America - the gentle giant?

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The Independent Culture
SOMETHING HAS changed in the last few months in the world's perception of America. Looking out is always different from looking in, but in the case of the United States the contrast is extreme. For the US seems suddenly to be widening its lead over the rest of the world in a number of ways - including the performance of its fast-growing economy, its development of new electronic technologies, its entrepreneurship, its financial service industries, its military competence as demonstrated in the Kosovo air-raids, even its cultural dominance - demonstrated by the still-growing share of Hollywood movies on the world market.

The perception of dominance is very different depending on whether you're the dominator or the dominated. The contrast was summarised by a professor at Baltimore's Johns Hopkins University, Michael Mandelbaum: "If you are the 800-pound gorilla, you're concentrating on your bananas, and everyone else is concentrating on you."

The US is indeed concentrating on its bananas - literally as well as figuratively, witness the banana trade war with Europe. It is content, busy with its own long boom, and (in as far as it is concerned about anything) working out how to extend its prosperity still further. It is not, however, engaged in any grand plan to dominate the rest of the world. If the rest of the world wants to join in the party, that's great. If others prefer to stay poor, that is up to them.

Of course not all Americans feel that way. Many of the more thoughtful firms are anxious to counter this "dominant America" view of the world, for they are aware that they can be blind-sided by different attitudes elsewhere in the world. A good example: the US agricultural industry was totally unprepared for European consumer resistance to genetically-modified foods. This has not been an issue in the US, and it never occurred to the industry that what everyone there saw as a technical advance might shut US producers out of the most lucrative markets overseas.

Still, for every American who says: "We can learn from abroad" - there are ten of them who don't have passports.

From outside, though, the dominance feels different - and, crucially, it feels different depending not just on where you are, but who you are. If you are a Chinese diplomat, you profess outrage at the bombing of your embassy while continuing to welcome the representatives from US Inc setting up the next joint venture. If you are a French minister, you step up the policing of your language, to counter the invasion from across the Atlantic, and give large subsidies to your film-makers in an effort to get them to produce films your own citizens don't want to see.

If you are an ordinary European, you get an Internet connection and find out what this amazing US-led technology is going to do to your life. And if you are a Briton? Well, I suppose you just hope that the UK economy will continue to prosper, even if it is partly as a sub-contractor to the great American growth machine.

But is American exceptionalism just a matter of perception or is it reality? I believe it is both. Take each of those areas where America seems to be out-pacing the rest of the world, and then look at the evidence.

The fast-growing economy: yes, the US has outpaced every major economy in the world during the Nineties. Partially, this is the result of the astonishing way in which US companies, large and small, have not only lifted their productivity but also increased their employment. The US economy employees nearly 40 per cent more people now than in 1980. By contrast. Britain employs 8 per cent more; while Germany, France and Italy together - none.

Still, this fast growth has resulted in signs of strain, which you can see now in the surging US current account deficit and plunging savings rate. That can't go on, and at some stage there will be some kind of reaction. The gorilla is over-eating.

New technologies? Yes, the US genius at developing new technologies, and in particular for finding new commercial applications for them, is undimmed. It is fascinating to see the way in which Japan's genius for refining electronic hardware has not been transformed into refining software, so enabling the focus of growth to swing back across the Pacific. But there are aspects both of technology and of commercial applications where Europe leads the United States. Mobile phones and telephone banking are perhaps the best examples.

When you turn from the newest technologies to older but still high technologies, Europe does very well: it looks as though Airbus has passed Boeing in civil aircraft sales and the Daimler-Chrysler "merger" is clearly a takeover.

Yes, the United States dominates, and yes it has increased its lead in some areas, but it is not so utterly dominant as it sometimes seems. Within the US, companies are very aware that a foreign firm can bite them in the backside if they are not alert: Nokia from little Finland has displaced the mighty Motorola as the world largest supplier of mobile phones.

Entreprenuership? No question, here. On just about every measure - business start-ups, employment by small companies, proportion of the country's stock market accounted for by companies less than ten years' old - the US outpaces the world. Anecdotally the performance is even more impressive than the figures. Anyone who talks to young Americans will be aware of the drive and zeal they have to have a successful career in their own business. Here in Britain we have a little of it, but in much of Europe and in Japan the best graduates still hope for jobs in large organisations.

Part of the reason for US success in high-tech is its flexible, innovative financial service industry: the young can raise the dosh to back their ideas. In the money world, the US dominates partly because of the strength of the dollar, but also because the whole world is shifting to more of an "Anglo-Saxon", shareholder-dominated model of financial organisation. But even here it is not a walk-over. In a sense American finance is successful because it is successful. As and when US markets turn down, there will be pain in the US financial community, and that pain will weaken the institutions and dent the present perception of American hegemony.

Military competence? Well, the Kosovo war has had a profound impact on European politicians, for they suddenly realised both that they could not do without America and, by extension, what poor value European countries got from military spending. Europe spends two-thirds as much on the military as America, but does not get two-thirds of the US clout.

Just this week Tony Blair has sought to improve cross-European co-operation in an efforts to lift Europe's game. He's been talking to the Italians. You might think this a slightly odd place to start, but at least they recognise the problem. If the somewhat humiliating Kosovo experience leads to Europe extracting better value from its defence establishments, then it will be a useful side effect from a less-than-impressive performance.

Finally culture. The plain fact is that the US is the only country in the world than can export popular culture. Strangely, it cannot export its sport: for key sports such as football and Formula One racing are controlled from abroad. But it seems to be gaining growth in all other areas, including television, film (of course) and popular music.

The Internet has yet to develop into a mainstream entertainment medium, but whichever way the Net grows it seems pretty clear than entertainment will become a larger element in it. Control of many of the portals, or entry-points, into the Net, will probably enable the manufacturers of United States entertainment to achieve the same level of market share as they have in, say, pop music.

Still, while America dominates the world's media, there are corporate challengers, particularly from Germany. It is worth remembering, too, that the United States entertainment industry depends disproportionately on United Kingdom talent to maintain its lead. We are sub-contractors again.

Does the American dominance matter? The response will be different from person-to-person, from place-to-place. However, anyone concerned might like to ponder the alternative.

How would we feel were the Cold War to be reinstated? Or have a world dominated by China? Or even one run by the bureaucrats of Brussels? The gorilla may look fierce, but mercifully is benign.