The Global Economy Bungled

Perception of Decline Troubles America

"WHO AM I? Why am I here?" So went Vice Admiral James Stockdale's surprisingly existential outburst in his slightly more than fifteen minutes of fame as a vice presidential candidate. But the comment could just as easily have issued from the entire nation, which was suffering last year from a collective identity crisis. With the Cold War over, the United States had become unsure of its place in the world. And its two major industrialized partners, Europe and Japan, were both suffering from a loss of purpose as well. The result was a year of confusion and drift in the management of the international economy.

The numbers were bad enough. Economic growth in the industrialized countries crept ahead at a sluggish 1.5 percent pace in 1992-not enough to keep unemployment from rising. The jobless rate in the countries of the Organization for Economic Cooperation and Development averaged 7.9 percent over the year and was projected to creep up to 8.2 percent in 1993.

But the debilitating problem was less one of production than of psychology. In the United States, in particular, the mood was extraordinarily sour, as Americans developed a gloomy foreboding, not seen since World War II, that their nation was caught up in an inexorable process of economic decline and that their children's generation would not live as well as they had.

Polls early in the year by The Wall Street Journal and NBC News found that 66 percent of voters felt that the United States was "in a state of decline," Most said they feared the next generation of Americans would not live as well as the current one. And 72 percent rated Japan as a stronger economic power than the United States. But the most stunning measure of America's pessimism came when respondents were asked to rank America's relative economic power: only 17 percent of voters still believed the United States was the world's leading economic power, and an astounding 43 percent believed it was not even in the top tier.1