By John Cookson
Last year the United States imported $314 billion more in goods and services from China than it exported to the country. This trade deficit is cited by some as an example of America’s economic decline and China’s ascendency. You say in the book, "not so fast."
I do say, "not so fast" because I think we are calculating the way goods and products are made in a way that goods and products are no longer made. The assumption that every product comes from one country is simply not true. It's something that many people who know this world better than I do have recognized and have tried to show the ways in which an iPhone and iPad are made up of multiple components from many different countries. If you were able to break down where the value of each of these products goes you would find that it goes to lots of different places, and it especially goes to whoever has created the intellectual property in the first place. But most of that is invisible for trade numbers. Because there isn't a system of breaking down every manufacturing good in the world into its component parts, we end up ascribing all the value to a country that has the factory, that did the final assembly, missing out on all these other aspects of how goods are made.
You mentioned the iPhone, which of course advertises itself as being "Designed by Apple in California" and "Assembled in China."
The reality is that from a trade perspective and official trade figures there is no "designed in."
You write that there are problems not only with measuring trade, but also with measuring the overall size of the economy. Should gross domestic product (GDP) and other economic measurements be replaced with something different, such as a poll of how happy we are?
I don't think replacing our numbers with other numbers is really the answer. A happiness index is appealing to people because it purports to measure the value of things, the value of life and the quality of life. But all it does is look at a different set of variables than GDP. There's no one number that can capture our experience of are we collectively and individually doing well. The kind of will-o'-the-wisp of we are going to find a number, a really simple number, and if it goes up that means we are all doing well and if it goes down we are doing badly – that's just silly on the face of it.
Considering all the shortcomings of the measurements that are intended to tell us how an economy is doing, how is the U.S. economy really doing?
There's no one answer to that question. And granted, the world is full of "one answers" to that question. What I try to do in the book is help us understand that, first of all, the economy is just a creation of numbers. It isn't a physical, tangible entity that we can easily measure.
If by "the economy" one means GDP, which is usually the default number that people go to to answer the question of how the economy is doing, GDP only measures how much stuff we are making and how much stuff we are consuming at market prices, that we can measure. And those last two parts are probably the most crucial – at market prices, that we can measure.
There's a lot that GDP doesn't include. The limitations of GDP have long been understood, but the degree to which we continue to cleave to it remains pretty much unmitigated.I don’t think there's an answer to how the U.S. economy is doing unless one starts becoming more specific. What is the earning potential of most people relative to their cost of living? How do we even decide what cost of living is? Companies are doing really well. People who are wage earners are not doing so well. Both of those things are true, while simultaneously the GDP could be growing. So, I don’t think there are the answers we would like, which I know is not nearly as satisfying as if I could come up with the perfect other number that would then answer that question. But I think that's a dream world rather than the real world.
By John Cookson
You say in the book that there has been far more continuity in Russia policy since the end of the Cold War than many would publicly admit. Why is that?
We obviously like in our system to think that there’s a big difference between Republicans and Democrats, but the issue with Russia is that the presidential inbox has remained largely the same for the last twenty-two years. In the book, I go into six sets of issues with which we’ve constantly had to deal with the Russians, starting off with the nuclear legacy, with the proliferation of weapons of mass destruction, disagreements with Russia over the post-Soviet space (which is obviously very much on display today in Ukraine), the question of Euro-Atlantic security architecture (NATO and EU enlargement and the Russian response to that), then domestic Russian politics and more recently with all the upheaval in the Arab world.
These have been constant problems. Sometimes the approaches have varied a little bit, obviously. In the George W. Bush administration the arms control issues were downplayed, and in the Obama administration they were more important. But in general, many of these issues, including Iran which has been a constant for the past 22 years, haven’t really changed. Most of the people that I interviewed for the book – officials who were in the Clinton, Bush and Obama administrations – admit the same thing, that there really isn’t that much difference.
By John Cookson
Fareed’s ‘Book of the Week’ is Paul Brinkley's War Front to Store Front. Brinkley was the Pentagon official tasked with getting capitalism going in Iraq and Afghanistan. GPS's John Cookson spoke with Brinkley this week about his experiences, Afghanistan’s economic potential and the prospects for stability after the U.S. withdraws from the country this year.
Much of the focus in recent weeks has been on the politics of Afghanistan and on comments by President Hamid Karzai. But you say economics is the underlying issue for the country. What did you learn about Afghanistan’s economy during your time there?
We launched the mission in 2009, seven years after the Taliban had been deposed. We entered Afghanistan at the request of both the command and the embassy in Afghanistan to provide, to build and to understand what was possible economically. What was shocking about that was there was so much potential. But seven years into the conflict it was late to get started. The two areas we were most aggressively pursuing were resource development – both minerals and oil and gas – as well as agriculture.
Oil and gas and minerals had received no attention at all. And agriculture had basically been limited to provision of fertilizers and seeds, but no improvements in technologies, no improvements in yields, no effort to open markets and connect Afghan agribusinesses to international supply chains. So we immersed ourselves and launched an entire effort there to build a basis of economic stability for the country that you could then rest institutions on.
Here is a list of the books Fareed has recommended over the course of the GPS show. Stock up your library.
Adapt by Tim Harford, Franklin and Winston, an Intimate Portrait of an Epic Friendship by John Meacham, The Making of the President 1960 by Theodore White, The Increment, by David Ignatius, and The Post-American World: Release 2.0 by Fareed Zakaria
Land of Promise: An Economic History of the United States by Michael Lind
George F. Kennan: An American Life by John Lewis Gaddis
Looking for a good read this summer? On each episode, the "Fareed Zakaria GPS" show highlights a Book of the Week. Have you missed any? Then catch up on these past five recommendations and tell us what you would recommend in the comments below.
"Land of Promise: An Economic History of the United States." Author Michael Lind, one of the founders of the New America Foundation, gives a revealing history of the American economy, emphasizing the crucial role that the state has played in making America an economic superpower. It will unsettle many of your cherished beliefs. "Fate of the Species." In elegant, compelling prose, Fred Guterl, who is one of the great science journalists of today, lays out the megachallenges we confront - super viruses, climate change, disappearing species.FULL POST Shortly after eleven o’clock on the night of May 1st, two MH-60 Black Hawk helicopters lifted off from Jalalabad Air Field, in eastern Afghanistan, and embarked on a covert mission into Pakistan to kill Osama bin Laden. Inside the aircraft were twenty-three Navy SEALs from Team Six, which is officially known as the Naval Special Warfare Development Group, or DEVGRU. A Pakistani-American translator, whom I will call Ahmed, and a dog named Cairo—a Belgian Malinois—were also aboard. It was a moonless evening, and the helicopters’ pilots, wearing night-vision goggles, flew without lights over mountains that straddle the border with Pakistan. Radio communications were kept to a minimum, and an eerie calm settled inside the aircraft. FULL POST This week's "Book of the Week" is Peter Godwin's The Fear.
It's a beautifully written, harrowing account of the ruin of a country.
The country is Zimbabwe, formerly Rhodesia, where Godwin was born.
The year is 2008.
That's when the nation's long time tyrannical ruler Robert Mugabe lost an election and brutalized his nation as punishment.
Here's the blurb for the book:
Looking for the perfect Father's Day gift?
How about a book that can put today's rapidly changing world in lucid perspective?
My book of the week was published three years ago, but - in a strikingly prescient way - foretold the January revolution here.
The book was banned by the Mubarak's regime - and understandably so! If you want to understand how Egypt got to this crossroads, read this book.
My book of the week is former U.S. Secretary of State Henry Kissinger's latest, On China. This is a must read.
Part history, part memoir of Kissinger's extensive dealings with Chinese leaders over 40 years and part analysis, this is a major work.
That Henry Kissinger could write such an ambitious book at the age of 87 is just extraordinary.
My book suggestion this week is Katie Couric's The Best Advice I Ever Got, featuring life lessons from everyone from Mike Bloomberg to Donald Trump, from Jimmy Carter to Bill Clinton and from Melinda Gates to Martha Stewart.
There is a chapter by yours truly.
The best part is the proceeds from this book help send worthy kids to college.
"Alarmed by the lack of innovation in the United States today, former Harvard Business School professor and current consultant Kao diagnoses the situation, describes best practices, explains how innovation works and puts forth a strategy proposal, all in an attempt to squirt ice water in America's ear.
Kao - who has been an entrepreneur, a psychiatrist, an educator and a pianist for Frank Zappa - is clearly passionate about his premise. Aimed primarily at policy makers and legislators, his three-pronged agenda is designed to help the government create a culture committed to constantly reinventing the nature of its innovation capabilities."
I'll have a special on innovation on GPS in June.
The Global Public Square is where you can make sense of the world every day with insights and explanations from CNN's Fareed Zakaria, leading journalists at CNN, and other international thinkers. Join GPS editor Jason Miks and get informed about global issues, exposed to unique stories, and engaged with diverse and original perspectives.
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