"I've just returned from Berlin and am scribbling a brief note from JFK Airport in New York.I'm a bit surprised to see this written, but it confirms my own impression of the American position in the world currently.
One of the unavoidable impressions I got from Europeans and particularly Germans during this trip is that there is widespread regret that America has slipped off its pedestal as a largely benign superpower that promoted liberty and economic opportunity. The dollar's decline against the euro has only reinforced a widespread view that America can't afford its global pretensions any longer. While America remains important, it is clear to everyone that it is less so. [Snip]
A widespread view among elite Germans and the non-elite normal types I spoke to is that America is in fast decline -- sort of like Britain after World War II. I think that the impressions foreigners have of this decline is "overshooting reality" as there are many substantive realities about America's ability to deploy force and purpose in the world that remain formidable.
I've written this before. After WW II the U.S. was the only industrial nation in the world which had not had its industrial infrastructure destroyed by the war. Our factories were in great shape and looking for customers world-wide, and we had the shipping available to ship the goods anywhere anyone wanted them. We had the financial centers which could finance such commerce and a government that encouraged it, so that New York surpassed London as the world financial center. The dollar became the world currency and was managed as such out of Washington D.C.
Militarily we were protected because we had the nuclear bomb. It also was a clear talisman that America was "Number One" in the World in a military sense.
American business was managed by a lot of men who had learned a true "can-do" attitude during the War, so that they tended to spend their time building businesses instead of scrapping with labor over how the profits would be shared. The result was a real benefit to the incomes of workers in general as well as to business in general, and led to a recognition that the waste of human resources that Segregation represented had to end. Segregation was both a moral and economic abomination. The amazing body of government funded research that came out of the war created numerous opportunities for whole new industries (particularly aviation) and the government continued to fund the development of computers until they became economically viable and a new industry. The GI Bill provided the necessary educated labor force to make all this work.
The Korean War and the Cold War were the only dark clouds on the horizon. Politically the American right wing had to frighten voters in order to get elected, so they latched on to the then pretty much destroyed Communist threat and played the fear card for all it was worth.
The expansion of the Soviet Union into Eastern Europe was primarily the movement of a numerous, very weak military representing the winning side of WW II into the vacuum of a destroyed Europe. The takeover of China by the Red Army was the success of a well-managed army that enforced honesty in its leaders and offered a previously unknown economic salvation and peace to the Chinese peasantry, in opposition to the corrupt KMT which mainly wanted to reinstitute the old Chinese class system with the KMT members as the new upper class. Neither the USSR nor the Chinese Communists were especially powerful. Each was in the position of having an effective organized force it could use to move into a political vacuum.
It's not clear that the Cold War could have been avoided, but the end result was never really in doubt. Communism offered an inadequate economic ideology that did not offer a viable economic system. This was attached to a pre-industrialism form of government that could not be adapted to the industrial factory manufacturing model effectively. The requirement to enforce the Communist ideology even in the face of its obvious failure forced both the USSR and the Communist China (separately) to adopt totalitarian models of government if they were not to abandon the failed economic policies their ideology demanded. Marxist-Leninism did, however, offer a vehicle for accumulating techniques and tactics for fighting against western right-wing exploitative capitalism, however, and was used as such.
America really did stand astride the world alone in those days. But by the end of the 1950's Germany and Japan had been sufficiently rebuilt so as to begin to provide real economic competition to America, and it was such a new thing to the American business management that they didn't recognize the challenge or deal with it. They'd been on top so long that they assumed that was their rightful place forever. The American financial industry made the same assumption, failing to recognize that the financial economy is no better than the real economy it rests on.
The right-wing, fighting to overcome the FDR democrats who had controlled government, continued to ride the exaggerated threat of Communism. This led the American economy to rely excessively on the Military Industrial Complex for economic growth, and led our government (from Eisenhower through Kennedy to Johnson) into the disaster we call the War in Vietnam. Military spending is inherently destructive of economic growth in the long run. The American inflation that started under Johnson and accelerated under Nixon and Ford was a direct result. Carter inherited both the inflation and the military spending that had caused it as had Ford, and also faced the consolidation of the oil producing states into an effective OPEC (based on the amazingly effective Texas Railroad Commission structure. TRC was the first OPEC.) Carter's solution was to work to find substituted for the American dependence on oil and to install Paul Volcker as the new Federal Reserve Chairman. Volcker sharply increased interest rates, causing the recession of the early 1980's, and removing inflationary expectations from the economy.
The oil companies, however, got together with OPEC and established a price for oil that was too low to encourage private enterprise to research for alternatives, while stopping all government-funded research. The result has kept Oil company profits higher for nearly thirty years, and only now it the real bill for that coming due.
The result of all this is that America has been in financial and economic decline since the early 1960's. There has been too much military spending, with not enough spending on basic research. Shutting down the Super Conducting Super Collider after half its $5 billion budget had already been spent has delayed physics basic research world wide for two decades and sent it to CERN, Switzerland instead of Texas. College tuitions have been increased and are today primarily funded by student loans rather than by grants, so that an MD who graduates from medical school today faces student loan payments for thirty years or so. Most of the rest of the world has instead invested in its educated labor. American bleeds it financially.
The financial position of America in the world today is a legacy of the post WW II period when the dollar was established as the world currency. Today it remains the world currency only because it is to the (short-term) advantage of the Chinese economy. Without the Chinese buying American debt, American would have followed Argentina into bankruptcy sometime in the last decade.
The mismanagement of the Federal budget by the Bush administration assures that the bankruptcy will arrive. When the EURO was established, it was designed to be on par with the dollar, one for one. Today it requires at least $1.30 American to buy one EURO. For a nation that spend the last half century on top of the world in terms of the economy, moral leadership, and military power, the economic aspects of leadership are in the past, Bush has abandoned all pretense at moral leadership, and the insurgents in Iraq have clearly demonstrated that the U.S. cannot effectively fight an insurgency in a distant country.
The decline of America as the unique leading nation in the world is obvious for anyone to see now. It leaves a power vacuum in the world that Europe is not prepared to fill. It appears to me that China is moving to fill some of that vacuum, and that explains why China is building soft-power around the world. This has become obvious in the last year or two, and it is in large part a direct result of the fact that the Bush administration has been so tied down in Iraq and Afghanistan that they took their eye off the ball and have allowed China to make such moves. [This probably is not bad. American - Chinese relations are much better than they would have been if Cheney and Rumsfeld had not decided to defend against terrorists by attacking Iraq.]
With luck the Republicans will have so thoroughly discredited their fear-mongering that they will not be able to prevent America from recognizing its new, less exalted world position and take appropriate actions to invest in our people and our economy. In this the Europeans will, I am certain, be glad to cooperate. It will be to their advantage as well as ours. But right now we need to stop letting the insurgents in Iraq bleed the giant in an unwinnable and unnecessary war. That means getting rid of Bush and Cheney as rapidly as possible. Beyond that, we'll just have to see where it goes. Like an alcoholic, America appears to now recognize that it has hit rock bottom. That is the first step to recovery, and this is still a very great nation, no matter how badly the conservatives mistreat it.
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