Preparing For the 21st Century

Chapter 13:

The American Dilemma

Chris Calagis, Eric Elliott, Jay Mathias,

Mike Maulone and Serge Svarovsky

The American Dilemma

There has been much debate over America’s future

Conservatives emphasize achievements Winning the Cold War Success of Capitalism

The American Dilemma

Liberals have a more pessimistic view Social and educational decay Decline of middle-class standard of living Erosion of economic leadership Large military presence abroad

The American Century

The 20th Century was named “The American Century” by Henry Luce

This expression contained enormous psychological and cultural power

Became a source of pride for Americans

United States Armed Forces

The U.S. military is the strongest and most influential force in the world

Not the largest military in the world High technology weapons Versatility of location

The World’s Policeman How do other countries feel about this? Is this important for the world?

Military Spending

Does military spending hurt the U.S. economy? $300 billion dollars spent on national defense every

year - 65% of R&D dollars allocated to defense compared to 0.5% for environmental protection and 0.2% for industrial development

Other countries such as Japan and Germany allocate almost 50% of government monies directly into their economy

– RESULT: These countries have made significant gains to catch up with the US economy

Military Spending

Diverts other resources away from non-military production:

capital, personnel, materials, skilled labor, engineers, and scientists

However defense spending can stimulate the economy

example: post-war economic trends, such as after WW II

U.S. Growth Rates

Steadily declining over the past 50 years Kennedy blames military spending and diversion of

other resources

However, these statements have been proven to be untrue

Economic growth has increased since the release of the book

Labor Productivity

U.S. has been the world’s labor productivity leader since the 19th century

Allowed for huge war production in both World Wars

Still the global leader in productivity but by a much smaller margin than in the past

Other countries (Germany and Japan) have increased productivity at a faster pace than the U.S.

Labor Productivity

Consequences of lower labor productivity: growing indebtedness frailty of financial system deficits in trade balances

Debt

Occurs at different levels: national government state and local government consumer corporate

Debt

The national debt originally arose from the refusal of lawmakers to raise taxes in order to cover spending increases in the 1960s

The debt skyrocketed during the Cold War under Reagan in the 1980s

Debt is now over $5.5 trillion Each Americans share of the debt is approx. $21k 15% of government spending goes to pay interest

on debt

Debt

State and local government debts increased in the 1980s when federal grants were cut

Consumer debt has continually increased due to easier credit

Corporate debt was so high at one point that 90% of after-tax income was going to pay interest on borrowed money

Trade Deficit

Arises from importing more than you export U.S. had its first trade deficit in 1971 Trade deficit neared $200 billion in 1987 Now stays around $100 billion

Trade Deficit

Deficit led to a battle over tariffs Some favored protectionary tariffs on imported

goods Others were fearful of a tariff backlash by other

countries Out of this debate came trade agreements

NAFTA and GATT

Why worry?

Even with high lower productivity, high debt and a trade deficit, U.S. is still #1

Many think that these declines are natural U.S. was simply so far ahead after WWII that it took

a while for other countries to catch up

Others believe that this trend spells trouble borrowing to pay interest, huge foreign investments,

and reliance on foreign capital could erode American sovereignty

What to do?

No matter what you may think, things have changed

The business world is now enmeshed in a global marketplace

Leaders of countries and companies must realize this and react accordingly

U.S. can stay #1 by thinking globally and reacting to the changing world

Being Debated in America

Health-care Drugs and Violence Political Culture and Taxes Education Where we are headed?

In the words of John Chancellor

“We have weakened ourselves in the way we practice our politics, manage our businesses, teach our children, succor our poor, care for our elders, save our money, protect our environment, and run our government.”

Health Care in Jeopardy

1980’s health care workers doubled 37 million lack health care U.S. has highest infant mortality rate among

developed countries

Drugs and Violence

U.S. makes up 4-5% of world population but consumes 50% of world’s cocaine

Highest crime rate in world 180 million handguns and rifles 19,000 killed/year by weapons Homicide rates 4-5 times higher than Europe Rape crimes 7 times higher

Social and Political Dilemma

Americans hate taxes Politically unpopular

Some European countries’ taxes account for:– college tuition– health care– public transportation

Education Strong Points

1989 U.S. spent $350 billion on public and private education

Best Collegiate system in world Caters to scientists (nobel prize winners) Every American has Education privileges

Education Weak Points

1960 to present - SAT scores decreasing 1/5 of all high school pupils drop out 1/2 of inner city kids drop out About 25 million Americans illiterate K-12 pupils behind Japan, S. Korea and Europe

(nearly last in math) 75% can not locate Persian Gulf on map

Education System (cont)

American schools 175-180 days/year W. Europe schools 200 + days/year Japan school 220 + days/year By age 18 - S. Korea and Japan children have 3

more years of education

American Children’s Priorities

5,000 hours of TV watched before entering grade school

20,000 hours by graduation Why??? Babysitter

U.S. kids learning value system and moral standards from TV

Americans Want Change to:

Tax system Schools Health Care Poverty Crime Politics

Will America Persevere?

John Chancellor wrote that the U.S. needs a peace time Pearl Harbor to invigorate Americans to work - wake up and realize our troubles

How well prepared is the U.S. for the 21st Century? Population forecast

steady growth in terms of age and ethnicity

Figures 1960: 16.5 million Americans were age 65+ 1990: 31 million Americans were age 65+

Forecast 2020: 52 million Americans will be age 65+ 2030: 65.5 million Americans will be age 65+

By Early 21st Century, the elderly will outnumber children in the U.S.

Retirees’ Organization Division of Resources Social Security Funds Unpleasant Choices

Slash provisions Other spending Increase taxes upon younger Americans

Ethnic composition will change in the 21st century Large scale immigration

legal and illegal

Differentiation in birth rates ethnic groups will have higher rates

Views both negative and positive immigrants have fueled country in the past low educational and skill levels congregate in inner cities additional demands on U.S.

THE WORK FORCE

A WIDENING IN THE GAP BETWEEN THE SKILLED AND

UNSKILLED WORKERS

This spreading started in the 1970’s and will continue into the 21st century

Loss of skilled and relatively high paying blue collar jobs

Growth in white collar, technical jobs advanced training higher education

By the end of this century, 52% of new jobs will require some college education

Kennedy’s forecast and possible solutions White males will constitute only 15% in the labor

force Mismatch between education levels and the

forecast demand for jobs requiring advanced education

Kennedy’s suggested solutions: Set up a national scheme Use the states to have chief contact with population

American Agriculture

Newer global forces Biotechnology Global warming

Conglomerates to replace traditional farmers Pharmaceutical firms Agrochemical firms

U.S. is leader in agricultural output

Improved technology Abundance of crops Foreign market Subsidization by government Biotechnology

artificial sweeteners bovine growth hormone

Impacts of Biotechnology on the Agricultural Sector (cont)

Small farms mere 10% will be able to adopt biotechnology diversified income lessens the impact

Moderate-sized farms 40% will adopt biotechnology will continue to shrink and go out of business

Large farms 70% will adopt biotechnology will grow in size and efficiency: by the year 2000,

50,000 of them will be producing 3/4 of all output

* US Office of Technology Assessment data

Possible Effects of Global Warming

Depletion of water supplies in southern Great Plains Northward movement of crop growing regions Northward forest migration

threat to the wildlife Coastal shoreline retreat

MA will loose 3,000-10,000 acres by 2025 in SC-NJ shoreline losses will be even greater

Environmental changes outside national boundaries

U.S. May Not Be a “Loser” But It Could Be Less Than a Clear “Winner”

Altering demographic pattern graying/browning

Environmental problems Educational and social deficits Political-constitutional gridlock Fiscal problems

National debt Consumer debt, etc..

Trade deficit

Nature of American Society Discourages Any National “Plan”

Tradition of American free enterprise and its cultural heritage:

Differentiation Decentralization Individualism Dislike of organized central government

“Muddling through” rather than centralized attack upon the problems will result

20th Century United States vs. 19th Century Great Britain

Both were preemptive world powers In both countries:

economic competitiveness and international position were less assured at century’s end than 50 years earlier

alarmed citizens called for changes to improve national competitiveness

proposed reforms threatened “coziness” of established lifestyles

United States today faces the same dilemma Great Britain faced 100 years ago

To “muddle through” or not to “muddle through”?

Resistance to “Great Changes”

National traditions has to be amended in imitation of foreign ones

Involve costs and redistribution of national resources

Upset powerful vested interests– spending priorities– educational system– patterns of career choice, etc. etc..

Price Paid for “Muddling Through”

Slow but steady relative decline in– Living standards– Educational levels– Social provisions– Industrial leadership

Ultimately - loss of national power

United States Cannot Win Without Becoming a Different Kind of Country

Serious program of reforms must be undertaken These reforms might be catalyzed by:

– financial crash– broadly perceived external threat– act of war– other cataclysmic events

Reforms will require leadership very different from any previous White House administrations

THE END