THE `THIRD WORLDING` OF AMERICA?

By HAROLD L. SIRKIN

From Boston Consulting Group

If you look carefully behind today's economic headlines, a huge story is developing.

The short version is this: The United States, through a combination of neglect and various self-inflicted wounds, is undermining its economic vitality. A number of former Third World economies, meanwhile, are now growing at warp speed. Sometime in the foreseeable future, the U.S. economy ( now the most powerful in the world) will be overtaken.

It won't happen overnight. But based on all-important trend lines, such a scenario is not beyond the pale. Nor is it a sure bet; there are many "ifs" still in the equation. Nevertheless, if the United States doesn't get its house in order, it's not too difficult to envision the high-speed China and India Express overtaking the aging U.S. local.

The United States has always prided itself at having more and better of virtually everything needed for modern commerce and comfortable living, from infrastructure to schools. The problem is: While America's competitors are rapidly improving in these areas, America is backsliding  and there doesn't seem to be the political will to reverse things.

A good example is the highway system. The United States has some 47,000 miles of interstate highway and some 600,000 bridges. Much of this, however, is dated and decaying. The Interstate Highway System was started in the mid 1950s. Many bridges predate that. According to the U.S. Federal Highway Administration, more than 75,000 bridges are now "structurally deficient" and a third of America's urban and rural roads are in poor to fair condition. The highway bridge that collapsed last summer in the city of Minneapolis, Minn., for example, had been declared structurally deficient. More than a dozen people died.

By comparison, China, which is slightly smaller than the United States, has added some 15,350 miles of expressway since 2001. It plans to expand its highway network to nearly 53,000 miles, surpassing the U.S. system.

This story is similar in other areas. Consider air travel. While flying is the preferred mode of long-distance travel, efforts to build new airports or expand existing facilities routinely run into strong opposition from pressure groups concerned with noise, air pollution, and other "quality of life" issues. The U.S. air traffic control system, meanwhile, is a relic of the past, relying on 1960s radar technology: a maintenance nightmare. Capacity remains static, while demand grows. The Federal Aviation Administration expects more than one billion passengers annually by 2015.

America's ports are operating at or near capacity(especially on the West Coast) but political leaders have no apparent interest in expanding them. Many of America's wastewater treatment plants are aging, causing serious overflow problems. The electric power transmission grid is congested. The North American Electric Reliability Corporation predicts electricity usage will grow more than twice as fast as capacity over the next decade. The Department of Energy considers the situation "urgent." If it isn't remedied, more "brownouts" and "blackouts" are likely. This, in turn, will trigger greater reliance on small generators, which are more expensive and less eco-friendly.

There's more. America has one of the most extensive and expensive public school systems in the world. Yet, U.S. secondary school students score near the bottom on math and science tests among students from developed countries, the U.S. Department of Education reports. At the university level, decline is also apparent, particularly in science and engineering (S&E), where approximately 78 percent of all S&E doctorates are now earned outside the United States.

On top of this, the U.S. health care system seems to consistently deliver less for more. The latest evidence: a new peer-reviewed study from the Commonwealth Fund showing the United States ranking last among 19 industrialized nations in reducing premature deaths. The value of the dollar has fallen, down 29 percent relative to the euro in five years, as of October 2007. Government and private-sector watchdog agencies that in the past helped guarantee financial stability all missed (and may have contributed to) the sub-prime mortgage mess, pushing the economy closer to recession.

The data all indicate that America is moving in one direction while many of its top competitors  especially those from such rapidly developing economies (RDEs) as China and India  are moving in another. At some point, the paths will cross.

There's a saying in the navy that it's difficult to turn around a battle ship. The point is simple: Because of its size and weight, when a large ship is moving in one direction, it takes a long time to slow down and make a turn.

The United States economy today is that battle ship. It is still large and powerful, but it's on a dangerous course that needs to be corrected.

More and more, the United States is starting to look like a Third World country. If it hopes to move in a different direction, it needs to start now. Perhaps that's the kind of "change" Americans need to demand of their next president  not a change in style, but a change in substance.