Saturday, January 29, 2005

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Fred Kaplan exaggerates just a wee bit

In Slate, Fred Kaplan has an assessment of the National Intelligence Council's 2020 report -- about which I've blogged before. He's puzzled about a few things:

The report has received modest press attention the past couple weeks, mainly for its prediction that, in the year 2020, "political Islam" will still be "a potent force." Only a few stories or columns have taken note of its central conclusion:

The likely emergence of China and India ... as new major global players—similar to the advent of a united Germany in the 19th century and a powerful United States in the early 20th century—will transform the geopolitical landscape with impacts potentially as dramatic as those in the previous two centuries....

The trends should already be apparent to anyone who reads a newspaper. Not a day goes by without another story about how we're mortgaging our future to the central banks of China and Japan. The U.S. budget deficit, approaching a half-trillion dollars, is financed by their purchase of Treasury notes. The U.S. trade deficit—much of it amassed by the purchase of Chinese-made goods—now exceeds $3 trillion. (emphasis added)

A few minor corrections to Kaplan's essay:

1) The U.S. trade deficit is big, but it is most certainly not $3 trillion. The November trade deficit was $60.3 billion. 2004's trade deficit will be in the neighborhood of $600 billion. In 2005 it's expected to grow in size to around $670 billion (see this John Quiggin essay for more). These are all very big numbers and it's worth wondering about the macroeconomic implications -- but they're not $3 trillion. I have no idea where Kaplan got that figure, but it's just wrong.

2) I suspect one reason that the mainstream media didn't cover the trend that Kaplan stressed is that this was not new analysis. From what I can see, the NIC based their projections on a Goldman Sachs paper by Dominic Wilson and Roopa Purushothaman entitled, “Dreaming with BRICs: The Path to 2050” -- which was released in late 2003. I remember it because I referenced it in this TNR Online essay. The danger with such projections, of course, is that too often they are straight-line extapolations from recent history -- remenber, in the early eighties, it was projected that Japan's economy would be bigger than ours right now. As Arthur Chrenkoff points out when discussing potential rivals to American power:

To anyone familiar with Indonesia or Brazil to posit that these two states might as early as 15 years from now pose a challenge to the United States (even if in combination with others) might seem a wildly extravagant claim. China and India are in a much better position to eventually end the "unipolar moment", but both countries still face tremendous challenges in translating their considerable human and natural resources into sustainable and significant international reach.

I'm not saying that the NIC projections should be ignored -- but perhaps they should not be given the status of certified fact that Kaplan would like to stamp on them.

posted by Dan on 01.29.05 at 06:29 PM


Kaplan's $3 trillion figure is the U.S. net foreign debt.

The U.S. net international investment position was -$2.4 trillion in 2003. If you add in the projected current account deficit for 2004, you get a projected U.S. net international investment position for 2004 of -$3 trillion. The negative of the net international investment position (as you know, but some readers might not) is the equivalent of the U.S. net foreign debt.

The title of your post should, I think, be "Fred Kaplan Misspeaks" rather than "Fred Kaplan Exaggerates a Wee Bit." His use of the word "amassed" makes me think that he meant to write "foreign debt" rather than "trade deficit," but suffered one of those unfortunate bursts of aphasia that most academics know all too well.

All the best,


posted by: Noel Maurer on 01.29.05 at 06:29 PM [permalink]

Hey, it's difficult to make prediction. Especially about the future.

posted by: Barry Posner on 01.29.05 at 06:29 PM [permalink]

I look at the 2020 report conclusions and other that spell out a current and future environment where the US ability to project its will on others will decline. This is true wether you are talking about economic or military power.

The problem this poses for the current administration is that they do not realize this.
If you take Iraq as an example that is the lesson we should be learning from this.
The neocon believed that we could easily
overpower Iraq and impose out will on them.
Yes, we quickly overpowered the Iraq army.
But beyond that the real lesson to the world and to the US is that the US ability to control events is much less than the admin believed and
that they believe to this day. The election today is just another in a string of events that were suppose to show how the US was winning in Iraq. Maybe, but the jury is still out on that.

The admin is still trying to implement their policy on the cheap and the end result is that they are showing that the US is a lot weaker than many believe and that others willingness
to accept US "solutions" has fallen sharply.

posted by: spencer on 01.29.05 at 06:29 PM [permalink]

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