For the last 40 years, Americans have lagged in recognizing the declining fortunes of their foreign rivals. In the 1970s they thought the Soviet Union was 10 feet tall -- ascendant even though corruption and inefficiency were destroying the vital organs of a decaying communist regime. In the late 1980s, they feared that Japan was going to economically overtake the United States, yet the crony capitalism, speculative madness, and political corruption evident throughout the 1980s led to the collapse of the Japanese economy in 1991.
Could the same malady have struck Americans when it comes to China? The latest news from Beijing is indicative of Chinese weakness: a persistent slowdown of economic growth, a glut of unsold goods, rising bad bank loans, a bursting real estate bubble, and a vicious power struggle at the top, coupled with unending political scandals. Many factors that have powered China's rise, such as the demographic dividend, disregard for the environment, supercheap labor, and virtually unlimited access to external markets, are either receding or disappearing.
Yet China's declining fortunes have not registered with U.S. elites, let alone the American public. President Barack Obama's much-hyped "pivot to Asia," announced last November, is premised on the continuing rise of China; the Pentagon has said that by 2020 roughly 60 percent of the Navy's fleet will be stationed in the Asia-Pacific region. Washington is also considering deploying sea-borne anti-missile systems in East Asia, a move reflecting U.S. worries about China's growing missile capabilities.
In the lead-up to the Nov. 6 U.S. presidential election, both Democrats and Republicans have emphasized perceived Chinese strength for reasons of both national security and political expediency. Democrats use China's growing economic might to call for more government investment in education and green technology. In late August, the Center for American Progress and the Center for the Next Generation, two left-leaning think tanks, released a report forecasting that China will have 200 million college graduates by 2030. The report (which also estimates India's progress in creating human capital) paints a grim picture of U.S. decline and demands decisive action. Republicans justify increasing defense spending in this era of sky-high deficits in part by citing predictions that China's military capabilities will continue to grow as the country's economy expands. The 2012 Republican Party platform, released in late August at the Republican National Convention, says, "In the face of China's accelerated military build-up, the United States and our allies must maintain appropriate military capabilities to discourage any aggressive or coercive behavior by China against its neighbors."
The disconnect between the brewing troubles in China and the seemingly unshakable perception of Chinese strength persists even though the U.S. media accurately cover China, in particular the country's inner fragilities. One explanation for this disconnect is that elites and ordinary Americans remain poorly informed about China and the nature of its economic challenges in the coming decades. The current economic slowdown in Beijing is neither cyclical nor the result of weak external demand for Chinese goods. China's economic ills are far more deeply rooted: an overbearing state squandering capital and squeezing out the private sector, systemic inefficiency and lack of innovation, a rapacious ruling elite interested solely in self-enrichment and the perpetuation of its privileges, a woefully underdeveloped financial sector, and mounting ecological and demographic pressures. Yet even for those who follow China, the prevailing wisdom is that though China has entered a rough patch, its fundamentals remain strong.
Americans' domestic perceptions influence how they see their rivals. It is no coincidence that the period in the 1970s and late 1980s when Americans missed signs of rivals' decline corresponded with intense dissatisfaction with U.S. performance (President Jimmy Carter's 1979 "malaise speech," for example). Today, a China whose growth rate is falling from 10 to 8 percent a year (for now) looks pretty good in comparison with an America where annual growth languishes at below 2 percent and unemployment stays above 8 percent. In the eyes of many Americans, things may be bad over there, but they are much worse here.