Asia Votes America Off the Island

David (“Spengler”) Goldman’s latest Asia Times article is a must-read.  As the saying goes, you’re not paranoid if they’re really following you. Goldman makes a strong case that those of us prophesying declines in U.S. power and influence on the world scene have good cause to worry (emphasis mine).

It is symptomatic of the national condition of the United States that the worst humiliation ever suffered by it as a nation, and by a US president personally, passed almost without comment last week. I refer to the November 20 announcement at a summit meeting in Phnom Penh that 15 Asian nations, comprising half the world’s population, would form a Regional Comprehensive Economic Partnership excluding the United States.

President Barack Obama attended the summit to sell a US-based Trans-Pacific Partnership excluding China.  He didn’t.  The American led-partnership became a party to which no-one came.

Instead, the Association of Southeast Asian Nations, plus China, India, Japan, South Korea, Australia and New Zealand, will form a club and leave out the United States.  As 3 billion Asians become prosperous, interest fades in the prospective contribution of 300 million Americans -especially when those Americans decline to take risks on new technologies. America’s great economic strength, namely its capacity to innovate, exists mainly in memory four years after the 2008 economic crisis.

From there, Goldman proceeds to cite facts and figures, complete with charts. Taken together, they deliver a simple, but powerful message: Chinese exports to and imports from the U.S. are declining; trade among the Asian nations is booming. Increasingly, China’s neighbors are pegging their currencies to the Chinese currency, the renminbi, as the U.S. dollar fades increasingly into irrelevance. Even our major trading partner, Japan, is turning eastward as they too realize, à la Willie Sutton, that Asia is where the money is.

“Where does the United States have a competitive advantage?” Goldman laments, and adds:

Apart from commercial aircraft, power-generating equipment, and agriculture, it has few areas of real industrial pre-eminence. Cheap natural gas helps low-value-added industries such as fertilizer, but the US is lagging in the industrial space.

In other words, Goldman sees America increasingly resting on past glories and neglecting to innovate for the future:

Without innovation and investment, all the trade agreements that the Washington policy circuit can devise won’t help.  Neither, it should be added, will an adjustment in exchange rates.

It is hard to fathom just what President Obama had in mind when he arrived in Asia bearing a Trans-Pacific Partnership designed to keep China out.  What does the United States have to offer Asians?

  • It is borrowing $600 billion a year from the rest of the world to finance a $1.2 trillion government debt, most prominently from Japan (China has been a net seller of Treasury securities during the past year).

  • It is a taker of capital rather than a provider of capital.
  • It is a major import market but rapidly diminishing in relative importance as intra-Asian trade expands far more rapidly than trade with the United States.
  • And America’s strength as an innovator and incubator of entrepreneurs has diminished drastically since the 2008 crisis, no thanks to the Obama administration, which imposed a steep task on start-up businesses in the form of its healthcare program.

And then Goldman delivers the final blow, and it’s devastating:

Washington might want to pivot towards Asia. At Phnom Penh, though, Asian leaders in effect invited Obama to pivot the full 360 degrees and go home.

Sadly, Goldman suggests no remedies for the decline he sees. But were he to suggest any, I feel myself on safe ground in assuming that four more years of Barack Obama and the Democrat-controlled Senate would not be among them.

  1. DocJay

    Those who fail to see the end of the dollar as the world reserve currency are in trouble.

  2. Misthiocracy
    Gene Schwimmer, Guest Contributor: 

    Instead, the Association of Southeast Asian Nations, plus China, India, Japan, South Korea, Australia and New Zealand, will form a club andleave out the United States.  

    Please note, it’s not simply the United States left out. 

    Every Pacific nation in the Western Hemisphere was also left out.

    Free market countries with strong(ish) economies like Canada, Chile, Peru, Costa Rica, etc, also are not included.

    So, does that mean Australia and New Zealand have more economic influence than Canada or Chile? That doesn’t seem to make sense, given that Canada and Chile have natural resources for sale.

  3. Misthiocracy

    Furthermore, the inclusion of China, India, Japan, and Korea in the same economic club seems like a hopeful sign to me, considering how recently these nations have been mortal enemies.  

    India and China, especially, are often seen as economic rivals.  It’s gotta be a hopeful sign that they are able to sit at the same table.

  4. Nick Stuart

    Just one more indication that 100% of us are going to have the country 51% of us voted to have.

  5. grotiushug

    I think it was Krauthammer who said, a year or so ago, that “‘decline is a choice.”  We’ve made our choice, now we live with it. 

    Would that the United States in the 21st century could have it so good as Italy in the 5th century.  Not possible in the nuclear age.

  6. Jim  Ixtian
    Nick Stuart: Just one more indication that 100% of us are going to have the country 51% of us voted to have.

    We are all Chicago now…and well on our way to Argentina*. All that’s really left is the coup de grace of currency collapse.

    Gene Schwimmer, Guest Contributor: What does the United States have to offer Asians?

    This. And the answer is pitifully little. Asian decoupling is here to stay.

    *Update:

    Fitch downgrades Argentina and predicts default
    Credit rating agency Fitch has downgraded Argentina, which is locked in a court battle in New York over its debt, and said the country would probably default.

    Fitch cut its long-term rating for Argentina to “CC” from “B,” a downgrade of five notches, and cut its short-term rating to “C” from “B”. A rating of “C” is one step above default, AP reported.

    US judge Thomas Griesa of Manhattan federal court last week ordered Argentina to set aside $1.3bn for certain investors in its bonds by December 15, even as Argentina pursues appeals…

    Take a read folks, that’s just a taste of America’s future.

  7. Misthiocracy

    Other international organizations which do not include the United States as a member:

    Does the exclusion of the United States from these international organizations also represent a snub?

    Sometimes a cigar is just a cigar, and sometimes an Asian economic association is just an Asian economic association.

  8. Not JMR
    invited Obama to pivot the full 360 degrees and go home.

    Dat don’t make no sense!

  9. Edmund Alexander

    180°, not 360°!  Gaaaah!

  10. Whiskey Sam
    Misthiocracy: Other international organizations which do not include the United States as a member:

    Does the exclusion of the United States from these international organizations also represent a snub?

    Sometimes a cigar is just a cigar, and sometimes an Asian economic association is just an Asianeconomic association. · 24 minutes ago

    That would depend, was the US present when these organizations were formed and try to be involved?  This was a direct snub to the US, and a rebuttal to the idea of our President who was supposedly the savior of our international reputation.

  11. Misthiocracy
    Whiskey Sam

    Misthiocracy: Other international organizations which do not include the United States as a member:

    Does the exclusion of the United States from these international organizations also represent a snub?

    Sometimes a cigar is just a cigar, and sometimes an Asian economic association is just an Asianeconomic association. · 24 minutes ago

    That would depend, was the US present when these organizations were formed and try to be involved?

    According to the article, the US didn’t try to get involved with this organization, but instead tried to create a separate organization that excluded China.

    That seems a lot like the US trying to form a competitor to The Commonwealth that excludes the UK, or a competitor to La Francophonie that excludes France.

    I agree that it’s a rebuttal of the idea of “Obama the Saviour”, but I’m not convinced that it’s a snub of the US, which quite simply is not an Asian country.

    Actually, I think it’s more of a snub for those Asian nations that were (apparently) not included, such as Russia, North Korea, Bangladesh, and Sri Lanka.

  12. Pseudodionysius

    I suggest that someone can buy an hour of Sandra Fluke’s time to plot strategy.

  13. Misthiocracy

    One other point: There is already an association for Asia-Pacific Economic Cooperation.

    So … Obama was proposing a new, nearly identical association, with the only difference being the exclusion of China?

    Well, duplication of effort on a massive international scale does indeed seem like something a Democratic Party president would go for, but I’m not sure it’s something that Republicans should get behind.

  14. Gene Schwimmer, Guest Contributor
    C
    Jim Ixtian

    Nick Stuart: Just one more indication that 100% of us are going to have the country 51% of us voted to have.

    We are all Chicago now…and well on our way to Argentina. All that’s really left is the coup de grace of currency collapse.

    Gene Schwimmer, Guest Contributor: What does the United States have to offer Asians?

    This. And the answer is pitifully little. Asian decoupling is here to stay. · 1 hour ago

    And Chicago could be a best case scenario.  If we don’t change course, America cold become Detroit; one might argue that California is well on the way.  

    I’m Detroit born and bred; I know whereof I speak.

  15. JimGoneWild

    We need to strengthen the dollar.

    But this is a call for central government planning. Americans should do what they want. If that means building heavy equipment or paying others to do it, who cares. It is none, NONE of the governments business.

  16. Gene Schwimmer, Guest Contributor
    C
    Misthiocracy: Other international organizations which do not include the United States as a member:

    Does the exclusion of the United States from these international organizations also represent a snub?

    Sometimes a cigar is just a cigar, and sometimes an Asian economic association is just an Asianeconomic association. · 1 hour ago

    What if all of NATO’s members left to form a new organization that excludes the United States, not from a “nationalistic” desire to have a Europeans-only organization, but because the U.S. had allowed her military to deteriorate to the point that we became so militarily weak that we were no longer militarily strong enough that it made sense to include the U.S. in a military alliance and indeed might even have become a burden?  Would you not be concerned?

    Now imagine an “economic alliance” in which the U.S. had allowed her “innovativeness,” economic vitality and her currency to deteriorate to the point where we were no longer economically strong enough…  Would that not worry you, too?

    And it’s a Regional - not Asian – Comprehensive Economic Partnership. But assume that it is. NATO is a “European Defense Partnership” in which U.S. participation is vital.

  17. Gene Schwimmer, Guest Contributor
    C
    Misthiocracy

    Whiskey Sam

    According to the article, the US didn’t try to get involved with this organization, but instead tried to create a separate organization that excluded China.

    That seems a lot like the US trying to form a competitor to The Commonwealth that excludes the UK, or a competitor to La Francophonie that excludes France.

    I agree that it’s a rebuttal of the idea of “Obama the Saviour”, but I’m not convinced that it’s a snub of the US, which quite simply is not an Asian country.

    Actually, I think it’s moreof a snub for those Asiannations that were (apparently) not included, such as Russia, North Korea, Bangladesh, and Sri Lanka. · 1 hour ago

    Edited 1 hour ago

    And after WWII, the U.S. formed a “separate defense organization,” NATO, that excluded China – and still does.

    What would it have said about U.S. military power, had NATO declined to join NATO and turned around and formed its own defense alliance to exclude America and include China.  Would that not be a strong signal that Europe strongly viewed China as a rising power and America as a declining one?

  18. Misthiocracy
    Gene Schwimmer, Guest Contributor

    What if all of NATO’s members left to form a new organization that excludes the United States, not from a “nationalistic” desire to have a Europeans-only organization, but because the U.S. had allowed her military to deteriorate to the point that we became so militarily weak that we were no longer militarily strong enough that it made sense to include the U.S. in a military alliance and indeed might even have become a burden?  

    But that’s just it, nobody’s leaving any organization.  They are simply creating an organization of Asian and Indian Ocean economies. This new association is not a replacement for APEC or any other international economic association.

    I am no more concerned by my country’s exclusion from this particular Asian/Indian Ocean economic association than I am by my country’s exclusion from an African association or a European association.

    I would be concerned if my country was expelled from an international association of which it was already a member, but that has not happened in this case.

  19. Misthiocracy

    You know who should REALLY be worried about being excluded from this club?

    Taiwan.

  20. Sumomitch
    Misthiocracy: Other international organizations which do not include the United States as a member:

    • La Francophonie

    The USA is excluded from La Francophonie? Why was this not brought to my attention in the past 40 years? I would hate to think my 2 years of College French was for naught.  Moi, je suis un Francophone.