David Frum

02.16.12

Is Decline Optional?

Robert Kagan posted a letter to the editor in the Financial Times, replying to Ed Luce's comment on Kagan's essay about the non-inevitability of US economic decline.

[T]he US share of global GDP, measured in purchasing power parity, was a little over 24 percent in 1980 (the database does not go back farther), a little over 23 per cent in 2000, and a little over 21 per cent prior to the recession that began in 2008. This is not a world-altering shift in economic weight.

But even if Mr Luce’s numbers were the only measure out there, it is simplistic to judge the distribution of power in the international system entirely on the basis of the size of a nation’s economy. China’s economy was also the largest in the world in 1800. Mr Luce does not address such complicating matters as the fact that China’s per capita GDP is a small fraction of that of the US.

Four thoughts in reply:

1) A decline from one-quarter to one-fifth over a single generation is a significant change.

2) The citation of China's experience in 1800 can point in a different direction: It reminds us that today's #1 economic power can lose pre-eminance, sometimes radically so.

3) By focusing on economic output, Kagan concedes the very point that Luce was arguing: wealth, not will, is the relevant variable for predicting the future of American power. Suppose the decline had been not 24% to 21%, but say, 24% to 18%. Wouldn't that matter? Yet unless the trend lines change, such a decline is very likely to occur.

4) The crucial variable for the US-led world order is not America's share of world output, but that of the broader Western alliance. A point I made in my 2007 book Comeback: back in 1985, NATO plus Japan plus Australasia produced 50% of world GDP. Projecting forward from 2005, that bloc (now reinforced by Central Europe and throw in Mexico for good measure) will account for about 33% of world GDP by 2025. Such a magnitude of change must have global consequences—indeed, is already having global consequences. And the economic crises since 2007 have only accelerated that pace of change.