But prophecies of the United States’ decline can easily be exaggerated, as portraits of its dominance in recent decades also have been. The arena of economy, corporations, and culture elicits more strongly than any other a troubling mixture of feelings toward America: envy, admiration, desire, resentment, revulsion, and misunderstanding. It touches ordinary people in other countries where American foreign policy may not, and their resentment is often expressed as a sense of powerlessness at keeping the American giant at bay.
Some of that is entirely understandable. The unraveling of the Soviet Union was license for economic triumphalism in the United States —a conviction that it had perfected the system of economic relations between people. “The U.S. is now leading the way with a new economic paradigm,” declared the National Economic Council, which advises the president, in June 1997 at the gathering in Denver of the world’s most powerful democracies, an exercise in boasting so unashamed that it brought blunt, formal complaints from European, Japanese, and Canadian delegates. America scarcely needed support from the disintegration of its rival, however, given the evidence from its own citizens’ standard of living (outstripped only in Liechtenstein and Luxembourg) and the military power its economic strength supported.
Some found this triumphalism unbearably provocative. The anti-globalization movement of the past decade, a curious tangle of antipoverty campaigners, environmentalists, and self-described anarchists as well as union workers and those who would directly suffer from the fall of trade barriers, seized on the United States and its best-known international companies as its prime target. Their arguments were deeply confused about the supposed damage caused by economic growth, but their attack meshed well with the antagonism people in many countries felt about the intrusion of American culture. The “No Logo” movement railed against McDonald’s, Coca-Cola, Starbucks, Hollywood, and other footprints left by the American giant.
But these critics, whether out of idealism or self-interest, give only cursory acknowledgment to the contribution America has made to world growth and living standards elsewhere —or dispute it altogether. They skate over the efforts the United States has made to open up trade or argue that these efforts have hurt the world’s poorest, denying any benefit to their own countries of American trade policies. They ignore the United States’ historic contribution in the development of corporations and capital markets, and in the promotion of competition.
The resentment also caricatures America as a model of pure free-market capitalism. This portrait of the ruthless pursuit of profit does not allow for the United States’ high degree of regulation and intervention in its own markets, as the financial turmoil of early 2008 showed. It also exaggerates America’s proficiency (something America itself is not beyond doing). It does not allow for the way that the United States, despite its image of being on the leading edge of modernity, has often lagged behind other countries in such modern skills as banking and telecommunications, the price it pays for its own federalism and antitrust rules. Indeed, it was a comedy for decades that in the heart of world capitalism you could not use a checkbook across state borders; that cell phones were far less common (and reliable) than in Japan or Europe; and that the use of broadband lagged (and still lags) well behind other nations.
The United States’ share of the world economy, which has held steady at about 27 percent for a decade, is now slowly beginning to fall as others overtake it. But it still remains the world’s most astonishing success story of the pursuit of prosperity and well-being. The record of the twentieth century —the “American Century” —underpins the United States’ claim to have demonstrated the unrivaled success of the liberal market economy, based on an individual’s right to own property, respect for the rule of law, and allowing private investment and innovation a free hand. It would be a pity not to draw the right lessons from this, although it is remarkable how many resist doing just that.
Giant
The United States overtook Britain as the world’s largest economy during the 1880s, the start of three decades of international economic integration and liberalization which were seen, at that point, as all but irreversible until they were halted in the disaster of the First World War. America was Europe’s banker in the recovery from that catastrophe and in the reconstruction after the Second World War.
In the past century, the United States set the rules and helped establish the institutions which shaped the West’s economic organization. These included the 1944 Bretton Woods Agreements to govern financial relations between the main industrial countries, and the World Bank and the International Monetary Fund, both of which began operating in 1946. Domestic policy had international impact as well. The Sherman Antitrust Act of 1890, along with the Clayton Antitrust and Federal Trade Commission Acts of 1914, laid the framework of modern American business regulation, restraining the creation of monopolies or other moves that would undermine competition, and they heavily influenced international corporate regulation as it developed.
The World’s Most Famous Brands
It is easy to see why so many have found provocation in the ubiquity of American brands. United States companies are among the world’s largest and most famous. Coca-Cola, sold in the United States since 1886, is now found in more than two hundred countries,2 and McDonald’s reported 31,000 restaurants worldwide in 2006. Hollywood, after several decades of aggressive expansion outside the United States, now earns 60 percent of its revenues from other countries. And a Fortune 500 survey in 2007 which ranked the world’s biggest companies by revenue put Wal-Mart in first place, with revenues of $351 billion, unimpeded, it seems, by a reputation in Europe for controversial employment practices and for selling guns (in the United States) cheaply and easily.3
This reach and level of recognition around the world is not always matched by financial success or by future prospects of growth. Wal-Mart’s profits, while hardly nothing at $11 billion, were less than a third of ExxonMobil’s, in second place. And while General Motors made fifth place and General Electric eleventh, the list was dominated by oil companies, the result of oil at nearly $100 a barrel.
But still, there are enough superlatives to rub home the lecture on American exceptionalism. The one that stings most, for many countries, is the annual tally of Nobel laureates in the sciences. These are prizes —devoid of ideology, representing intellectual achievement and the promise of future technological wealth —that no leader would turn down except those sitting in Waziristan caves plotting the replacement of the West with an Islamic caliphate. Researchers from the United States won all the science prizes in 2006; in most years, American-based scientists will win half or two-thirds. Gunnar Öquist, the permanent secretary for the Royal Swedish Academy of Sciences, which oversees the science Nobel Prizes, said after the American clean sweep of 2006 that Europe had simply fallen behind America when it came to funding and ambition.4
Resentment
This reach of American economy and culture across the globe is often called “soft power,” a term coined by Professor Joseph Nye of Harvard University’s John F. Kennedy School of Government. It has become a ubiquitous phrase to describe American influence that is not the result of conscious diplomacy and military power. But “soft power” is an awkward metaphor, deployed to do too much work, from measuring America’s moral authority and ability to persuade other countries to do what it wants to simply describing the reach of American culture across the world. Above all, the term does not take into account the very mixed feelings —or outright resentment —the American presence may provoke.
That resentment can trigger opposition to American capitalism —to its opponents’ view, the free market at its harshest. An analysis by Stefan Theil, Newsweek’s European economics editor, in a study for the German Marshall Fund, noted that in a 2005 poll, just 36 percent of French said that they supported a market economy, and that European school textbooks can be openly hostile to the notion. “Economic growth imposes a hectic form of life, producing overwork, st
ress, nervous depression, cardiovascular disease, and, according to some, even the development of cancer,” declared the Histoire du XXe Siècle, a text for high school students preparing for university. Another paper discussed whether technological progress reduces jobs. Theil cited a German social studies text called FAKT which blames unemployment on computers and robots, and tells the jobless how to join antireform protest groups “in the tradition of the East German Monday demonstrations,” which in 1989 helped begin the process that resulted in a toppling of the Communist government the next year. “It is no surprise that the Continent’s schools teach through a left-of-center lens,” Theil concluded. “The surprise is the intensity of the antimarket bias.”5
After a single trader’s fraudulent dealing brought huge losses to French bank Société Générale in January 2008, earning him the tag of the “Che Guevara of finance” and a “modern hero” in the French press, the Economist magazine noted the “contradictions of France’s attitude to capitalism: on the one hand, there is widespread suspicion of the markets; on the other, world-class financial skills.”6 It added, too, that the suspicion could be detected as far back as Honoré de Balzac, the nineteenth-century novelist who wrote, “Behind every great fortune lies a forgotten crime.”
That reflex —recoiling from free-market principles as too harsh, as contrary to the principles of European social democracy —has persisted even though the United States’ economy has grown faster than most European economies (including those of France and Germany) for the past fifteen years, raising its citizens’ living standards and cutting unemployment in ways those European countries would love to emulate.
In recent years, Nicolas Sarkozy, in campaigning to become president of France, and Angela Merkel, in becoming German chancellor, proposed reforms to take their countries toward the “Anglo-Saxon” model, making it easier to hire and fire people, and encouraging competition. Sarkozy was stirred up by a deep sense of national gloom at the stubbornness of unemployment, dragged back below 10 percent only with great pain. In Merkel’s case, the motivation came partly from her roots in East Germany, her opposition to socialism and her natural pro-American bent, and an acute consciousness of the struggles for her old compatriots in finding work in a united Germany.
But in each country, the reforms have wilted in the face of protests from labor unions, and in Merkel’s case, from coalition partners drawn from the center-left and from a philosophy where mistrust of the markets runs deep. In a phrase that has hung over German corporate and financial policy ever since it was used in April 2005, Vice-Chancellor Franz Müntefering referred to foreign investors as “locusts.” 7 The British press had dubbed Merkel, on her emergence, as “Germany’s Margaret Thatcher” —intended as a compliment, out of the conviction that Germany needed a dose of Lady Thatcher’s prescriptions even though her legacy remains contentious at home. But Merkel was never going to be a German Thatcher, and she did not even manage to become the chancellor she wanted to be, such was the opposition to her reforms.
In fact, it has been German companies themselves who have managed to push through the changes in deals with their own workers that politicians have failed to accomplish. In 2005, the year when this phenomenon gathered pace, Mercedes pushed through 8,500 job cuts while Volkswagen was able to make large workforce reductions because its union accepted that without these cuts, a plant would close. Changes that were too controversial as German national policy were possible for managers and union bosses sitting across a table.
In Sarkozy’s case, once elected, he developed a new refrain that European countries “should not be so naive as to expose our companies to competition,” which contradicted his earlier free-market rhetoric.
In backing away from making such market reforms, these French and German politicians are responding to the ambivalence of their own people about America and “American-style capitalism.” They want the best of the United States —the scientific discovery, the technological innovation, the anticancer drugs. Quite a few want American music and movies, too —those products were not thrust on foreign audiences against their will. But they criticize or reject the system that produced them.
Anti-Globalization, Anti-American
In this short argument I cannot do justice to the extraordinary tangle of agendas and players in the anti-globalization movement, which has set itself against the opening of trade barriers and which has come to identify the United States —and American companies —as the prime villains. But the movement has been an exercise in such systematic misrepresentation of the benefits of free trade and free markets that it has, through jeopardizing trade talks, done real damage to the interests of the poorest people on the planet, those it says it wants to help.
If there is a single moment when the movement came of age, it was the November 1999 Seattle trade riots, when the cast of a chaotic opera assembled on the streets of that normally serene city. European diplomats, dressed in their uniform of coats with fur collars, Homburg hats, and good leather shoes, tried to pick their way through dreadlocked demonstrators wearing papier-mâché turtle shells. José Bové, a sheep farmer from France’s Larzac and a nationally loved figure back home for his campaign against “McDomination,” drew thousands to his rallies as he held lumps of Roquefort cheese aloft, with Danielle Mitterrand, wife of the late president, sitting adoringly at his feet.
The opponents of globalization are, as Martin Wolf at the Financial Times has written in his superb book on the phenomenon, a mixture of those who have something to lose from the opening of trade barriers —such as labor unions and, in the past, farmers —and a medley of environmental campaigners, nongovernmental organizations, and charities (prominently, Christian Aid) who argue that trade, on terms they believe are set by America, hurts the world’s poorest.8
It would be foolish to suggest that there are no cases in which free trade makes some people worse off. Paul Collier, a professor of economics at Oxford University who worked for five years at the World Bank, in his passionate analysis of how to rescue the world’s poorest countries, particularly those in Africa, argued that rich countries should give them preferential terms of trade if they are in no position yet to compete.9
But to take the cause of anti-globalization beyond those particular cases is a grotesque misrepresentation of the principles of the benefit from trade. As Adam Smith described that benefit in 1776, “If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.” As advocates of more open markets argue, the lowering of trade barriers helps poor countries. Peter Mandelson, the European Union’s trade commissioner, in a February 2008 speech attacking the “backlash” against trade, said that economic integration had “operated as an unprecedented ladder out of poverty,” noting that developing countries now account for a third of all global trade.10
On the whole, the United States has been firmly on the side of opening up trade, although its presidents have proved easy prey for protectionists in Congress. The Farm Bill, signed in May 2002 by President George W. Bush, who has been otherwise vigorously in favor of free trade, was one of the worst pieces of legislation dreamed up for decades, showering $180 billion in subsidies over ten years on the mere two million people who still run a farm in the United States. In Seattle in 1999, President Bill Clinton delivered a speech guaranteed to scupper the talks, in which he declared his sympathy for the rioters, adding that he was part of the generation which had demonstrated in the 1960s. But Seattle aside, Clinton’s instincts did generally come down in favor of trade, and he was justified in saying that trade deals were one of the achievements of which he was proudest.
In general, it is fair to say that the United States’ actions have been in line with its philosophy —and that the effects, over the last twenty years, have been to help lift millions of people out of poverty. Without American leadership in this area, that would very li
kely not have happened.
An Exaggeration of American Power
The railing against American commercial power and cultural reach is often based on exaggerations. In many cases, the power was never as great as critics made it out to be. There are many examples. The 1980s and 1990s were the height of the Coca-Cola Company’s reach, under Roberto Goizueta, its legendary chief executive officer. But since the start of the twenty-first century, the company has been struggling to push profits ahead in a more health-conscious market, triggering headlines such as “Why Coca-Cola Has Lost Its Fizz.” The company lists competition and consumers’ worries about obesity as threats to its markets in developed countries, while warning that “due to product price, limited purchasing power, and cultural differences, there can be no assurance that the company’s products will be accepted in any particular developing or emerging market.”11 That is, it’s too expensive for the world’s poorest, and when you come down to it, they prefer their own.
Similarly, McDonald’s, after the heady days of seeing its golden arches opening throughout the former Soviet Union and Red China, found itself battling against health concerns and the spread of coffee chains. Wal-Mart, having tried to push into Europe, found tight planning laws a choke on the kind of superstore it could set up so easily across all of America.
It is possible that America’s 2003 invasion of Iraq did even more damage to these iconic brands; commentators were quick to assume that was the case when Coca-Cola’s revenues in Europe fell in 2004 and the sales of McDonald’s were flat. But the trends which have given such companies trouble go well beyond that single event.
Hollywood
It is worth a particular word about Hollywood, because it has been one of the greatest provocations of resentment against America, as well as one of its most successful exports.
In Defense of America Page 5