Post economic primacy USA

I thought it might be interesting to try and discuss some of the possibilities of a USA that is losing it's position of economic supremacy in the world. Try not to just rant, and point out something of comparison to the rest of the world.

One thing that seems very obvious is that most of us under the age of 60 grow up with the the 47,000 mile Interstate system allowing us to drive around the country at relatively low cost. In addition all the goods and products can come to us at relatively low cost. In Europe you often take the train because the cost of gasoline and tolls is prohibitive.

Mexico did not begin developing their cuota system (toll roads) that allowed people, trucks, and buses to move long distances until the presidency of Salinas in 1989. The miles of the highway system opened during the presidential terms of the last 10 presidents are in the table. The highway system built during the 6 year presidency of Salinas was ushering the state of Mexico into the first world. It was a period of unprecedented Mexican economic expansion, which unfortunately was followed by two things (1) one of the largest presidential grafts in history, the stealing of hundreds of millions of dollars, (2) the 50% collapse in the value of the peso in about 2-3 months, resulting in a third of small businesses collapsing in the country.

miles	President	Innauguration
109	Adolfo Ruiz Cortines	1-Dec-52
133	Adolfo López Mateos	1-Dec-58
103	Gustavo Díaz Ordaz	1-Dec-64
22	Luis Echeverría	1-Dec-70
0	José López Portillo	1-Dec-76
0	Miguel de la Madrid	1-Dec-82
2,632	Carlos Salinas de Gortari	1-Dec-88
210	Ernesto Zedillo	1-Dec-94
802	Vicente Fox	1-Dec-00
311	Felipe Calderón	1-Dec-06

Even though Mexico is about 25% of the area of the continental United states, the total mileage of limited access highway (4200 miles) is pretty small compared to the USA's 47,182 miles.

Driving from Tijuana to Cancun (similar distance to driving I-80 from New York City to San Francisco, costs US$300 in tolls for an automobile (more for trucks or buses). So even though the roads are built, many Mexicans can only ride on them in a bus.

Tolls on the Interstates in America are being eyed by many of the states as a way to solve their budget problems. The FHA so far has prevented states from adding large scale tolls, but that is one of the things that may change.

When it starts costing $1 to drive 10 miles of the Interstates, the impact that will have on American economic life will probably be far more profound than the rising cost of air fares.

I have always thought, that US highway system is (somewhat paradoxically) actually putting it at disadvantage compared to Europe and other countries.
Rapid development of the auto roads, and dirt cheap gasoline in US have effectively stopped development of both freight and passenger train infrastructure, shifting focus to trucking and busing, which now seems obvious to have been a bad idea. Trains are much, much more efficient in both operation and maintenance than auto transport. At $4/gallon gasoline, and raising labor costs, they are also incomparably cheaper.
However, getting rid of the tracking industry now, building and restoring all the missing and abandoned rail roads, and implementing necessary infrastructure now is going to be prohibitively expensive short term. Enough to leave no chance of anyone in their right mind ever agreeing to do it.

All other things being equal, good roads is better than no roads ... But the problem is, that, as a result, we seem to be stuck with suboptimal, expensive, slow, environmentally damaging from of transportation with pretty much no way out of the crunch.

Quote: weaselman

I have always thought, that US highway system is (somewhat paradoxically) actually putting it at disadvantage compared to Europe and other countries. All other things being equal, good roads is better than no roads ... But the problem is, that, as a result, we seem to be stuck with suboptimal, expensive, slow, environmentally damaging from of transportation with pretty much no way out of the crunch.

Well when Japan began building it's modern system of passenger trains in the 1950's, the USA began it's Interstate project. When Europe began building their modern system of passenger trains in the late 70's and early 80's, our response was airline deregulation. While long distance trains will never be more than "retirement land cruising" in the USA, the lack of ability to build any short haul trains for ultra busy corridors is disturbing. Even the New York - Boston corridor passenger trains are pretty anemic.



Mexico has no passenger trains, but they do have a highly sophisticated network of buses, including luxury bus in the photo for overnight travel for the upper middle class. Fares on these buses are about double the price of a normal bus. The stated intention is to produce the relative seating comfort of business class on an airplane, but without the speed of an aircraft (and still far less than normal airfare).

Tolls can be just as expensive in Europe as they are in Mexico

For example the Milan-Naples route of around 700 km costs approximately €40=647 Mexican Pesos (1.08 km per peso). The Tijuana-
Cancun drive of 4,378 km costs 3869 pesos in tolls (1.13 km per peso).

Of course, Italians have a much higher income than Mexicans.

How would life change in America if it cost $300 in tolls to drive across the country?


The Holland Tunnel into Lower Manhattan cost $1 round trip when it opened in 1927. The fare was maintained for roughly 50 years while the value of a dollar dropped by to less than a dime in 1927. Presumably government officials felt that it was better to get people into the city to do business than to block them out.

Today the cash fare is $12. The NJ Turnpike provides the easiest approach to the tunnel from the Newark Airport, and these few miles of road are $2.40 each way. Combined with parking, the goal is now to encourage you to park in NJ and take the train the last 10 miles.

There may be a change in attitude where it is more important to get some tolls than to give people inexpensive access.

In italy if you are a single driver it is much cheaper to take the train, in Mexico it is less money to take the bus.

Quote: weaselman

I have always thought, that US highway system is (somewhat paradoxically) actually putting it at disadvantage compared to Europe and other countries.
Rapid development of the auto roads, and dirt cheap gasoline in US have effectively stopped development of both freight and passenger train infrastructure, shifting focus to trucking and busing, which now seems obvious to have been a bad idea. Trains are much, much more efficient in both operation and maintenance than auto transport.

Trains are more efficient if all of the people and freight are all going from one place to one other place. Otherwise not so much. Consider freight. It must be loaded at a central yard and consolodated. This takes time, time is money with Just-In-Time delivery now the norm. And while NY to LA might make sense for some freight, most shipments are more regional. The train-advantages dissapear. It is just as bad for people. Either many marginal stations must be built or stops must be further apart. And the schedule must make sense. I used to drive all over NY, but I had to get from my office to the customer's place. For most people, being met at the station is not an option.

Quote:

All other things being equal, good roads is better than no roads ... But the problem is, that, as a result, we seem to be stuck with suboptimal, expensive, slow, environmentally damaging from of transportation with pretty much no way out of the crunch.

If trains were so good, they would not have been driven to near-extinction by 1970.

Quote: pacomartin

How would life change in America if it cost $300 in tolls to drive across the country?

Ask a NY'er.

Currently, the I-90 in NY is completely toll, except for a small stretch through Buffalo. I believe to drive the length of it (PA border to Mass border) costs about $22.75 for a personal car. Towing my boat or a trailer brings that to $28.40. A typical semi truck pays a whopping $92.95, and one of those heavy equipment/military/wide load deals runs $113.85 (every penny of which is squandered by the Thruway Authority, but I digress). That is an incredible amount of money for what amounts to about 1/7th the distance across the country.

As we speak, the Authority is trying to up the semi toll by 45% in one fell swoop. Should it come to pass, I'd imagine the price of goods to go up quite a bit, as well as many small towns near Routes 5 and 20 to be swamped by an excess of big rigs avoiding tolls. Having lived through something similar once before when the Senecas shut down the Thruway, it would be a big, BIG deal.

I remember what it was was like before we had
freeways. All the roads outside on the city were
two lane and passing other cars was an artform.

My dad always got big engine cars that had the
huge four barrel carbs. When he'd kick it down
into passing gear out on the highway, you could
really hear that carb sucking in the air. He always
wanted one of the Chryslers with the twin 4 carb
setups but could never afford it. Like this one in a
58 Plymouth:

Quote: Face

Currently, the I-90 in NY is completely toll, except for a small stretch through Buffalo. I believe to drive the length of it (PA border to Mass border) costs about $22.75 for a personal car.
Having lived through something similar once before when the Senecas shut down the Thruway, it would be a big, BIG deal.

Tolls from Pennsylvania State Line (I-90) to Massachusetts State Line - Massachusetts Turnpike (I-90) 386.7 miles
TOLLS FOR A CLASS 2L VEHICLE: $18.45 ($17.53 : EZ PASS)

That works out to about 21 miles per dollar toll. While that is very high, in Mexico the tolls for the cross country route are 9.25 miles to US$1 (over twice as high). Same with Italy.

But if New Yorkers would be shocked, how will they react out West where they are used to driving for free.

Also consider that Mexicans only make a small fraction of what Americans make.

Quote: pacomartin

But if New Yorkers would be shocked, how will they react out West where they are used to driving for free.

It's not just the West. I only recall one other toll section on the I-95 trip from NY to FLA. I think toll roads are a pretty extreme minority. It would be quite a shock for most of the country, and the price of, well, everything would increase a healthy sum across the board.

I have difficulty comparing the US with anywhere else. In an episode of Top Gear, Clarkson raced the sun from the East coast of the UK to the West...and won. That's about 7 hours to cross the country. Here, that might get you from Albany to Cleveland. Italy is about 40 miles shorter than just the state of California. While their tolls may cost twice as much per mile in a cross country trip, our country is far more than twice as large. That doesn't mean much in the daily commute, but for shipping and transport it's huge.

America is the land of the Freeway, home of the Bronco. Driving is life. For many millions, there are no buses, no trains, and walking or biking isn't a possibility. Price people out in the UK, and see a surge of alternate transportation. Price 'em out in the USofA, and see people with no choice but to eat the cost. I'm sure that'll go over nice and easy ;)

Actually Weaselman has it about right IMHO. There are a LOT of Rails to Trails in the N.E. for lack of maintanence. And rails are the most efficient weight per mile per gallon transport factoring in distance/time. Just like the Rails, the highway system is in need of constant 50-ton truck-induced repairs. Been to the E. Coast lately?, there ARE some rather unsafe bridges and overpasses within 30 miles of the coastline, not to mention the SALT thats put down every winter.

Besides, any choice you make, Mountains are a bitch!

Quote: Face

I have difficulty comparing the US with anywhere else. In an episode of Top Gear, Clarkson raced the sun from the East coast of the UK to the West...and won.

I'm guessing he must have gone from the extreme west to the extreme east of England (somewhere near Norwich to Land's End)... as I could drive coast to coast across the England in about 2 hours (at just south of the Scottish border).

But yeah, it's small place. I realized this after driving 3,000km across Canada and only just about being half way.

Quote: thecesspit

I'm guessing he must have gone from the extreme west to the extreme east of England (somewhere near Norwich to Land's End)... as I could drive coast to coast across the England in about 2 hours (at just south of the Scottish border).

But yeah, it's small place. I realized this after driving 3,000km across Canada and only just about being half way.

Indeed. Land's End was the one point, don't remember the other It was very, very far south, I believe at the widest point in the UK. But that was kind of my point. Tell a trucker that has to drive cross country in the UK that his tolls went up $1/per hundred miles, and he's out ~$5 more dollars per trip max. In the US, it's over $30. We're way too dependant on the car and on trucking to suffer severe changes to the lifestyle.

Quote: Face

Indeed. Land's End was the one point, don't remember the other It was very, very far south, I believe at the widest point in the UK. But that was kind of my point. Tell a trucker that has to drive cross country in the UK that his tolls went up $1/per hundred miles, and he's out ~$5 more dollars per trip max. In the US, it's over $30. We're way too dependant on the car and on trucking to suffer severe changes to the lifestyle.

Church Flatts Farm in Derbyshire (near Coton-in-the-Elms) which is the farthest point from the sea in the UK. The section of coast nearest to this farm is on the edge of The Wash, south of Boston, Lincolnshire which is 113 kilometers distant, i.e. 70.21 miles.

The New Zealand’s furthest inland point — S45.00.340', E16.922.245' 119.44 kilometres (74.22 mi) from the Tasman Sea and Pacific Ocean near the town of Cromwell.

I am not saying that these changes would be for the good. I am just trying to imagine a world where the US is on the same footing as much as the rest of the world.

The extreme liquidity of the dollar is dramatic compared to many countries. You can't evict some people in Mexico (or Portugal) for non payment of rent for decades partly because no one can afford to purchase the real estate. When it became legal to sell new cars made in the USA in Mexico a few year ago, they were available for 20% down, 24% interest for three years. I couldn't believe that those were the best terms available.

Quote: pacomartin

Tolls from Pennsylvania State Line (I-90) to Massachusetts State Line - Massachusetts Turnpike (I-90) 386.7 miles
TOLLS FOR A CLASS 2L VEHICLE: $18.45 ($17.53 : EZ PASS)

You can get from Erie, PA to Stockbridge, MA (Alice's Restaurant) and pay no tolls. It will only cost you an extra 10 minutes. New Yorkers know this.

Quote: s2dbaker

You can get from Erie, PA to Stockbridge, MA (Alice's Restaurant) and pay no tolls. It will only cost you an extra 10 minutes. New Yorkers know this.

Perhaps. I'm a homebody so can't verify or dispute. But paco's question was about tolling all interstates. I assume the voyage you refer to involves is I-86, which would then be tolled and would apply. If not, then it's a series of A roads similar to Routes 5 and 20, which would flood small towns and 'burbs with unheard of traffic.

Using NY as the benchmark, an East to West coast voyage would incur an extra $800 in fees for those who deliver every good we use. With as much as truckers went apeshit when diesel went over $3 a gallon back when I ran a truck stop in the mid '00s, they would go absolutely nuclear if such an event happened. It would be a complete disaster the likes of which we've never seen.

Hell, where's avargov? Ask him what he thinks and how much he'd be affected.

Quote: Face

Perhaps. I'm a homebody so can't verify or dispute. But paco's question was about tolling all interstates. I assume the voyage you refer to involves is I-86, which would then be tolled and would apply.Using NY as the benchmark, an East to West coast voyage would incur an extra $800 in fees for those who deliver every good we use. With as much as truckers went apeshit when diesel went over $3 a gallon back when I ran a truck stop in the mid '00s, they would go absolutely nuclear if such an event happened.

Repeating my table of how many miles of toll roads (i.e. interstates) built under each of the Presidential terms in Mexico. The Gortari presidency in Mexico was a time of unprecedented economic expansion.

On 1 January 1993 the New Peso banknotes and coins were released. The banknotes removed three zeros from the end, to make up for the catastrophic devaluations that occurred since the USA went off the gold standard in the early '70s. On 1 January 1994 NAFTA went into effect. The 2600 miles of new roads was another sign that Mexico was entering the first world. Yet in the first few months of the Zedillo presidency, the currency last half it's value against the dollar. Nearly a third of the small businesses closed. It became nearly impossible to borrow money except for short periods at very high interest rates as no one could reliably issue a long term loan for cars or mortgages.

It would be a huge economic jolt, resulting in massive protests by truckers and rising costs across the board.

Pennsylvania is trying to institute tolls on Interstate 80. I80, as many of you know, does not pass by any of the major population centers in PA, so consequently most of the traffic is people trying to bypass the state in going from Northern NJ to Cleveland, Detroit and Chicago regions. As such it is a tempting place to look for taxes, because as we all know, states would prefer to tax people from other states.

miles	President	Innauguration
109	Adolfo Ruiz Cortines	1-Dec-52
133	Adolfo López Mateos	1-Dec-58
103	Gustavo Díaz Ordaz	1-Dec-64
22	Luis Echeverría	1-Dec-70
0	José López Portillo	1-Dec-76
0	Miguel de la Madrid	1-Dec-82
2,632	Carlos Salinas de Gortari	1-Dec-88
210	Ernesto Zedillo	1-Dec-94
802	Vicente Fox	1-Dec-00
311	Felipe Calderón	1-Dec-06

Just want to thank all the posters here on this thread. Interesting topic, good points of view, something to think about.

While this topic is of interest, the idea behind the thread is what kind of economic changes can we realistically look for in a world where USA is no longer the principal economic power.

(1) The one most often cited by the media is a world where gas is pick a number dollars per gallon.
(2) Where the US currency is no longer the benchmark

(3) The ability to drive around the country with minimal tolls might vanish.
(4) Perhaps a new tax structure will limit automobiles per household. When I was in graduate school, a student from Greece said that taxes on a second car were almost as high as the price of the car. Of all the families he knew, none had a second car, no matter how rich. The goal may be to reduce automobile ownership to levels the same as Canada.
(5) With the vilification of coal, perhaps air conditioners will have mandatory control by outside agencies. Peak electricity is almost entirely driven by air conditioning demans, so it makes sense that government will instill control over this end of usage.

I split of the shipping debate to a separate thread.

Generally, we think of life in the USA as getting easier from generation to generation. We have more automobiles, more access to airplanes, more TV's, better quality food, more electricity, etc.

I am just trying to imagine what it would be like if we lose our pre-eminent economic position. One way is to lose much of our mobility.

In 1989 the US had 3 million hotel rooms with 63.8% occupancy and average of 68 rooms per hotel. Average Room rate was $56.31
In 2008 the US had 4.6 million hotel rooms with 60.4% occupancy and average of 93 rooms per hotel. ARR was $106.84

Frankly, I don't see the hotel industry diminishing. Corporations are more likely to hire contractors. While it seems like it is more expensive to put someone up in a room in a strange city for 4-6 months, it diminishes the long term commitment to the person. The additional price of long term stay is actually small compared to pensions, retirement funds, etc. It is also easier to change staffing levels dramatically with short notice.

Paco, thanks for splitting that thread off.

I think that the one thing we really need to worry about is the dollar being removed/replaced as the worlds reserve currency. All types of hell will break out if that happens.

Quote: avargov

I think that the one thing we really need to worry about is the dollar being removed/replaced as the worlds reserve currency. All types of hell will break out if that happens.

Everyone says that. But the dollar was 71.0% of the world's official reserves pre-Euro, and is 62.2%.
The Euro was 24.2% in 2002, but is only 24.9% today.

So the primacy of the US dollar has remained pretty much unshakeable. The IMF has not deviated from the predicted year (2017) when the Chinese economy becomes larger than the US economy (PPP method), but the per capita GDP of China will still be less 25% of that of the USA. But there is no sign that China will have a currency that can function as a reserve currency by that date.

So it doesn't seem like a major worry.

US cigarettes were a de-facto currency at lower levels of commerce for quite some time, but mainly its always been the US Dollar ever since the Sun set on the Pound Sterling.
The US stock market can suffer, the US economy can suffer ... but the US Dollar will stagger on until there exists something of value to replace it. What are you going to use? Kruggerands, BitCoins, or other such Flash in the Pan candidates? Gold? Sure gets hard to lug around.

Even in the depths of the Depression with a discord between labor and currency and Manhattan women dangling keys as they walked and accepting two or three dollars, there really was no replacement currency. Even if the despair of Company Towns with "scrip" rather than tranferable coins, nothing replaced what value the dollar did retain.

Some other economy gains ascendancy? Perhaps, but it will still be measured against the Dollar for a long time.

Quote: FleaStiff

Some other economy gains ascendancy? Perhaps, but it will still be measured against the Dollar for a long time.

The Eurozone is smaller than the dollar by 19% using current exchange rate, and 28% using Purchasing Power Parity.

Your comments seem accurate for the forseeable future.

Just as a simple, quick exercise would it be possible for you to list the above countries according to their recent Booms and Busts and then also show them against the US Dollar at those times?

I'm think of such things as the Real Estate Boom in Portugal when half of the UK bought retirement homes there.
Similarly the Spanish Booms and Busts in rural real estate and political mismanagement such as all those airports that don't have any flights.
France with its health system prior to Brits being declared off limits.
Scandinavia prior to Nationalistic revival that came too late too avoid massive employment pressure.
Iceland's Banking crisis wherein the UK declared all those nordic blondes in Rekyavik to be Terrorists and took their money as well as their cod fish.

Its not just the primacy of the US Dollar but the depth and variety of its economy. The headlines in the USA can always be dismal somewhere but great somewhere else. Nationwide, the worst real estate one year was Phoenix but the best real estate that very year was also in Arizona's hippie land, Sedona. The freedoms of entry and exit of capital in the USA is greatest. Forming a corporation for twelve dollars in six minutes is no challenge in the USA, but an absolute joke in South America. We allow foreign ownership of real estate and foreign ownership of minerals. Things like that can be a challenge abroad where foreign real estate purchases are often controlled and all minerals are state owned.

So even if the Dollar might decline a good bit of its value is based in convenience and robustness. Just look at how favorable the Icelandic currency was ... for a brief period of time. No one looks on the US economy as a klan-based club of businessmen. There is too much depth to the US Dollar and its the resilency that provides value.

Quote: FleaStiff

Just as a simple, quick exercise would it be possible for you to list the above countries according to their recent Booms and Busts and then also show them against the US Dollar at those times?

So even if the Dollar might decline a good bit of its value is based in convenience and robustness. Just look at how favorable the Icelandic currency was ... for a brief period of time. No one looks on the US economy as a klan-based club of businessmen. There is too much depth to the US Dollar and its the resilency that provides value.

It would take some time, but I suppose you are correct. The dollar does cover a variety of economies, almost as diverse as the Euro. West Virginia does not even have a "FAA hub" airport (defined as an airport carrying more than 1/2000 of the total air passengers). But the decaying economy in WV, or Arkansas does not get the amount of press coverage as that of Greece relative to the Euro-land. The politics of state government are well below that of national coverage.

Iceland is a good example. Things can look amazing, but when you are playing a shell game with a currency that covers only 300K people, it can upend pretty fast.

Quote: pacomartin

Iceland is a good example. Things can look amazing, but when you are playing a shell game with a currency that covers only 300K people, it can upend pretty fast.

That is partly because where there are only 300K people in the entire country, how many do you think are sharp-eyed banking watchdogs?

West Virginia and Arkansas respond to local issues. West Virginia does not need a hub airport because coal is shipped by airplanes.

Small towns in decaying areas are finding it profitable to sell abandoned buildings for one dollar to establish local businesses rather than to try to attract investment through chambers of commerce or industrial bonds.

Its the depth and breadth of the US economy that gives persistent value to the US Dollar. Whatever sectors of the economy and whatever areas of the country do poorly, there is enough to rebound after all the hot air is over with. So will fragments of the Euro do poorly? Sure. Will fragments of the Euro do particularly well? Sure. But even the economists in Europe will want their salaries paid in US Dollars or will put their savings into US banks. After all, would anyone want to trust an Icelandic bank again? Or even the Icelandic economy?

It will be the US Dollar.

Quote: FleaStiff

That is partly because where there are only 300K people in the entire country, how many do you think are sharp-eyed banking watchdogs? After all, would anyone want to trust an Icelandic bank again? Or even the Icelandic economy?

After the party in Iceland


Seriously, Iceland should make it a national priority to switch to get rid of banknotes and coins and switch to an electronic currency. It will make it much easier to adopt someone else's currency (like Canada).