Bank of Canada Governor Mark Carney thinks the United States is in permanent economic disarray. At best, it will take the country years to recover. At worst, it will never recover. “It’s going to take a number of years before they get back to the U.S. that we used to know,” Mr. Carney told CTV’s Question Period. “In fact, they are not in our opinion ultimately going to get back fully to the U.S. we used to know.”
Well, perhaps. He could be right. (U.S. Federal Reserve chairman Ben Bernanke appears to agree with him.) But he could be wrong – as noted historian and political science scholar Charles Doran, for one, would readily affirm. In a January musing on Canadian-U.S. relations, he said: “Misjudging either the vitality of the American political system, or the capacity of the U.S. economy to recover, is a fool’s game.”
Prof. Doran, an American, is a professor of international relations and director of Canadian studies at the Johns Hopkins School of Advanced International Studies in Washington. He developed the “power cycle” theory of the rise and fall of great states – the latter of which, he says, almost always ends in great wars. On this basis, we must hope Mr. Carney is wrong. A never-ending American recession would surely imply a cataclysmic “power cycle” event of one kind or another.
Prof. Doran understands why people think the U.S. is in decline. “Oh America!” he writes. “Still buried in a painful recovery from recession, while coping with record 9 per cent unemployment levels, the United States appears unable to reach conclusive decisions about a strategic path for recovery. At least to outsiders, the two-party political system seems fatefully polarized. … The United States seems less dominant on the world stage.”
But it would be a serious mistake to underestimate America, he says. “Still by far the largest and richest economy in the world, possessing the most flexible and massive military capability, which remains the backstop of global order, the United States enjoys a diverse and balanced economy marked by a capacity for innovation and entrepreneurship.” The invention of shale gas “fracking,” he says, is only the most recent example. The coming U.S. recovery will be based on a stronger foundation than ever: the highest labour productivity in the world.
Further, the U.S. political process is not as dizzy as it appears, Prof. Doran says. “Politics in the time of James Madison was no less turbulent than it is today. … Despite the noise and contention, the bills do get paid.” Watch for a return to sanity after the November election, he says. Whoever wins, the Keystone XL oil pipeline will be approved – and everyone knows it. “Washington has not given up on the 21st century – far from it.”
Mr. Carney’s pessimistic prediction implies turbulence for Canada – whether the U.S. recovery is merely prolonged or whether it’s permanent. In an average recovery, he notes, American GDP would already be 2.5 per cent higher and Canadian exports would be 6.5 per cent greater. This weak U.S. recovery means that Canadian businesses have lost $30-billion in export sales – so far.
Extrapolate this slow recovery across a decade, Mr. Carney says, and the cumulative loss of income could equal $30,000 for every man, woman and child in Canada. Canadians would be well advised to pray for a speedier U.S. economic recovery.
Not to despair. Economists who predict the future are frequently wrong. Historians who predict the future are frequently wrong, too. In neither profession does prognostication imply predestination. But chances are that Prof. Doran is more apt to be right on American manifest destiny than Mr. Carney. Prof. Doran’s expectations are shaped more by the character of the country than by thousands of statistical data points.
For his part, Prof. Doran anticipates that history’s next “power cycle” peak will coincide with wrenching economic turbulence in China – the country Mr. Carney thinks essential to safeguard Canada from U.S. decline. Prof. Doran sees an abrupt end to China’s “accelerating rise up its power cycle.” When China’s economy hits the wall, he says, the country will enter a period of social collapse and national paranoia that will require major U.S. help – “beyond trade and commerce” – to survive. He could be wrong. But he could be right.