The 20th century was indeed the American Century. In the post WWII period we enjoyed an unprecedented expansion of domestic and then global energy supplies, massive expansion of the money supply of US dollars held outside the United States that facilitated a massive expansion of domestic credit, thereby resulting in 60 years of overall strong economic growth.
The 21st century will be a very different era. First and foremost, the two defining factors of this century being the imminent peak in global oil production, and the unknown but likely unpleasant consequences of excessive levels of CO2 in the atmosphere, and the resulting global warming. Secondly, and in conjunction with those global issues, the opening decades of this century will be noted for massive shifts in the macroeconomic landscape.
We are witnessing the rapid decline of US economic and energy superiority, due in equal parts to a credit/debt crisis, an inflationary monetary strategy, increasing geopolitical divisions over strategic control of hydrocarbon energy supplies, and ongoing US militay overstretch in an attempt to control the world's largest remaining supplies of oil and gas.
Regarding the last item, we are now 5 years into what future historians will undoubtedly refer to "Imperial Overstretch," eloquently defined by Paul Kennedy in his famous book...
Great Powers in relative decline instinctively respond by spending more on ‘security,’ and thereby divert potential resources from ‘investment’ and compound their long-term dilemma.
— Historian Paul Kennedy describing “imperial overstretch” in The Rise and Fall of Great Powers (1989)
In his classic study of empires,
The Rise and Fall of Great Powers: Economic Change and Military Conflict from 1500 to 2000, Yale historian Paul Kennedy observes that when great powers begin to decline, they almost invariably resort to war and belligerency, thereby accelerating their demise as they waste their national treasuries on military spending to the detriment of their economies and their peoples.
Kennedy described this pattern as "overstretch." The United States is not immune to these historical patterns — the ultimate legacy of the 2003 invasion and occupation of Iraq — may in time be viewed by future historians as the pivotal event that solidified our own classical “imperial overstretch.”
So, where is all this heading? To a multi-polar world order - a world that will look much different than the pre WWII era where the US was a rising star, different from the bi-polar Cold War period of 1945 to 1991, and different from the brief uni-polar world order circa 1991 to 2003. The March 2003 invasion of Iraq ushered in a new era which I refer to as the "petrodollar warfare" era (hence the name of my book). For those curious, here are some random excerpts from Chapter 6:
New Realities of the 21st Century: Emerging Tri-Polar World...here's what the Europeans think (BTW, Emmanuel Todd famously predicted the fall of the USSR in 1976, and now is predicting the fall of the US empire...)
Let the present America expend what remains of its energy, if that is what it wants to do, on the “war on terrorism” — a substitute battle for the perpetuation of a hegemony that it has already lost. If it stubbornly decides to continue showing off its supreme power, it will only end up exposing to the world its powerlessness….What the world needs is not that America disappear but that it return to its true self — democratic, liberal, and productive."
— Emmanuel Todd, After the Empire: Breakdown of the American Order, 2004
...here's what the Chinese think...and they typically take a long view of history...
In the last century, American people were pioneers of system and technology innovation. However, the interests of a few American financial monopolies now lead this country to war. This is such a tragedy for the American people.
— Wang Jian, Chinese bureaucrat, 2003
...and the Chinese view of our Imperial Overstretch...
The current US predicament in Iraq serves as another example that when a country’s superiority psychology inflates beyond its real capability, a lot of trouble can be caused. But the troubles and disasters the United States has met do not stem from the threats by others, but from its own cocksureness and arrogance. …The 21st century is not the ‘American Century.’ That does not mean that the United States does not want the dream. Rather it is incapable of realizing the goal.
— Qian Qichen, former Chinese minister regarded as one of the “main architects” of China’s foreign policy, October, 2004
...and their view of the dollar losing its world reserve currency status (note: 6 months after this statement the Chinese divorced their RNB currency from the dollar peg and went to a basket of currencies. Once OPEC does the same circa 2008-2012, we can officially end the American Empire on that date...)
The US dollar is no longer … in our opinion [seen] as a stable currency, and is devaluating all the time, and that's putting troubles all the time. So the real issue is how to change the regime from a US dollar pegging ... to a more manageable reference, say euros, yen, dollars — those kind of more diversified systems.
— Fan Gang, director of the National Economic Research Institute, China Reform Foundation, quoted at the World Economic Forum in Davos, Switzerland, January 26, 2005
...and from an American who knows a bit about economics...
The US can lose its dominance only as a result of its own mistakes. At present the country is in the process of committing such mistakes because it is in the hands of a group of extremists whose strong sense of mission is matched only by their false sense of certitude.
This distorted view postulates that because we are stronger than others, we must know better and we must have right on our side. That is where religious fundamentalism comes together with market fundamentalism to form the ideology of American supremacy.
— George Soros, The Bubble of American Supremacy, 2003
...Why is the US committing these mistakes in Iraq? Iran? Venezuela? Antagonzing Russia? Alienating the EU? In essence, why is the "bubble of American supremacy" beginning to falter? Why such desperation? Follow the trends in global oil production...and always -
follow the money...
In the real world … the one factor underpinning American prosperity is keeping the dollar the World Reserve Currency. This can only be done if the oil producing states keep oil priced in dollars, and all their currency reserves in dollar assets. If anything put the final nail in Saddam Hussein’s coffin, it was his move to start selling oil for Euros.
— Richard Benson, “Oil, the Dollar, and US Prosperity,”
www.prudentbear.com, August 2003
..summarzing how we arrived at this period of Imperial Overstretch...
There were only two credible reasons for invading Iraq: control over oil and preservation of the dollar as the world's reserve currency.
— John Chapman, “The Real Reasons Bush Went to War,” the Guardian (UK), July 2004
...and from a macroeconomic perspective, here's why the 21st century will likely
not be another American Century...
Beneath the surface of current security debates, therefore, and in stark contrast to the perceived mismatch of strategic competence and geopolitical power between the US and Europe, lies a sleeping tiger. Despite the many arguments that would question Europe’s capacity to take economic and political advantage from such a tectonic shift in monetary realities, the only likely future scenario of change in the realm of currencies is one of greater relative weight for the euro. This is the one area in which long-run dynamics seem to place Europe in a relative structural advantage vis-a-vis the US — despite the appearance of the contrary in the realm of economic productivity and with respect to the current military gap.
— Paul Isbell, “The Shifting Geopolitics of the Euro,” 2002
Here's are some excerpts from my book regarding the rapid decline of US economic, political, and military power, as we enter this new century:
From a macroeconomic perspective, global trends suggest the probable emergence of a multipolar world, which itself can be destabilizing if the poles act unilaterally rather than multilaterally. Right now the United States government is increasingly relying on unilateral military power to shore up its global position economically. Despite this strategy, the dollar's status as the world's reserve currency is slowing eroding.
In essence, the petrodollar-recycling system is now under pressure from a competing currency, a problem that has been exacerbated for the US by political tensions arising from the Iraq War and from US neoconservative ideology. The Bush administration probably believed that the occupation of Iraq and the installation of large and permanent US military bases there would keep the remaining OPEC producers from even considering switching the denomination of their oil sales from dollars to euros. It appears that any attempt by OPEC members in the Middle East or Latin America to do so will be met with either overt or covert expressions of US power.
Regrettably, Bush and his neoconservative advisers chose to apply a military option to a US economic problem that ultimately requires a multilateral treaty. Under the guise of the “war on terror,” Bush deceived the American people about the unspoken, but real economic reasons for the invasion of Iraq. While doing so, this administration sent an authoritarian message to other OPEC members: “
You are either with us or against us.” However, the blowback against US foreign policies, including nuanced statements by foreign leaders, OPEC, and even allies, reveals the limitations of the unilateral hard power that lacks international support. The lesson is clear: the US cannot unilaterally overthrow sovereign nations at will under the pretext of an expanding “war on terror” without considering the world’s potential to retaliate economically by abandoning the US dollar.
The neoconservatives have chosen to pursue a military-centric approach to the Peak Oil conundrum. However, the challenges presented by Peak Oil
cannot be resolved by military force — but in fact would only be exacerbated by the levels of capital, energy, and people that would ultimately be
wasted on military operations when these resources should be allocated toward
energy reconfiguration.
The only rational strategy regarding Peak Oil would involve the G8 nations plus China and India (in conjunction with the UN) devising an exceedingly difficult treaty regarding the allocation of hydrocarbon reserves (i.e., Oil Depletion Protocol). Failure to reach a multilateral accord could result in the systemic breakdown of international relationships and destabilization of the global community.
So, if we are to have a multipolar world, let us hope it is a balanced one in which incorrigible greed give way to enlightened cooperative action. The world community, and especially the highly industrialized nations, desperately need leaders who are fundamentally committed to arrive at multilateral compromises and concessions. Although not guaranteed of success, the only rational policy regarding Peak Oil is an unprecedented attempt at international cooperation and coordination.
A collective approach is the only strategy that could conceivably result in the development and implementation of both
demand-side strategies and
alternative-energy technologies in the post–Peak Oil world. Developing and adhering to a multilateral approach to Peak Oil is the foremost challenge to mankind at the dawning of the 21st century.
The beginning of the 21st century will be an epochal moment in history; either a disastrous period of resource-related military and economic warfare, or an unprecedented and noble effort at international cooperation.
Either way, the status quo is no longer plausible due to both physics and macroeconomics, nor is it desirable if we wish to preserve our humanity. The American experiment has reached a historic crossroad. Our political, social, and economic choices in the next few years will decide these questions. Will America march on to an endless “war on terror” and economic ruin in a desperate attempt to maintain its superpower status, or will it rejoin the community of nations as an equal among allies and collectively work on today's energy and climate challenges? Will future historians write that America was just another reckless, selfish empire that collapsed — as all empires do? Or will they sing praises of a long-lived, enlightened democratic republic that resisted the temptations and follies of empire — and compromised for peace, justice, and the rule of law as it entered the 21st century?
America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves.
I am a firm believer in the people. If given the truth, they can be depended upon to meet any national crisis. The great point is to bring them the real facts.
— Abraham Lincoln, US President 1861–1865
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