Relying on your wonderful and prestigious past to ensure your wonderful and prestigious future is probably the most dangerous attitude you can take.  Just ask Don Burr and PEOPLExpress or TWA "Old Timers". 

The past is the past.  But never lose sight of the present and future.  If the US decides to rest on its laurels thinking it's untouchable, then it's absolutely possible for us to be unseated as #1. 

I doubt USA will be oertaken by EU.  I think there is too much speculation in the media about how EU could overtake US economically.  However, there is other country that could and most likely will challenge USA in next few decades - China.  It's economic power grows very fastly, same as technology.  From manufactorer of cheap and often bad quality things it became technological superpower.  It was the state which first launched commercial MagLev trains, it will soon have the tallest skyscreaper and probably could surpass USA and Russia in space program later also.  Neither of those things could even be imagined in like 1970.  Remember, that China has about 1250 millions people (USA has less then 300 millions, thus a bit more than one fifth of China's people), which means that Chinese GNP per capita could be just one fourth of US one and it would still surpass USA by the size of economy.  With Chinese rowing rates and opening to capitalist economy, it doesn't sounds like an impossible thing. 

Matt D you are saying the truth - however, I doubt EU (which is a very bureucratic machine with many conflicts between member states themselves) could become the economic or technological superpower.  Of course, only time will tell that.  But saying that EU will overtake US is something like saying that Japan or Russia will.  Of course, that could happen some time in the future, but by current situation it isn't likely.  What I said is that by looking into current political situation, if US economic leadership would be lost, China would overtake it. 

We as a nation go from periods of huge imagination (the 90s, tech, Internet) to periods of imaginative accounting (now), when the investment money holds off until visionaries return. 

I hope those who get chub over such self-anointed titles enjoy our status as "world's only superpower" now (and clearly they are)....because the EU, China/Asia and even India are shaping up to be very serious contenders for the same title. 

Economy is about trust, do people trust the US$ and US stock market better than other currencies or stocks?  If yes, then the USofA will continue to lead,
if not someone else will.  During GWB the world has seen wars and now talks about less public spending (tax cuts), if you cut public spending, education will surely suffer for these with poor parents and less people will be able to
get high education.  I think the USofA is more dependent on the world than
it thinks, if people around the globe stop drinking Coca/Pepsi-cola and drive
Ford, then the US economy will suffer....

Speaking as a citizen of America's largest trade partner, I can see the EU theory materializing. 

With respect to Canada, the US has undermined the spirit and the rules of North American Free Trade Agreement several times.  Our industries have been shaken by boycotts, increased tariffs, and US government subsidies that are clearly outside the law with respect to NAFTA. 

Now we are faced with vague threats from various US legislators about "punishing" Canada economically because of our official Iraqi war stance.  The threats will boil over when Canada decriminalizes pot in the near future since the US now promises to make it harder to deal and travel across the border. 

The EU is looking more attractive as a focus of trade.  In the aerospace field, we are already utilizing their products rather heavily.  Airbus is just the tip of the iceberg. 

Another thing the EU has that the US doesn't is inexpensive labour.  The EU is diverse enough to be able to offer everything from hi-tech to lo-tech services at corresponding prices. 

Of course the biggest obstacle for trade between the EU and Canada is the distance.  It's much easier to move goods between the US and Canada....for now anyway. 

Perhaps we can just ask them to load up all the Airbusses with goods on delivery flights...

Anyway, we've got oil.  We've got natural resources, we have tons of fresh water and hydro-electric power.  The US won't ever stop buying that stuff.  As far as McDonalds and Wal-Mart go, we all know we can do without those 21st century plagues.  I foresee a transition where we move our economic "strawberries" into more than one basket.  We need diverse trade policies that don't soley rely on the US during periods where it's led by an idiot like Bush. 

Airplay ... you just can't resist, can you?  Regardless of the topic, your conclusion is always the same .... Bush is an idiot.  Makes your credibility really soar!!! 

I agree with Sonic ... China is the future world power.  I suspect that by the end of this century, China will be #1.  They exactly fit Airworthy's economist friend's remark .... "...the ability to adapt to science and technology is more important than the nature of the trading area." 

That's exactly where China is heading. 

The educational system in the USA does not offer a consistently good (or even adequate) product across the board.  Certainly, we have the best schools anywhere, but they only cater to a small number of students -- by and large, the majority are mediocre, and many are clearly substandard. 

The USA will, of course, continue to turn out top notch technology, but in smaller numbers than China.  The EU will continue to be dragged down by domestic squabbles and bureaucracy, as one member suggests. 

"We as a nation go from periods of huge imagination (the 90s, tech, Internet) to periods of imaginative accounting (now),"

Absolutlely not true.  The creative accounting and supposed creative business went hand in hand.  They are just being exposed now.  The accounting misdeeds occurred almost entirely under Clinton's watch.  They restate earning well back into the 1990s these days.  Let's all be clear about that one.  The huge imagination is not gone.  I am confident that America's imagination is alive and well.  However investors are just not throwing money hand over fist at bad ideas like wash-my-car.com or ijustwantyourmoneyyouidiot.com

It will be a long, long time before China becomes an actual superpower.  Coastal China has seen a boom perhaps unprecedent in human history.  However, the Chinese hinterland needs development and China has not done much about it.  It will cost hundreds of billions and years to fix.  There are great disparties within Chinese society that will also cause problems.  China will not become a true economic superpower until the one-party state ends.  The communists do not permit the free flow of information and that will retard the country's development in some measure. 

I think that sometime in the 25-40 years we could see the fall of an economic superpower: Japan.  The second largest economy in the world has gone from being world's largest creditor to the largest debtor in about 10 years.  They effectively have zero economic growth and a sclerotic political system that prevents necessary reform.  Japan has an assload of foreign reserves which can keep them afloat for a very long time. 

Unlike the rise of military superpowers, the rise of an economic superpower would not harm or threaten the US.  Ultimately it is in our interest to see China, India, and any other poor to become economically powerful.  Not only would they be better off but we would also.  The only potential downside for us is that our currency may no longer be the world currency for trade in many goods and commodities. 

Despite his near-lunatic anti Bush rants, Paul Krugman has written an excellent book on this topic called "Pop Internationalism."  The premise is that contrary to popular views, nations do not compete economically.  It is worth a read. 

With respect to Canada, the US has undermined the spirit and the rules of North American Free Trade Agreement several times.  Our industries have been shaken by boycotts, increased tariffs, and US government subsidies that are clearly outside the law with respect to NAFTA. 

As a Canadian, I will admit that Canada is as guilty as the US of violating NAFTA in substance and spirit.  The above comment is just a one-sided myopic viewpoint often espoused by Canada's hard left. 

The EU is looking more attractive as a focus of trade. 

Incorrect.  Canadian trade is increasingly focused on the US.  Canadian trade with Europe is at an all-time % low and continues to fall (due in part to Europe's marginal economic growth in the last 20 years).  I suspect this comment was just to minimize the US impact on Canada (anti-Americanism?). 

Another thing the EU has that the US doesn't is inexpensive labour. 

The EU's extremely rigid labour laws make it a very expensive place to source labour. 

We need diverse trade policies that don't soley rely on the US during periods where it's led by an idiot like Bush. 

No.  Canada needs to further integrate its economy into that of the US to ensure Canadian prosperity and efficiency.  By the way, Bush is not an idiot. 

Referring to Paul Krugman means, I assume, that you spend some time with the Times.  I hope you noted this past week the almost jaw dropping casual indifference that most of 'the Street', and indeed some of its' biggest players, paid to the big score settling fines. 

I also hope you read this excellent commentary by the Times editorial board:

The huge imagination is not gone.  I am confident that America's imagination is alive and well. 

I am too.  I just think, like a hermit crab, it crawls back into its' shell when the "in" thing seems to be blood & guts adventurism and new and wondrous ways to polarize the nation.  Certainly the money that funds it does. 

However investors are just not throwing money hand over fist at bad ideas like wash-my-car.com or ijustwantyourmoneyyouidiot.com

(chuckle) Or ideas like a Pentium microchip or an operating system offered up by a nerd from Harvard. 

It will be a long, long time before China becomes an actual superpower. 

I think you've lent creedence to Airworthy's original post. .... a citizen of a superpower badly underestimating the competition simply because their product...or in this case, their culture and politics...has always been regarded as inferior. 

The People's Republic already is an economic superpower.  It is so powerful , we in the States modify our very values and policies to suit it.  For 40 years we scoffed and grunted at the Soviet form of Communism.  We to this day still have Cuba on the 'silent treatment' for their transgressions against our values.  But about 25 years ago, we smelled a sweet scent coming from a China no less communist and no less oppressive.....the smell of profit.  Vast profit, from the growing change purses of a customer base four times the size of our own.  It, like oil, addicted us.  Since then, our addiction has transcended supply and gorged on demand as well.  Not only do we get rich off of helping to build this massive new consumer economy, but in turn we integrated its' vast, cheap labor pool into a standard element in our own society. 

China is in charge of Chinese markets.  China is in charge of the vast factory of labor that pistons our own economy.  We're not.  That's power. 

I'll sum it up by saying this, En....Here in the US, Wall Street reacts almost as extremely to a tiny virus in the streets of Hong Kong as it does to 300,000 Americans at war in Iraq. 

That's power.  And you may be assurred it isn't getting dimmer. 

I think that sometime in the 25-40 years we could see the fall of an economic superpower: Japan.  The second largest economy in the world has gone from being world's largest creditor to the largest debtor in about 10 years. 

Unlike the rise of military superpowers, the rise of an economic superpower would not harm or threaten the US. 

An economic superpower that's not a military superpower.  Hmmmmn.  There is modern precedent, Japan from the 60s to present day.  But a first world economy more likely than not would require a first world projection/protection of will......the ability to get one's way, and keep it.  Japan became an economic superpower over a period of time when a military superpower protected its' interests (still does).  Let's envision an economic superpower that doesn't have that foriegn protection.  The easy answer is, What would you do? 

Exactly. 

It's ironic that it took 8 years of a Democratic President to convince me what had essentially been a Republican lauded idea ....that free trade and economic integration can keep the peace better than armies and navies (Howard Dean got scalped last week, by his own brethren, for suggestting that exact notion).  I'm still a firm believer in it.  Which is why I think the unilateralism and Dirty Harry-jingoistic pablum eminating from the present Administration has done nothing to further that. 

Our policy towards China is shaped in large part by profit but it is about half the picture I would say.  The actions taken with respect to China over the past 14 years while distasteful (the capital of my China is Taipei), were the right thing to do.  China now needs GDP growth of something like 6-7% just to keep up with population growth.  If the US had isolated China following Tiananmen, then two things would have happened: China would have fallen to the hard-liners and China could have gone into the throes of mass social unrest because of umemployment.  Many academics have speculated that if China were to actually suffer mass unemployment and social unrest, they would drum up nationalism and go after Taiwan.  Then we would step in and lots of Chinese would die.  We did the right thing as unpleasant as that may be. 

I agree that we should not underestimate China but I do not think I am.  China is still a poor country.  Despite the amazing skyscrapers in Guangzhou, Shanghai, Dalian, and everywhere else, I think they lack many things that would make them a superpower in the near or medium term.  China is no superpower yet.  They are big and they can affect us.  If they cut us off, Wal-Mart would raises prices until we found alternate suppliers in SE Asia.  There are plenty of takers in region that are ready to step up to the plate should China ever try to muscle us.  They won't.  They still need us more than we need them. 

There is absolutely no comparison between the complete fiscal irresponsibility in Japan and US deficit spending.  Japan's fiscal situation is untenable.  No way.  Many Japanese officials even refuse to acknowledge the problem.  I won't go into the details of the Japanese situation, but they are screwed unless they turn things around in a hurry. 

Hong Kong is a major entrepot with thousands moving in and out.  If SARS broke out at a similar crossroads, we would have the same reaction.  Notice we do not react as much to outbreaks in the Ebola river valley. 

The EU already has surpassed the USA on a few economic indicators and more are to follow; And if foreign confidence in the US economy and fiscal policy should continue to erode as it does now, that process would just accelerate. 

As for China, I suspect it´s quite a bit like a rather small western Germany with a gigantic eastern Germany tied to its back... Handicaps like that aren´t just overcome in a heartbeat or without substantial setbacks, although they ultimately can be.  Even Germany is still fighting hard to overcome the stagnation of a mere 40 socialist years... In China, we´re talking about millenia of imperial plus a few decades of communist stagnation, and on a much larger scale. 

But still: It´s not about "who´s got the biggest economy".  The USA with their mere 290 million inhabitants couldn´t keep up in such a race in the long run anyway.  It´s a lot more important how healthy the economy is - including its social, strategic and political environment. 

In this respect, Europe is working hard on a vast range of reforms (it´s not always pretty, but all in all quite successful).  China is determined to succeed.  Japan is sleeping at the wheel.  Africa is in a coma.  Southern America is sick, but will probably come back.  India has a hard time solving its social problems.  But the USA even seem to be in regression to the 19th century.  And that´s not good. 

" But the USA even seem to be in regression to the 19th century.  And that´s not good." 

What a bunch of nonsense.  The EU has probably the most sclerotic, ossified labor market in the world.  The US is still the most dynamic economy despite the last few quarters of what can only be described as correction from the excesses of 1990s.  While Europe has many bright spots, it is not as good as attracting talent and applying technology.  There are still laws that prohibit entrepeneurs from starting to businesses after a certain number of bankruptcies. 

Smart Chinese, Indians, etc are not flocking to Europe to seek opportunity.  EU fiscal policy is no better than that of the US particulary with certain members exceeding their deficit limits.  Actually those limits lengthen recessions in Europe. 

The US, and many other countries, particularly Europe and Japan, face a demographic problem in the coming decades, as more and more of their population reaches retirement age and decreasing birth rates coupled with increasing life expectancy means that the ratio of the size of the dependent population to the size of the workforce will continue to increase.  This would place a huge strain on the social security and retirement benefit programs in these countries. 

This coming problem is most acute in countries like Japan, western Europe etc, which have high life expectancy coupled with very low birth rate; the U.S. has a higher birth rate, but it will still be a problem as the baby boomers get into their 60s.  Even China will face this demographic problem within the next 3 decades because of their falling birth rates, and unless its able to develop significantly by then, its transition to a developed country would be a non-starter. 

While this is a threat to many societies, its also an opportunity for others, like India, Indonesia and others.  In India, in fact, a proposal was introduced to the Government very recently to further develop technical education and infrastructure with the sole aim of wresting additional business in the services sector from more advanced countries, through a combination of low-cost skilled workers and the demographic pressures in western countries causing their own workforces to shrink. 

I think the USA will survive economically in the long run for one good reason: despite the recent economic downturn we still have a stable economic market. 

The problem with Europe is that the changing demographics of that continent could eventually case some quite ill effects there.  This is especially true with the explosive immigration of people from the Middle East and northern Africa over the last 20 years--and these immigrants have very high birth rates. 

As for Japan, they are still in trouble due to the fact they never really bothered to clean up their financial huge debt problem like what the US did with the Resolution Trust Corporation (RTC) did for the failing savings & loans companies. 

The advantage that the US has over other parts of the developed world is immigration.  Japan has near zero.  Europe has some but not on the scale of the US.  The US does a far better job assimilating new arrivals than any other country. 

As a Canadian, I will admit that Canada is as guilty as the US of violating NAFTA in substance and spirit.  The above comment is just a one-sided myopic viewpoint often espoused by Canada's hard left. 

Open your eyes YYZ717.  The sale of Canadian Durham wheat is being attacked again this week.  18 billion worth of illegal agriculture subsidies are being questioned.  The decimation of the west coast lumber industry due to unfair tariffs on Canadian board wood is under investigation.  Cedar shakes, beef and pork.  You name it, the US has violated NAFTA.  Hard left?  Man you are fixated aren't you Mr. McCarthy. 

Incorrect.  Canadian trade is increasingly focused on the US.  Canadian trade with Europe is at an all-time % low and continues to fall (due in part to Europe's marginal economic growth in the last 20 years).  I suspect this comment was just to minimize the US impact on Canada (anti-Americanism?). 

Ah yes.  The old "anti-American" chestnut.  I wonder if you'll feel the same after Canada decriminalizes pot and the trade sanctions start. 

The EU's extremely rigid labour laws make it a very expensive place to source labour. 

Yes.  That's why Portugal is manufacturing computer chips just like Mexico, Malaysia, Taiwan and other countries with inexpensive labour.  Remember I said that the EU had a diverse workforce.  That doesn't mean that EACH country has a source of cheap labour. 

No.  Canada needs to further integrate its economy into that of the US to ensure Canadian prosperity and efficiency.  By the way, Bush is not an idiot. 

I wonder if you'll feel the same after Canada decriminalizes pot and the trade sanctions start. 

Celluci has said that US border checks will likely increase if Canada does decriminalize pot posession.  This should further cause the Liberals to rethink what they're doing.  Anyway, it makes no sense to decriminalize a dangerous addictive substance anyway. 

The Fed Govt (whatever political stripe) should be HARMONIZING all Canadian laws with US laws as our 2 economies continue to integrate.  Of course the hard left would disagree. 

Anyway, it makes no sense to decriminalize a dangerous addictive substance anyway. 

Yes.  It's much better to spend billions of dollars in a vain attempt to keep 2% of the pot out of the country...

I am in no way a pot smoker but even I have read tons of documentation from auhthoritative sources that consider pot to be neither dangerous or addictive.  And even if it was, why aren't we adding the use of cigarettes and liquer to the criminal code?  How about gambling?  It's been shown to be addictive and hazardous. 

By decriminalizing pot, you put the criminals out of work and start drawing revenues from taxation much like you do with liquer.  You can even introduce a new cash crop to make up for the loss of tobacco. 

And...furthermore, the last 2 US presidents wouldn't be guilty of violations of federal law...no wait.  Bush used Cocaine.  Can't help him there.