The Future of American Power

How America Can Survive the Rise of the Rest

Fareed Zakaria

From Foreign Affairs, May/June 2008

Summary:  Despite some eerie parallels between the position of the United States today and that of the British Empire a century ago, there are key differences. Britain's decline was driven by bad economics. The United States, in contrast, has the strength and dynamism to continue shaping the world -- but only if it can overcome its political dysfunction and reorient U.S. policy for a world defined by the rise of other powers.

FAREED ZAKARIA is Editor of Newsweek International. This essay is adapted from his book The Post-American World (W. W. Norton and Company, Inc., © 2008 by Fareed Zakaria).

THE GRAY ZONE

The United States' advantages might seem obvious when compared with conditions in Asia, which is still a continent of mostly developing countries. Against Europe, the margin is slimmer than many Americans believe. The eurozone has been growing at an impressive clip, about the same pace per capita as the United States since 2000. It takes in half the world's foreign investment, boasts strong labor productivity, and posted a $30 billion trade surplus in the first ten months of 2007. In the World Economic Forum's Global Competitiveness Index, European countries occupy seven of the top ten slots. Europe has its problems -- high unemployment, rigid labor markets -- but it also has advantages, including more efficient and fiscally sustainable health-care and pension systems. All in all, Europe presents the most significant short-term challenge to the United States in the economic realm.

But Europe has one crucial disadvantage. Or, to put it more accurately, the United States has one crucial advantage over Europe and most of the developed world. The United States is demographically vibrant. Nicholas Eberstadt, a scholar at the American Enterprise Institute, estimates that the U.S. population will increase by 65 million by 2030, whereas Europe's population will remain "virtually stagnant." Europe, Eberstadt notes, "will by that time have more than twice as many seniors older than 65 than children under 15, with drastic implications for future aging. (Fewer children now means fewer workers later.) In the United States, by contrast, children will continue to outnumber the elderly. The United Nations Population Division estimates that the ratio of working-age people to senior citizens in western Europe will drop from 3.8:1 today to just 2.4:1 in 2030. In the U.S., the figure will fall from 5.4:1 to 3.1:1."

The only real way to avert this demographic decline is for Europe to take in more immigrants. Native Europeans actually stopped replacing themselves as early as 2007, and so even maintaining the current population will require modest immigration. Growth will require much more. But European societies do not seem able to take in and assimilate people from strange and unfamiliar cultures, especially from rural and backward regions in the world of Islam. The question of who is at fault here -- the immigrant or the society -- is irrelevant. The reality is that Europe is moving toward taking in fewer immigrants at a time when its economic future rides on its ability to take in many more. The United States, on the other hand, is creating the first universal nation, made up of all colors, races, and creeds, living and working together in considerable harmony. Consider the current presidential election, in which the contestants have included a black man, a woman, a Mormon, a Hispanic, and an Italian American.

Surprisingly, many Asian countries (with India an exception) are in demographic situations similar to or even worse than Europe's. The fertility rates in China, Japan, South Korea, and Taiwan are well below the replacement level of 2.1 births per woman, and estimates indicate that the major East Asian nations will face a sizable reduction in their working-age populations over the next half century. The working-age population in Japan has already peaked; by 2010, Japan will have three million fewer workers than it did in 2005. The worker populations in China and South Korea are also likely to peak within the next decade. Goldman Sachs predicts that China's median age will rise from 33 in 2005 to 45 in 2050, a remarkable graying of the population. And Asian countries have as much trouble with immigrants as European countries do. Japan faces a large prospective worker shortage because it can neither take in enough immigrants nor allow its women to fully participate in the labor force.

The effects of an aging population are considerable. First, there is the pension burden -- fewer workers supporting more gray-haired elders. Second, as the economist Benjamin Jones has shown, most innovative inventors -- and the overwhelming majority of Nobel laureates -- do their most important work between the ages of 30 and 44. A smaller working-age population, in other words, means fewer technological, scientific, and managerial advances. Third, as workers age, they go from being net savers to being net spenders, with dire ramifications for national savings and investment rates. For advanced industrialized countries, bad demographics are a killer disease.

The United States' potential advantages today are in large part a product of immigration. Without immigration, the United States' GDP growth over the last quarter century would have been the same as Europe's. Native-born white Americans have the same low fertility rates as Europeans. Foreign students and immigrants account for 50 percent of the science researchers in the country and in 2006 received 40 percent of the doctorates in science and engineering and 65 percent of the doctorates in computer science. By 2010, foreign students will get more than 50 percent of all the Ph.D.'s awarded in every subject in the United States. In the sciences, that figure will be closer to 75 percent. Half of all Silicon Valley start-ups have one founder who is an immigrant or a first-generation American. In short, the United States' potential new burst of productivity, its edge in nanotechnology and biotechnology, its ability to invent the future -- all rest on its immigration policies. If the United States can keep the people it educates in the country, the innovation will happen there. If they go back home, the innovation will travel with them.

Immigration also gives the United States a quality rare for a rich country -- dynamism. The country has found a way to keep itself constantly revitalized by streams of people who are eager to make a new life in a new world. Some Americans have always worried about such immigrants -- whether from Ireland or Italy, China or Mexico. But these immigrants have gone on to become the backbone of the American working class, and their children or grandchildren have entered the American mainstream. The United States has been able to tap this energy, manage diversity, assimilate newcomers, and move ahead economically. Ultimately, this is what sets the country apart from the experience of Britain and all other past great economic powers that have grown fat and lazy and slipped behind as they faced the rise of leaner, hungrier nations.