Is America in Decline? The Charts Don't Lie ...

(Dec. 9) -- It is a possibility universally debated, to paraphrase (or mangle) the great writer: that the American dynasty is in decline.

That, after all, was the subtext for the controversy over President Obama's bow to Emperor Akihito of Japan during his trip to Asia in November, which conservative critics took as an expression of what they regard as Obama's belief that the U.S., no longer the unchallenged superpower, must strike a deferential posture on the world stage. It's been the theme for consecutive Newsweek covers, and of dissenting columns asserting that America's primacy is more secure than the worrywarts understand. Even Hollywood is tapping into the popular sentiment: In a remake of the movie Red Dawn set for release next year, the bad guys will be played by the Chinese, whose ascendancy is the source of much of this latest round of American status anxiety.

Of course, measuring an empire's influence or might is a tricky business, and the injection of partisan politics into the discussion only further muddies the picture. But thankfully, where economics are concerned, we can consult objective metrics to get an unsullied look at where the U.S. -- or at least its business -- ranks in the global order. And when you run those numbers ... well, suffice it to say they are not going to put the worriers at ease.

Let's go to the charts:

1. Just five years ago, according to data from Forbes, nearly a third of the world's 2000 largest publicly traded companies were based in the U.S. Since then, that total has fallen by 36 percent.



Taking over their spots have been businesses from the emerging BRIC countries (Brazil, Russia, India and China). Since 2004, the number of BRIC-headquartered firms that can be counted among the world's largest has doubled to 258.

2. Some (left-of-center) scholars have called the growth of multinational firms over the 20th century the new face of modern imperialism. And it's true that in one sense, American businesses have lived up to this billing by earning a growing share of their profits from overseas – 28 percent last year, versus just 4 percent in 1948. But at the same time, globally, American businesses' earning power has declined dramatically this decade compared with those from other nations.


Of course, this could just be a sign that America's mature capitalist economy makes profit opportunities harder to come by. Given the rapid decline in this measure, however, it's more likely that U.S. firms are facing both tougher and nimbler competition from upstarts overseas.

3. To get a further sense of where the United States could be headed, it can also be instructive to look back at the economic fates of past world powers. This next chart shows the GDP of an empire's home country over time. (Economic data prior to World War II is hard to come by, so the dashed lines in the chart below represent years when no data is available.)



While the United Kingdom and Germany saw sharp drops in their global economic presence as their respective empires contracted, Japan and Brazil experienced robust growth post-imperialism. Unfortunately, the U.S.'s path has so far looked more like the former group rather than the latter:



In fact, as the chart above shows, the U.S. has been in relative economic decline for almost 40 years. All that doesn't necessarily mean the U.S.'s eventual second- or third-fiddle-hood is sealed -- though the trajectories are not encouraging. As the previous chart also shows, China was once the world's largest economy, and if present trends continue, it will reclaim that title before mid-century. Should that happen, here's hoping the past won't repeat itself, and the U.S. won't take 150 years to reclaim the top spot.