In a world awash in debt, power shift to the creditors.
---Fareed Zakaria
America is the undisputed global hegemon today. What gives us the power to be the world hegemon? Well, there are four pillars that undergird our power. The first is financial. We are the world's richest nation. We produce the most GDP per year. The next highest, China, with four times our population, produces 70% of what we do. The next pillar is scientific achievements. One look at the top universities in the world will find that a very large share of these are based in the United States. The third one is military. The U.S. spent more on our military than the next 11 countries combined. We have 11 carriers that outclass anything the world owns. China, the next biggest operator of carriers, has two. They are also not in the same league as our Nimitz and Ford class carriers. Finally, our ability to control international discourse, news and entertainment gives us the fourth pillar of our power.
These four pillars reinforce each other. Our wealth allow us to extend our investment all over the world. Our military allows other countries to defer to our interests and wishes, even if some of these may go against their own. It also protects our investment from being seized by other countries. Our scientific discoveries produced in the Universities allow us to keep our edge on both the military and the economy. You can see it in the many pioneering achievements such as the use of stealth aircraft in the military as well as the founding of the new economy such as micro electronics and the flourishing of the internet and its related businesses. Hollywood lowers the cost of governing the world. Many of the best minds of the world want to come to the U.S. as we are seen as the shining city on the hill. The rest of the world internalize our values and cooperates with us. This is a much lower cost model of running the world compared to the traditional empire way where brute power must be used. We still send our warships if things don't go our way, but not nearly as often as the British might have to with their empire model.
It has not always been this way. Before the two world wars, Great Britain has the most money and military. Germany was a powerhouse in science and technology. The U.S., while up and coming, was considered backwaters in terms of military, science and tech.
Being the world factory for WWII gave us our wealth and productivity. Acquiring the best scientific talents from Europe after WWII kicked started our ascend in both our scientific achievements as well as advancing our military.
Scientific achievement is definitely the most important of the four pillars. It allowed us to have the most advanced military and also to trail blaze new segment of the economy that did not exist even a decade before. Financing it all has been a strong economy.
We are no longer alone. Yes, we have challengers before, like the Soviet Union, Germany and Japan. None of these countries have anything close to the economic parity with the U.S. that China did. In the next decade, China will have a larger economy compared to the U.S. With their new found wealth, they have started competing with us in scientific research . In fact, in the next decade, they will outspend us in R & D. Actual scientific achievements will take a few more years after they achieved parity in spending, but they will come. In the not too distant future, China will most likely surpass the U.S. in scientific achievement, just as the U.S. surpassed old Europe. China has the most number of start ups which are worth 1 $billion or more, what is also known as unicorns, though the value of their unicorns are somewhat lower compared to the U.S. Their military have also come a long ways.
picture courtesy of Raymond Dalio at
https://www.principles.com/the-changing-world-order/
With this backdrop, a high national debt that may cause the dollar to lose the reserve currency status will erode all four of our pillars of power. Already, our economy is vulnerable as the financial sector is too big and suck the life out of our manufacturing. Our healthcare sector is too big which depends on generous benefits. Once we lose our reserve currency status, domestically, we will go through a stagnation period with inflation, or stagflation. While Hollywood is a commercially profitable industry, our military requires enormous amount of money, our basic research also requires a fiscally sound government. A government that is severely constrained financially will not be able to finance more scientific research and military. In turn, it would impact our businesses abroad. Suddenly, Exxon Mobil may find that their deals with Russia or the Middle East unraveled as our military is not there to enforce our interests against the interests of the countries that has the oil under their grounds. With the constant bickering of the two political spectrum, the nation may turn more violent and chaotic and outsiders may find our way of life less appealing. Top scientists in the world may go someplace else. Hollywood may loses its magic to the world as the U.S. is no longer viewed as the shining city on the hill. The unraveling of our power will continue until we become only a regional power. History is repleted with examples of former hegemons that lost their power to upstarts as each fall into the spiraling debt traps of their own making.
The four pillars of American Power had been dominant for the last few decades. However, due to our imprudence with war and spending, they are now all endangered. In the future, the probable course is for these powers to further erode as we flounder. The power of the American global hegemon is fading.
No comments:
Post a Comment