America celebrates its Declaration of Independence from Britain on July 4th. These sentences from the document forged in Philadelphia in 1776 still rank among the most stirring words ever written in a political text:
"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed."
Of course, the nation has often fallen far short of the social and political revolution announced by the founding fathers. It took a brutal civil war to end slavery and federal troops to topple Jim Crow. The battles between farmers and the moneyed interests, capital and labor, were long and often violent. Nevertheless, after 56 democratically held Presidential elections, it's fair to say that America's political revolution has been remarkably durable and successful.
Question is, is America losing its economic independence 234 years later? And if so, does declining economic independence threaten the nation's hard-fought political gains?
The reasons for worry are apparent and abundant. The most prominent revolve around the federal government's $13 trillion in debt. Foreigners now hold more than half of the Treasury bond market and almost a fifth of the corporate debt market, according to Paul Warnock, professor at the Darden Business School at the University of Virginia. China alone is an investor in some $900 billion in Treasuries. There are widespread fears that China now possesses an economic stranglehold over the U.S. American companies have hollowed out their country's manufacturing base, shifting much of their assembly lines into cheaper regions of the globe, especially China. The necktie class is losing jobs to outsourced service-sector employment, most notably to India. Taken altogether, a growing number of commentators foresee an empire in decline, brought down by too much debt, too much consumption, and too little production. "This is how empires decline," writes Harvard University historian Niall Ferguson, perhaps the most erudite of the declinists. "It begins with a debt explosion. It ends with an inexorable reduction in the resources available for the Army, Navy, and Air Force."
There's no gainsaying that the risk is there. The long-term budget deficit and debt projections are on an unsustainable path. In that sense, the alarms are a healthy response. But the operative word is "long-term," and they have less relevance when the unemployment rate is at 9.5 percent and only 590,000 private-sector jobs have been created over the past six months. What's more, there's a mountain of difference between dependence on another nation that comes from weakness—a colony, say, that makes a living selling natural resources—and that which comes from strength, where the ties reflect gains from commerce.
At the moment the global capital markets are comfortable making a big bet that America isn't losing economic independence or political resilience—or becoming a colony of China. For instance, as investors flee the debt of such countries as Greece and Spain, which they fear won't be able to meet their obligations, they're flocking to U.S. Treasury notes. That has driven the yield on 10-year Treasuries to a mere 2.9 percent. The rate has come down from the 4 percent level reached in April.
For another, the dollar is reasserting its value as the global economy's main currency. It's the euro that's crumbling instead. As for the Chinese government, it may have some theoretical
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