The global economic system came into existence after World War II and at first it encompassed North America, Western Europe, Japan, Australia and little more. Over the past two decades, most countries, many after toying with various alternatives, also embraced financial capitalism, private enterprise and free markets. But, even though the U.S. economy has shrunk relative to the rest of the world, the system itself remains very much an American creation.
The United States devised the rules that control global commerce, provided the dollar as a reserve currency and lent military muscle to safeguard the system from non-economic disruptions. Not surprisingly, these U.S.-created arrangements particularly benefit the U.S., evidenced by the fact that American multinationals have expanded around the globe more readily than companies of any other nation. Half of the 100 most valuable global brands are American, including 17 of the top 25, according to 2010 data from Interbrand.
American companies have succeeded in many foreign markets where common sense suggests they should have failed. McDonald’s has entered the insular world of French gastronomy, for instance, and Starbucks has been able to expand into Europe’s traditional cafe societies. Expansion, in fact, is the operative world, because American capitalism is based on the concept of constant expansion.
Modern European nations are the product of successive invasions both from outside the continent — from east and south — and from within. Starting in the 16th century, as soon as their technologies allowed, Europeans themselves began expanding beyond their tiny continent. But the American experience of expansion was unique — the conquest and settlement of a vast new continent, which offered seemingly boundless space and unlimited resources. By virtue of their pioneering history, Americans have always been more concerned with finding new frontiers and moving forward, than with cultivating or preserving the already settled territories.
Since the dawn of space exploration, for instance, it was also seen in terms of expansion, settlement and colonization, giving rise not only to sci-fi literature but to scientific projections of communities of humans all around the solar system. While this has not come to pass, Hollywood continues to cash in on regular space adventure blockbusters.
Hand in hand with limitless expansion goes unlimited consumption. To break out of Europe was to throw off the constraints of the old continent’s social boundaries, the pull of traditions and origins and the straitened possibilities afforded by small territories and meager resources. For Americans, to rein in consumption would almost mean betraying the spirit of the pioneers.
America’s New Frontier ethos explains why the environmental movement, which is by now old hat in the rest of the rich world, has not taken deep roots here. Americans are far more excited by calls to “drill baby drill” than by commonsensical measures to economize energy, even though new oil finds tend to be small and provide only temporary relief, whereas energy conservation and efficiency promise far more permanent solutions to shortages and pollution.
The frontier ethos is the reason why legislation to protect the environment has never ceased being a contentious ideological issue. Americans insist on seeing environmentalists as tree-huggers and wimps. Meanwhile, in such traditionally warlike cultures as Germany and Japan , those policies have become mainstream and are backed by the broadest possible domestic consensus.
A Different Model
American belief in never-ending progress as measured by more and more output has been remarkably vindicated. In the two centuries since Thomas Malthus — a Brit, of course, not an American — published his alarmist book, An Essay on the Principle of Population, the number of people on earth increased sevenfold — well beyond what he thought the planet could sustain. Yet, capitalism with its green revolution, efficient production methods and distribution networks has relegated planet-wide famines to Hollywood horror movies.
More recently, the date when the world will run out of energy has been pushed back as well, thanks to new exploration, drilling and extraction technologies of conventional deposits, deep-water drilling and extraction of oil and gas from shale.
The profit motive is a universal human driving force. This is why attempts to dispense with it didn’t work, failing to deliver economic success and turning people against communism and socialism. But, while embracing capitalism, other nations were not as eager to emulate America’s New Frontier mentality. In Japan, for instance, a large number of exporters highly adept at winning market share abroad for a while even defeated American rivals in their own game. But Japanese society as a whole recoiled from the U.S. consumption model. Japanese consumers preferred to add to their already swollen savings accounts rather than shop till they drop. The national malaise has even started to affect consumer electronics and motor vehicle companies, which are losing their luster in international markets.
The response in Japan to the severe earthquake in March and the leakage of radiation from nuclear plants was very un-American: the Japanese showed little interest in blaming the power plants. Rather, many thought their nation should have been more economical with its resources, in which case it wouldn’t have needed the power plants.
The China Factor
When European civilization became more advanced, it projected its power and sent its population overseas. China, though more populous and better developed than its neighbors, built the Great Wall instead to keep them out. China has always thought of itself as the Middle Kingdom. When you’re the center of the universe, there is no need to go anywhere else.
By most projections, China will become the world’s largest economy in the next 10-15 years. It is already the largest automotive market, where General Motors, once the icon of American industrial success, sells as many vehicles as in the U.S. China is also America’s largest creditor and its economy is highly dynamic and well-capitalized.
China’s cultural heritage, while important, will not be the key force changing the existing economic development paradigm; its size will. Despite making major strides over the past 20 years, it remains a very poor country. Economic success has created a small affluent class measuring slightly more than 5 percent of the population. Consider that even this 5 percent share comprises close to 70 million people. Already China has put a strain on world oil markets as well as on copper, soybeans and other commodities. The Chinese government has been investing money in commodity-producing countries, building infrastructure, expanding production and providing loans. China has now replaced the World Bank as the world’s largest lender, a banker to the world.
But sweetheart deals with Brazil, Argentina, Russia and African countries can only go so far. The government in Beijing realizes that sustainable development requires economy of means, not access to a larger portion of the world’s resources. The arithmetic is simple: if China consumes as much oil per capita as the United States, it will use up all the oil currently pumped out of the ground everywhere in the world. It is an unreachable goal.
The challenge vis-à-vis China is stark: the country will either find a way to develop in a sustainable manner — not winning new frontiers but managing available renewable resources —or else run into a development dead end. Whoever has to tell some 1.4 billion Chinese that they must shelve their aspirations for a better life indefinitely will not win many friends. Political turmoil will likely follow an end to economic growth.
And, beyond China, there is India, which is also growing rapidly and promising its own billion-plus inhabitants better standards of living, as well as Brazil, Indonesia and so on. America’s New Frontier mentality is clearly a thing of the past.