Tuesday, June 14, 2011
83% say of American adults say they have less trust in "politics in general" than they did 10 or 15 years ago;
79% say they have less trust in big business and major corporations;
78% say they have less trust in government;
72% report declining trust in the media.
Distrust of government and Big Business is not new and has been trending negatively for decades. However, the distrust numbers have grown to such startling negative levels that the confidence of the nation in itself and in the capacity to create the future leaves the Dream wondering about itself.
Disgust and public separation from politics is clear. Big Business now seems to be an important and recklessly self-interested arm of the political process. So how does the media get into the distrust formulation?
As late as May of 1972, 70% of Americans "had trust and confidence that the government could handle its domestic problems." But the Watergate break-in happened one month later and the decline of trust in government has never abated.
In 1980 CNN was created by Ted Turner. This led to the creation of a 24/7 news cycle. Cable has proliferated and the Internet has transformed communication to an extent unimaginable in 1980.
In spite these changes, legacy media still authenticates news while cable and alternative media elaborates it and serves as a GPS for like-mindedness as these fertilize segregated communities of interest . When trying to analyze the distrust of the media there are many theories. Here are four.
1. Roughly half the US the population, (Gen X,Y,Z) doesn't know the media is supposed to be trusted as a public watchdog. They have their own personalized media and know no other world and their most trusted news person today is John Stewart, host of a pretend news program. Among these younger Americans traditional media is simply irrelevant.
2. Proportionality - is the appropriate ratio of one quantity to another, especially the ratio of a part compared to a whole. The media persistently displays for ratings, a loss of proportionality by over-coverage of the unimportant events such as Charlie Sheen's crack-up, the impending royal wedding and Donald Trump's Birther campaign.
3. Factoids; a term coined by Norman Mailer is not about little facts. It's about unmelodious fabrication lazily repeated so often in the media, that it becomes "true". In terms of the American Dream, factoids are rampant and begin with the idea, still peddled desperately by the real estate, home building and mortgage industries, that "homeownership" is the American Dream. In fact, only 3% in the Survey indicated this was their American Dream. Among many other examples is the China story told to Americans in such a way that 62% of us believe China has the largest and most powerful economy in the world even though it is one-third the size of the U.S. 52% of us believe "the future will be created by China."
4. Information Theory - A central principle of Information Theory is that information is received in inverse proportion to its predictability. Predictability leads to the incubation and multiplication of factoids. One reason we are losing confidence in the nation is because we are now accustomed to bad news about ourselves. Our sails are trimmed every day and the nation's self-worth is bruised.
Here's an example of how the three problems of proportionality, factoids and information theory play out in practice.
47% of the US debt held by the public is held by foreigners and the greatest holder of that debt is China ($1.1 trillion). Is China the most important part of that story? Probably not. Japan is 9.7% of the Chinese population but itself owns 80% of the amount of US debt owned by China ($885 billion). The story isn't China. The story is that nearly half of the US publically owned debt is non-American hands whereas in 1970 it was less than 5%. China is not the point. The point is that our financial future is increasingly not in our own hands.
The American public is in the dark and increasingly afraid of China based on disproportionate factoid driven stories.
Monday, June 13, 2011
Xavier University's Recent State of the American Dream Survey Reveals Irrational U.S. Fears About China
A growing majority of Americans believe "the future will be created somewhere other than America." (57% in 2011- 52% in 2010.)
- 52% believe the future will be created by China.
- 16% by the European Union.
- 10% by Japan
- 3% by India
In addition, 63% of Americans believe that the Chinese economy is larger than the US economy although it is actually one-third the size.
It's not unusual for Americans to misunderstand foreign affairs but these numbers reveal a chink in the armor of the American Dream which is ultimately fueled by self confidence. The famous "can do" spirit doesn' wilt from challenges.
Complicating matters are new counter-intuitive economic wrinkles. Advanced economies grow primarily through innovation and technology breakthroughs. Developing economies offer investor advantages that developed nations do not; low wages, higher returns on capital, the freedom to adopt or reverse engineer technology rather than invent it. The incessant pressure to innovate, create new technologies, products, and processes is the curse of success. Thus, it is the natural economic order that investor capital flows from wealthy countries to developing countries.
But according to World Bank numbers it appears counter intuitively that money is flowing more from rich countries to rich countries. In 2007 as the US was entering its economic slide and facing the loss of 8 million jobs, direct foreign investment in the US was $240 billion. In China it was $138 billion. Despite all the hype, that's about the same as the direct foreign investment into the Netherlands with a population 1% of China's.
There has been phenomenal growth in China and other successfully developing economies. But before we turn over the future to China there are some important considerations.
- China is still not fully a free market economy and the irony is that Americans distrust both their government and big business but we are evidently willing to trust that the communist Chinese government and businesses have competence we do not.
- The "cheap labor" in China is becoming more expensive. Wages doubled between 2002 and 2008 and cheap labor has declined as a priority for US companies. According to a survey of by KPMG, labor costs are now less important to buisinesses than "product quality, fluctuations in shipping rates and currencies."
- Quality issues - A survey by MFG.com indicated that 19% of companies surveyed brought all or part of their manufacturing operations back to North America in 2010, (up from 7% from 2009.) This action is largely credited for the increase of 136,000 jobs last year --- the most since 1997.
The idea that countries like China and India are successfully creating a "middle class", a legendary signal of economic health, are exaggerated. Based on the calculations of the World Bank, in 1980, the per capita GDP in China was $525 per person, while in the US it was $25,000 per person. This means there was a differential between China and the US of about $25,000 per person.
China has had spectacular growth and the per capita GDP there is now about $7,000. However, per capita GDP in the US has also grown in the same period to $46,000. This means, counter intuitively, that despite China's remarkable growth, the per cap GDP differential has actually widened from $25,000 per person to $39,000 per person.
According to Branko Milanovic, head of research at the World Bank, "if the US per cap GDP grows by 1%, India will need to grow at 17% and China by 8.6% a year, just to keep absolute income differentials from rising."
A relevant question is whether the odds are greater that China can persistently grow at nearly 9% a year or whether the US will only grow at 1% or less per year? The average growth rate for the US has been 3.1% for 65 years and in the recent very tough years (2003 - 2011) the US has still averaged 3.2% with only one year of negative growth.
The point is that our fate is in our own hands not in China's or anyone else's. If we feed the beast of innovation by keeping up with the educational and financial commitments necessary to do so, it's America's game to lose.