Perhaps because we are a young country, Americans tend not to pay much attention to the lessons of history. Well, we should start, because those lessons are brutal. Power, even great power, if not well tended, erodes over time. Nations, like corporations and people, can lose discipline and morale. Economic and political vulnerability go hand in hand. Remember, without a strong economy, a nation's international standing, standard of living, national security, and even its domestic tranquility will suffer over time.
Many of us think that a superpowerful, prosperous nation like America will be a permanent fixture dominating the world scene. We are too big to fail. But you don't have to delve far into the history books to see what has happened to other once-dominant powers. Most of us have witnessed seismic political shifts in our lifetime. In 1985, Mikhail Gorbachev settled into his job as the Soviet Union's young and charismatic new leader and began acting on his mandate to reenergize the socialist empire. Seven years later that empire collapsed and disappeared from the face of the Earth. Gorbachev runs a think tank in Moscow now.
In a sense, the larger world is starting to resemble the nasty and brutish life that long has characterized the corporate world. Just ask Jeffrey Immelt, chairman and CEO of General Electric. Of the twelve giants that made up the first Dow Jones Industrial Average in 1896 - all of them once considered too big to fail - only GE remains. The other towering names of the era - the American Cotton Oil Company, the US Leather Company, the Chicago Gas Company, and the like - all have faded away. And as GE stands against the winds of today's financial challenges, ask Immelt whether there is such thing as a company that is too big to fail.
I love to read history books for the lessons they offer. After all, as the homily goes, if you don't learn from history, you may be doomed to repeat it. Great powers rise and fall. None has a covenant to perpetuate itself without cost. The millennium of the Roman Empire - which included five hundred years as a republic - came to an end in the fifth century after scores of years of gradual decay. We Americans often study that Roman endgame with trepidation. We ask, as Cullen Murphy put it in the title of his provocative 2007 book, are we Rome?
The trouble is not that we see ourselves as an empire with global swagger. But we do see ourselves as a superpower with global responsibilities - guardians if not enforcers of a Pax Americana. And as a global power, America presents unsettling parallels with the disintegration of Rome - a decline of moral values, a loss of political civility, an overextended military, an inability to control national borders, and a growth of fiscal irresponsibility by the central government. Do these sound familiar?
Finally, there is what Murphy calls the "complexity parallel": Mighty powers like America and Rome grow so big and sprawling that they become impossible to manage. In comparing the two, he writes, one should "think less about the ability of a superpower to influence everything on earth, and more about how everything on earth affects a superpower."
A superpower that is financially reliant on others can be vulnerable to foreign influence. The British Empire learned this in 1956, when Britain and France were contesting control of the Suez Canal with Egypt. The Soviet Union was threatening to intervene on Egypt's side, turning the regional dispute into a global showdown between Moscow and Washington. The Eisenhower administration wanted to avoid that, and the United States also happened to control the bulk of Britain's foreign debt. President Eisenhower demanded that the British and French withdraw. When they refused, the United States quietly threatened to sell off a significant amount of its holdings in the British pound, which would have effectively destroyed Britain's currency. The British and French backed down and withdrew from Suez within weeks.
The US dollar has never come under a direct foreign attack (though its vulnerability is growing). A direct foreign attack would result in a dramatic move away from the dollar. That would lead to a significant decline in its value, as well as higher interest rates. This is often referred to by economists as a "hard landing." In lay terms, it's more like a crash landing. Still, Americans have become intimately acquainted with the shocks of financial instability. Americans of a certain age still vividly recall the depths of the Depression in the 1930s and the chaos of inflation and long gasoline lines during the oil shock of the 1970s. We will also remember the financial collapse that began in 2008, and we pray for nothing worse. Some of our smartest financial thinkers are praying right along with us. "I do think that piling up more and more and more external debt and having the rest of the world own more and more of the United States may create real political instability down the line," investor Warren Buffett has said, "and increases the possibility that demagogues [will] come along and do some very foolish things."
Regards,
David Walker
for The Daily Reckoning Australia
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About the Author
David Walker served as United States Comptroller General from 1998 through to 2008 and is now the President and CEO of The Peter G. Peterson Foundation. He is also the author of Comeback America: Turning the Country Around and Restoring Fiscal Responsibility.
Comment by dinakarananda on 9 February 2010:
I remember the TV news report about the last Soviet tank out of the famous 'grave of empires', Afghanistan. Would we see the last US ship out of every military base around the world before the end of this new decade?
Comment by Ross on 9 February 2010:
The Japanese may finally even dump their white men of Asia imperial status.
That assigned voluntarily and secretly as evidenced in writing signed by Roosevelt's hand. And that status which survived the double crossing Roosevelt's energy sealane blockading and drawing them in and knocking them out in the WWII Pacific slugfest.
So bye bye trilateral commission, see u later rockefeller, and JPII isn't praying for you from beyond ZBIG ....
http://www.nytimes.com/2010/02/09/world/asia/09japan.html?hpw
Roosevelt and imperial Japan's "negroes of Asia" might even finally be courted rather than marshalled.
Comment by Dan on 9 February 2010:
From the article: (referring to secret WW2 pacts between Japan and USA):
"This could lead to calls to remove the American bases, rewrite Japan’s pacifist Constitution to allow a full-fledged military or even develop the country’s own nuclear deterrent, political observers said."
Well the battle lines are being drawn, but I think Japan will be unlikely to side with its Chinese neighbour, unless perhaps if it occurs through a mutual friend. In other words I think it's still very easy for the US to keep Japan in a state of submission. For Japan to break free, their economy would first need to have decoupled sufficiently from the US. I can't see that happening just yet.
It will be interesting when the secret files on JPII get released, though. Mightn't be long actually.
Comment by Ross on 10 February 2010:
Dan, check out Nissan's recent results and where they sold the most cars and what tipped them into profit. Japan is mercantilist. The Chinese auto market is now the world's largest by units.
It is though in my opinion way too early for anyone major or with anything less than extreme fervour to accept the massive losses (to at best fight to a standstill) to do anything but stonewall the US, so I don't see any external acts of aggression directly. The soft diplomacy competition is ratcheted up in Africa and South America and the Chinese are doing quite well. The Brazilians and the Chinese are fully embracing and getting lots of local press both sides ahead of the big visit.
For us the Indians are the biggest worry but they are doing well in Mozambique and a few other spots so I hope they keep their eyes off us for a while. But most of their elite studied liberal fascism at Oxford and Cambridge and so we get victim propaganda of the highest quality as the first shot across our bow. When they start claiming their genetic stock and those of aboriginal Australians is akin then its time to worry about their aircraft carriers and subs and missile and nuke capability and their brand new supposed F22 killing Sukhois (co-developed with Russia) flight tested last month. And would the US go India in our defence? No. As evidenced by Bush okaying Uranium and advanced weapons sales to them without even informing us in advance. Does the US need what we produce? Are we a great landbase that can establish a beachhead into Asia? Not really unless they get kicked out of all their existing forward bases and partner territories.
Comment by christina on 10 February 2010:
The Roam empire lasted 500 years and it collpased. America has been an empire for 65 years and they think they are too big to collpase. Hmmmm....
Comment by Don on 10 February 2010:
History repeats itself until it doesn't.
Comment by Ross on 10 February 2010:
Don, I am reminded by same in this http://money.cnn.com/2010/02/09/markets/thebuzz/index.htm
Comment by Daniel Newhouse on 10 February 2010:
Ross, Roosevelt was dead before Japan surrendered.
If Japan wants us out of its agreements, fine. But then we withdraw the nuclear umbrella. So all this talk is pointless until Japan develops its own nuclear arsenal. I highly encourage them to do this. The U.S. is overextended. If the Japanese and the Chinese want to nuke themselves into oblivion, more power to them.
Comment by GB on 10 February 2010:
You cant really compare the soviets and rome to the US. The soviets and rome invaded and occupied foreign lands, the US does not. They may invade but they leave the country eventually
The talk of the system turning rotten is probably correct and i think its true of the last decade but deep recessions change people and i think you will find the US will not be the same in the future as it was in the past. They will probably become more family orientated and less materialistic and greedy
Comment by Biker Pete on 10 February 2010:
That was because the Roam Empire was always wandering off, Christina...
Comment by Ross on 10 February 2010:
Daniel, we are talking about the actions of two different Roosevelt's, one made the treaties and secret agreements and the other broke them :
And extracted here because it is succinct :
http://en.wikipedia.org/wiki/Arthur_H._Vandenberg
In mid-1939 he introduced legislation nullifying the 1911 Treaty of Navigation and Commerce with Japan and urged that the administration negotiate a new treaty with Japan recognizing the status quo with regard to Japan's occupation of Chinese territory. Instead, Roosevelt and Secretary of State Cordell Hull used the resolution as a pretext for giving Japan the required six months' notice of intent to cancel the treaty, thus beginning the policy of putting pressure on Japan that led to the Attack on Pearl Harbor.
unquote
Teddy cuddled up with the Japanese to ally against the European's in East Asia but at the same time he built the white fleet and is said to have have predicted the conflict with Japan. There was a cable to the Japanese in 1905 but I believe I saw a direct letter recently also (above the notorious one he sent to his son)
More reading here :
http://en.wikipedia.org/wiki/Treaty_of_Portsmouth
http://en.wikipedia.org/wiki/Taft-Katsura_Agreement
http://en.wikipedia.org/wiki/Lansing-Ishii_Agreement
http://www.nytimes.com/2009/12/06/opinion/06bradley.html "Diplomacy That Will Live in Infamy" (ignore Taft-Katsura secrecy claim but apply it to the cable)
Comment by Ross on 10 February 2010:
Daniel I have a post in moderation that might take a day or so to list here (re Teddy Roosevelt deals v FDR breaking them to sort the confusion) meanwhile people calling US financial fraud for what it is can still manage to harbour xenophobic extraterritorial chauvinism like this : http://market-ticker.denninger.net/archives/1949-China-Flaps-Its-Jaws-Again.html (love how he puts it in the 1949 archive - the great wrong to be undone!)
Comment by Ross on 10 February 2010:
I forgot the Hull note http://en.wikipedia.org/wiki/Hull_note
Comment by Unpopular Truth on 10 February 2010:
There's an article linked here which came out today (or at least I saw it today) showing a similar move by the Chinese who are angry about USA selling weapons to Taiwan.
http://www.reuters.com/article/idUSTRE6183KG20100209
Using money weapons is better than using bullet weapons I guess. Casualties can be big either way
Btw, comparing Rome's demise and the USA's theorized demised is a fun but pointless exercise. It's like comparing modern aircraft carrier based battles to ye olde shipe of the line battles. Too many changed variables.
Comment by Dan on 10 February 2010:
All money and every contract is ultimately backed by the military (or physical force, more generically), which is able to threaten, invade, or at also cause 'nasty accidents' to happen to people and countries who push their luck too far, or happen to be in the way of something.
If America were to crumble from its current military supremacy (despite everything that has happened this last few decades), it can only occur by the wilful mismanagement by its own leaders. No matter how much it appears that some usurper appeared to win fair and square, you can be sure that to a significant degree, they were given the OK beforehand. China can huff and puff but ultimately all the trade routes well and truly belong to NATO and the US.