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State of the Union 2012: The Return of the Superpower

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When the economy of a militarily-bruised America stood on the brink of collapse in September 2008, the end of the superpower dominated the news, think tank reports and academic circles. Over the past few months, however, America has been showing a sure -- even if bumpy -- comeback.

The United States has succeeded in reversing its downturn, thanks to a flexible system that allows for the renewal of leadership and shift in paradigms. While President Barack Obama cannot claim all the credit, the comeback has been happening on his watch, and under his policies.

In fact America's shift goes much deeper than a mere change in leadership. Obama's election coincided with the crash of three decades of neo-liberal economics that had started as an experiment to save the government of the city of New York in 1975.

The godfathers of the New York upturn suggested that the city's government become leaner by shrinking the bureaucracy, ending welfare programs and subsidized housing, cutting out red tape, and implementing deregulation and the lowering of taxes in order to attract investors.
The successful experiment was endorsed by America's Ronald Reagan and Britain's Margaret Thatcher and applied on national scales. On the two leaders' conservative watch, the West prospered after years of recession. The boom was coupled with the collapse of the alternative Communist model in the Soviet Union. Reaganomics was later recommended by the World Bank and the International Monetary Fund to developing countries, only to cause economic disasters.
Presidents Bill Clinton and George Bush endorsed Reaganomics, and further contributed to deregulation and -- during Bush's tenure -- lowering of taxes. Throughout the 1990s and 2000s, America was growing on the back of unsustainable bubbles that always burst. The 2008 burst looked final.

Throughout the fat decades, two underlying trends eventually proved detrimental for America. While the federal government cut taxes, its expenses -- especially the military under Bush -- were getting bigger. The result was a national debt surge to $15 trillion between 1980 and 2010.

Another crack appeared in Reaganomics: Outsourcing, especially of America's manufacturing. When manufacturing emigrated, so did the accompanying research and development: America's crown jewel.

By 2008, America had become a nation of seemingly burger flippers. Most workers had shifted to the services sectors, and a culture of brokerage and undue bonuses spread. The country's trade deficit widened as the country pinned most of its wealth to the non-productive construction sector.

When Barack Obama took office in January 2009, almost all economists were shouting in the same direction: Bring back America's manufacturers. But the young president had to take care of unfinished business first. He continued bailing out giant American companies then on the verge of collapse. He then designed an exit strategy for the wars of Iraq and Afghanistan, two drags on the Treasury with little or no return.

Obama also believed that he should fix the health care system that was hemorrhaging resources. The results of Obamacare are yet to be seen.

He later signed into law new regulations that restrict the adventures of the financial sector in order to limit possibilities of yet another bubble.

Most importantly, Obama bet on America's manufacturing as the government practically nationalized car companies and employed a German business model. Instead of searching for continuous profit for shareholders, the car companies are now striving to keep stakeholders, which include workers, happy and therefore efficiently productive. Workers are now consulted over company strategy and wages.

As told in the 2012 State of the Union, America filed several complaints with the World Trade Organization to level the field with countries like China. Manufacturing started trickling back to America. The trend has been called in-sourcing and has brought back close to 350,000 jobs. The Boston Consulting Group estimates that in five years, the gap between China and America will be closed as the latter becomes equally competitive and attractive for manufacturing plants, which will bring back not only jobs, but research and developments, among other benefits.

America's economy is back to growing, this time without government money. Unemployment is on the decline, even though the government is shedding jobs. The economy looks promising, even with Obamacare, regulations of the finance industry and other policies deemed unorthodox a few years ago.

Bringing back manufacturing has become so popular that Republican presidential nominees found it popular to attack Mitt Romney for his career in company takeovers and workers layovers. America, both Democrat and Republican, is now abandoning the post-industrial age of bogus financial products and going back to its industrial prowess, the source of its world supremacy.

On Obama's watch, America's foreign policy has become wiser, though not perfect. Washington now realizes that its unmatched military power should be used sparingly and that it should lean on diplomacy, supported by various unmatched tools such as its economy, the biggest in the world, and its vast network of friends and allies.

The Middle East, once America's preoccupation, is now relegated to the backseat as Washington turns its attention to competing with China and staying number one in the world.
Barring unforeseen disasters, Obama now stands on solid grounds -- with tangible achievements -- for reelection. If that happens, he should be expected to grow bolder and more politically adventurous. At that point, he might employ Clinton's budgeting tactics that generated treasury surpluses. These can be used toward bringing down the national debt. When that happens, Obama would have reserved for himself a seat in history, next to presidents like Franklin Roosevelt and Ronald Reagan, for fully restoring America back to its unmatched superpower status. At least his State of the Union on Tuesday will be remembered for some time to come.