[mobglob-discuss] [Infoshop News] The End of Empire (fwd)

[Tom_Childs at Douglas.BC.CA]

Subscribers,  Powerful analysis from William Greider here.  -tc
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
 --- Forwarded message: ---From: "Tom Wheeler" <twbounds at pop.mail.rcn.net>
To: "Infoshop" <infoshop-news at infoshop.org>
Subject: [Infoshop News] The End of Empire

http://www.thenation.com/doc.mhtml?i=20020923&s=greider

The End of Empire
by WILLIAM GREIDER

The imperial ambitions of the Bush Administration, post-9/11, are founded on
quicksand and are eventually sure to founder, but for fundamental reasons
not currently under discussion. Bush's open-ended claims for US
power--including the unilateral right to invade and occupy "failed states"
to execute "regime change"--offend international law and are prerogatives
associated only with empire. But Bush's greater vulnerability is about
money. You can't sustain an empire from a debtor's weakening
position--sooner or later the creditors pull the plug. That humiliating
lesson was learned by Great Britain early in the last century, and the
United States faces a similar reckoning ahead.

The US financial position is rapidly deteriorating, due mainly to America's
persistent and growing trade deficit. US ambitions to run the world, in
other words, are heavily mortgaged. Like any debtor who borrows more year
after year with no plausible way to reverse the trend, a nation sinking
deeper into debt enters into an adverse power relationship with its
creditors--greater and greater dependency.

These creditors are both private investors and governments from Europe and
Asia; now none of them have any incentive to disrupt their lopsided
relationship with the superpowerful leader of the world. After all, it works
for them: Their exports have unfettered access to the largest consumer
market in the world, producing trade surpluses and gaining greater market
share. Their capital, meanwhile, reaps good returns on the loans and
investments in the American economy. But history suggests that with
sufficient provocation, the creditor nations will eventually assert their
leverage over the United States, however reluctantly. That critical juncture
is likely to arrive either because the American debt burden has become so
great that additional lending would be too risky or because the creditor
nations want to jerk Washington's chain, perhaps to head off reckless new
adventures. Either way, it will be a humbling moment for American
triumphalism.

No one can know exactly what circumstances will prompt our old friends to
give a sharp elbow to Washington and Wall Street--that is, refuse to lend
more or threaten to withdraw capital--but US finance is currently getting a
small taste of what it would feel like. Saudi Arabia (not the government but
its wealthy private investors) has pulled as much as $200 billion out of US
financial markets in recent months, perhaps to diversify holdings but
clearly provoked by the Bush hawks, who are demonizing the Saudis as the
"kernel of evil" behind Islamist terrorism. An investment consultant in
Riyadh told the Financial Times, "People no longer have any confidence in
the US economy or in United States foreign policy." Extracting $200 billion
from US stocks and bonds may have contributed to the weakening value of the
dollar, but by itself it is not a major blow. If Asian money or Europe's
were to undertake a similar exit, the financial quake would send damaging
tremors through virtually every dimension of US economic life. If severe and
sustained, it could shut down economic growth and lead to a lower standard
of living.

The threatening implications are seldom discussed with any clarity or
candor, but the numbers are not secret. The US economy's net foreign
indebtedness--the accumulation of two decades of running larger and larger
trade deficits--will reach nearly 25 percent of US GDP this year, or roughly
$2.5 trillion. Fifteen years ago, it was zero. Before America's net balance
of foreign assets turned negative, in 1988, the United States was a creditor
nation itself, investing and lending vast capital to others, always more
than it borrowed. Now the trend line looks most alarming. If the deficits
persist around the current level of $400 billion a year or grow larger, the
total US indebtedness should reach $3.5 trillion in three years or so.
Within a decade, it would total 50 percent of GDP. Instead of facing this
darkening prospect, Bush and team regularly dismiss the worldviews of these
creditor nations and lecture them condescendingly on our superior qualities.
Any profligate debtor who insults his banker is unwise, to put it mildly.

The specter of America's deepening weakness seems counter-intuitive to what
people see and experience in a time of apparent continuing prosperity--and
contradicts everything they are told by authoritative voices. But the
quicksand is real. We are already in up to our knees.

Deep-running tides of history have been steadily undermining America's
economic hegemony for decades. In the years after World War II, as Japan,
Germany and many other shattered nations recovered prosperity and acquired
world-class production, the US economic position naturally became relatively
smaller and less dominant. This shift was achieved in part by America's own
self-interested stewardship, leading the non-Communist world and reviving
global trade, spreading investment capital and technology through US
multinationals and injecting economic demand in overseas markets with cold
war military spending. The postwar economic order succeeded brilliantly, on
the whole, dispersing economic power more broadly among the leading
industrial nations and causing those nations' economies to be more
intertwined through globalizing finance and production. Interdependence is
not the problem, since it would provide a healthy foundation for maintaining
a peaceable planet. The problem is that US leadership acts as though the
changes never happened.

Instead of reformulating global governance to share power and burdens more
broadly, a multipolar system that matches the economic reality, America
still acts as if it runs things--alone. And America pays dearly for the
privilege, both through its bloated military spending and by accepting the
lopsided trade deficits. Both are implicitly regarded in Washington as the
burdens of leadership--defending the world against terrorism on any
frontier, upholding the global trading system by serving as "buyer of last
resort" for other nations' exports.

Our sinking condition as a debtor nation was not inevitable, in other words,
but a function of hubris--the reluctance among US governing elites to give
up on the past glory and adjust to the new realities. Dependency might have
been averted years ago if US leadership had awakened fully to the financial
implications and compelled major trading partners to do the same--that is,
to join in adjusting the global trading system so the United States would no
longer carry alone such burgeoning trade deficits. Under the original terms
of the General Agreement on Tariffs and Trade, for instance, it is legal for
a nation to impose emergency general tariffs to correct a dangerous
financial imbalance flowing from trade.

If the United States took such a provocative step, however, it would ignite
fierce global opposition and also expose decades of triumphant propaganda.
Washington would have to confess to voters that globalization had become a
negative proposition for the national balance sheet. Above all, facing
reality would require US elites to resign their inherited role as the
singular superpower that runs things--and begin sharing that power with
other nations. Neither political party wants to face such a painful retreat
on its watch. Besides, for politicians and policy-makers, it feels good to
run the world.

In theory, this problem might still be corrected, but only in theory,
because it is impossible to imagine such a dramatic policy reversal from
Washington without some great crisis to provoke it. American leadership has
instead become increasingly delusional--I mean that literally--and blind to
the adverse balance of power accumulating against it. Presidents from both
parties (Clinton no less than Bush) have embraced the notion that additional
trade agreements will eventually solve the US problem by eliminating tariffs
and other trade barriers. We have thirty years of evidence to prove the
contrary. The gap between imports and exports keeps growing larger right
along with each new agreement.

Elite opinion, after years of offering various faulty explanations for the
persistent trade deficits, has now decided they do not matter. The new
conventional wisdom describes the national economy's indebtedness as
unimportant bookkeeping because the exchange actually benefits all--foreign
capital invests more in the United States, and we return the favor by buying
more of their stuff (and they lend us the money to do so). In fact, the
long-running "trade wars," in which Washington demanded that Japan, Korea
and others open their markets to American goods, are over--principally
because major US multinationals are no longer interested in pursuing them.
In every sector (save steel and textiles), the American companies have made
peace with their foreign rivals, joining them through mergers and alliances
or moving production into the foreign markets and withdrawing from
competition. If you are an American multinational with feet planted in many
countries, it may be true that US indebtedness will have no consequences.
But for homebound citizens, whose fate depends solely on America's balance
sheet, the debt obligations are real.

For their own reasons, the major trading partners are reluctant to disrupt
the status quo. The current arrangement allows them to have it both
ways--gaining a greater share of markets under the shadow of US hegemony.
Privately, they recognize that the US economic position is steadily ebbing.
But it seems wiser to let the Americans keep their delusions for now. The
space for self-interested maneuvering is much greater if the United States
carries the burdens and costs alone. Despite occasional whining, Japan and
Germany are not eager to claim a prominent share in global leadership (both
once had a go at running the world and it ended badly). Far better to prop
up the United States financially without forcing awareness of the shifting
power.

Their reluctance resembles the American attitude early in the last century,
when it was the ascendant economic power but did not wish to become a "Great
Power" itself, with responsibility for maintaining world order. Instead, the
United States propped up Britain for many years as the failing empire sank
into unsustainable debt. British power was fundamentally eclipsed in 1914,
but the United States provided the financial nurture to keep it upright, as
a kind of dummy leader in world affairs, until after World War II.
Washington decisively pulled the plug in 1956, when Britain (along with
France and Israel) invaded Egypt to capture the nationalized Suez Canal. It
was the last gasp of British colonialism, and Washington disapproved. By
withholding an IMF loan to London, the United States crashed the pound,
forced Britain to withdraw from war and its prime minister to resign in
disgrace. The Brits were finally relieved of their delusions.

It is most unlikely, of course, that the US drama will play out in a similar
way--we are far too big and powerful by comparison--but Britain's
humiliation might serve as a cautionary tale for power-drunk American
statesmen. Other nations, when they feel their global market power is
sufficiently stronger and we have become still weaker, might organize a
transition of gradual adjustments that allows the United States to climb
down gracefully from its long-held role. This would be very difficult to
accomplish, however, without a real blow to the US standard of living, not
to mention national pride.

More likely, the United States and the global system are going to encounter
harsh bumps and ugly surprises. Japan, which has the most to lose if the
United States taps out as "buyer of last resort," suggested privately a few
years back that it would accept a discreet ceiling on its trade surpluses
with the United States--a "managed trade" deal the free-market Americans
rejected on principle. Richard Medley, a global financial consultant with
inside connections in Tokyo, told me afterward, "One of the Japanese
strategies is to keep us from doing anything rash for the next decade and a
half--until they have become self-sufficient in Asia and can go along
without us."

The European Union, meanwhile, is patiently assembling the economic girth
and institutional confidence to act as the leading counterpoise to
Washington. That is the essential idea of the euro--a competing world
currency other nations can use for trade and as a reliable storehold of
wealth. As the euro establishes its durability and comes into wider usage,
the dollar will no longer be the only option. At that point, it will be
easier for Europe or others to exercise their financial leverage against the
United States without damaging themselves or the global financial system as
a whole. Europe is not quite there yet, but the euro is rising and so is
European anger. The Saudis' financial withdrawals this summer may be a hint
of what Americans can expect--episodes of veiled pressure until Washington
gets the message.

The Bush warriors' reckless American unilateralism can only hasten the day
when the creditors' conclude that they must assert their leverage over us,
perhaps in order to defend peace and stability in the world. How will
Americans react when they discover that "U-S-A" is a lot less muscular than
they were led to believe? Assuming Americans do not really yearn to become
latter-day Roman legions, many people may be relieved to learn the truth.
Stripped of imperial illusions, this country could concentrate on building a
different, more promising society at home. But while we can hope that the
transition ahead will be gradual and without national humiliation, it's more
plausible that America's brave new imperialists will plunge ahead blindly,
until one day they encounter their own intense reckoning with the
bookkeepers.

*******************************
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