Paul Kennedy: American Power Is on the Wane
[Mr. Kennedy, professor of history and director of International Security Studies at Yale University, is the author/editor of 19 books, including "The Rise and Fall of the Great Powers" (Vintage). He is currently writing an operational history of World War II.]
As the world stumbles from the truly horrible year of 2008 into the very scary year of 2009, there seems, on the face of it, many reasons for the foes of America to think that the world's number one power will take heavier hits than most other big nations. Those reasons will be outlined below. But let's start by noting that curious trait of human beings who, in pain themselves, seem to enjoy the fact that others are hurting even more badly. (One can almost hear some mournful Chekhovian aristocrat declare: "My estates may be damaged, Vasily, but yours are close to ruin!")
So while today's Russia, China, Latin America, Japan and the Middle East may be suffering setbacks, the biggest loser is understood to be Uncle Sam. For the rest of the world, that is the grand consolation! By what logic, though, should America lose more ground in the years to come than other nations, except on the vague proposition that the taller you stand, the further you fall?
The first reason, surely, is the U.S.'s truly exceptional budgetary and trade deficits. There is nothing else in the world like them in absolute measures and, even when calculated in proportion to national income, the percentages look closer to those you might expect from Iceland or some poorly run Third World economy. To my mind, the projected U.S. fiscal deficits for 2009 and beyond are scary, and I am amazed that so few congressmen recognize the fact as they collectively stampede towards the door entitled "fiscal stimulus."
The planned imbalances are worrying for three reasons. The first is because the total projections have been changing so fast, always in a gloomier direction. I have never, in 40 years of reading into the economics of the Great Powers, seen the figures moved so often, and in such vast proportions. Clearly, some people do believe that Washington is simply a printing machine.
The second reason all this is scary is because no one seems to be certain how usefully (or fecklessly) this money will be applied. I wish Barack Obama's administration all the best, but I am frightened by the prospect that he and his team will feel under such time pressures as to shovel out the money without adequate precautions, and that lots of it will slip into the wrong hands. The news in the press last week that lobbyists were pouring into Washington to make the case for whatever industry, interest group, or service sector they have been hired to represent made my heart sink. Printing lots of unsecured money is bad enough. Frittering it away on courtiers is worse.
The third thing I'm really scared about is that we'll likely have very little money ourselves to pay for the Treasury bonds that are going to be issued, in tens of billions each month, in the years ahead. Sure, some investment firms, bruised by their irrational exuberance for equities and commodities, will take up a certain amount of Treasury issues even at a ridiculously low (or no) rate of return. But that will not cover an estimated budget deficit of $1.2 trillion in 2009....
If the above is even half-true, the conclusions are not pleasant: that the economic and political travails of the next several years will badly crimp many of the visions offered in Mr. Obama's election campaign; that this nation will have to swallow, domestically, some very hard choices; and that we should not expect, even despite a surge in international goodwill towards America, any increase in our relative capacity to act abroad decisively or in any sustained way. A rather wonderful, charismatic and highly intelligent person will occupy the White House, but, alas, in the toughest circumstances the U.S. has faced since 1933 or 1945.
In this focus upon chronic fiscal deficits and military overstretch, certain positive measures of American strength tend to get pushed into the shadows (and perhaps should be given more light at another time). This country possesses tremendous advantages compared to other great powers in its demographics, its land-to-people ratio, its raw materials, its research universities and laboratories, its flexible work force, etc. These strengths have been overshadowed during a near-decade of political irresponsibility in Washington, rampant greed on Wall Street and its outliers, and excessive military ventures abroad....
Read entire article at WSJ
As the world stumbles from the truly horrible year of 2008 into the very scary year of 2009, there seems, on the face of it, many reasons for the foes of America to think that the world's number one power will take heavier hits than most other big nations. Those reasons will be outlined below. But let's start by noting that curious trait of human beings who, in pain themselves, seem to enjoy the fact that others are hurting even more badly. (One can almost hear some mournful Chekhovian aristocrat declare: "My estates may be damaged, Vasily, but yours are close to ruin!")
So while today's Russia, China, Latin America, Japan and the Middle East may be suffering setbacks, the biggest loser is understood to be Uncle Sam. For the rest of the world, that is the grand consolation! By what logic, though, should America lose more ground in the years to come than other nations, except on the vague proposition that the taller you stand, the further you fall?
The first reason, surely, is the U.S.'s truly exceptional budgetary and trade deficits. There is nothing else in the world like them in absolute measures and, even when calculated in proportion to national income, the percentages look closer to those you might expect from Iceland or some poorly run Third World economy. To my mind, the projected U.S. fiscal deficits for 2009 and beyond are scary, and I am amazed that so few congressmen recognize the fact as they collectively stampede towards the door entitled "fiscal stimulus."
The planned imbalances are worrying for three reasons. The first is because the total projections have been changing so fast, always in a gloomier direction. I have never, in 40 years of reading into the economics of the Great Powers, seen the figures moved so often, and in such vast proportions. Clearly, some people do believe that Washington is simply a printing machine.
The second reason all this is scary is because no one seems to be certain how usefully (or fecklessly) this money will be applied. I wish Barack Obama's administration all the best, but I am frightened by the prospect that he and his team will feel under such time pressures as to shovel out the money without adequate precautions, and that lots of it will slip into the wrong hands. The news in the press last week that lobbyists were pouring into Washington to make the case for whatever industry, interest group, or service sector they have been hired to represent made my heart sink. Printing lots of unsecured money is bad enough. Frittering it away on courtiers is worse.
The third thing I'm really scared about is that we'll likely have very little money ourselves to pay for the Treasury bonds that are going to be issued, in tens of billions each month, in the years ahead. Sure, some investment firms, bruised by their irrational exuberance for equities and commodities, will take up a certain amount of Treasury issues even at a ridiculously low (or no) rate of return. But that will not cover an estimated budget deficit of $1.2 trillion in 2009....
If the above is even half-true, the conclusions are not pleasant: that the economic and political travails of the next several years will badly crimp many of the visions offered in Mr. Obama's election campaign; that this nation will have to swallow, domestically, some very hard choices; and that we should not expect, even despite a surge in international goodwill towards America, any increase in our relative capacity to act abroad decisively or in any sustained way. A rather wonderful, charismatic and highly intelligent person will occupy the White House, but, alas, in the toughest circumstances the U.S. has faced since 1933 or 1945.
In this focus upon chronic fiscal deficits and military overstretch, certain positive measures of American strength tend to get pushed into the shadows (and perhaps should be given more light at another time). This country possesses tremendous advantages compared to other great powers in its demographics, its land-to-people ratio, its raw materials, its research universities and laboratories, its flexible work force, etc. These strengths have been overshadowed during a near-decade of political irresponsibility in Washington, rampant greed on Wall Street and its outliers, and excessive military ventures abroad....