Could we please call an end to the empire, and get it over with?
In business, geopolitics, science, and education, it has become a familiar lament: The United States is losing its edge. Or has already lost it. The Swedes, or the Singaporeans or the Japanese or the Chinese, are eclipsing us. We will no longer be calling the shots.
One big shoe likely to drop this year is the displacement of General Motors by Toyota as the world's biggest carmaker. This has been coming for a long time and might happen even sooner than people expect. Toyota just posted a record quarterly profit of $3.5 billion–yes, that's quarterly, not annual–while GM is sure to report a sizable overall loss for 2006. Toyota seems to be gaining as many customers as GM is losing. So for the next several months, there will be an agonizing deathwatch, followed by stern declarations, when it actually happens, that the giant has fallen. It will assuredly mark the end of an era and signal the decline of American pre-eminence.
Or maybe it will be the financial markets that signal America's overall decline. The New York Stock Exchange is falling out of favor with worldwide investors, displaced by exchanges in London, Frankfurt, and Hong Kong. Most big IPOs have been taking place in overseas markets, not here. The investment-banking sector in Europe is now almost as big as it is in the United States–egad!–and Asia is catching up fast. A recent report sponsored by New York Sen. Charles Schumer and New York City Mayor Michael Bloomberg warns that the U.S. financial sector is on the verge of losing 4 to 7 percent of the world's financial services market over the next five years. Not to mention all the $10 million bonuses that fuel Manhattan's exotic restaurants and car dealerships.
Or the U.S. government might just strangle American-based businesses before they have a chance to lose any more global market share. Treasury Secretary Hank Paulson and a Greek chorus of business leaders have been warning that the Sarbanes-Oxley reforms, meant to prevent any more Enrons from tarnishing the glittering example that American companies set for the world, are making U.S. businesses uncompetitive with those overseas.
And of course, our math and engineering students aren't keeping up with those in China and India, and we sure don't build anything here anymore.
Boy, these are uncomfortable times for America. And that's before you even mention Iraq.
Yet what a relief it will be when we are indisputably no longer No. 1. Since GM is a symbol of our decline, let's use GM as a case study for why it might be nice to be No. 2 or No. 3. A big part of GM's problem is that it is No. 1. The company is way too big. It has too many employees. It can't sustain top-quality levels across all the products it builds. Almost by definition, the company cannot get healthy until it shrinks. And then there's the awful pressure to remain at the top of the heap! It will be an embarrassment to lose the No. 1 spot, but once it happens, it won't matter anymore.
Getting smaller is not a model strategy for success–but discarding labels and focusing on substance is. It is completely irrelevant whether the United States is No. 1 in anything. We can still have a vibrant financial services sector, even if Europe's is bigger–but not if we cling to the idea that market share trumps everything. What really matters is ingenuity and innovation–starting new companies, developing new products, and generating high-skill, high-wage jobs that keep our standard of living high.
If that makes us No. 1, then I suppose that's nice. But when we fixate on where we rank in the world, we tend to overlook the things that affect the way we live every day. We prop up fading industries like textiles and manufacturing–lest we lose our dominance in something we don't really need to dominate–instead of finding the best ways for workers in those industries to adapt to newer fields. Our priorities drift. How about aiming to have the world's best healthcare affordability, or retirement system, rather than making sure we have the biggest market for financial services? And being No. 1 produces an entitlement mentality, as if we deserve the best jobs, the highest pay, and the most lavish benefits. We don't, and others who are hungrier are learning how to claim their share. A dose of humility is never pleasant. But sustaining an empire is no picnic, either.