With
the US government firmly on the back foot in Iraq
and President George W Bush rendered a lame duck by a
Democratic Congress, the end of the American
century is approaching rather faster than
previously expected. [1] My characterization of
the United States as Garfield may have been too
gentle in the context of what is likely to happen
going forward, when the cat becomes feral. The
death of any superpower usually carries with it a
combination of military and economic defeats
and, as with the Soviet
Union's demise in the 1990s, America's decline
will prove equally cruel.
Iraq has
descended into a civil war in recent weeks, as a
feckless US military attempts to recover lost
ground with the same failed tactics of the past
few years. Albert Einstein defined insanity as
doing the same thing over and over again but
expecting a different result. Bush, reeling from
stunning losses in mid-term elections, had to fire
defense chief Donald Rumsfeld, but has since
failed to signal any changes in strategy. The
matter may not be entirely up to him as insurgents
and terrorists, sensing a potential shift in US
strategy, have stepped up their attacks to record
levels. This makes an early US exit not only more
likely, but also more ignominious.
For a
people imbued with a sense of infallibility, this
turn of events would be nothing short of a
catastrophic reality check. As with the end of the
Vietnam conflict, it might take 10 years or more
for any resurgence in national optimism in the US.
The difference is that this time around, putative
successors are much better positioned to inherit
the mantle of superpowers.
Echoes
elsewhere The impact of a
significant foreign-policy setback is hardly minor for
any economy, and will be quite marked for the
US economy. A decline in government spending on
the "military-industrial complex" would reduce
profits for many US companies, especially the ones
that tend to fund policymakers or send
their executives into politics.
The
downward adjustment of such sectors would,
however, pale in comparison to the impact of
reduced optimism at the top level. Simply put, US
consumers would be less likely to spend on new
houses, cars or home improvements. The notion of
"keeping up with the Joneses", which underpins vast
swaths of the US economy, would operate in reverse
under such circumstances, with people cutting
their spending in competition.
Financial
markets are already signaling the possibility that
the US confronts a recession at home, as the US
dollar has declined sharply in recent days. While
the prestige factor mentioned above is only part
of the story, the other part is the likely
monetary easing that makes the currency less
attractive going forward. Stock markets have also
seen a wobble in recent days.
The
immediate impact of a decline in the US economy is
of course negative for exporting countries,
including China, Japan and pretty much the whole
Middle East. However, to the extent that China and
India continue to build their infrastructure, and
allow their currencies to appreciate against the
US dollar, one can expect increased consumption
from these countries to take up the slack created
by the US decline. The worst-positioned countries
are those that do most of their business with the
US today, namely those in Latin America.
Some financial commentators have pointed
out that a falling US dollar is good for the
country's exports. This might be the case when a
country produces anything that others want
to buy, but that's largely not the case with the
US. In a previous article, [2] I wrote:
The US has lost its competitive edge
in manufacturing ... The simple fact is that
after the Cold War ended, US innovation stopped
dead in its tracks. Evaluate the engineering
aspects of any American car, and you are likely
to walk away completely unimpressed. A six-liter
engine used by US car companies produces the
same power as an engine half that size from the
Germans, and one-third of the size by the
Japanese (tuned, admittedly). Leave out
engineering, and simple design dynamics don't
work either - Detroit has not produced a single
desirable car in the past decade.
The
United States came to the forefront of righting
human-rights wrongs such as racism, but only
when its economic prosperity was threatened by
the status quo. Now, America's lost
competitiveness in manufacturing comes alongside
its declining demographics (when keeping
immigrants out of calculations), and rising
threats from the likes of India and China in all
areas of the global economy that it currently
dominates. In this high-pressure economic
environment, rising geopolitical risks argue for
an unwelcome acceleration of the country's
transition. Much like a worker who becomes a
wife-beater when threatened with losing his job,
the US lashes out, with its anger directed
toward garnering any resource advantage that it
can to lengthen its reign at the
top.
As I pointed out then, the US
is unlikely to go quietly into the night. It will
attempt to lash out at the rest
of the world, particularly at its potential successors - the
Eurozone, Russia and China.[3] Of these, the Eurozone
has neither the military nor social mandate to
pose a strategic counterbalance to the US. This
leaves Russia and China to consider. I have already
written about the latter in the aforementioned
article, concluding that China would make
necessary accommodations to its currency and
economic policy to avoid confrontation with the
US. Russia's role, though, is more intriguing.
Russia's sinister game That
President Vladimir Putin has stepped up his great
Asian game comes as no surprise in the context
described above. To a large extent, his strategy
has been shaped by the impact of a dying Soviet
Union on the national psyche, something that he
has personally mourned more than once. A shameful
withdrawal of the US from Iraq guarantees a strong
role for his country in the immediate aftermath,
particularly given the proximity of concerns with
Iran, whose potential to disturb southern Russian
regions has never been doubted in Moscow.
The assassinations of various dissidents,
including journalist Anna Politkovskaya and former
KGB spy Alexander Litvinenko, show a return to the
"bad old days" of the KGB under Josef Stalin and
Leonid Brezhnev, while apparent intransigence on
energy businesses show that the Kremlin is keen to
maximize every advantage it perceives. What this
means for Putin himself is a matter of much
conjecture, but it seems a fairly safe bet that he
will not slide into oblivion quite as easily as
president Boris Yeltsin did.
At the
logical extreme, one can expect that Russia will
hold Europe hostage with its gas supplies, while
increasing its shrill behavior on world forums
against US interests. This would in turn cause the
US to dial back its old suspicions on Russia. The
nomination of Robert Gates (of "Mikhail Gorbachev
is a fraud" fame) as US defense secretary makes it
ever more likely that the US would prefer to pick
battles with known enemies, particularly one that
appears to be so willing to become recognized once
again as the strategic counterbalance to the US.
The only event that could derail this
train would be a large terrorist attack on Russia,
perhaps mounted by Chechen Muslims. [4] Similarly,
a bigger attack on the US may make Americans more
amenable to concessions for the Russians, making
any conflict escalation unlikely.
Over the
longer term, though, Russia's tilt toward
regaining the Soviet Union's lost dominance is
ill-conceived for both historical and demographic
reasons. However, it provides just enough
breathing room for China to emerge fully into the
limelight. For this reason, more than anything
else, China's foreign policy in the next few
months is likely to "encourage" adventurism on the
part of the Russians, while playing lip service to
the United States.
Notes 1. Garfield with guns, Asia
Times Online, September 2. 2. In-Sen!, Asia Times
Online, September 16. 3. China's four-play, Asia
Times Online, November 11. 4. It is
interesting to note that Alexander Litvinenko
alleged that it was the KGB rather than the
Chechens who bombed Moscow apartment buildings.
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