Jeffrey Madrick, The End of Affluence (New York: Random House, 1995).

Robert J. Samuelson, The Good Life and Its Discontents (New York: Times Books, 1995).

Odd though it now appears, less than a decade ago Americans were debating whether the United States was a declining power in world politics. Paul Kennedy's The Rise and Fall of the Great Powers reached the national bestseller list. Geo-economics was alleged to be replacing geopolitics, and Japan was cast ominously as a rising giant. At the time of the Group of Seven Summit in Houston in 1990, some observers portrayed Japan and a reunited Germany as rising superpowers.

Such predictions look less impressive today. At mid-decade the German and Japanese economies languish in the doldrums: Japan has low unemployment but very little growth, while Germany has only modest growth and high unemployment. In recent years the U.S. economy has experienced 2 1/2 percent annual growth, low unemployment, low inflation, and impressive productivity gains in manufacturing that have restored the country's competitiveness in key industries.
Even more to the point, and as some observers noted during the earlier "declinism" debate, the United States is the only country that scores well in all the components of national power: military, economic, and soft power (cultural and ideological attraction). Germany and Japan are largely uni-dimensional powers with limited portfolios of instruments. Moreover, the decline of communism and the collapse of the Soviet Union removed the counterbalances to American military and soft power. Since power is relational, the poor performance of others has the effect of enhancing American power. Some commentators began referring to the 1990s as an era of American hegemony in a unipolar world. Such descriptions are misleading, however, because they fail to portray the growing complexity of domains of power.

At the military level, it is true that power is unipolar and likely to stay that way well into the next century; this is because of America's edge in harnessing the information revolution to military capabilities. Outmoded measures of military force misled many to overestimate the importance of Iraq's tanks in 1990, and many misread the significance of China's three-million man army today. America's greatest military advantage lies in its ability to collect, integrate, and disseminate information about complex events occurring in wide geographic areas in real time. Such dominant battlespace knowledge provides us with an unparalleled capacity for both tactical surprise and the identification of targets for attack with precision force. Although the basic technologies--satellites, high speed computers, sensors, software--that underlie this military advantage will be increasingly available in commercial markets, the United States is likely to keep its military lead because: (1) it is rich; (2) it is unlikely to stop innovating; and (3) a country's possession of pieces of hardware is far less important than its capacity to integrate the pieces into a system of systems. China's military power, for example, will increase with rapid economic growth, but it will be a long time before it reaches the current American level--and by then America's military capabilities will have surged still further ahead.

Military force is important as a final arbiter of disagreements, and no state can afford to ignore it. Like oxygen, military security can be taken for granted only until it is missing, and then its absence dominates all else. But there are domains of world politics where military force is difficult or too costly to apply directly, and this gives rise to alternative distributions of power. While the global military system is unipolar, the global economy is multipolar with the United States, Europe, and Japan currently accounting for nearly two-thirds of world production, and China likely to join them early in the next century. Similarly, in the domain of transnational relations that cross borders outside government control--ranging from currency flows to terrorists to carbon dioxide--there is a broad diffusion of power. Thus we have the paradox of American unipolarity without hegemony--or more accurately, a unipolar military distribution of power that poorly predicts outcomes in other domains of power.

It is in this context that one must consider Jeffrey Madrick's The End of Affluence and Robert Samuelson's The Good Life and its Discontents. While the American economy is doing well compared to other rich countries, it is languishing in comparison to its own past performance. Since 1973, the rate of economic growth has slowed, and as Madrick quotes Herbert Stein, "the difference between 2 percent and 3 percent growth is not 1 percent; it is 50 percent." Had the economy grown 1 percent faster, America would have produced an additional $12 trillion in goods and services over the past two decades. That could have wiped out the federal budget deficit and reduced the current national debt by half, to $4 trillion. It would also have meant higher incomes. As Samuelson reports, in the 1950s and 1960s Americans became accustomed to real family incomes rising about 37 percent per decade, but that dropped to about 6 percent in the 1980s. He also notes that most Americans live far better today than they did twenty years ago. There are new products, more channels of communication, and 30,000 products stocked in the typical supermarket compared to 7,000 in the 1970s. But just as Tolstoy's rich man with a thorn in his bed of roses suffers as much as the barefoot peasant in the snow, so citizens of the richest nation suffer discontent because their expectations have been set so high. In Samuelson's words, "our present pessimism is a direct reaction to the excessive optimism of the early postwar decades. . . . Americans are now richer and freer than at any time in history. . . . Yet, we fixate on societal flaws. . . . Our faith in the superiority and power of the American economy has faded."

Does this mood of domestic dissatisfaction affect America's global power? Since power is relational, what matters internationally is not America's performance in comparison to its own past, but how it is doing in relation to other countries. And in this regard, as we have seen, the United States is doing better than ever since the end of the Cold War. The slowdown of economic growth since 1973 has affected every advanced industrial country, and the American information edge is so great that even the rapidly growing countries of East Asia will be unable to challenge American power for a long time to come.

A dismissal of the question in these terms, however, would be too sanguine. While it might be an accurate portrayal of capabilities, it ignores the subtle ways in which domestic politics can affect intentions or the willingness of Americans to use their power. Here are four such ways.

First, the current economic discontent can give rise to protectionism. As Samuelson notes, the current anxiety about increased lay-offs is far greater than the actual increase in lay-offs, yet it is the perception that is the relevant fact politically. Moreover, the "democratization of domestic insecurity" as lay-offs affect the middle class gives rise to a politics of the anxious middle. In such circumstances, political entrepreneurs are tempted to blame foreign scapegoats such as low wage workers in Mexico or East Asia for their problems. Despite the fact that with only about a tenth of the American economy involved in international trade, and three quarters of that trade being with other high wage countries, the workers of East Asia cannot possibly have caused a large part of the wage slowdown, the political pressures for protectionism can still grow. And a protectionist, inward-focused United States is less likely to be influential abroad.

A second, related connection is the belief that the United States cannot afford to invest in foreign affairs. In an era of deficit reduction, it is tempting to devalue the claims of foreigners first. American economic and military aid has been severely cut and by far the larger part goes to just two countries: Israel and Egypt. The State Department budget is cut and embassies and consulates are closed, while arrears in payments to international organizations mount. Congress cuts the budget of the U.S. Information Agency and the Voice of America even though they are crucial instruments of American power in an information age. (Those who say that information should be left solely to market forces should contemplate Rupert Murdoch's dropping of BBC News from his satellites, after China complained about its coverage.) The military budget, which has declined steadily for a decade, has revived somewhat in congressional favor after the 1994 elections, but as we saw earlier, there are domains of power in the international system that are difficult to affect with military power. And total spending on foreign affairs--defense, diplomacy, aid--is now about 4 percent of the GNP, a decrease of one-third since the end of the Cold War.

A third effect is more indirect. The relative economic slowdown may well be contributing to the decline of trust in government, as both Madrick and Samuelson suggest, and that loss of confidence may in turn reduce governmental effectiveness and constrain American foreign policy. Expectations are higher than the economy can satisfy, and government is held accountable for the shortfall. As Samuelson puts it, "by expecting our leaders and institutions to do the impossible, we overburden them and hamper them in doing the possible." The politics of exaggerated expectations leads to scapegoating and decline of trust in institutions. Trust in the federal government has declined from three-quarters of the public polled in 1970 to less than a quarter today.

A certain distrust of government is healthy. After all, the United States was founded on distrust of government in London and the Jeffersonian tradition remains as strong as the Hamiltonian in our philosophy. But healthy distrust differs from cynicism and paranoia. At some level, low trust is likely to become cumulative and causal through repetition. That in turn inhibits the flow of good people into government careers (including the Foreign Service) and reduces the willingness of the public to provide resources, which in turn further reduces the effectiveness of government. Others around the world notice when America seems unable to function as a great power is expected to function. Whatever its causes, the spectacle of repeated shutdowns of the federal government in 1995-6 did not enhance American influence abroad.

The final and most fundamental connection between perceptions of American economic decline and its power internationally concerns preserving the kind of nation that is at the heart of America's soft power appeal in an information age. Slow growth and negative politics undercut this resource. In recent years, this most valuable foreign policy asset has been endangered by foreign perceptions of American domestic life as one riven by crime, violence, drug abuse, racial tension, family erosion, fiscal irresponsibility, political gridlock, and negative politics. America is not alone in having such problems; some are worse in other countries. But soft power, the cultural and ideological appeal that makes many--though clearly not all--others want to follow our lead, depends upon our being a beacon, not on our limping along with the rest. A healthy democracy at home, made accessible around the world through modern communications, is essential to the long-run future of American power. In this sense, more than ever, America's domestic and foreign policies are intertwined.

What are the prospects for escaping from our current domestic discontents? Since there is no single cause, there is not likely to be a single solution. But to the extent that Madrick and Samuelson are correct about the importance of the economic slowdown, there may be an unexpected glimmer of optimism. Both identify the culprit as the decline of productivity, particularly in the service component of the economy. In the early postwar years, productivity grew at about 3 percent per year; since the 1970s it has averaged about 1 percent. (While measurement of productivity in services is a factor, it does not account for the whole problem.)

No one knows for sure why productivity has declined, but one possibility is that we have not yet made the social changes necessary to allow us to enjoy the full benefits of the information revolution. At the turn of the last century, during the second industrial revolution, electricity did not have a strong effect on productivity for several decades after its introduction. Early applications were electrification of existing vertical water-driven mills. Only when Henry Ford and others used electricity to reorganize factories into long horizontal mass production lines did the large gains in productivity arise. By analogy, the current investments in computers and information technology are still in the "water mills stage." If so, the early part of the next century may see a punctuated equilibrium in our economic evolution. By a similar analogy, our political system may evolve into a new bipartisan progressive era similar to that which accompanied the economic transformation of the second industrial revolution.

At this point, it is too early to tell whether these optimistic analogies will describe the future, or whether the only healthy response to our current domestic economic discontents will be to lower expectations. Perhaps books like The End of Affluence and The Good Life and Its Discontents will help stimulate us to solve our problems rather than be demobilized by them.

Essay Types: Book Review