Many believe Donald Trump is ceding the United States’ global leadership to China or leaving a vacuum of global anarchy with his “America first” policies. Ruchir Sharma offers an interesting but flawed contrarian view in The New York Times this week.
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Sharma, who is the chief global strategist at Morgan Stanley Investment Management, bases his case on the continued global importance of the dollar. Whatever world opinion might think about America withdrawing from the Paris climate accords, dissing its European allies or its go-it-alone Iran policy, this is all so much noise compared to the real issue of where the world puts its money, he argues.
As Sharma points out, three-quarters of all global cross-border lending is in greenbacks while the dollar’s share of the world’s forex reserves has remained a steady two-thirds since 1980. American financial markets are still the world leader in volume by a wide margin, which means foreigners know they can easily buy, hold and sell the U.S. currency.
“Confidence in the dollar reflects longstanding faith in American financial and political institutions and effectively ignores both the recent advent of Mr. Trump, who as a candidate threatened to reduce United States debt payments, and the dysfunction in his White House,” Sharma concludes.
Alas, if only Trump were the source of America’s problems. He’ll be gone in four years, or eight at the most, and the U.S. should have no trouble surviving that, especially as Trump has proved more adept at tweeting than at passing legislation or consistent policies.
America’s real problem is how it looks at itself. Trump’s genius (to use the term loosely) is his ability to articulate it so well, and that is what cleared his way to the White House against such seemingly insurmountable odds.
Anyone who grew up in the post-war United States knew they were a citizen of the world’s undisputed No. 1 power. Americans were more prosperous, more equal and more free than anyone else. They lived longer and were better educated. American technology and industry were unsurpassed. The Russians might be a military threat, but the communist system was doomed to fail, which it did in 1991.
The lessons of history – the genius of the Founding Fathers, Manifest Destiny and the unbroken war victories until Vietnam – relayed the message that America as No. 1 wasn’t just a fleeting moment in history. America would always be on top. The idea of “the end of history,” which emerged with the end of the Cold War, posited that America’s liberal democracy and free markets would now become the global norm.
Americans are no longer as confident about their status. But rather than look at how the world is changing and what they need to do adjust, Trump and for too many Americans think the way to reverse the decline is to restore the past.
This backwards-looking view expresses itself in Trump’s call to save the coal and steel industries, as if the 1950s can be brought back by government order. It is also evident in the National Rifle Association’s insistence that the way to stop mass shootings is to let everyone pack a pistol as if Dodge City is the future of law and order. Likewise, they think that America should aspire to the low taxes and small government that worked so well a century ago.
The opposition to Obamacare is mired in the nostalgic view of medicine as family doctors and non-profit hospitals, not the big, high-tech business it is now. American ranks 31st in the world for life expectancy, but don’t tell that to the enemies of Obamacare, who insist giving a bigger role to government will ruin what they still nostalgically believe to the world’s best healthcare system.
As great as it is, the U.S. Constitution is a flawed document (as evidenced by the fact that it’s been amended 33 times) but to a lot of Americans it has a quasi-divine status. If it says Americans have the right to bear arms, then who is anyone to say that America’s murder rate suggests otherwise.
Looking to a glorious past as a guide to the future is tempting but very dangerous. America’s future lies not with steel but with semiconductors. A high-tech economy needs immigrants (half of its $1 billion-plus startups were founded by immigrants). It also needs better healthcare and better schools, which in the 21st century, requires more government, not less.
Policy based on nostalgia is a real threat to America, because it’s not a fleeting phenomenon like Trump. It’s firmly fixed in the minds of so many Americans, and not just the disenfranchised working class white but a large part of the Republican leadership who for better or worse controls the country. Long after Trump is gone, America seems destined to make all the wrong choices. That, eventually, is what is likely to lose America its primacy.