China vs. USA: Who will win the 21st Century?

    Editor's Note: The following is an edited excerpt from a transcript of Fareed Zakaria answering viewer questions online. Read more from Fareed Zakaria at TIME: China's New Parochialism

By Fareed Zakaria, CNN

     We’re clearly moving to a Post-American world. This is a world that is not dominated by the

    United States but not dominated by anyone else yet either.

     The 21st Century is up for grabs and how the United States does depends on how well it can marshal the key ingredients of economic and societal success.

     In the 20th Century, the key ingredients were labor and capital.

     In the 21st Century, the key ingredients will be ideas and energy.

     Ideas will be critical because manufacturing has been commoditized. That means that anyone can make anything. The only thing that distinguishes someone today is if that person or organization has new ideas and innovations. We need to create a better mousetrap every week. We need to do something different and unique.

     Energy will be critical simply because everybody is growing quickly and everyone needs a supply of energy. Countries that have figured out the energy puzzle are going to do better and better.

     So who’s better suited for this new world?

     In an odd way, China is best suited for the 20th Century. They have cheap labor and huge amounts of capital coming in. They can make whatever you want them to make. But they haven’t yet been able to move up the value chain. They haven’t been able to generate the big, new ideas.

     Like the U.S., China also struggles with the issue of energy. China is a consumer, not a producer of energy.

     But they are quickly getting very smart on the energy front. They are becoming the global leaders of clean tech - whether it is solar or wind.

     They are also aggressively trying to move up the value chain. They are laying the foundations to compete in the 21st Century. They are building a great university system and they are working to get research labs in place.

     In America’s case, we have all the ingredients to succeed in the 21st Century. We have the most innovative companies in the world such as Facebook, Apple and Google. We have the best universities in the world. We have a nexus between universities and research-oriented companies. We have the most dynamic capital markets in the world. We have an incredibly flexible, diverse society, which is also very much a part of our inherent societal innovation and dynamism.

     But what we don’t have is a political system that can harness all of this and execute.

     You see this with regard to energy policy. America has no energy policy and hasn’t had one for thirty years. It’s not just that. We also don’t have an immigration policy. We don’t have a policy toward jobs and growth. We don’t have a policy toward the budget deficit.

     Instead, we have an absurd political paralysis in Washington where everyone is more concerned with scoring points and maintaining their viability with their most extreme members rather than just coming together and solving problems.

     There used to be a model in which you became famous as a lawmaker by making deals - by reaching out to the other side and doing some compromising, which you have to do because not everyone agrees with you, and moving the issue forward. Now the way you get famous and powerful in Congress is by not making a deal, by being a deal breaker rather than a deal maker.

     You can see this in the Republican Party right now where the energy is all in saying “No, there’s no deal we could possibly accept.”

     If “No” is where we end up as a country, we could have all the innovation and ideas and dynamism in the world and we’d still will have a society that is crumbling.

     Look at California as an example. California has Silicon Valley and Hollywood. It has incredible private sector talent and creativity.

     But after a while if every road is crumbling, every state university collapsing and every educational institution under-funded, people will no longer want to come there. They will no longer think that it is the place where they can make their American dream come true. In this case, having Steve Jobs and Mark Zuckerberg there will probably not be enough.