A Set of Paradoxes

An adversarial backdrop, in my opinion, has recently defined many of our interactions with the international community whether it is foreign, economic, or scientific in nature. To many there are predictions of a seismic shift where the West gives way to the rest. Just like fair-weather fans who cheer on the winning team, the statistics have certainly been laid in their favor: anemic growth in the United States, a growing debt problem in Europe and gridlock amongst Western policy makers. Not surprisingly, a Chinese hedge fund that wants to protect itself from a cataclysmic deterioration of the U.S. economy is in talks with Nassim Taleb who owns the hedge fund Universa. Taleb coined the term 'Black Swan' after the once popular myth that all swans were white. This myth was disproved when black swans were found in Australia. Taleb in his book "The Black Swan" encourages investors to use options to buy insurance against what economists call the fat tail risk of highly improbable events becoming a reality. The hedge fund believes that the cost of letting options expire and replenishing them will be made up when that inevitable 'crash' happens. Sadly, actions such as these which root for the titans who set the world standard to falter are troubling.

And the news marches on: China overtook Japan to become the second largest economy in the world. Germany--a bright spot in the West--has shattered all its previous GDP growth rates by exporting its way out of its financial troubles. But questions remain: Is the Chinese economy overheating? (Think rising wages and Foxconn suicides) How long can Germany keep exporting its Benz's? (Think anemic growth in developed countries.)

Irrespective of whichever side of the  aisle your're on--the message has changed very little. When was the last time a conservative offered a new idea? When was the last time a liberal challenged established views? A mentality of stubbornness has pervaded our consciousness where we continue to dismiss others and believe that our system is the best, second to none. We refuse to change our way and this is the heart of our problem. 

The analogy reverberates strongly: the crumbling of the Roman Empire was because of high debt, far flung wars, and a stubborn and out-of-touch leadership. I will concede that a multitude of other factors also played a role in the Ancient Empire's demise but historians are quick to point out that most great empires and countries fall prey to the same problems time and time again. Little has changed despite having the benefit of a rear view mirror. After all, the sun did settle on the former British Empire. 

What about our Pax Americana? How do we prevent the fate of others who fell from the perch of power? This is not to cast a doomsday scenario or claim that America's best days are not ahead, but is more a warning shot--if you will--that serious and concerted effort is absolutely necessary.  Change--as expected-- is riddled with uncertainty; the status quo is a lot easier. And the change I am referring to is not the habitual switching of policies between Republicans and Democrats. We need to do what other countries did to spark their engine of prosperity: follow the model that worked. A wellspring of liberalized markets, educated workforces, and American styled markets came into fruition around the world because countries realized it worked. Now why not take copy those who seem to have success today?

Germany, for example, subsidized worker's wages and made companies hold onto their workers instead of laying them off. This way worker's did not get discouraged (as is a huge problem in America) and continued to hone their skills. China is powering ahead with broad based investment in high-speed rails, solar power plants, and advanced technology. India is investing more money into educating its future. Britain is considering broad based cuts in the military as well as other government services.

All these things challenge the ego of American might. We want to have the fastest growing economy. We want to have the most powerful military. We want to reduce our budget deficits. We want to regulate Wall Street and prevent asset bubbles/leveraging that fueled our growth.

How can we have and eat our cake? These demands all conflict with each other and unless serious leadership prioritizes and pushes through difficult reforms the Roman analogy may (in some form) affect our great nation as well. Only time will tell.