Fareed Zakaria
Fareed Zakaria
Opinion Writer

Be thankful — sensible solutions do exist for U.S. problems

This might seem a tough time to celebrate Thanksgiving. The national mood is pessimistic. The economy continues to limp along. The failure of the supercommittee has come to symbolize the breakdown of not just governance but democratic politics. Yet there are reasons to be cheerful about the United States this week.

The United States continues to have the most dynamic economy in the developed world. We are enamored of Germany for having maintained its manufacturing base through timely reforms. That’s good, and we could learn a lot from other countries. But let’s note that Germany’s great companies are products of the second industrial revolution — from the early 20th century — clustering around cars, chemicals and machine tools. Germany has one notable company in the information economy, SAP. The post-industrial, information economy is dominated by the United States. The industries of the future, from biotechnology to nanotechnology, are dominated by the United States. The best research centers, universities and companies remain American.

Fareed Zakaria

Writes a weekly foreign affairs column.

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We also have the most dynamic society in the developed world. While Japan has entered and Italy and Germany are approaching a demographic death spiral, the United States remains young, vibrant and active. Demographics is not destiny, but it helps mightily to have a growing society, with a healthy share of young workers — who are also taxpayers. This country still attracts the most immigrants and most investment in the world.

The United States has gone through a big bust, which has cast a long shadow on its economy. But to put it in perspective, it is not nearly as bad as the one that crippled Japan almost two decades ago. In a recent debate, former Treasury secretary Lawrence Summers pointed out that housing prices in Japan dropped not by a third (as they have here) but by 85 percent; that the Japanese stock market plunged to a level that would be equivalent to the Dow falling to 2,600; and that the Japanese output gap — the difference between GDP growth and projected growth before the crisis — was 50 percent, not the 6 or 7 percent in the United States.

We should worry about what’s happening in Europe. But really, those problems are of a different order. Greece and other countries have debt problems. But they also have much larger competitiveness problems: They don’t make much that the world wants to buy. Italy’s economy has not grown in more than a decade. And crucially, these countries’ debts are denominated in a currency that they don’t control. The United States, by contrast, controls its currency, which is also the world’s reserve currency. That might produce a lack of discipline that has long-term risks, but it is unlikely to produce a European-style debt crisis anytime soon. Notice that as Europe faces its troubles, the borrowing costs for the United States keep dropping.

What about our political dysfunctions? These are real, but things are changing. Over the past two years we’ve seen political leadership from both parties at the state and local level. Governors such as Andrew Cuomo, Chris Christie and Jerry Brown are tackling deeply entrenched problems, such as pension shortfalls, that threaten to destroy state budgets.

A groundswell for deeper political reform has also begun to grow. In California, a committee of prominent Democrats and Republicans — Gray Davis, George Shultz, Eli Broad, Willie Brown, Condoleezza Rice and others — has produced a remarkable report endorsing a series of deep reforms. Next, they will put these on referendums to garner public support. The “Think Long” Committee has proposed fundamental tax reform that, while lowering rates, would yield $10 billion in new revenue to pay down debts and invest in education and infrastructure. It has outlined a series of smart structural changes to ensure better governance in the future. Nicolas Berggruen, the young, public-spirited billionaire who organized this effort, says, “The Committee has shown that difficult bi-partisan compromise can be reached if politics is set aside and the public interest is put first.” Other civic movements — Americans Elect, No Labels, Opportunity Nation — are out there trying to spur change through bottom-up activism.

Structural reform is crucial. We need sensible solutions to the problems of growth and deficits. But these exist. Simpson-Bowles and other commissions have already shown the way to lower deficits. The larger challenge is structural reforms to stop small minorities from blocking reform. We need to highlight the corrupt ways that Washington works — with Senate filibusters, secret and arbitrary holds and a broken budget process — and create a much more streamlined structure of governance for the 21st century.

The United States has problems. But unlike many other countries, it also has solutions. And since politicians won’t, citizens are increasingly finding ways to propose these solutions. That’s something to be thankful for — and hopeful about.

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