The Four-Year Reich: or how blind aggression, unparallel hubris, and sheer idiocy wrecked America in record time.
How long did American hegemony last? Less time than it takes you to learn how to pronounce it. Bush is touring Europe and the U.S. press is celebrating it as something of a victory lap. The truth is, this trip is more akin to an 8-Track distributor at the Consumer Electronic Show. Look at that clunky, dusty old thing. Can you believe they used to be important?
You think I'm exaggerating, or making "what if" predictions? We don't look defeated. It doesn't feel like we're near destruction. But you can't tell the difference between a solid block and an hollow box until you try and pick it up, and these days the United States is feeling very, very light.
America is on top. We're the world's largest economy. We have the strongest military. And when it comes to diplomacy, when America talks, people listen. Being a superpower, like making a working footstool, requires at least three legs. For a superpower, those legs are: military might, diplomatic respect, and economic muscle.
But what if your stool has only two legs? What about one?
What about none?
First off, we have to drop the idea that the United State is the "only superpower." Right now there are at least three entries on the "massively powerful, capable of shoving almost everyone else around" list: the United States, China, and the European Union. Let's compare these three and see how they stack up.
Economy
The United States has a huge and growing economy. Based on the entry in the CIA World Fact Book, in 2003 the United States had a Gross Domestic Product of just under $11 trillion dollars and a growth rate just above 3%. The first number is huge, the second respectable. Investment in new assets (factories, equipment, housing, inventory, etc.) ran at 15%.
China's economy is a bit hard to compare, because some of the numbers are not available and the Chinese government puts restrictions on currency exchange. The CIA tags it at $6.5 trillion in 2003. That sets China at around 60% of US levels in 2003. Another massive economy. And China is growing fast. In 2003, the growth rate was 3x that of the United States (9.1%). By comparison, Japan, which was long regarded as the United State's chief competitor for economic dominance, has been lodged at $3.5 trillion, with a growth rate slower than that of the United States.
It doesn't take a genius to see that, with the large difference in growth rate, the U.S. and China will soon converge. In fact, if current trends continue, China will have a larger GDP than the United States well before 2015 (kind of makes those predictions about Social Security in 2042 look far away, huh?). Don't think that China can hold up this level of growth? Check out this level of investment: 43.4% of GDP. Chinese factories are already a generation ahead of their U.S. counterparts, and they're making the investments to be sure it stays that way. And China has the labor pool to fuel their enormous growth. Not only does their available workforce outnumber ours 6 to 1, 50% of China's workers are still out in the fields. China has the demand, the people, and (as we'll soon detail) the money to keep the fires burning hot. In 2004, the growth rate increased to 9.5%.
Europe is a little hard to figure. In the minds of most people, and most atlas makers, this is still 26 separate nations. But on an economic front, they have ties that are much closer than those of the United States and its neighbors under NAFTA. When you stack the GDP of those nations together, you get: $11 trillion dollars. The GDP of the European Union is already as large as that of the United States. The consolation is that the growth rate in the EU is behind that of the US. They're held back by a lagging Germany, which has been in recession almost since reunification. That flat growth is also holding investment in some Western European states down to the 15% level of the US. On the other hand, inflation is lower in the EU than it is on this side of the "pond."
The EU has a lot of upward potential. Like China, there's plenty of undeveloped regions, and a bigger population base to draw from. Don't expect a China-sized growth rate from the EU, but expect them to hold at least economic parity with the United States over the next ten years. And don't forget that the EU has another method of growth: expansion. The EU is likely to continue it's creep to the east, picking up more of the former Soviet satellites and fragments. It's also quite likely that within a decade, the EU could add some nations that are not so much "E." Oh, and the EU has one fun feature nobody else on the list can top. When it sits down to make treaties, it can act like one massive buying block. When it comes time to vote at the U.N. or at international trade federations, it can use its Wonder Twin powers to unfold into 25 nations, each of which gets a vote. Nifty, eh?
So there's the first leg. On the economic front, the United States is clearly one of three, and arguably the biggest of the three, if only by a slim margin. Only remember the hollow box I mentioned before? When it comes to the U.S. economy, that box is so hollow you can hear the echo from a world away.
The United States economy is running on vapor and promises. We're in hock up to our eyeballs, and completely dependent on our competitors. We're standing at the bar, roaring drunk on debt. Our competitors are still setting us up with another round, because they have confidence that we'll do exactly what they want us to do - spend it on their goods. But as the prospect us the United States ever paying up its huge tab become more and more remote, our patrons are starting to get a little wary of filling the glass.
In 2004, we hit a record $617 billion deficit. That's a 24% increase in one year from the record trade deficit of half a trillion dollars we ran in 2003. And that record only exceeded the record deficit from 2002, which beat out the 2001 record, and... well, you get the idea. If it's any comfort, the EU also spilled a little red ink last year, running up a $62 billion dollar gap. However, the EU ran up this much smaller deficit will churning out exports that were about 1/3 higher than those of the US. The EU ran up a tidy $68 billion dollar surplus with the United States.
And China... really, do you even have to ask? Remember Ross Perot and the "giant sucking sound?" Well that slurp you hear is coming from the east, not north or south. China is draining our dollars faster than Paris Hilton goes through clothes. The biggest piece of that US trade deficit comes from China. Last year, the number was $162 billion. China is getting our money, and using it to build factories, with which they get our jobs. And more of our money.
Lather. Rinse. Repeat.
Everybody's aware that "trade" is not the only word that comes before "deficit." In the U.S., the most common partner is most likely "federal." In 2004, we ran up a record $412 federal deficit. But wait! That was before Bush launched his plan to cut the gap in half in some ill-defined number of years. Under that plan, in 2005 we'll have a new record of $427 billion. We're the world's largest debtor. In fact, we borrow so much that if it wasn't for us, capital costs around the world would be 1-2% lower. And who do we borrow from? China. China and Japan are the two largest purchasers of US debt in the form of bonds.
They do this for two reasons. One, it keeps the drunk on his feet and drinking. Two, it keeps him from swinging in their direction. By controlling our debt, China controls us. This week, Bush is making a big deal about a few harsh words for the Russians and how they're not living up to the ideals of democracy. In the meantime, the Chinese make no pretense of democracy. Do we cut off trade? Threaten sanctions? Raise a word of protest? Of course not. Because we don't dare upset the Chinese. Without them, we would have to raise the price of our bonds drastically to get anyone else interested, tossing away the pretense of a good economy in the process. To coin a phrase, China has us by the nutsack, and they're getting less and less shy about squeezing.
If I owned land in Taiwan, I'd be shopping for home sites in Canada (and hey, I might do that anyway. How's the weather in Halifax?).
One more point about U.S. debt and I'll move on. The U.S. economy is like a soufflé held up by consumer spending. As recently as 1990, the average US household saved about 6% of its income. The number today is less than one half of one percent. The level of support our staggering economy has needed to keep some air in the mix can only be reached by those consumers spending more than they make. We now have a record personal debt to go with record federal debt.
Doesn't scare you enough? Think about this. Just as the federal debt is getting so bad that many countries have stopped buying US bonds and even investors like Warren Buffet are running to have their investments denominated in other currencies, personal debt is getting so bad that many people are no longer able to satisfy their need for more cash at traditional banks, or even from credit cards. They're turning to "loan consolidators" charging 35% or more in interest. Even more ominously, they're fueling the rise of the "pay day loan" industry. Pay day loans have rates equivalent to 400%, and the number of offices and income for these companies were up 200% in the last year. There are more pay day loan offices in Oregon than there are of any fast food chain. If you're looking for a sign of an economy circling the drain, it's hard to find one more obvious than this.
Soon enough, we will stop spending, because there will be nothing left to spend, and no one willing to lend us more.
Diplomacy
If the economic leg of the U.S. superpower chair is riddled with termites of debt (bet you're wondering just how far I'm going to push these analogies, huh?), the diplomacy leg has been sawed clean off.
In its unilateral moves toward Iraq and "extending democracy," foregoing the International Criminal Court, and passing on Kyoto, the United States has held up its middle finger to the world. Most of our former partners have not only been insulted, they've been shocked. This has been a wakeup call for them - America is not the country it was 50 years ago, or even 10 ago.
Think of it like a consumer. You've been buying one brand all your life, but lately you've found their quality slipping and their products erratic. European consumers - world consumers - are ready to stop buying brand USA and look at something new.
Many of them have taken this as an opportunity to shop around. If we can't count on the US as a responsible, consistent partner, who can we count on? For the EU, the answers are (a) we can count on ourselves, and (b) we can count on China.
Why China? Because, just as with the United States, China is already a major trading partner with Europe. And, just as with the United States, that trade is growing.
To put it bluntly, the EU now sees its partnership with the United States as the past, and China as the future. The clearest sign of this is that the EU is willing to defy the U.S. and sell arms to China over Washington's protests.
We cannot get Europe to side with us on going to war. We cannot get Europe to side with us on economic sanctions. We cannot get Europe to side with us on providing arms to nations we see as a threat.
The "special partnership" between the United States and Europe is now as hollow as our economy. Words and handshakes will be exchanged, but nothing of substance will occur for the next few years. Europe is holding its breath, hoping that the US shuffles off the world stage gracefully - and at a comfortable distance.
Bush's trip wasn't a total loss. Estonia did volunteer to send one, count 'em, one, soldier to Iraq. I guess we can now add them to the coalition of the willing.
Military
Now we come to the strongest leg of that battered stool. The neocon theory seems to be that we don't really need the other two legs anyway. With careful balancing, and by making the leg really big, we can perch on our military and to hell with what anyone thinks of us.
It might work, too. Heck, that was the operating theory for the Soviet Union for half a century - if you can't make them love you, make them fear you.
Only they're...uh, not so much afraid as we might think. Our abject failure to secure Iraq has shattered the idea of an all-powerful US military. And our efforts in Iraq have left the military so battered that we may not be able to take other action for years to come. Add to that the crumbling of our volunteer force, and the fact that military spending is being funneled away from training and into follies like missile defense, and the US military starts to look less than super.
China, by the way, has 2.3 million men under arms. They may not be equipped with the latest equipment (yet), but you want to bet that they can't take and hold a country the size of Iraq? (Tibet, is about 3x the area of Iraq, though much less populous).
In the meantime, our buddies in the EU are working to expand their national armies, the cooperation between their forces, and the technology of their armies in the field. All of this at the expense of the U.S.-lead NATO. This is nicely detailed in T. R. Reid's The United States of Europe.
Where we are
America the sole superpower? Only if you listen to nothing but your superego. We're one of three, and a good case can be made that we're in third place. And slipping.
The rest of the world still listens when the U.S. talks, but not because we're on top. It's because we're dangerous. Our military may not be configured to hold territory, but it can apply a sharp boot to the butt of anyone who comes cross-wind of the neocons on a given Tuesday. Our debt is so large, that should we choose to default, it might drag the world economy into a decades long depression.
We're the crazy cousin in the corner, scheming, mumbling to himself, and frequently waving his .45 at the rest of the room. They will humor us because we can hurt them - but they don't have to like it. And they don't.
Where we're going
Where I'm going is out of this diary, since I've almost reached the magic number where the blog won't take another word (she can't handle no more, cap'n). But the prescription to what ails us can be summed up in three terms:
Damage Control
Sacrifice
An End to Oil
I'll try to deal with each of these soon - and steal liberally from your comments while I'm doing it. Assuming there are comments.
(I didn't say half of what I wanted to, or say it half as well as I wanted, but you get a gold star sticker for making it this far. Congrats.)