America, China, and Potatos

My third favorite blog (The Thinker) recently linked to an editorial by a gentleman named Fred.  The article seems to argue that the U.S. will soon suffer economically and politically because of the rise of China, an overlarge defense budget, and crappy politicians who won't cut government spending.  Fred makes the following claim:

It is internationally that the monkey principle really bites. The country is well on its way to being a merely regional power militarily, economically, and diplomatically. Short of a miracle, short of a conceivable but unlikely catastrophe in China, Amricans will soon be medium potatoes. There is nothing we can do about it, but we will bankrupt ourselves trying. We can’t let go.

I don't understand why being "medium potatoes" is a bad thing. For most of its history, the U.S. was at best medium potatoes and things were pretty good, then it became the big potato and things were still pretty good. So am I supposed to worry that returning to medium potato status is bad? I would love to live in a medium potato county if it meant my taxes weren't used to bomb near stone age people on the other side of the world. Or maybe Fred is complaining that the U.S. will spend so much money trying to remain a world power that it will bankrupt itself. This is possible, but the U.S. defense budget is currently about 4.7% of GDP, about what it was in the early 1990's. (See here and here.)  This does not seem like a nation that is bankrupting itself with military over spending (despite that fact that it is fighting one major ground war and has troops deployed around the world).  Had Fred complained about Social Security and Medicare growth going forward, I would have been a much more sympathetic reader.

Fred then goes on to make the following astonishing claim:

The US is midway through an inexorable suicide. If a country does not manufacture things, it does not have an economy, and manufacturing has fled American shores. Ship-building, steel, consumer electronics, railroads: gone. You may think your HP laptop is an American product, but in all likelihood every component was made overseas and it was assembled in Taiwan.

Fortunately, my second favorite blog (Carpe Diem) just posted an article about U.S. manufacturing. The U.S. is currently the world leader in producing manufactured goods. It is likely that China will overtake America soon, but the fact remains that American manufacturing output has been increasing, even while the number of Americans employed in manufacturing jobs has decreased.  See this excellent article for more information and to understand why.  It is basically a matter of increasing productivity of workers that allows the production of more goods with fewer people.  But on another point, what exactly is the lure of a manufacturing employment?  Wouldn't most people want a service job for themselves and their children?  Engineers, doctors, lawyers, accountants, financiers, and other jobs seem to be a much better alternative than working in a factory.  Why do people lament the loss of manufacturing jobs?  Good riddance, I say.  Let China and other developing countries with lower productivity rates handle as much of the manufacturing as they can.  For a much better written version of this argument see this post from my favorite blog (Cafe Hayek).  Really, if you don't read Cafe Hayek every day, you should.

Fred's last complaint is about crappy U.S. politicians, a stand to which I am completely sympathetic.  But are U.S. politicians really worse than they have been in history, or are they worse than those in other countries such as China?  Politicians are people (really) and are subject to the same things that we all are, namely money, power, prestige.  Fred writes:

Note that China has that perfect government, an intelligent dictatorship concerned with advancing the country. The American government consists of self-interested lobbies and Wall Street looters. China is run by engineers, America by lawyers. Watch.

I'm not going to buy the argument that Chinese leaders are not self interested. They are human aren't they? Humans are self interested by our very DNA. Claiming that a government is composed of enlightened, forward thinking individuals is pure nonsense, unless they are robots. China is stuck with the same crappy politicians and bureaucrats that the U.S. and every other government is stuck with. But there is an underlying idea to Fred's statement that surfaces often in people. The idea that top down control by an enlightened few is much better than the confused, seemingly random knee-jerking  of an elected government.  Top down control has been tried many times and the track record is clear.  Control fails miserably because the controllers are never particularly enlightened,  in it for the greater good, or have anything like the amount of information needed to let them effectively mange the billions of individual daily transactions that make up an economy.  They are in it for themselves, like everyone else, and giving a few control results in those few concentrating the wealth and power amongst themselves while shutting out the rest.  Better a confused mess of a government where it least in theory the people have the ability to wrest power away from the government from time to time and individuals free to buy and sell goods and services as they please.

Overall, I am actually sympathetic to Fred's rant.  I would like the U.S. to have a smaller and cheaper military.  I would like the U.S. to have lower tax rates, a much simplified tax code, and much less regulations. I wish the size of the government was smaller, indeed probably much smaller than even Fred would prefer.   I believe these things would lead to greater economic growth and prosperity for everyone.  But I don't think there is any good evidence that the U.S. is on the verge of economic collapse, or that the continued growth of China economically is anything but good for me and the rest of the world.  The best part of China's growth is the escape from poverty by hundreds of millions of people.  I hope they all can rise to my standard of living, where a shockingly little amount of work can get you a nice climate-controller house, a car, fast computers, way too much food to eat, all the beer you can drink and really good Scotch.  Meanwhile I expect the U.S. to continue plodding along like it always has, full of people trying to make a better life for themselves and their kids while complaining about the government and worrying over stuff that doesn't matter.