Paul Kennedy Finally Speaks

Where has he been during the last decade? Events during the Bush Era seemed to follow the terrible blueprint he laid out in "The Rise and Fall of the Great Powers", 20 years ago:

So while today's Russia, China, Latin America, Japan and the Middle East may be suffering setbacks, the biggest loser is understood to be Uncle Sam.

...The first reason, surely, is the U.S.'s truly exceptional budgetary and trade deficits. There is nothing else in the world like them in absolute measures and, even when calculated in proportion to national income, the percentages look closer to those you might expect from Iceland or some poorly run Third World economy. To my mind, the projected U.S. fiscal deficits for 2009 and beyond are scary, and I am amazed that so few congressmen recognize the fact as they collectively stampede towards the door entitled "fiscal stimulus."

...Never mind, I am told, the foreigners will pay gladly for that paper. This notion makes me queasy. In the first place, it is (without its advocates ever acknowledging it) a dreadful sign of America's relative decline. If you have seen Clint Eastwood's poignant war movie "Flags of Our Fathers," you also will have been stirred by the scenes where the three bewildered Iwo Jima veterans are dragged all over the country to beg the cheering audiences: "Buy American Bonds!" It's uncomfortable all right, but there was one massive consolation. The U.S. government, fully converted to Keynesianism, was asking its citizens to dig into their own hoarded savings to help sustain the war effort. Who else, after all, could buy? A near-bankrupt British Empire? A war-torn China? The Axis? The Soviet Union? How fortunate it was that World War II doubled U.S. GDP, and the savings were there.

Today, however, our dependency upon foreign investors will approximate more and more the state of international indebtedness we historians associate with the reigns of Philip II of Spain and Louis XIV of France -- attractive propositions at first, then steadily losing glamour.

...Do people really think that China can buy and buy when its investments here have already been hurt, and its government can see the enormous need to invest in its own economy? If a miracle happened, and China bought most of the $1.2 trillion from us, what would our state of dependency be then? We could be looking at as large a shift in the world's financial balances as that which occurred between the British Empire and the United States between 1941 and 1945. Is everybody happy at that? Yet if foreigners show little appetite for U.S. bonds, we will soon have to push interest rates up.

...Moreover, no three or four of those countries -- and perhaps not a dozen of them combined -- have anywhere like the staggering array of overseas military commitments and deployments that weigh upon Uncle Sam's shoulders. That brings us back, I'm sorry to say, to the "imperial overstretch" remarks I made some 20 years ago.

As I suggested at that time, a strong person, balanced and muscular, can carry an impressively heavy backpack uphill for a long while. But if that person is losing strength (economic problems), and the weight of the burden remains heavy or even increases (the Bush doctrine), and the terrain becomes more difficult (rise of new Great Powers, international terrorism, failed states), then the once-strong hiker begins to slow and stumble. That is precisely when nimbler, less heavily burdened walkers get closer, draw abreast, and perhaps move ahead.