Struggling U.S. Economy Will Prevail as Always

IT'S NO PICNIC to be an American these days. There's the knock-kneed dollar, there's the economy, there's Iraq. There's a president who may almost single-handedly accomplish the highly improbable feat of getting Hillary Clinton elected commander-in-chief.

Our stock market is a Chevy Nova getting unceremoniously lapped by foreigners in pricey, sleek sedans. The Chinese and the Arabs hold the deeds to our houses — though fortunately that's their headache now.

National polls reveal a seemingly incurable malaise aggravated by insecurities about housing, health care, retirement and jobs. Half of us are tempted to raid our 401(k)s and the other half doesn't have them.

Serial escapism is all the rage: The seven highest-grossing movies of the year are "Spider-Man 3," "Shrek the Third," "Transformers," the latest "Pirates of the Caribbean," the newest "Harry Potter," "The Bourne Ultimatum," and "300." Meanwhile, topical films like "Rendition" and "In the Valley of Elah" are about as popular as Army recruiters and mortgage brokers. Hollywood has seen this mood before, but it's been quite a while.

Outside of the subprime borrower with an adjustable-rate mortgage or any other Wal-Mart (WMT: 44.64, +0.76, +1.73%) shopper restocking the empty pantry on a payday, no one feels the national fall from grace as acutely as the well-informed investor. One doesn't need to know that the Chinese stock market has quadrupled in the last 18 months, or that the Indian market has doubled in two years, to understand that the world has changed. We're reminded of the rapid wealth buildup overseas every day by the rising oil price and the weakening dollar.

The greenback's struggles are beginning to recall the chronic currency crises that plagued postwar Britain, another financially strapped empire humbled by the rise of a new superpower across the seas. Our current-account deficit is even larger, and could become similarly crippling.

American auto factories are competitive only if they pay Asian wages, while the financial system has been tainted by its association with the dollar and subprime defaults. The U.S. now constitutes the primary risk to global growth, and is increasingly perceived as a loose cannon on the global stage.

We've soured most of the alliances we have left, so that even the British are drawing down in Iraq while holding their noses. Russia is saber-rattling and covering for Iran. China is on the same authoritarian team, and is quickly catching up in military electronics. America's closest allies are either deeply distrusted in their own neighborhoods (Israel, Japan) or, in India's case, are in it mainly for the nuclear technology.

The last remaining superpower is deeply in hock to the very people it's trying to boss. That hasn't gone well. No wonder CNBC has taken to calling itself "America's business network," the better to compete with the uber-bullish patriots over at Fox.

At the Republican grass roots the economic insecurity manifests itself as an unhealthy preoccupation with the Mexican border, while Democrats and unions find China easier to blame. Neither party seems able to root out growing political corruption or to take the unpopular steps needed to avert looming budget shortfalls, which will put the debt we've piled up so far to shame.

This state of affairs can't be comfortable for the business elite, whose legitimacy and livelihoods depend on economic stability and broadly rising living standards. Such proofs of prosperity have been scarce with the housing sector on its knees and real earnings on the decline for most workers. Next thing you know Angelo Mozilo is no longer the butcher's boy made good, but rather a fast talker who stepped up sales of stock while extolling Countrywide's (CFC: 17.30, +4.23, +32.36%) prospects.

And now it's probably best to back away from the ledge, before we all suffer a nasty fall. America remains the world's best-selling brand, with natural advantages second to none. Chief among these is our famous work ethic and strong family values (the real ones, and not the prudery of busybodies.) Some of our business leaders retain a progressive streak at odds with the facile and smug conservatism of many boardrooms.

We're a cohesive and increasingly networked society with plenty of resources to tackle our present ills. And we have honorable traditions to fall back on — corruption in local government is not the plague it is in much of the developing world. For most business people, bribes remain optional.

Moreover, we're home to some of the best-run companies around, ones that are well-paced to capitalize on the consumer revolution abroad. Apple (AAPL: 184.70, +1.92, +1.05%), Coca-Cola (KO: 61.57, +0.27, +0.44%), Nike (NKE: 64.61, +0.77, +1.20%) and McDonald's (MCD: 58.47, +0.40, +0.68%) are more popular than ever, their sales unaffected by the widespread disgruntlement with American policies.

The United States retains a global technology lead thanks to its excellent universities. The leafy campuses attract top academics from all over the world — a brain drain for their countries of origin but a boon for American business, arts and scholarship.

We still have lots of living room and lots of amenities, with lower population densities and comfier middle-class suburbs than China or Europe can boast. Compared with Madrid or Moscow our North American dirt is now dirt-cheap, and most of us remain more open to immigrants than might be the norm in their homelands.

American business remains more dynamic than most foreign variants, with fortunes quickly made and just as quickly squandered. We benefit more fully than, say, France from the "creative destruction" that is one of capitalism's chief virtues. Many of our CEOs are former software engineers or biotech researchers. More so than in many places overseas, success is shaped by what one knows, not whom one knows.

There's no rule requiring us to indulge in an orgy of debt-driven consumption while stinting on essential investments in infrastructure and public services. In fact, the falling dollar is a clear market signal to cut it out. On the bright side, the weaker buck has trimmed the potential profits from outsourcing jobs, as have the heady pay increases in Bombay and Shanghai. And despite all the outsourcing, America remains among the most productive and prosperous nations on earth, one capable of sharing the economic spoils of its industry much more broadly than it does now. Read my lips: No more corporate welfare programs .

The country has a long track record of coming to grips with its shortcomings once most people have had enough. This looks to be one of those times. We might be closer to midnight than we are to dawn, but dawn is coming.