November 27, 2012 -- Updated 1859 GMT (0259 HKT)
Editor's note: Patrick Doherty is the deputy director of the National Security Studies Program at the New America Foundation and author of the forthcoming report, "Grand Strategy of the United States of America."
(CNN) -- Washington is all about the fiscal cliff
these days. In Doha, Qatar, world leaders are negotiating over climate
change. Federal debt and carbon emissions are indeed two big problems on
the nation's front burner. But they are just the beginning.
As the fog of the
election season lifts, America has a lot to worry about -- everything
from competing economically with China to housing rapidly retiring baby
boomers.
But there is another way
to look at it. Decisively addressing the nation's primary global
challenges -- backed by the market potential of powerful demographic
shifts at home and abroad -- could yield opportunity unlike any other in
America's history.
First, our four major challenges:
• In the last 20 years,
households, businesses and the federal government accumulated
exceptional levels of debt, which they are now trying, painfully, to pay
down. The 2008 financial crisis triggered a spiral of unemployment and
reduced demand that is nowhere near complete.
As household income contracts, families consume less and try to erase
debt, reducing demand for goods and services, forcing companies to
reduce expenses, meaning more layoffs, deepening unemployment, and so
on. Monetary policy and fiscal stimulus may have contained the worst of
the pain, but they cannot cure the disease. Federal Reserve Chairman Ben
Bernanke is right when he says the economy needs a broad-based and durable source of demand.
• Over the last 20 years, roughly 1 billion people entered the global middle class. In the next 20 years, there will be
3 billion more. Good news? Yes, except that these new consumers use
huge amounts of resources and emit more carbon, a roughly 300% increase.
Expect price increases for basic commodities like energy, food, and
minerals, and deepening conflicts among the great powers over resources
in familiar places: the Persian Gulf, the South China Sea, and Central
Asia.
• Climate change is
already with us. Superstorm Sandy, the Derecho, Arctic melting, and
droughts in the Midwest, India, China, and Russia this past year confirm
the scientifically proven trend. Beyond this, humanity consumes about
150% of the "goods" provided by the earth's natural systems -- including
fresh water, soils, and fisheries. We are consuming our limited
endowment of natural capital, reducing future returns while our global
population expands to 9 billion. This is massively destabilizing,
whether you're in New York City or Pakistan.
• Our infrastructure,
systems, and supply chains are not designed for the scale or the risks
of the 21st century. Transportation, financial, food, and industrial
systems have choke points, are inefficient, and lack oversight and
sufficient investment. They are magnifying threat and risk when they
should be compartmentalizing them. Quiet disruptions in such things as rare-earth minerals (critical to high-tech manufacturing), auto parts, and computer hard drives have all hit industry in the last two years, for example.
America's economy must
do some heavy lifting. Just as the country transitioned from war
production to civilian production 60 years ago, it must now transition
to sustainable production, while building a new American dream. If it
can, the United States will be ideally positioned to rebuild our middle
class, compete globally and pre-empt growing confrontation over
resources.
We must adapt and once again define the future.
First, America has a
homegrown demographic opportunity unlike any other. Driven by baby
boomers and millennials, 56% percent of homebuyers say that they want
the trappings of their American dream to be walkable and convenient, not car-dependent and isolated, and home prices already reflect this.
From 2014 to 2029, these two largest American demographics, each 25% of
the total population, will meet in the housing market as boomers empty
their nests and as more millennials marry and have children -- creating
the largest concentration of demand for housing since the period after
World War II. To seize this opportunity, however, Washington needs to
let cities and towns decide how to grow, and discourage the car-based
population dispersal known as sprawl. Not only will this put Americans
back to work in construction, it could reduce the environmental
footprint by roughly a third.
Second, global demand
for food and resources is skyrocketing. By 2050 global food production
must increase by 60%, while soil and fresh water must be regenerated,
not depleted. American farmers are held back by expensive, distorting,
and antiquated Cold War era subsidies that essentially pay farmers to
overwork the land and waste scarce water resources. We've already lost up to 50% of Iowa's topsoil, drained the Ogallala Aquifer, and created a fertilizer-based "death bloom"
at the mouth of the Mississippi. While conventional agribusiness is
enjoying high global prices, climate-related drought and floods have
reduced the harvest to the lowest since the early 1970s. Shifting the
worst of these subsidies from big commodity crops (like corn, wheat, and
soybeans) to pay farmers to convert their operations to modern
regenerative systems will help our farming families earn a more secure
living and be better stewards of the land.
Finally, the world needs
innovation. To accommodate 3 billion new middle-class aspirants in 20
years, we will need to make our resources more productive while reducing
the amount of carbon emitted. By focusing on advanced materials, energy
and manufacturing, we can rebuild our middle class, supplying the jobs,
wages, and returns Americans deserve. To lead this revolution in
resource productivity, we must stop taxing work and start taxing waste.
Washington universalized
the income tax to pay for World War II, when we had full employment and
needed to subsidize resource extraction to get materiel to the Allies.
Now we get 80% of federal revenues from taxing individuals,
are suffering from long-term unemployment, and consume far more
resources than Europe for an inferior standard of living. We're
conserving labor and expending resources when we need to do the
opposite.
We have the demand. Do
we have the capital? Plenty. There are trillions of dollars in pent-up
investment capital looking for reasonable, reliable returns, as the
chairman of Goldman Sachs recently wrote.
Instead of Washington
footing the bill, the federal government must reorient the Cold War
subsidies for housing, agriculture, and resource waste and create a new
generation of regional financing mechanisms. These new regional tools
must connect Wall Street's capital to the infrastructure and innovation
opportunities that will arise as regions plan for and build the future.
If it's done right, we'll channel excess liquidity back into the
productive economy and stop it from sloshing around as underperforming
corporate cash, money market funds, and high-risk derivatives.
Yes, Washington must
address the issue of the fiscal cliff and make progress on climate
change. But isolated solutions will only waste precious time. Tapping
into the new demand pools of the 21st century, unleashing pent-up
capital, and shifting American markets to lead a revolution in resource
productivity will position the United States to lead the world once
again.
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