Our Declining Economy Weakens Bush’s Bluster

The difference between threat and bluster is the power to back up one’s words. Of late, President Bush has had

The difference between threat and bluster is the power to back up one’s words. Of late, President Bush has had many loud words to say, and he accompanies them with the threat of force, which is certainly a form of power. But how powerful is his power-and, by extension, ours?

He is so short of soldiers that he lacks the power to do any invading for the time being, unless it’s a country like Haiti-a smoldering ruin thanks to previous American attempts to shove democracy up that suffering island’s rectum. The prospects for recruiting a significant number of new soldiers are iffy. Recruitment is down, and President Bush’s loud and artless yappings about democracy and freedom haven’t inspired many youths to sign up. To get more soldiers, the government will have to pay dollar patriots more, both to sign up and while they’re on duty.

Kicking up death benefits is hardly a lure, but Mr. Bush-who has shown a talent for little else-is an accomplished spender of money, so perhaps in a couple of years we shall have a larger and more mercenary Army. Let’s hope this will not lay us open to the danger of a coup d’etat, but people who are in the service strictly for the money may more easily be led into destroying the Constitution by occupying the Capitol. Hell, we already have banana-republic finances, why not banana-republic politics?

So is it a threat or bluster which Mr. Bush has laid down against his enemies du jour, Syria and Iran? He can’t invade either place, because he doesn’t have enough soldier boys-and if he thinks our European friends were unhelpful in Iraq, he will see new levels of unhelpfulness if he tries to get them to march into Iran. Not even the British poodle (it used to be a lion) will take his lead on that one. Of course, he could blow the Iranians to smithereens, but even his fellow Republican philobellicists (war lovers) might have second thoughts about a new orgy of bombardments.

Plan B is economic sanctions, but here’s the rub: In the economics department, American power ain’t what it used to be. It’s still great, but American sanctions by themselves are no longer the killer they once were. An indication of the decline in the United States’ relative importance as an economic power is the rise in the amount of crude oil paid for in euros rather than dollars. If George Bush wants to kick any more ass in the Middle East (at least if it’s economic ass he’s after kicking), he is going to have to tell the Mushroom-Cloud Lady, Secretary of State Condoleezza Rice, to remember, when speaking to the E.U., that you catch more flies with honey than you do with vinegar.

Instead of carrying on like an international blowhard, the President would do us more good by exploring why the United States is fading relative to others. Unless military coercion of the globe is what Mr. Bush and his partisans have in mind, they must understand that American power is based on economics. The word here is not used to refer to some theoretical system like the free market but on business success, which doesn’t have much to do with the kind of big talk habitual with Republican politicians.

It is customary for Democrats-and a growing number of Republicans-to blame the long, slow American economic decline on cheap labor abroad. This argument is countered by the Republicans saying that in a global economy, every society dominates in the business activities it’s best at. According to the observations of Adam Smith, some places are able to do some things cheaper and better than elsewhere because of access to raw materials, power and location, plus the differences in the quality and cost of labor. In times past, even without legal protections, high-labor-cost societies weren’t being threatened by lower-labor-cost competitors because that advantage was wiped out by high transportation costs.

That’s no longer so. While we have been correctly fascinated by the information revolution, a less snazzy but equally important change has also been happening: Transportation costs have been so dramatically lowered that locational advantage has been eliminated. If the difference in transportation costs is less than the difference in labor costs, it doesn’t matter if goods must be shipped 10,000 miles-they still beat out the competition.

Twenty-five years ago, when the reductions in transportation costs were nowhere as low as they later would be, there was solace in the belief that, though some manufacturing would go abroad, much of it would stay where it was, and that service industries would also be tied to home base. We should’ve known better than to think that way. Even then, the Japanese were able to buy Pennsylvania coal, take it to Yokohama, make steel, send the resulting product back and still undersell the local product.

Now, thanks to low transportation costs, service industries which nobody in their right mind thought were transportable are competing from thousands of miles away. What is more local than medical treatment? What seems to offer less feasible access to foreign competition than a doctor’s attention? Yet we now see gravely ill patients traveling to India and South Africa for expensive procedures of the most advanced kind because the cost-transportation and hotel expenses included-is 10 to 15 percent less than what the same patients would have had to pay here in American hospitals.

Right now, only a small number of patients are going to New Delhi for operations, but other services once exclusively performed here are routinely being done elsewhere. Lately, airliner maintenance being done in Central America has gotten attention, as it should. It used to be that the planes were worked on a couple of hundred yards from where the tickets were sold.

To some extent, the elimination of locational advantage has been answered by business importing cheap labor on a scale not seen for a century. Back in the 1880’s, American companies actively recruited Eastern European labor-something which is unnecessary in the television/movie age, where the deluxe life in America is, evidently, a daily fact of life in the inaccessible peaks and valleys of New Guinea. Though business no longer has to recruit foreign labor, it does use its political power to see that the immigration laws are nullified, in fact or in practice. The flouting of immigration laws is driving some people nuts. Lou Dobbs, CNN’s top news star, has nightly conniptions on the subject. Listening to him, one would think that the blame for this state of affairs belongs to the tattered, underpaid, politically correct lawyers and protest groups who work as hard (but not as effectively) as the employers in abrogating the immigration laws.

If they turned this country into a cheap-labor replica of rural China, it wouldn’t return the United States to the position it formerly held in the world. With millions of illegal workers already here, the gap in the value of what we buy from abroad and what we sell there continues to grow.

We need not assume that we are doomed, that the jig is up, that from now on we’ll pick up speed as we zoom down toward heaven knows what unpleasantness. It’s possible, of course: We’ve seen enough retrograde societies with rising mortality rates and crashing standards of living to know that you cannot take anything for granted. But nothing is foreordained in history. We are what we make ourselves, which can be religious cant and political hot air, or something much, much better.

Our Declining Economy Weakens Bush’s Bluster