America in Decline? - Answers Part III

One of the most often cited arguements for the decline is the "Rise of China and India."

This one is actually rather simple. Because the real question is, "Are China and India really on the rise?" And the answer is: no, not yet. Well over 90% of China's economy is still of foreign origin. And India isn't much better.

And as Ireland has discovered, foreign investment comes rapidly can go just as rapidly. China and India hold that foreign investment only as long as the cheap labor exploit that that is being taken advantage of their remains available, as long fuel prices are kept low keeping the exploit viable, and as long as no other country captures the investment with an even more advantageous exploitable resource or an undercutting of their resource of cheap labor with even cheaper labor.

If any of those things happen, all of that investment disappears.

China and India know that, which is why they are trying hard right now to get their local economies brewing. The idea has always been that they would do as Hong Kong and Puerto Rico did before them -- take the infrastructure and skills that foreign investment built and trained them in, and use those to rapidly advance their own internal economies.

Only, for every Puerto Rico, there is a Cuba. For every Hong Kong, there is a Detroit. For every Japan, there is a Russia.

Likewise, all of that growth is based on a trade relationship with America and to a lesser extent Europe, and trade relationships are not stable. The current relationship is based on a nest of laws, agreements, and exploits on both sides. If anything should happen to alter that relationship -- an insult, a tariff, a culture shift, anything -- then the whole thing could collapse overnight.

Rapid foreign investment is no guarantee of an economically successful future.

More to the point, though, is the question -- has a country really risen when so little of their growth is from their own economy, when all of their growth is based on an exploit that could collapse at any moment and for several different reasons, when their rapid growth is so completely based on a trade relationship that could change at any time.

No.

China and/or India might be able to navigate through the rocky shoals of rapid foreign investment and soon begin to rise, following the path of Japan, Hong Kong, and Puerto Rico. But not yet.