Jim Manzi has a thoughtful essay in National Affairs discussing how the ordering of America’s domestic political economy is impacting America’s global economic and strategic position. He argues that a trade-off exists between innovation and social cohesion. Policies promoting the latter–government-run health care, unemployment insurance, etc.–undermine American global economic preeminence, while policies promoting the former–free markets–are breeding social divisions and disuniting American society. Ultimately, Manzi, a conservative, rallies to the cause of Reaganism, insisting that America must choose innovation over cohesion in order to preserve its position in an increasingly competitive international order. But his argument for doing so isn’t all that convincing.

Manzi makes two arguable assumptions. He admits that America is “between a rock and a hard place. If we reverse the market-based reforms that have allowed us to prosper, we will cede global economic share; but if we let inequality and its underlying causes grow unchecked, we will hollow out the middle class — threatening social cohesion, and eventually surrendering our international position ­anyway.” Yet, even while recognizing the emerging post-American world order–where the rise of new great powers shakes the foundations of American hegemony–he blithely believes that freer American markets and innovation can actually salvage American economic preeminence. Regardless of the domestic policy choices America makes, the relative (and by no means absolute) decline of American power is underway.

Secondly, Manzi assumes that these new rising powers themselves won’t face the same decision matrix. A cursory glance at the political economies of Brazil, Russia, India, and China (the BRICs in Goldman Sachs parlance) shows how even the much-vaunted new powers will spend far more of their GDPs on social cohesion spending than America. India’s extremely high poverty levels and high regional, ethnic, and caste disparities will force greater state intervention as its economy develops. China’s burgeoning pension crisis and its already significant welfare expenditure–the cost the Chinese Communist Party pays to maintain its power monopoly–means that this nation of one billion will remain mired in welfarism for decades. Russia’s falling population and stagnating economy will call for greater state intervention. And Brazil, which is not a serious geopolitical contender, cannot outmaneuver the world’s largest economy in its own backyard, especially considering the unrest that exists within its own borders.

Of course, the challenges the rising powers face are only part of the picture; their rapid economic development (or in Russia’s case, their possession of natural resources) assure them an important place in the future international order. American power is surely on the decline–relative decline. However, the crumbling of American hegemony has less to do with the failings of America than with the rise of the rest. Thus, when Americans decide on domestic policy–whether health care, immigration, or financial reform–they should not be concerned about their falling place in the international rung, but rather about the kind of future they envision for their country. Do they prefer a social democracy or do they prefer a rogue, laissez-faire establishment?

Want to see how American economic power compares to the rest? See for yourself: http://www.google.com/publicdata?ds=wb-wdi&met=ny_gdp_mktp_cd&idim=country:IRN:USA:CHN:IND:RUS:BRA:GBR:FRA:JPN&tstart=-315619200000&tunit=Y&tlen=48

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