Copyright The Wall Street Journal
…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.
If I have spent so much space on America’s fiscal woes, it is because I guess that its sheer depth and severity will demand most of our political attention over the next two years, and thus drive other important problems to the edges of our radar screen. It is true that the economies of Britain, Greece, Italy and a dozen other developed nations are hurting almost as badly, and that much of Africa and parts of Latin America are falling off the cliff. It is also true that the steep drop in energy prices has dealt a heavy blow to such charmless governments as Vladimir Putin’s Russia, Hugo ChâˆšÂ°vez’s Venezuela, and Mahmoud Ahmadinejad’s Iran, with the hoped effect of curbing their mischief-making capacities.
On the other hand, the data so far suggest the economies of China and India are growing (not as fast as in the past but still growing), while America’s economy shrinks in absolute terms. When the dust settles on this alarming and perhaps protracted global economic crisis, we should not expect national shares of world production to be the same as in, say, 2005. Uncle Sam may have to come down a peg or two.
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.
If the above is even half-true, the conclusions are not pleasant: that the economic and political travails of the next several years will badly crimp many of the visions offered in Mr. Obama’s election campaign; that this nation will have to swallow, domestically, some very hard choices; and that we should not expect, even despite a surge in international goodwill towards America, any increase in our relative capacity to act abroad decisively or in any sustained way. A rather wonderful, charismatic and highly intelligent person will occupy the White House, but, alas, in the toughest circumstances the U.S. has faced since 1933 or 1945…
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Paul Kennedy – The Wall Street Journal
Copyright The Wall Street Journal