Is the USA in 'irreversible decline'?

I've been hearing about the imminent collapse of the United States for 50 years. Yet here we are in 2012 and the US is still, for the moment at least, the world's dominant power. Under the circumstances you'll pardon a little scepticism on my part. On reading his obituary Mark Twain famously said "The reports of my death are greatly exaggerated." I'm beginning to wonder whether the same may be said of the supposed death of the USA.

In my lifetime doom saying about the USA has gone through three major phases. The first was the Soviet Union phase. When I started at the University of Cape Town most of the student body took the eventual triumph of that clunky totalitarian monstrosity for granted. Those few of us who thought the very notion of the Soviet Union ever surpassing the US was crazy were dismissed as dimwits.

That being said we recognised the Soviet Union was dangerous. The real worry was that the Soviet Empire, in its death throes, might ignite an all-out nuclear war.

By the 1980s, when it had become evident that the Soviet Union was a dinosaur albeit a dangerous one, Japan was the country that was supposed to supplant the USA. This was the era of articles in Foreign Affairs Magazine about the "emerging Japanese superstate."

Japan was no more likely to supplant the USA than the Soviet Union but this era was more fun. The Japanese were not going to start a nuclear war and they produced cool stuff like well-made affordable cars and the Sony Walkman. I am an unabashed Toyota fan. Being threatened with a better car was preferable to being threatened with intercontinental ballistic missiles.

And now we are in the third phase where China is presented as the great challenger to the United States.

Unlike the Soviet Union and Japan, China is a credible challenger. I thought the very idea of the Soviet Union or Japan supplanting America was inherently preposterous. I would not say that about China. China could supplant the USA. For reasons which I shall explain below I don't think it will; but it could.

But first let me explain what I mean by "China." I am using the word "China" to mean China under the current Communist Party regime.

It is always possible that China, like Taiwan and South Korea before it, morphs from dictatorship into a decent democracy. If that happens all bets are off. I think a China that follows the Taiwanese / South Korean trajectory of increasing prosperity and then a transition to democracy could well supplant the USA as the world's dominant country. The probability of China following that trajectory is a separate issue.

I don't doubt that China will overtake the USA in the size of its economy. It does, after all, have four times the population. Even with an economy twice the size of the USA it would in per capita terms be only half as well-off as the United States. It should get there at an easy canter in a couple of decades.

In the international sphere size matters. In per capita terms New Zealand has a larger economy than China but is hardly a contender for global dominance. Once China has an economy twice the size of the next biggest country it will have enormous clout in the international arena even if its populace is still relatively poor. It is also likely that by then China will have a very capable military.

But this is where matters get more interesting and to explain why I need to explode a two myths about China and the USA.