Immigration Forum / USA / February 2008

The ‘third worlding’ of America
By Harold L Sirkin on Thursday, February 21 , 2008

If you look carefully behind today’s economic headlines, a huge story is
developing. The short version is this: The United States, through a
combination of neglect and various self-inflicted wounds, is undermining its
economic vitality.

A number of former Third World economies, meanwhile, are now growing at warp
speed. Sometime in the foreseeable future, the US economy – now the most
powerful in the world – will be overtaken.

It will not happen overnight. But based on all-important trend lines, such a
scenario is not beyond the pale. Nor is it a sure bet; there are many “ifs”
still in the equation. Nevertheless, if the US does not get its house in
order, it is not too difficult to envision the high-speed China and India
Express overtaking the ageing American local.

The US has always prided itself on having more and better of virtually
everything needed for modern commerce and comfortable living, from
infrastructure to schools. The problem is: While America’s competitors are
improving rapidly in these areas, the country is backsliding – and there
does not seem to be the political will to reverse things. A good example is
the highway system. The US has about 75,640km of interstate highways and
some 600,000 bridges.

Much of this, however, is dated and decaying. The Interstate Highway System
was started in the mid 1950s. Many bridges pre-date that.

According to the US Federal Highway Administration, more than 75,000 bridges
are now “structurally deficient” and a third of America’s urban and rural
roads are in poor to fair condition. The highway bridge that collapsed last
summer in the city of Minneapolis, Minnesota, for example, had been declared
structurally deficient. More than a dozen people died in the incident.

By comparison, China, which is slightly smaller than the US, has added
24,704km of expressways since 2001. It plans to expand its highway network
to nearly 85,295km, surpassing the US system.

This story is similar in other areas. Consider air travel. While flying is
the preferred mode of long-distance travel, efforts to build new airports or
expand existing facilities routinely run into strong opposition from
pressure groups concerned with noise, air pollution and other “quality of
life” issues. The US air traffic control system, meanwhile, is a relic of
the past, relying on 1960s radar technology: a maintenance nightmare.
Capacity remains static, while demand grows. The Federal Aviation
Administration expects more than one billion passengers annually by 2015.

America’s ports are operating at or near capacity – especially on the West
Coast – but political leaders have no apparent interest in expanding them.
Many of America’s wastewater treatment plants are ageing, causing serious
overflow problems. The electric power transmission grid is congested. The
North American Electric Reliability Corporation predicts electricity usage
will grow more than twice as fast as capacity over the next decade.

The Department of Energy considers the situation “urgent”. If it is not
remedied, more “brownouts” and “blackouts” are likely. This, in turn, will
trigger greater reliance on small generators, which are more expensive and
less eco-friendly.

There is more. America has one of the most extensive – and expensive –
public school systems in the world. Yet, US secondary school students score
near the bottom on maths and science tests among students from developed
countries, the US Department of Education reports. At the university level,
decline is also apparent, particularly in science and engineering, where
approximately 78 per cent of all doctorates are now earned outside the US.

On top of this, the US healthcare system seems to consistently deliver less
for more. The latest evidence: a new peer-reviewed study from the
Commonwealth Fund showing the US ranking last among 19 industrialised
nations in reducing premature deaths. The value of the dollar has fallen,
down 29 per cent relative to the euro in five years, as of October 2007.
Government and private-sector watchdog agencies that in the past helped
guarantee financial stability all missed (and may have contributed to) the
sub-prime mortgage mess, pushing the economy closer to recession.

The data all indicates that America is moving in one direction while many of
its top competitors – especially those from such rapidly developing
economies as China and India – are moving in another.
At some point, the paths will cross.

There is a saying in the navy that it is difficult to turn around a
battleship. The point is simple: Because of its size and weight, when a
large ship is moving in one direction, it takes a long time to slow down and
make a turn. The US economy today is that battleship. It is still large and
powerful, but it is on a dangerous course that needs to be corrected.

More and more, the US is starting to look like a Third World country. If it
hopes to move in a different direction, it needs to start now. Perhaps that
is the kind of “change” Americans need to demand of their next president –
not a change in style, but a change in substance.  (Harold L Sirkin is a
Chicago-based senior partner of The Boston Consulting Group and global
leader of its operations practice. Courtesy, The New York Times Syndicate.)