“I don’t know a soul who’s not been battered
I don’t have a friend who feels at ease
I don’t know a dream that’s not been shattered
Or driven to its knees
Oh, but it’s alright, it’s alright
For we lived so well so long
Still, when I think of the road we’re traveling on
I wonder what’s gone wrong
I can’t help it, I wonder what’s gone wrong
…And we come on the ship they call The Mayflower
We come on the ship that sailed the moon
We come in the age’s most uncertain hours
And sing an American tune
Oh, and it’s alright, it’s alright, it’s alright
You can’t be forever blessed
Still, tomorrow’s gonna be another working day
And I’m trying to get some rest
That’s all I’m trying to get some rest”
–Paul Simon, American Tune (1973)
This song, released near the nadir of the 1970s, echoed in 2024 as pundits and political candidates asserted the decline of the nation.[i] Simon invites a debate: can a nation “be forever blessed”? Here, in my final post of the year, I encourage readers to think critically about theories of national decline (and rise), and I point to five factors that can help to organize your own thinking on the subject.
This post is motivated by a panel I joined last month, to speak to some European politicians, journalists, and business leaders about the state of the U.S. The premise of others’ comments and questions was downbeat: rising U.S. isolationism, large deficits, rising debt, the stalemate in Ukraine, instability in the Middle East, the difficulty of defending Taiwan, on and on. Some comments mocked the U.S. So, I asked everyone, “Well, if not the U.S., then what kind of country would you like to lead the international order?” After some throat-clearing, the group volunteered that it would like a hegemon that is a liberal democracy, a market economy, has ample resources and a powerful military—rather like the U.S. The irony of this conversation impressed me that almost constant speculation about decline stalks leaders—see for instance, the New York Yankees, Liverpool FC (soccer), Joey Logano (NASCAR racing), Dior (haute couture), etc.
Decline seems to be a thing, a fashionable topic of conversation. Speaking prophetically (“the end is nigh”) seems to gratify pundits and express the wishes of adversaries. But who knows for sure? Certainly, the U.S. has been in some very tough spots before (such as 1786, 1814, 1860, 1893, 1932, 1941, 1968, 2008, and 2020) from which it recovered, sometimes slowly, sometimes rapidly. Even if you are confident of more recoveries it behooves you to dig into assertions about national decline. By what benchmarks could we test the claims? Given the gravity of the rhetoric, leaders need to get smart(er) about “declinism,” the sentiment that a national bust is approaching and inevitable.
Declinism is an evergreen subject for artists, pundits, and publishers. Edward Gibbon’s History of the Decline and Fall of the Roman Empire (1776-88) helped to define the genre. It framed a classic explanation for a nation’s decline: loss of civic virtue. Ancient history buffs relish Gibbon’s detail but the seven volumes of this work daunt most readers. Oswald Spengler’s The Decline of the West (1918) argued that all of Western Civilization was in terminal decline, which a century later seems rather wide of the mark, yet fostered a school of thought that resurfaces with each new crisis. Today, Spengler’s heirs argue that two world wars, a Cold War, the Great Depression and Global Financial Crisis, consumerist excess, inequality, and social injustice foreshadow national demise. Recent works by Robert Kagan[ii] and Fareed Zakaria[iii] argue that American hegemony is fading. And some of the books I cited in a recent post about the history of capitalism also carry the aroma of declinism.
A modern idea
In general, the subject of national decline, and American decline, has been a growing genre over the past century, as an Ngram of the annual frequency of phrases, “national decline” and “American decline,” in English Language books published from 1920 to 2022 shows. Surges in the frequency of such phrases suggest that declinism is associated with economic stress. Declinism is a way of thinking about the future, and recent economic stresses can warp one’s outlook.
For instance, recency bias affects expectations about the future by attributing greater weight to recent events than events farther in the past. Humans tend to extrapolate into the future what they have just experienced. Made a profit speculating on Bitcoin?—one can tend to believe in the repeatability of such profits. Lost your job or taken a pay cut?—expectations for future income will plummet. The over-weighting of recent events occurs because recent events reside in humans’ in short-term memory, which is more vivid, accessible, and easy to recall than events in long-term memory. Humans tend to discount reversion to the mean, the tendency of economic measures to return to long-term trend.
Leading Theories and Books on Why Nations Rise and Fall
By now, there is a large and growing research literature on why nations rise and decline—a search for “declinism” on Jstor, a database of academic papers, yields some 100,000 hits. The only way a general reader can begin to grasp the richness of thinking is to turn to some books written by thought leaders in the field. These writers tend to favor particular theories about rise and decline, which means that you can’t really gauge the field by reading just one book. Theories abound. Eventually, enough data may accumulate, and better analytic approaches may emerge to sort theories out. But until then, my advice is to get familiar with each of these theories. Here are four prominent theories about the rise and fall of nations with book recommendations about each. And I’ll offer a fifth of my own.
Geography and resources. In Guns, Germs, and Steel: The Fates of Human Societies (1997) Jared Diamond argued that geography, natural resources, and the environment that the nations face shape their cultures, institutions, and productivity. For instance, access to navigable water (Britain and Holland) leads to active foreign trade, which leads to transfer of ideas and technology, which encourages cultural openness and economic prosperity. Isolated landlocked countries (such as Afghanistan, Mali, and Chad) have tended to turn inward and forsake openness and prosperity. Diamond wrote, “history followed different courses for different peoples because of differences among peoples’ environments, not because of biological differences among peoples themselves…environmental geography and biogeography influenced societal developments.”[iv] In a later book, Collapse: How Societies Choose to Fail or Succeed” Diamond highlighted environmental damage and climate change as triggers of national instability.
Culture. Enduring questions in economic history deal with the influence of culture, norms, and societal practices. For instance, a thousand years ago, why did Western Europe did break out of the stagnant growth trend characteristic of most nations elsewhere? And why did the Great Industrial Revolution begin in Britain and not other countries? In The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor (1998) David Landes explored how “the world’s cultures lead to—or retard—economic and military success and material achievement.” He concluded that cultural norms motivated the breakout. Landes profiled the breakout nations as those that:
- “Knew how to operate, manage, and build the instruments of production and to create, adapt, and master new techniques on the technological frontier.
- [Were] able to impart this knowledge and know-how to the young, whether by formal education or apprenticeship training.
- Chose people for jobs by competence and relative merit; promoted and demoted on the basis of performance.
- Afforded opportunity to individual or collective enterprise; encouraged initiative, competition, and emulation.
- Allowed people to enjoy and employ the fruits of their labor and enterprise.
These standards imply corollaries: gender equality (thereby doubling the pool of talent); no discrimination on the basis of irrelevant criteria (race, sex, religion, etc.); also a preference for scientific (means-end) rationality over magic and superstition (irrationality). Such a society would also possess the kind of political and social institutions that favor the achievement of these larger goals.”[v]
Among all of Landes’s cultural drivers of national prosperity, a high regard for education is the paramount attribute. Attitudes toward work, saving, innovation, entrepreneurship, and social cohesion also figure importantly.
Productivity and competitiveness. Nations that promote innovations and technological diffusion and secure civil rights (property, sanctity of contract, equal justice before the law, etc.) tend to rise, while those that stifle the engines of competitiveness will fall. Two books argue that the advance or decline of a nation follows from the efficiency of its economy. The extent to which it invests wisely in productive assets and shuns fruitless commitments shapes its future. In The Rise and Fall of the Great Powers, (1987) Paul Kennedy documented the flow and ebb of Spain, the Ottomans, Britain, and the U.S. He argued that hegemony is expensive and tends to lead to economic overcommitments that sap a country of its productive vitality. He was doubtful about the prospects for the U.S. and wrote:
“Although the United States is at present still in a class of its own economically and perhaps even militarily, it cannot avoid confronting the two great tests which challenge the longevity of every major power that occupies the “number one” position in world affairs: whether, in the military/strategical realm, it can preserve a reasonable balance between the nation’s perceived defense requirements and the means it possesses to maintain those commitments; and whether, as an intimately related point, it can preserve the technological and economic basis of its power from relative erosion in the face of the ever-shifting patterns of global production.”[vi]
Michael Porter’s The Competitive Advantage of Nations (1990) argued that the relentless upgrading of productive capacity is essential to national advancement: “The only meaningful concept of competitiveness at the national level is national productivity.”[vii] He criticized the classic notion of comparative advantage that stimulated the globalization of American corporations and offshoring of jobs. He wrote, “You can source chairs or pencils globally, but you must make sure there’s a core capability at home in areas that are integral to the process of improvement and innovation in your industry, such as sophisticated components and specialized production machinery.”[viii] Plus ça change …Porter’s thesis anticipated today’s debates over deglobalization, industrial policy, subsidies for private sector enterprises, sovereign wealth funds, and protection of domestic industries.
Institutions are the guardrails on society: laws, norms, best practices, anything that shapes behavior and expectations for the future. David Landes and Jared Diamond acknowledged the importance of institutions on the way to their own special arguments. Various researchers advanced important arguments for this over the past four decades.[ix] But today, Why Nations Fail: The Origins of Power, Prosperity, and Poverty (2012) by Daron Acemoglu and James A. Robinson is the go-to book for the argument that the rise and decline of nations is about the adequacy and sustainability of institutions. And not just any institutions, but those that ensure voluntary exchange in markets, rule with the consent of the governed, and distribution of prosperity. The book distinguishes institutions that are “extractive” (or exploitative and authoritarian) from those that are “inclusive” (or democratic and redistributive). Inclusion expands political participation and economic benefits across society. Extractive economies usually align with authoritarian rule and domination by oligarchical elites. Inclusion leads to economic prosperity; extraction leads to economic stagnation and decline. The authors harness an impressive volume of research, as well as highly instructive pairwise comparisons such as between North and South Korea, East and West Germany, and two border cities, Nogales, Mexico and Nogales, Arizona. Acemoglu and Robinson wrote,
“Our theory for world inequality shows how political and economic institutions interact in causing poverty or prosperity, and how different parts of the world ended up with such different sets of institutions. …Different patterns of institutions today are deeply rooted in the past because once society gets organized in a particular way, this tends to persist. We’ll show that this fact comes from the way that political and economic institutions interact.”[x]
The recognition of Acemoglu and Robinson as Nobel Laureates in economics this fall applauded their focus on institutions.[xi]
I recommend reading these books about national rise and decline. They are well-documented, well-written, and impactful. But they leave me thinking that there is more to the story. First, it seems that any of the classic examples the authors offer could be explained to some extent by all four factors. To truly explain the rise and decline of nations begs for a synthesis of all four theories.
Second, in virtually all examples offered in these books, a shock of some kind seems to figure in the turning point to rise or decline. A famine (or abundance), a natural disaster, a plague, a war (with victory or defeat), the discovery of new reserves of a critical resource or a transformational new technology seems to awaken a nation to new growth or trigger a self-defeating spiral. I think the tendency toward rise or fall depends on the legacy of policies aimed at preventing a fall or promoting a rise. For this reason, I offer a fifth driver of the rise and fall of nations:
Resilience. Stuff happens. A foolhardy nation adopts a strategy of don’t-worry-be-happy. Thomas Jefferson supposedly[xii] said, “I’m a great believer in [good] luck, and I find that the harder I work, the more I have of it.” Prudential management of resources and the resilience necessary to withstand shocks require forethought. In financial crises, rapidly changing conditions and new information can make tight regulations treacherous. Markus Brunnermeier in The Resilient Society (2021) has argued that a strategy based on mere risk avoidance (such as rigid regulations against shocks) is usually costly, creates path dependence, and often fails to prevent risk—instead, he advocates “the acceptance of risk but in a framework of institutions, rules, and social processes that ensure resilience.”[xiii] Resilience is based on an amalgam of resources, culture, productivity, and institutions. Throughout history, national decline occurred when the nations became brittle, unable to absorb shocks without cracking. I think the scope of preparation should span at least the four preceding drivers:
-
- Resources (and geography). Operational science trains managers in the need to maintain adequate reserves of the factors of production against the risk of stockouts. The parallel to national reserves is straightforward.
- Culture. Leaders need to make the compelling case to the nation of the importance of international leadership, education, investment, professional competence, and teamwork.
- Productivity and competitiveness. Rising productivity creates the possibility of a rising standard of living within a nation and a greater ability to meet the challenges of international competition. Governments must renew a commitment to raising productivity in the policies and regulations they adopt. Businesses need to commit to strategies of capital renewal and employee training.
- Since 1970, informal norms of initiative and action in the private sector have been bound up increasingly by constraints of laws and regulations. Resilience in American society is better served by norms and policies that permit nimble action-taking on problems of local and national importance.
How the U.S. stands today
Brevity prevents a full listing here of America’s strengths and weaknesses today regarding resources, culture, productivity, institutions, and resilience. From my own perspective, I see both overwhelming strengths and some weaknesses that warrant serious concern. Repairing the weaknesses will be expensive, and it is not obvious how the country can pay for it. U.S. history suggests at least four tactics:
- Borrow more. But we can’t borrow our way out of this; the nation’s level of debt as a percentage of GDP is at a historic high. And borrowing more amounts to an intergenerational wealth transfer: taking resources from our children and grandchildren to pay for things today.
- Austerity. We might be able to cut some government spending—but special constituencies have proved so adept at protecting their claims on the government purse that meaningful cost reductions are likely to be few, protracted, and bitterly contested.
- Tax more. Raising taxes on the well-to-do is favored by some—but it seems likely that tariffs and soaking the rich won’t generate all of the necessary new revenue. A strategy of taxing our way out of these problems will likely need to touch the third rail of politics, taxing the middle class more heavily.
- Grow faster. Faster economic growth might relieve the burden of debt and spending relative to the size of the economy, and the pain of taxes. Proposals to goose the growth rate include relaxing government regulations, subsidizing special industries, and artificially depressing interest rates. But all of these can produce economic distortions that come to roost eventually. Though the U.S. economy has some rapidly growing sectors and other that have lost momentum. The U.S. economy is also huge, complex, and slow to respond to incentives. Can you make an elephant sprint?
My guess is that for the next 10-20 years, the U.S. will try a little of all of these approaches, but it won’t be pretty. And success will depend crucially on the absence of destabilizing shocks. Keeping fingers crossed for good luck, the country might climb out of the hole it has dug. The U.S. has done it before (1865-1879, 1918-1928, 1945-1960, and 1976-1982). But as business leaders are constantly reminded, hope is not a strategy.
The year, 2025, heralds a new presidential administration, new policies and politics, and probably a lot of new rhetoric. The ride might get turbulent, so hang on. Even if the recent election had turned out differently, the challenges of the near term would not have vanished.
I told the European visitors that I am concerned for the near term but optimistic in the long run, because I believe our liberal democracy and market economy can weather these challenges with enough time.
As 2025 approaches, I wish all of us a year of upward lift in how we rule, how we produce, and how we engage with one another.
End notes
[i] For instance, see Myra Adams “Five Reasons American Decline Appears Irreversible” (The Hill, Jan. 19, 2024); Ron Desantis, “The country is in decline.” (The Hill, June 17, 2023); William Cooper “America Is in Decline,” (Newsweek, April 19, 2024). See also “Views of the Nation’s Economy,” a survey by Pew Research Center, May 23, 2024, https://www.pewresearch.org/politics/2024/05/23/views-of-the-nations-economy-may-2024/.
[ii] See Robert Kagan, The World America Made (2012).
[iii] See Fareed Zakaria, The Post-American World (2008).
[iv] Diamond, page 25.
[v] Landes, page 217.
[vi] Kennedy, pages 514-5.
[vii] Porter, page 6.
[viii] Quotation of Michael Porter in Nancy Jacobson, 1990. “Review of The Competitive Advantage of Nations,” HBS Bulletin, October 1990 page 7.
[ix] For instance, a very influential article about the importance of institutions in national development was “Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England,” by Douglass C. Morth and Barry R. Weingast, The Journal of Economic History, 1988.
[x] Acemoglu and Robinson, page 44.
[xi] https://www.nobelprize.org/prizes/economic-sciences/2024/press-release/.
[xii] This quotation is by now widely attributed to Jefferson, though Monticello claims it is spurious. See https://quoteinvestigator.com/2012/07/21/luck-hard-work/.
[xiii] Brunnermeier, Markus, 2021. The Resilient Society, New York, NY: Endeavor Literary Press, page 23.