies to have their effect, which they will." They will? Are you sure? As the late Louis Rukeyser used to say on Wall Street Week, "No guarantees from the management."

The other, and I would argue most critical issue completely missing from FZ's column, is the role of education. Until the United States values education - as other countries do - we have no future. We cannot hope to compete effectively in the global marketplace without a public education system that society as a whole recognizes, appreciates and supports.

Americans must learn to accept a lower standard of living. Yes, we have a democracy but it is dysfunction beyond belief. Let's face it folks, we have the best government money can buy (read: special interests) and their welfare may or may not have anything to do with effective government. In fact, I would argue, that the agenda of special interests have nothing to do with the public good. All the proof you need is contained within ZF's column.

Mohamed MALLECK,Swift Current, Canada:

When Jagdish Bhagwati and others were insisting that globalisation was good for the US, others like Paul Samuelson, T.N. Srinivasan and Paul Krugman were rightly arguing that it is not as simple as naive, frictionless, perfect- information, rational-expectations-based models of economic theory predict. But even Samuelson's et al's caveats did not factor-in the madness of endless war, of a culture of fear, of xenophobia, of an unyielding sense of entitlement. With all those variables thrown into the equation, Bruce Kasman might be right about long-term gloom (and he is right about some short-term rebound by year-end). But for once, I am more sanguine (or at least less pessimistic) than Kasman about the long term because the track record of innovation in the US is admirable. While Kasman and Zakareea rightly point out that that dynamism has in significant measure been due to an immigration policy that had, in its time, attracted the world's most talented people and enjoin an immigration policy that restores that edge which the US used to enjoy, the culture of fear that the Bush administration has injected into American society will be exorcised soon by the bubbly masses of young people who have cheered Obama on, and are ready to take up the challenge. Spending on research, technology and infrastructure, which Kasman and Zakareea say needs a big boost, will, in fact be boosted, and the 'old economy' production structures will be restored as the new President and his team respond to blue-collar worker aspirations.

The hitch will be whether, in a world of fleet-footed capital, American big-time mega-corporations won't move capital massively to the BRICs (Brazil, Russia, India, China and their likes), partly in the spiteful style of the South African capitalists who caused the Rand to depreciate by a vertiginous 50% from 7 Rands to 14 to the dollar just because a non-white Minister of Finance had been appointed to replace the white one who was at the helm in the immediate post-apartheid days.

But I remain sanguine because I am also keenly aware of the structural problems of the BRICs, a fact often overlooked in the romanticised narrative of the post-globalisation world.

Tom Brucia:

The strange thing about this article is what it does NOT mention... The per capita debt is going up much faster than the per capita income. If interest rates spike, the housing situation (folks can't afford their debt load) will be replicated throughout the economy. It's a simple matter of time until that federal debt is such as to require the entire budget to be spent on simply paying interest! (Of course, that won't happen; instead taxes will soar, or benefits will be cut.) As for 'attracting the world's best people', American policies (based on fear of terrorists) are targeted at REDUCING the number of highly skilled people coming into the US. Americans are becoming xenophobic. The fact that both parties are bent on spending more and more money on social welfare programs flies in the face of the simple fact that the top quintile is cutting itself in for a larger and larger percentage of the nation's wealth, while the bottom quintile sinks into third world poverty. Lots of talk; no action. And the idea that a nation can have health when the bottom fifth of the population is a disease reservoir is mindbogglingly short-sighted... (I can't help but think of Edgar Alan Poe's 'Masque of the Red Death' -- which makes the point eloquently...) Perhaps the US can reverse course, but it seems like a death spiral from my point of view. (Even the Iraq War is being funded by borrowed funds provided by the Chinese and Japanese). If there were any awareness of the severity of the problem it would be one thing... but the bread and circus culture has blinded the polloi to their fate...

Mark:

Well, the US still is by far the most productive country in the world, by far. If the US economy tanks, the rest of the world will feel the pain as well. I don't dispute a lot of what the article says. The good news is that the US has the ability to turn this around, unlike other counties with far greater entitlement programs, less develop infrastructures, older populations, etc.

stephen:

Sorry, but this article suffers from some pretty serious errors.

Specifically, if you were to go back to the 1980's you would find exactly the same kind of economist as Kasman- with careful research to back him up, coming up with the same result. And completely missing the (then unknown) factors that contributed to the 15 years of growth-- internet, green revolution, globalization, etc.

The United States still has the most robust climate for incubating and growing new ideas. New ideas that economists and talking heads such as Fareed have trouble seeing and can't model.

Berry, Ecuador:

Interesting article. Let me add my two cents.

First, the U.S. dollar is in free fall as a global currency. Sure it helps exports, but it is not a good value holder. No wonder people are now buying food-futures and oil-futures like crazy.

Second, America has already lost whatever technological advantage it had. Japan already produces efficient hybrid cars. Europeans are already very good at alternative energy sources: sun, geothermal, tide, nuclear. China produces everything, from baseballs to LDCs to cars and trucks. Brazilians are experts at ethanol-powered cars and now they also make excellent aircraft. Mexico, Spain and Finland compete for global dominance on cell phones. And Indians are the masters of today's internet.

Third, on a global competition for human talent, the U.S. has very little to offer. Europeans, Canadians, Australians, and more recently Chinese, Koreans and some Middle East countries, have been eager to attract talent from all over the world. Although I got a graduate degree from a prestigious U.S. university and I consider myself a friend of the U.S., I wouldn't send my children to study there: there's just too much xenophobia and too much "We are the center of the world" attitude.

Somali:

I hope they take your advice. But don't count on it. Americans got USED to HAVING THEIR WAY around the world for faaaaaaaaaar toooooo long. They got used to a very ADDICTIVE way of life. Their WHOLE phylosophy has been: MINIMIZING PAIN and MAXIMIZING PLEASURE. This way of life HAS CRIPPLED THEM. People who get used to this sort of delusional lifestyle soon forget REALITY and start LIVINg in FANTASYLAND.

Lets see how they adjust to REALITY in a world that NO longer REVOLVES around them!!!

Salamon:

I hope that the future foreseen comes to fruition. Unfortuanately I have grave dopubts. The doubts are based on the presumtion within GDP numbers that the great amount of money flowing through the military industrial comlex is of any value for the avarage USA citizen. Most of the goods produced by this industry such as Nuclear Subs, B2 Bombers, etc tkes the requisite fundoing from the needs of citizens, such as basic infrastructure [1.5 Trillion needed accoding to USAQ engineering assoc] educational improvement [can not afford 30-40% high school dropout rate] healthcare for the masses not only for the well to do, Gove employees and few industry's employees] etc.

Not the leasat but last the complex takes the funds which the USA will need to tranform itself from a gasoline based society to a public transport based society.

Non of the baove can come to contribute to the growth of USA ecoenomy, when the banking sector is seized, the inflation rate is accelerating [s3ee DOW Chemicals recent announcement] and the country keepsw on wasting funds on unwinnablke wars.

Deb Chatterjee:

Dr. Zakaria,

This is really one of the best articles from you that I have read in the past several months.

Kudos !

Deb Chatterjee

PostGlobal is an interactive conversation on global issues moderated by Newsweek International Editor Fareed Zakaria and David Ignatius of The Washington Post. It is produced jointly by Newsweek and washingtonpost.com, as is On Faith, a conversation on religion. Please send us your comments, questions and suggestions.