No Apology: The Case For American Greatness Page 5

  It is time for America to pursue the difficult course ahead, to confront the looming problems, to strengthen the foundations of our prosperity, and to secure the sources of our liberty and safety. The sacrifice and hard work will not sap our national energy; they will restore it. I’m one of those who believe America is destined to remain as it been since the birth of the Republic—the brightest hope of the world. And for that belief, I do not apologize.

  No Apology: The Case For American Greatness

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  Why Nations Decline

  It is inconceivable that America would ever be surpassed by another nation. As long as any of us can remember, America has been the power of last resort—the nation the world turns to when matters get completely out of hand. America stopped Adolf Hitler; we stopped Imperial Japan; we stopped Slobodan Miloševi; we stopped Saddam Hussein. Our economy dominates as well: our currency is the world’s standard; our GDP is the world’s largest; America is where the Internet was born, the place where titans like Apple and Microsoft battle it out. Even our culture is on top: Our music, movies, books, and fashion are enormously influential in almost every nation. It is simply inconceivable to us that America could ever be eclipsed.

  We’re not the first people who believed that about themselves. The Ottomans, the Spanish, the Portuguese, the Chinese, the British, the Soviets—these and others were superpowers, and they were all surpassed. The advantages of leadership are so significant that it’s hard to imagine how any nation could squander them. But that in fact has been the usual course of world history.

  This kind of collapse is not unique to nations. We’ve witnessed business powerhouses lose their lead to upstarts. United Airlines was upstaged by Southwest. Sears and Kmart were passed by Wal-Mart. Western Union and AT&T watched Verizon speed by. And look at General Motors: it was once the undisputed automotive heavyweight, the champion here and around the world. No more.

  The fall of leaders doesn’t make sense in the private sector, either—the advantages of leadership should ensure invincibility. But they demonstrably do not. My first job following graduate school was working for Bruce Henderson at the Boston Consulting Group. Bruce had set out to determine the mathematical advantage of leadership. He discovered that in almost every industry, the enterprise that had the most experience doing or making something could enjoy a calculable economic advantage over an enterprise with less experience. His analysis demonstrated that a company with twice as much experience as another should enjoy a 20 to 30 percent cost advantage. That’s why, he concluded at the time, IBM should be more profitable than Burroughs, GM more than Chrysler, Owens-Illinois more than Anchor Hocking, Sears more than JCPenney, Goodyear more than Firestone, and Xerox more than AB Dick. His predictions were borne out, at least for a time. But one by one, great leading companies, like leading nations, found that their potential for advantage was not a guarantee for success.

  Why is it that the great fail? It’s a question America must ask, not only because we are the world’s leading nation, but because the continuation of our lead has been called into question.

  The Ottomans

  The improbability of decline by the great has long piqued my interest. I could observe the fall of businesses firsthand. Growing up with a father in the car business, I had a front-row seat to the decline of the Big Three automakers. When it came to nations and civilizations, however, I read. There’s nothing approaching consensus when it comes to the reasons for the fall of empires, of course. But there are common causes, and in some respects they parallel what I had seen in the small backyard of the American business world.

  In high school, history teachers made us draw maps of the world at different points in time. (It was mostly a tracing and coloring project; we evidently hadn’t made much progress since kindergarten.) One of the most striking maps was one that delineated the Ottoman Empire. It was astonishingly large, including Turkey, Greece, Syria, Egypt, North Africa, and a large swath of southeastern Europe reaching all the way to the gates of Vienna.

  The Ottoman achievements spanned seven hundred years. The empire’s wealth was amassed from pillage and taxes. Culture flourished in poetry, ceramics, weaving, and architecture. The sultans managed it all with massive political and military bureaucracies. Then Christian Europeans won the Battle of Lepanto in 1571 and decimated the Ottoman navy. Rebellion and war ultimately were overwhelming. But why was the empire unable to rally to victory? What had so weakened the Ottomans?

  Highly beneficial global trade routes that had traditionally passed through Ottoman territory had been abandoned for ocean passages, and the empire’s revenues dropped accordingly. More important, while Europe embarked on the early stages of manufacturing, the Ottomans did not; they were confident that their pillaged wealth would sustain them indefinitely. The Ottomans’ growing isolation from the dynamic world of manufacture and trade was reinforced by the conviction that their holy scriptures provided all the knowledge that was necessary; foreign technology was infidel technology. The empire banned the printing press for half a century.

  Like the Ottomans, the Spanish and Portuguese achieved wealth through plunder, and their empires fell for remarkably similar reasons. Christopher Columbus didn’t find a route for spice; he found a route for gold—Incan, Aztec, and Mayan gold. The Portuguese pioneered trade to the Indian subcontinent and the Orient. And they capitalized on their innovations in navigation with another: the cannon. Safely anchored offshore, they could lay waste to any mainland enemy they chose. Spain and Portugal became extraordinarily rich.

  While the rest of Europe was learning how to make things people wanted to buy, Spain and Portugal stuck to the buying. They were the centers of wealth consumption; France, England, and Germany became the centers of wealth creation. And just as the Ottomans had done, the Spanish and Portuguese shut their borders—and their minds—to innovation, technology, and learning. The Protestant Reformation to the north had spawned not only dissent and skepticism but also literacy and innovation. Spain and Portugal isolated themselves from such heresy. Portugal placed strict controls on printing presses. The Spanish crown banned scientific works by Protestant authors. They banned study abroad in any non-Catholic country. Spain went so far as to impose the death penalty on anyone who imported an unauthorized foreign book. Like the Ottomans, Spanish and Portuguese isolation became complete: They eschewed the manufacture and trade of goods that was sweeping the rest of Europe, and they closed their borders to outside thought.

  The Great Wall

  For many centuries, the Chinese were the greatest power in the world. When Marco Polo reached China in the thirteenth century, he encountered technology that surpassed anything the rest of the world had achieved. Advances in astronomy, physics, chemistry, meteorology, seismology, engineering, and mathematics came to the West from China. In the first century, China was first to manufacture paper—a huge improvement over papyrus and parchment. They invented the first printing press, published the first newspaper and the first book, and they invented moveable type around 1041—four hundred years before a German named Johannes Gutenberg developed similar technology.

  Some of China’s innovations had important military implications. They invented the first compass and the first seismograph. They were the first to cast iron; they machined it into firearms as well as cooking pots. While Taoist monks were looking for an elixir for immortality in the ninth century, they stumbled on gunpowder, something far more suited to inducing mortality. Rockets, bombs, mines, cannons, and of course, fireworks soon followed.

  Chinese ships were the envy of the world; some of them were as long as 400 feet, with multiple decks and masts. In one three-year span, they built more than 1,600 ships outfitted for trade, transport, or war. What the Chinese accomplished was nothing short of spectacular.

  And then China declined.

  As ships from foreign lands increasingly docked in their ports, the Chinese feared cultural contamination. Confucians claimed that commerce would corrupt t
he society, calling for a return to the primacy of agriculture. The government moved the capital from Nanjing, at the mouth of the Yangtze River, to Beijing, hundreds of miles inland. And rather than build ships to trade with the world, it built the Great Wall to lock it out. By 1500, anyone who built a ship with more than two masts was put to death. Then the government charged coastal authorities with the task of destroying all oceangoing ships and arresting their owners.

  The Chinese rejected not only all things foreign but even technology that they had devised themselves. For the Ottomans, the Qur’an contained everything that life required; for the Chinese, it was their ancient culture that was to be revered and sustained, even at the cost of abandoning innovations like the printing press.

  China’s cultural and economic isolation continued throughout the twentieth century. Mao Zedong sought to revitalize the country with his Cultural Revolution. But rather than viewing learning and innovation as paths to prosperity, he saw them as threats. Merchants, writers, researchers, and intellectuals were jailed and sometimes killed. Professors were removed from universities to become peasant farmers.

  China’s neighbor, Japan, shared a penchant for isolation, but the Japanese had a very different self-identity. Proud and confident, the Japanese sought to extend their self-perceived superiority over the rest of the world. And rather than reject foreign technology, they assiduously gathered it, improved on it—and thrived. As their economic and military prowess surpassed that of China and other neighbors, they pursued imperial ambitions in Asia and across the world. And China, long the world’s leader, was eclipsed by a nation only a fraction of its size.

  The Sun Sets on the British Empire

  England is just a small island. Its roads and houses are small. With few exceptions, it doesn’t make things that people in the rest of the world want to buy. And if it hadn’t been separated from the continent by water, it almost certainly would have been lost to Hitler’s ambitions. Yet only two lifetimes ago, Britain ruled the largest and wealthiest empire in the history of humankind. Britain controlled a quarter of the earth’s land and a quarter of the earth’s population.

  Late in the eighteenth century, after the loss of their American colonies, the British set out to compensate for what had been lost, first by defeating Napoleonic France and then by expanding the reach of the crown in colonies from India to the tip of South America and from Africa to the islands of the Western Pacific.

  Britain’s might was military, having built the most powerful navy the world had ever seen. But what enabled their military superiority was their industrial might. The British had pioneered the Industrial Revolution, and they enthusiastically promoted free trade, understanding the huge export potential for their products. By 1860, the nation’s economy was the biggest in the world.

  But maintaining leadership proved more difficult than achieving it. Whereas other nations extended the manufacturing revolution by embracing new technology and innovation, the British reversed course and tried to contain it. The country’s culture of class immobility stymied the entrepreneurialism and initiative that propel a competitive economy. From owner to laborer, the British were eager to protect the status quo. Industrialists secured subsidies for themselves and tariffs on foreigners rather than face foreign competition and technology head-on. When subsidies proved insufficient for the most unproductive businesses, the government took them over. The nation spent national resources to keep sick companies alive rather than inventing new ones and investing in those that were strong.

  Britain’s economic missteps were compounded when it was forced to fight and endure the cost of two world wars. By the end of World War II, its national debt had tripled. Massive loans were required to shore up the ailing economy; they came from its former colony.

  Common Causes?

  There are similarities between the different countries’ paths of decline. Many turned toward isolation; most important, isolation from knowledge: the Ottomans, Spanish, Portuguese, and Chinese purposefully shut out foreign invention and learning. And they adopted economic isolation as well: China, Spain, Britain, and the Ottomans expressly or effectively retreated behind barriers to foreign trade, each convinced that competition had made them weaker. Their retreat from the marketplace of ideas and their retreat from the marketplace of goods inevitably led to their retreat from the pinnacle of leadership.

  This is a lesson that shouldn’t be lost on us. When we face challenge, there will always be cries for protection. They will be heartfelt and not entirely illogical. Foreign competition will seem unfair—after all, if foreign products and services are more desirable to consumers, it must be due to some form of advantage. And if one’s competitor has an advantage, that doesn’t feel fair. If the advantage persists, it will mean that jobs will be lost, well-connected people will be affected, and government will lose revenues.

  The only successful way to overcome foreign advantage, however, is to create an advantage of one’s own—to innovate. And if you conclude that your competitor’s advantage is permanent and insurmountable, the best course is to choose new paths and new products. Over the centuries, the siren songs of protectionism and isolationism have taken down some very impressive empires.

  Some of these failed powers were weakened as well by wealth and spending that exceeded their own production—in other words, by easy money. The spoils of the Ottoman pillage, the gold the Spanish stole from the Americas, and the tribute the Portuguese exacted from trade—all allowed each of these nations to live well in excess of their productivity. In the same way that inherited wealth can lead descendants to profligate spending and economic ruin, easy money weakened these nations’ willingness to work and invest.

  Harvard historian David Landes, in his book The Wealth and Poverty of Nations, sees an even more fundamental factor in the rise and fall of powers: If we learn anything from the history of economic development, he writes, it is that culture makes all the difference. Just as Islamic culture rejected foreign influence, so the Ottomans rejected foreign technology. The religious beliefs of the Spanish and Portuguese led them to deny foreign discovery and innovation. China’s economic isolation was the logical extension of its rejection of cultural diversity. And the British culture of order, organization, and rigid structure—once assets in Britain’s conquest of nations in the undeveloped world—may have prevented it from developing the risk-taking approach and entrepreneurialism critical in free markets. Culture did indeed make a difference.

  Of course, America can learn from these historic causes of failure; in some ways, they are eerily familiar. We, too, have been lavishly spending the easy money we obtained through excessive borrowing; there are growing calls for protectionism; government is expending resources to preserve the failed practices of declining industries; and the culture that led us to become the world’s greatest nation is under attack. Following the same path that has led the great to decline in the past is reckless and perilous.

  The history of leading nations that have fallen has even more to teach us, however, perhaps at a more fundamental level. In the face of evident decline, why do nations fail to act? Are there cases where nations have instead acted to halt their decline? What accounts for the difference between the two? The answers to these questions may be the most instructive because they can suggest a course of vigilance in the modern world very different from that of the Ottomans, the Spanish, the Portuguese, or even the British.

  Why Nations Fiddle as They Burn

  I’m reminded of the words from Proverbs, Where there is no vision, the people perish. If a nation simply doesn’t see a threat, it is unlikely to do something about it. It’s entirely understandable that the people of imperial Spain were blind to the downside of having too much money; when all seems to be going extremely well, it’s hard to envision anything but blue sky. In 1675, one official even boasted that Madrid is the queen of Parliaments, for all the world serves her and she serves nobody. But soon thereafter, the Spanish government was bankrupt. />
  The Dutch also suffered from unearned wealth. Their trade monopolies, underinvestment in productive industry, complacency, and cultural decay led this condition to be called Dutch disease. Lack of vision, lack of awareness, is an integral part of the malady. Today, Dutch disease afflicts a number of oil-rich nations; people literally live like sheiks thanks to the wealth under their feet. Relying on foreign labor for even the most basic domestic tasks, they have failed to develop productive economies and populations. Their future depends on the flow of oil, just as the Ottomans depended on pillage, the Spanish on gold, and the Dutch on monopoly. They are not alone, however, in failing to see peril.

  Our own lack of vision led to the collapse of our financial markets and our economy. It precipitated a global recession, triggered the loss of 12 trillion of our citizens’ net worth, and dealt a sharp blow to world freedom. We simply did not see that so-called subprime home mortgages, liar loans, and nonqualified loans had the potential to cause such destruction. I know some believe that the powers that be saw it all along—that the greed of Wall Street tycoons, for example, was the root cause. But I believe lack of vision played every bit as big a role.

  However, lack of vision is the exception when it comes to the decline of great powers. In most cases, there were warnings. Farsighted Ottomans warned that adherence to religious dogma and reliance on oversized bureaucracy would doom the empire. Portuguese diplomats returning home cautioned the crown that the inquisition against the Muslims, the redirection of the country’s wealth to the church, and the failure to develop agriculture and industry would lead to ruin.

  The warnings were discussed, debated, and then dismissed. Why?