The End of American Competitiveness

America is not only losing its signature competitiveness in a rough-and-tumble world, but there is a chance that it will never recover, according to a new report from Rand Corporation.

Our guest on this week’s WhoWhatWhy podcast is the author of that report, Michael Mazarr. Mazarr, a senior political scientist at Rand, previously worked for the US National War College, the Center for Strategic and International Studies, and the Joint Chiefs of Staff.  

To help us understand the admittedly nebulous concept of “national decline,” Mazarr breaks the danger down into seven specific areas where nations in the past have lost their competitive edge. And he argues that history offers only modest hope that the decline, once it gathers momentum, can be reversed.

Another way to understand the danger is to study what happens to once-dominant corporations that become too big to keep up with change and are displaced by more nimble competitors that remain lean and hungry. 

Mazarr shows that competitive nations, like competitive companies, succeed by being open, tolerant, full of intellectual energy, and committed to learning. He believes the US is relinquishing its one-time advantages in all these national traits.  

Ultimately, he says, we have to decide if the bad patch we are going through is akin to that of an angry adolescent, rebelling against setbacks by acting like the bully of the lunchroom — an unfortunate phase that a still-strong nation might outgrow — or if we are doomed to play the impotent old man in the twilight of life, standing in the front yard and yelling at people to get off the lawn. 

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Full Text Transcript:

(As a service to our readers, we provide transcripts with our podcasts. We try to ensure that these transcripts do not include errors. However, due to a constraint of resources, we are not always able to proofread them as closely as we would like and hope that you will excuse any errors that slipped through.)

Jeff Schechtman: Welcome to the WhoWhatWhy podcast. I’m your host Jeff Schechtman. For much of our 246 years, we were a young, dynamic, striving country. Sure, we had flaws, we made mistakes, we took wrong turns, but we believed deeply in our ability to learn from those mistakes and to move the country forward. Today, it seems that we’re caught between that young, energetic country and some of the more mature, but less dynamic nations we see in Europe, for example. We are like a mean, angry adolescent nation ready to fight with anyone and about anything.

When the James Dean character in Rebel Without a Cause was asked, “What are you rebelling against, Johnny?” The answer was, “What do you got?” We are like that adolescent. Some are rebelling against our founders, some against our institutions, against our diversity, our technology. Essentially, what do you got? Like any adolescent, maybe we will outgrow this, or will there be enough time before we destroy the very fabric of our democracy? We’re living in a high school lunchroom with cliques, and anger, and hormones, and guns, and bravado. We’ll either graduate to the next level, or we’ll take the world’s longest time out while China and the rest of the world pass us by.

We’re going to talk about the state of the nation today with my guest, Michael J. Mazarr. Michael is a senior political scientist at Rand. Previously, he worked at the US National War College where he was a professor and associate dean of academics. He was president of the Henry L. Stimson Center, a senior fellow with the Center for Strategic and International Studies, a senior defense aid on Capitol Hill, and a special assistant to the chairman of the Joint Chiefs of Staff.

He holds a Ph.D. in public policy from the University of Maryland, as well as an M.A. and a B.A. from Georgetown. He’s the author of a recent Rand report entitled The Societal Foundations of National Competitiveness, an unsexy title, but a report that goes to the heart of whether or not we ever leave that lunchroom. It is my pleasure to welcome Michael Mazarr here to the WhoWhatWhy podcast. Michael, thanks so much for joining us.

Michael Mazarr: Of course, really delighted to be with you. So, I loved your introduction, and I thought a lot of the themes were really brilliantly stated. Our work would almost suggest that the United States may have passed through its adolescence as it rose to global power, in the late 19th century or early 20th century. And now the question is, are we reaching middle age?

Are we reaching a cranky middle age where the energy is starting to flag, some of the idealism is starting to go, and we become that old cranky person out on the lawn, [chuckles] hollering at things that they don’t like and shouting into the wind? So I think it’s really— We didn’t set out to investigate this question specifically, but one of the issues that came up in our research was, as you put it, this idea of reaching a phase in a national lifespan where the drive, the energy, the optimism tends to flag.

Jeff: So often we get caught up in the minutiae of this, and we’re looking at the politics and the various aspects of what’s going on, and we lose sight of the bigger picture that all these things are simply symptoms of a much larger situation.

Michael: Right, exactly, and I think so much of the partisan fury right now is a distraction from that. There’s a really useful discussion to be had about, are there ways in which the country is moving in the wrong direction? Are there ways in which the values that created dynamism and a strong competitive position are ebbing, but that discussion is not the same one as the just really fragmented hyperpartisan debate that’s all too often going on now.

So, yes, part of what we were trying to do with the work is, as you’re putting it, put some attention back onto the bigger picture and the ways of, how do you think about if you’re trying to decide is a nation losing its energy and what are the characteristics that we have to attend to to renew that energy, what are the answers to those questions? That’s what we try to look at.

Jeff: Before we talk about some of the seven specific areas that you’ve identified, how important is it to understand where the inflection points were, how we got to this point, what were the specific things that really got us to this stage that we’re at now?

Michael: That’s a really good question, and it’s actually not— We looked at long-term trends. One important thing that I have to say about the study is, as you know, is the part that applies these trends to the United States is just one chapter. And the majority of the research we did was trying to look at history to say, “What are the right criteria to judge national competitive position?” So, in that sense, we didn’t do a long-term historical assessment of the United States to say, “Where were the specific choices? Where are the inflection points?” We more looked at current trends in a variety of these areas and said, “Which way are they heading?”

That obviously begs an interesting question that you’re asking, which is, if social opportunity and the ability of most Americans to express their talents in a way that gives the country competitive advantage, if that’s stagnating or moving in the wrong direction, where are the decisions, the events, the factors that produce that, but that really wasn’t so much a part of our analysis in this phase of the work.

Jeff: Right. And the reason I ask, it has less to do with perhaps what those points are, but in the broad historical context that you’ve looked at in other countries and other situations, whether there is something in our situation that has to do with technology, that has to do with the speed of information, the speed at which decisions are made today, that somehow alters that historical framework. The scariest words on Wall Street, as we hear over and over again is, “This time it’s different.” Is this different really fundamentally?

Michael: So, in a variety of ways, every major historical epoch is different from key periods that went before, and then there are obviously areas of similarity. One area of similarity, I think, is the issue of human capital and talent, and maximizing the degree to which a society can tap into the talents of its people is something that goes back to ancient times. But I think, to me, the biggest area that reflects what you’re talking about and involves a significant change, involves the information environment, and that’s something we stress in regard to one of the trends being a learning and adapting society.

With a combination of the speed of information, the massive and constant flow of information, the decline of mediating information institutions, whether it’s mass media or experts, and the rise of social media, professionalized misinformation, and disinformation, I think there’s now an open question as to whether what we have called the marketplace of ideas can still work in the same way anymore.

And if it can’t work in the same way, then that is a significant difference from a number of prior eras, and it means potentially that open societies lose some of their competitive advantage, because typically we say a democracy, a market society has advantages because it has a lot of grassroots energy, lots of different ideas come up, those ideas are debated, and whether it’s in science or in business models.

And eventually, the more successful ones emerge as opposed to more of a centralized system that’s mandating those things. Well, if your information environment isn’t working properly because of these relatively new trends, then does that grassroots marketplace of ideas still have the effectiveness that it did in the past. So that’s just one area, and there are some others where, as you say, some of the new technologies definitely are creating a different context for a national competitiveness than existed before.

Jeff: Part of that is that the learning and adaptive nature of the information that you talk about is somehow gotten so far ahead of the institutions — because one of the areas you also talk about is effective institutions — that those things are so out of sync, that that’s a big part of the problem.

Michael: That’s absolutely right. And I think one of the big trends that, that relates to institutions and also another one of our characteristics, what we call an active state, the role of governing institutions in creating an environment for competitive advantage is that, as you say, for a variety of reasons and in a lot of these cases, the reasons why these trends are rising aren’t entirely clear, but institutions are unable to keep up with the challenges in societies.

And we see that at the local level, at the state level, at the federal level, this consistent notion, whether it’s the IRS doesn’t have enough staff and technological competence to keep up with tax returns, to down at the local level, whether it’s law enforcement or health or a variety of other institutions that in different places have challenges keeping up with what’s going on.

And that feeds into this where we just saw a couple of days ago, Gallup released its latest poll on Americans’ confidence in major institutions, and it’s an all-time low in measuring, which shouldn’t be surprising, but that sort of an institutional crisis is really dangerous for free societies because when people lose a sense that their public and private institutions, the things that are supposed to keep society coherent, solve problems, and give us a faith that the future’s going to be better, when those institutions have lost their credibility, people start looking for sometimes pretty dangerous alternatives.

Jeff: Talk about the difference that you found in terms of loss of faith in institutions public versus private and the degree to which that loss of faith is equal to or different in those two areas.

Michael: That’s a really interesting question. Generally speaking, if you go by the poll and survey data, it appears that Americans have lost significantly more faith in public institutions, in the branches of federal government. They’re a little more confident in local government because it seems more responsive, but still a lot of challenges there in the perceived credibility and honesty of public servants. And then you have a number of private— Small business, for example, is at the top of the list I think with something like a 70 percent approval rating or a faith rating, confidence rating in Gallup’s latest poll.

Big business has slipped, but a number of other private sector organizations are still higher. Partly that reflects this endless debate in the United States about the shared responsibility for managing social problems between public and private institutions, and this argument about civil society. Putnam’s Bowling Alone argument about a big problem in post-war America has been the decline of a lot of the membership in and role of private sector institutions of various kinds, not just business, but various kinds of organizations.

And at the best, the public and private institutions had this healthy synergy where you had this, what we call an active state doing what’s necessary to create a general positive environment for solving social problems, for competitive dynamism, and then private sector organizations creating a lot of connections between individual citizens and activities that are addressing social issues.

And that whole dynamic is grinding down a bit in a variety of ways. So, the basic answer to your question is people appear, from polling, to have more faith in private, non-governmental institutions than they do in government ones. But even those are declining, and I think the bigger phenomenon is just the loss of a sense that we have collective institutions, both public and private, that can create dynamism, solve problems, and create a more positive future.

Jeff: And that goes to this idea of national ambition and will that you talk about because if you don’t believe that problems can be solved or that there aren’t either public or private institutions that can solve those problems, it causes that ambition and will to just be sapped.

Michael: Right. Absolutely. And I think that there’s other aspects to the piece, the issue of ambition and will, besides faith in institutions, it’s just kind of a general— We borrowed this phrase, there’s an Italian historian who used this phrase of the energizing myth of a society that Kenneth Bartlett, the Renaissance historian, has re-popularized that phrase.

And I think that that phrase has a lot of weight to it, that this energizing myth of the United States, getting back to your introduction, and a lot of the descriptions you were using, the United States and a lot of countries in their phase of growth and greatest period of ambition have this notion of hopefully a positive and a productive, and to some degree, altruistic energizing myth of what the country’s about and a drive and an ambition. And interestingly, we find this both internationally, but also domestically, that another hallmark of it is a domestic environment of competition, ambition, striving, work ethic — all of that goes together — a people that is determined to make a mark in their personal lives and also in the life of the country and the global scene.

And there’s all kinds of evidence, polling and otherwise, that that has been ebbing in the United States for some time. And it’s a characteristic that can easily go wrong. As Paul Kennedy argued decades ago, overreach is one of the commonest routes to national decline.

And if you have excessive ambition and you run around the world invading people and doing things that ultimately sap your strength, financial and otherwise, that’s not a good thing. But that basic sense of an energizing myth, that the people of a country believe that there is something inherently unique and valuable about their country, and they are determined to — both in their careers and so on and the role of their country and the world — to fulfill that ambition, that’s something that is universally present in countries that are at the peak of their competitive dynamism.

Jeff: Is there an analogy to be made beyond the geopolitical historical analogies that you talk about? Is there a corporate analogy to be made? We see so many times companies that, as startups, in their early phase, have this kind of dynamicism, and as they grow, as they get larger, as they get too large and too complacent, that they die away. There’s so many companies that have never been able to pivot to modernity and have gone away.

Is there something that we can learn from that because one of the things that seems to be inherent in those stories is the culture of the company and how that culture either allows for or doesn’t allow for the company to pivot? Is there something we can learn from that and does that in some way go to the heart of the cultural divisions that we see in this country today?

Michael: Well, that last part of the question is really fascinating, and I’ll try to get to that. It’s tough to answer, but the general question about the corporate analogy is absolutely right. And that notion of the basic cultural mindset of an organization, of a country, of a social group is really what we’re trying to get after. And in fact, we started off our research looking into a bunch of literature on national culture and national outcomes. And it’s a very disputed field because it can easily become simplistic assertions about “Western culture is better than others.”

But it doesn’t have to be exclusionary in that sense that, and folks that say culture is not so important will say, “Well, 100 years ago people said Confucian culture was not aligned to economic development because Europe was so far ahead, and now we say Confucian culture is a better source of economic development than the West at the moment.” So, these things can change, but there are a certain set of cultural practices. And the mention of the business literature on this, I think is very apt because the business literature on corporate culture is not trying to say there’s one company or one regionally associated culture that’s the best.

It’s just trying to identify certain characteristics of corporate cultures that succeed and fail, and we were trying to do the same thing with countries. And you’re absolutely right in terms of the life cycle that a good deal of the literature on that talks about how as companies get bigger, they get more bureaucratic, they get more rule-bound, they get more conservative, they get more focused, especially in a shareholder environment, they get more obsessed with quarterly returns as opposed to innovation and new product development.

And as you know, there’s been a lot of research on ways in which companies have tried to break out of that. For a while, the popular route was, “Well, break out your research aspect, your innovation piece into some equivalent of a Bell Labs, or something that is freed from the bureaucracy of the larger corporation.” And in national security, they’re doing the same thing, they’ve tried to create little defense innovation units and exempt certain kinds of procurement from larger DOD regulations.

But it’s an open question, whether walling off a little reservoir of innovation in your larger bureaucratic organization really works. I think now some of the literature says it didn’t work that well for some of those companies. So, all of these issues in these dynamics as organizations, as countries become big, successful, powerful, but then ultimately, over institutionalized over bureaucratized.

And then to your last question, I think what can happen is when that sense of slowing energy sets in, when the country or the company is not as successful anymore, when there’s not as many resources to go around, then you begin to have frustration, you begin to have worry about whether they can remain competitive. And that can then feed into what becomes a fragmentation of the organization or the country as people break off into different groups and debate, and can no longer get consensus on where they’re headed. So that whole issue of life cycle and the role of culture and dynamism is there’s a lot of commonalities between the corporate literature and the literature on countries.

Jeff: And to that end, I’m reminded of the famous Peter Drucker quote that, “Culture eats strategy for lunch.”

Michael: Absolutely right. And it’s funny you mentioned that, we published a couple of years ago some work— we were asked to look into strategic planning in the US Air Force. And one of the findings was the same. It’s not unique to the Air Force, it’s true of the defense department writ large, it’s true of all government agencies, it’s true of many big companies. An implication of what we’re talking about is the 1950s view of strategic planning has now gone by the wayside. And part of the reason why is that being super bureaucratized, large plans with hundreds of measured outcomes, a plan that stretches out five years and tries to dictate where the organization will be.

And part of the reason why that, I think, has given way to, in a lot of cases, a more adaptive, reactive process that tries to be more bottom-up and have more grassroots innovation, is this very idea that old-style strategic planning created a culture that destroyed the strategies it was trying to promote. And so, the whole idea is you have to create the right culture to get the right strategic outcomes that you want, but creating the right culture, as you know from the work of Drucker, from Schein, and other scholars of corporate culture, that is one of the hardest things to do, and it’s equally hard with at the national level.

Jeff: And that was the old policy in the DOD back in the McNamara era right before and right after.

Michael: Absolutely right. Yes. What became what is now known as the PPBE process, or was known as that. It was, “We are going to plan this to success.” And the irony always was that that was the cultural characteristic of our opponent in the Cold War and was the reason why they lost the Cold War. And we’re still struggling to escape the legacy of that overplanned mindset and culture of the DOD in the ‘60s and ‘70s.

Jeff: One of the other areas that you identify, one of the other seven areas, is this idea of a unified national identity. And I wonder how that relates to some of these areas that we’re talking about.

Michael: Yes, it relates to a lot of them. It’s one of the things that’s probably closest to the issues that are in the news for the United States. In a number of historical examples we looked at, it’s pretty clear that countries gain a competitive advantage and can sustain their coherence, their economic growth and dynamism longer when they have a more unified identity, not just one that avoids fragmentation, but one that promotes a willingness on the part of citizens to sacrifice for this identity. So, in the cases of countries like Great Britain in its rise to global prominence, the United States, earlier the Netherlands when it was more briefly a world leader in economic and even maritime military terms.

Those countries have an advantage from eventually getting to a sense of unified identity that they know what it means to be in some level British, that people are proud of it, they will sacrifice for it. On the other hand, you have empires like the Ottoman Empire, the Austro-Hungarian Empire, even the Soviet Union, which was a multiethnic empire that eventually suffered huge competitive disadvantage because they were more fragmented, less unified.

So that can be a factor that undermines the effect of other factors. You can have decent institutions, but if you end up being fragmented in those ways, it’s going to be a big problem. And that, of course, is one of the most worrying trends in the United States today in regard to the factors we looked at. If you look at obviously a lot of the polling, increasingly Americans question the idea of whether at some fundamental level, they think that they belong to a clearly unified country with shared values for which they’re willing to sacrifice at that level. I don’t think it’s been lost by any means, but the trends are not good.

Jeff: In a way, it comes back around to the corporate analogy that if you look at some of these large companies, historically, that have been successful in pivoting and doing that turnaround, generally, it’s been by making them smaller.

Michael: Yes, by breaking them up or by finding ways to— That idea of, and I forget if this was Jack Welch or somebody else, but in one case, or it may have been IBM, the notion was we’re going to create the spirit of a small company in a big company body.

Jeff: Right.

Michael: And that was always the goal, and I think now that looked really promising for a while. And I think then people realize the difficulties of that, again if you try to break out small pieces of the company, it may or may not work but that’s in terms of innovative drive. Now, a great advantage the United States has is— And so another one of our characteristics is diversity and pluralism, when we can do it right, we have 50 state laboratories and hundreds of municipal laboratories of public policy. And there’s lots of examples of one state, a few states experimenting with certain kinds of things, whether in crime prevention or health care, a variety of other things, and then they share best practices.

It’s almost like at the national level, we have a model that some corporations would die for, which is 50 and actually hundreds of different entities that are constantly experimenting and have the potential then to assess each other and take what works and pursue it. And that’s not done in a very efficient way, but it still is the essential pluralistic model of the country. So there’s a lot. One of the findings we come up with is, in a lot of structural ways, the United States still has the potential to reflect the characteristics we identify much more powerfully than our main rivals, even China.

The trouble is we just have some of these particular social problems right now we need to solve. But that’s one reason why I’m still optimistic that the United States, as we are organized as a nation to govern ourselves, and in terms of some of the basic societal values and habits, we’re still in a reasonably good place to compete very well. It’s just that there’s a few roadblocks in our way right now.

Jeff: And one of those roadblocks is the organizational structure itself. There are clearly constitutional problems that stand in the way of some of the things that we probably know we need to do.

Michael: Yes, that’s true. That is true. So it’s almost like the grand structure is, I think still has some advantages, but there are discrete issues. Gerrymandering is a great example of this that it has become a structural support system for our fragmentation and is obviously used in partisan ways to take political communities, that if you structured them differently, it would maximize their commonalities and structurally magnify their differences. So that’s one example of, yes, there are definitely some.

And there’s larger issues about the overall constitutional structure under which the country is governed. I think there’s an argument to be made that the essentials of the national governance structure are still perfectly able to be aligned with the demands of the characteristics that we talk about in our work. But there are certain specific pieces, like the gerrymandering piece that, yes, have become structural impediments.

Jeff: Which seems to leave two alternatives: Either we have to change some of the structural mechanism or we have to lean into the fragmentation.

Michael: Well, yes, that’s true. I don’t know what it would mean to lean— Leaning into the fragmentation could be just a much more highly decentralized country where when you move from one state to another, whether you’re— But I don’t know how that’s possible. I think at that point you really do lose a national energizing myth, and the ability to lead internationally.

If the United States is a country where if you’re a person of a certain gender, if you’re a person of certain sexual preference, whatever, you have fundamentally different rights and responsibilities in different states in the country. If the tax policies of the states, if the policies in terms of public health are radically different in a way that are far different, even than the members of the EU, for example, different national entities.

Jeff: Yes, the EU is an interesting example because you think of not so much states, but regions of the country and the national overlay, and you think about is the EU model something to look at.

Michael: Yes. Although the EU does not— Part of the shortcoming and the difficulties that people often point to, everybody wants the EU to lead as an institution, but it can’t really because it’s too fragmented. I could imagine a world in which we don’t have a civil war, and it’s totally peaceful, and 80 percent of the people in the country are living in areas that they think reflect their values, but it is a highly fragmented country. I really wonder if a country like that can lead internationally though. At that point, I think, first of all, you’ve lost the sense of a truly shared national sense of values, habits, beliefs that the country could take internationally.

It’s often said there’s a whole literature in international relations studies about how the foreign policies of countries are echoes of their domestic political structure in some ways. And if we become that kind of a country, I think the credibility of our voice abroad, our ability to gather resources, to do decisive things abroad, I think all of that would be fatally handicapped at that point.

Jeff: Unless it unleashed enough economic competitiveness that we become a leader so powerful in terms of economic force, that it compensates for some of those other things.

Michael: That’s possible. So my instinct, and we did not analyze this with data or research in our study, but my instinct is that the economic inefficiencies— So in that kind of a world we’re talking about, if you’re a company operating in the United States, you might have three or four different environmental standards you have to meet, you might have three or four different labor standards. You know what I mean?

Part of the idea of the EU is precisely the opposite of that, obviously, as you know, is a rationalization and a commonality of certain standards that creates greater efficiency. Well, if we move in the opposite direction here, there may be some areas that grow a little faster as a result of some of their changes, but I think the inefficiencies it would create for that fragmentation would be a bigger price than any benefit that we’d get.

Jeff: And finally, are there historical models, countries that we can look to that provide some insight into this?

Michael: So an interesting question. Yes, when we looked at a lot of them in terms of— we looked all the way back to ancient Rome, knowing that there’s such tremendous differences. But some interesting comparisons, I think, in terms of all these historical analogies of Rome and the Renaissance Italian states of Florence and the others and Great Britain during its rise, and some of the countries that have had more competitive challenges, we looked across all those for lessons. I think one of the really interesting questions now is the United States has hit these headwinds, and certainly internationally, there’s a lot of doubt in whether the United States will recover.

As we started talking about the beginning, this idea of are we approaching our middle age and can we recover energy? Can we get back to some of our youthful energy? And that is actually in a new phase of study, something we’re going to be looking at of, are there historical cases of renewed competitive advantage, countries or empires or whatever that got to difficulties. And there are some. Going back again to Rome, there were a variety of times during the Imperial period where people said, “Okay, Rome is done now.” Rome was actually sacked and then returned to a significant degree of international hegemony.

The British Empire lost the American colonies and then 100 years later was at a new peak. So a key analytical question for the United States is, as a great power, how do you get to a period of stagnation or even a bit of relative decline and then recapture the energy? Those are the historical examples, I think, that’s most powerful for the United States to look at right now.

Jeff: Michael Mazarr, I thank you so much for spending time with us today here on the WhoWhatWhy podcast.

Michael: Sure. I’ve really enjoyed the conversation.

Jeff: Thank you. Thank you for listening and joining us here on the WhoWhatWhy podcast. I hope you join us next week for another radio WhoWhatWhy podcast. I’m Jeff Schechtman. If you like this podcast, please feel free to share and help others find it by rating and reviewing it on iTunes. You can also support this podcast and all the work we do by going to whowhatwhy.org/donate.

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