Janet Bush: Brand boycotts, brain drains, big debts and low savings - the US has a fight on its hands

As the Bush administration muses on whether its blueprint for democratisation has been so successful in Iraq that it should now be applied to Iran, it might be worth considering how much this might cost the US in the long term. War is extremely expensive in itself: the US racked up huge budget deficits in the 1960s because of prolonged campaigns in Korea and Vietnam which left it highly vulnerable. America's fiscal health is also suffering now, and in spades.

As the Bush administration muses on whether its blueprint for democratisation has been so successful in Iraq that it should now be applied to Iran, it might be worth considering how much this might cost the US in the long term. War is extremely expensive in itself: the US racked up huge budget deficits in the 1960s because of prolonged campaigns in Korea and Vietnam which left it highly vulnerable. America's fiscal health is also suffering now, and in spades.

But there are other, perhaps less obvious but potentially even more far-reaching, costs to America's pre-emptive doctrine of foreign intervention. Last week, an online survey by Brandchannel asked nearly 2,000 brand and advertising executives to name their top global names. America dominated: Apple, courtesy of the spectacular success of its iPod, was in first place, Google in second and Starbucks in fourth. But there was also Ikea in third and, the surprise of all surprises, a new entrant - Al-Jazeera.

It is no wonder the executives pounced on the Middle East station that has become a byword for fear, because it is the station of choice for Osama bin Laden's broadcasts to the world as well as for the transmission of footage of the gruesome deaths of kidnapped Westerners. But Al-Jazeera's presence also points to more deep-seated and alarming consequences for America stemming from its "war on terror".

Its foreign policy not only involves expenses that have contributed mightily to a federal deficit heading for 5 per cent of US GDP; it also makes America unpopular, and that costs, too. During 2003, the US Pew Global Attitudes Project found an intensifying "fear and loathing of the US" due to the war in Iraq. Meanwhile, a Eurobarometer survey of EU countries found that as many people rated the US as significant a threat to world peace as Iran. In four countries, it was viewed as more menacing than Iraq or North Korea.

It is not surprising that poll after poll has shown consumers turning their backs on US brands as a protest against the administration's policies. So great is the concern over this that an organisation called Business for Diplomatic Action has set out to counter the damage being done to US multinationals. Keith Reinhard, President of BDA, says: "If we were looking at the US as a brand, we'd say it is time to relaunch."

Consumer boycotting is just one problem; another was highlighted by Microsoft's Bill Gates at the recent World Economic Forum in Davos. He noted that the tough new US visa regime introduced in response to 9/11 has caused a fall in the number of foreign computer science students coming to America. This decline is so severe that it threatens to undermine America's pre-eminence in the global software business.

The US is highly dependent on foreign talent. Between 1985 and 2000, more than half of US PhDs in science and engineering were awarded to overseas students from China, India, South Korea and Taiwan. But now, as a result not only of visa bureaucracy but the rapidly improving universities and business schools outside America, the US is failing to attract its usual quota of talent. In 2004, American universities suffered their first decline in international student enrolment since the early 1970s (as the Vietnam War reached its unhappy denouement). A survey in November 2004 by the Association of American Universities reported declines in international enrolment in advanced engineering programmes, and nearly 50 per cent said enrolment in business schools had fallen.

Late last year, Adam Segal, a senior fellow in Chinese studies at the Council on Foreign Relations, bemoaned the fact that American research is increasingly concentrated on the fields of defence and homeland security and the space (weapons) programme.

Writing in Foreign Affairs magazine, he said; "Research driven by scientific curiosity rather than specific commercial applications is under-funded, depriving the economy of the building blocks of future innovation."

It may appear a rather old-fashioned view, but it does seem intuitively to be the case that countries which do not make things the rest of the world wants to buy - whether it is widgets or stunning haute couture - don't, in the end, thrive economically. The US has a record trade deficit partly because Americans buy so much and buy so much from abroad. They have not saved so little since the Great Depression of the 1930s.

In 2003, household debt increased four times faster than the US economy as a whole. The average student credit card debt, it has been reported, rose by 46 per cent between 1998 and 2000. Meanwhile, personal debt is now an extraordinary 130 per cent of disposable income, up by nearly one third since the mid 1990s. In other words, people owe more than they earn. So imports are booming.

Exports are not. For one thing, America has been running down its manufacturing capacity steadily for several years. Employment in manufacturing has been dropping, too.

Instead of responding to its ballooning trade deficit by making more, innovating and reining back consumption, the US generally tends to blame others: China's exchange rate is too low, its tariff barriers too high, its workers badly paid and so there is "unfair competition".

Or the US boosts the bottom line through creative accounting, not creativity, as in the case of Enron. Or it uses marginally legal wheeling and dealing, as Citigroup appears to have tried to do in the eurozone government bond market to steal competitive advantage.

America has been at the top of the global economic tree for so long that it has become mightily complacent. It is not only getting the fundamentals of a successful economy wrong; it doesn't appear to realise it and is actively exacerbating its vulnerabilities.

While the mighty American Eagle turns his beady gaze on Tehran, the chickens are thundering in to roost at home.

The West kicked Asia when it was down. Now it's rising up

For the first time since records began, the US is no longer Japan's largest trading partner - China is. The People's Republic now accounts for just over 20 per cent of total Japanese trade, compared with a US share of 18.5 per cent

This is part of a region-wide phenomenon: typically, the share of Asian countries' exports going to China has doubled in four years. China itself has been one catalyst but there have been others, including the Asian financial crisis of 1997 and 1998.

Serious lessons were learned, the first being that Asia's long suspicion of co-operating with its neighbours meant a total lack of co-operation as the contagion spread. However, it also learned that foreigners bearing advice were even less trustworthy. There was a deep frustration with the policies imposed on the region by the International Monetary Fund, including jacking up interest rates and an insistence on fiscal austerity as a condition of various bail-out packages. Tighter, and simultaneous, fiscal and monetary policies swiftly brought down the region's economies, creating a bargain-hunting frenzy by US corporations buying Asian assets on the cheap.

There was outright anger over the US's refusal to support the November 1998 Sakakibara Plan to provide up to $100bn of funds for assisting the region. The explanation in Asia was that the US wanted the IMF, which is under its influence, to remain the sole actor in the crisis and prevent the building of any home-grown economic defences. In the end, that has proved counter-productive: Asia is now developing precisely that and more.

There are discussions about instituting an Asian Monetary Fund to provide balance of payments support for Asian countries when necessary, so bypassing IMF conditions which, it is perceived, too often support US economic and corporate interests. There is also talk of an Asian economic area; a single market; and, by 2020, of a "Community" that will include three pillars of co-operation - political and security, economic and socio-cultural. There is even talk of an eventual Asian single currency.

The region is looking with intense interest at Europe's experiment in economic inte- gration. If Europe's efforts founder, it may find that Asia develops a superior model by learning from the EU's mistakes. And if that is successful, Europe may discover that it has unwittingly fuelled the competitiveness of a mighty rival.

Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
Sport
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Travel
travel
PROMOTED VIDEO
News
Robyn Lawley
people
News
people
News
people
News
i100  ... he was into holy war way before it was on trend
Life and Style
lifeDon't get caught up on climaxing
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Arts and Entertainment
Harry Potter (Daniel Radcliffe), Hermione Granger (Emma Watson) and Ron Weasley (Rupert Grint)
newsBloomsbury unveils new covers for JK Rowling's wizarding series
News
scienceScientists try to explain the moon's funny shape
Sport
Usain Bolt confirms he will run in both the heats and the finals of the men's relay at the Commonwealth Games
commonwealth games
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
peopleHowards' Way actress, and former mistress of Jeffrey Archer, was 60
Life and Style
Troy Baker and Ashley Johnson voice the show’s heroes
gamingOnce stilted and melodramatic, Hollywood is giving acting in video games a makeover
News
i100
Arts and Entertainment
As Loki in The Avengers (2012)
filmRead Tom Hiddleston's email to Joss Whedon on prospect of playing Loki
Voices
voices In defence of the charcoal-furred feline, by Felicity Morse
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star