Rubin: Need to restore brilliance to nation’s faded glory

By Trudy Rubin

When I look ahead to the next decade, here's the question that haunts me: Can America get its mojo back?

In 2000, the great strength of the United States was not simply its overwhelming military power, but the other qualities that aroused international respect - our “soft power.” Much of the world still regarded our free-market economy as one they wanted to copy. Our democratic institutions were admired by many and abhorred by autocratic rulers who feared their people. Love us or hate us, most of the world admired how well our system worked.

In tandem with our “soft power,” our military was viewed as virtually unbeatable. This image of unshakable competence gave the United States very real leverage in the world.

That was then. As we enter 2010, America's glow - of economic competence and democratic achievement - has dimmed. No longer are developing nations eager to emulate our economic and political model.

That shifting view of America wouldn't matter so much if it rested on flawed perceptions. What makes me worry is that the new foreign view of America the incompetent may prove all too true.

Even after the collapse of the high-tech bubble in the 1990s, our ability to spring back and innovate created the expectation that our economy would always revive. Foreign governments were willing to underwrite our debt because our credit was golden, our currency sound, and our ability to repay unquestioned.

That was then.

In the first decade of the 21st century, during a fiscally irresponsible Republican administration, the United States heedlessly ran up foreign debt. Our financial sector - freed from regulation - indulged in gross speculation as if there were no tomorrow. Then came the crash.

The Obama administration, left to pick up the pieces, looks unlikely to produce serious reform of a financial structure ready to resume risky speculation. We are in hock up to our eyeballs to China, on whom we continue to depend to finance our staggering fiscal imbalances. Only God knows what we'll do when interests rates rise, as they ultimately will.

Who would want to emulate such a model?

People around the world used to talk about our innovators who developed incredible new products in their garages. But today, automakers and other once-signature U.S. industries are gasping for life, and banks won't make loans to new small businesses. We're not educating the scientists we need for tomorrow and are hampering the hiring of foreign grad students who have become our scientific mainstay.

This new image of the United States as economic bumbler has real consequences for our economic future. The world once looked to the United States to take the lead in international financial institutions, which worked to our advantage. Most international transactions are still conducted in dollars, the world's reserve currency, which saves us untold millions.

Now that we cannot seem to put our own house in order (and now that China has emerged stronger from the global economic crisis, in comparison with America's troubles) all that is changing.

I believe the United States is fully capable of staging an economic comeback, even if our role won't be what it once was. However, to rebuild, the country has to face its problems squarely, including those in the financial sector, the health and education systems, and within our political institutions.

Let's hope our leaders do better in the new year. We need our mojo back.

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