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.