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From: Biniam Tekle (biniamt@dehai.org)
Date: Fri Nov 12 2010 - 09:53:18 EST
http://www.smh.com.au/business/decline-of-the-us-empire-will-reshape-our-world-20101109-17m78.html
Decline of the US empire will reshape our world
November 10, 2010
Other states are on the rise, and the US has squandered its economic power.
MID-TERM elections in the US have traditionally been a poke in the eye
for presidents. Before Obama, it happened to Clinton, Bush, Reagan and
Truman. But this time around, it feels different. It is another sign
of an empire in decline.
The insurgency against Obama reflects a rage against the erosion of
American hegemony, its superpower status slipping away, driven by 9.6
per cent unemployment, people losing homes and no let-up in the worst
economic crisis since the Great Depression.
Obama has achieved a lot, such as healthcare reform and staving off a
depression. But the slippage continues; he was administering
chemotherapy on a dying patient.
Advertisement: Story continues below The decline of the American
empire will be felt around the world, by business and society
including Australia. It could take decades, but it will reshape our
world. As anthropologist Jared Diamond writes in his book Collapse:
How societies choose to fail or succeed (Penguin 2005), many
civilisations share a sharp curve of decline. It's a common pattern.
"Indeed, a society's demise may begin only a decade or two after it
reaches its peak population, wealth and power,'' Diamond writes.
All empires, not matter how powerful, must come to an end. Nothing
lasts forever. Economic historian Niall Ferguson associates imperial
decline with fiscal crises where governments must service a mountain
of public debt.
For example, Spain, the first global superpower, was created out of
the gold and silver flowing from its American colonies. It collapsed
because its economy could not keep up with demand. Its imports were
double its exports. In the end, the Spanish government went bankrupt,
unable to pay its soldiers who mutinied. In France, the Bourbon
monarchy might have thought it a good idea to intervene on the side of
the colonial rebels against British rule in North America, but that
tipped them into financial crisis, ultimately culminating in the
French revolution with Louis XVI executed. By 1875, the Ottoman Empire
administration was paying half its revenue servicing debt. That empire
began disintegrating after the financial crisis of the 1870s left it
struggling to raise money needed to fight nationalist agitation in the
Balkans. Ferguson says that with the British empire, debt charges were
absorbing 44.5 per cent of total government expenditure before the
war, but the real problems kicked in after 1945, when a substantial
proportion of that debt burden - equivalent to about a third of GDP -
fell into foreign hands. Within a decade, and less than a dozen years
after its victories over Germany and Japan, Britain had conceded
independence to Bhutan, Burma, Egypt, Eritrea, India, Israel, Jordan,
Pakistan and Sri Lanka, among others. Suddenly, the sun had set on the
British Empire.
In his piece ''Complexity and Collapse'', published by the journal
Foreign Affairs earlier this year, Ferguson says alarm bells should be
ringing in Washington, with the US contemplating a $US1.4 trillion
($A1.3 trillion) deficit, about 11.2 per cent of gross domestic
product, and public debt set to spiral from $US5.8 trillion in 2008 to
$US14.3 trillion in 2019. Interest payments will leap from 8 per cent
of federal revenue to 17 per cent. It's Ottoman dé´jà vu.
Ferguson writes: "For now, the world still expects the United States
to muddle through, eventually confronting its problems when, as
Churchill famously said, all the alternatives have been exhausted… But
one day, a seemingly random piece of bad news - perhaps a negative
report by a ratings agency - will make the headlines during an
otherwise quiet news cycle. Suddenly it will not just be a few policy
wonks who worry about the sustainability of US fiscal policy but also
the public at large, not to mention investors abroad."
Economist Nouriel Roubini links America's imperial decline to three
forces: over-reliance on hard military power and unilateralist foreign
policy; the rise of China, India's emergence and the resurgence of
Russia combined with the growth of other regional powers such as
Brazil resulting in the relative economic, financial and geopolitical
power of the US reducing over time; and, finally, the US squandering
its economic and financial power by running twin fiscal and current
account deficits.
In the 1980s, the US had friends and allies like Japan and Germany
funding its twin deficits. Today, it is getting funded by its
strategic rivals, China and Russia, and unstable petro-states such as
Saudi Arabia. This is unsustainable.
However, there is no clear replacement for the US. Neither China nor
India will do it; they have their own problems. We are moving towards
a delicate balance of powers rather than a single superpower, but will
these powers co-operate on financial, economic and geopolitical
issues, or will this create a more unstable world? The decline of the
American empire is under way, but what comes out the other end is
anyone's guess.
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