Pax Americana and US Decline

The spectre of decline and fall has long haunted the Western mind. For fifteen hundred years after the fall of Rome, the causes of its collapse were examined in almost every era. The most common lesson was that decline was integral to the system, just as death is integral to life: the responsibilities of a great power ultimately generate its own collapse. Edward Gibbon wrote: 

the decline of Rome was the natural and inevitable effect of immoderate greatness. Prosperity ripened the principle of decay; the causes of destruction multiplied with the extent of conquest; and as soon as time, or accident, had removed the artificial supports, the stupendous fabric yielded to the pressure of its own weight. 

Immanuel Kant agreed: “the laws progressively lose their impact as the government increases its range, and a soulless despotism, after crushing the germs of goodness, will finally lapse into anarchy”.

The short history of our own time has witnessed a surfeit of declines and falls: the empires of the British, the Dutch, the French, the Spanish, the Portuguese and the Soviets have all concluded within it. In the lives of our parents, the Hapsburg and Ottoman empires also came to an end and the last emperor of the ancient Chinese dynasties fell. This is an astonishing procession of historical drama in such a brief timespan, so it is not surprising there is a predilection in the West to believe the parade of ruin will continue, and that the turn of the United States of America may well be next.

There was a highly publicised prediction of this kind in the 1980s when Yale historian Paul Kennedy’s best-selling book, The Rise and Fall of the Great Powers, argued that American military spending and the consequent increase in federal debt would, unless curtailed, bankrupt the country. In an argument similar to Gibbon and Kant, he named the phenomenon “imperial overstretch”. Throughout history, Kennedy wrote, the rise and fall of great powers was dependent on the growth of their industrial bases and the costs of their imperial commitments relative to their Gross Domestic Product. While Kennedy omitted to apply his predictive powers to the USSR and so missed a great opportunity to get that collapse right, he did observe that Soviet military expenditure, at that time twice the share of GDP as that of the United States, was too high for its own good. Meanwhile, China under Deng Xiaoping was reducing military expenditure in favour of agriculture and industry. Kennedy predicted that China would therefore grow stronger relative to the other powers. As far as the empires of communism were concerned, Kennedy’s thesis was soon confirmed.

However, when the United States in 1989 suddenly found itself the world’s only superpower, the shine immediately went off Kennedy’s reputation. In the immediate post-Cold War world, Kennedy’s prediction about the decline of the USA seemed no more than wishful thinking by a left-leaning British professor. In any case, for the next two decades it had no influence where it counted. American presidents from both the Republican and Democrat parties launched fresh military adventures against rogue states in the Balkans and the Middle East without any concern for imperial overstretch.

September 11, 2001, dramatically changed the course of this discussion. After George W. Bush responded to the terrorist attacks by invading Afghanistan in 2001 and Iraq in 2003—actions that sent most academic commentators into a fury—there nonetheless emerged a number of observers from both sides of the conventional political divide who argued that, rather than eschewing an imperial role, the United States should recognise that it had itself become an empire. Accordingly, it should act like one. Notable contributors to this debate ranged from leftist liberals such as Peter Beinart in the New Republic, and Michael Ignatieff in the New York Times, to conservatives such as Max Boot in the Wall Street Journal, John O’Sullivan in the National Review and Paul Johnson in the New Criterion. Michael Ignatieff asked: 

What word but “empire” describes the awesome thing that America is becoming … It is an empire without consciousness of itself as such, constantly shocked that its good intentions arouse resentment abroad. But that does not make it any less of an empire. 

Peter Beinart said the world was suffering not from too much US imperialism but too little, especially in Africa. He wanted President Bush to intervene in Liberia to overthrow the Charles Taylor regime and to intensify its role in the Congo. Since much of sub-Saharan Africa is plagued by the same problems of civil war, corrupt dictatorship and economic collapse, the logic of his position was that Liberia and the Congo would be but the beginning of an American empire to match Britain’s former domain from the Cape to Cairo.

Beinart was critical of what he called “the cold and narrow” realism of those conservatives who mocked intervention in Africa as “foreign policy as social work”. However, not long after he wrote this in 2003, the neoconservatives Lawrence Kaplan and William Kristol produced a book, The War over Iraq, adopting the same enthusiasm for using American military power to remake the world. The American occupation of Iraq, they wrote, was likely to take many years and would not be complete until the whole Middle East was liberated from tyranny. America, they argued, was the great democratic hope for mankind. “Not only is the United States a beacon of liberal democracy; every one of this country’s leaders … has recognised the special role that America’s principles play in its conduct abroad.” Although some conservatives such as Owen Harries thought the idea of trying to create democracies throughout the world was a revival of post-First World War Wilsonian idealism and was bound to fail, Paul Kennedy’s notion that this was the route to decline and fall never became an issue. 

The same was true of the next two books on the subject, both published in 2004, Niall Ferguson’s Colossus: The Price of America’s Empire and Deepak Lal’s In Praise of Empires, which shared a similar central theme. “What the world needs today,” Ferguson argued, “is not just any kind of empire. What is required is a liberal empire” (his emphasis). By “liberal” he did not mean the American version that calls authors like Peter Beinart and Michael Ignatieff liberals. He meant the classical liberalism of free trade and rule of law that in the nineteenth century had provided much of the world with peace and order, ethical administration, and stable fiscal and monetary policies. It would also underwrite the free international exchange of commodities, labour and capital. Ferguson argued the project was feasible since the British Empire had already provided the model of how it could work.

It is a truism that writers are creatures of their times, but that does not license the dramatic turnaround Ferguson has recently undergone. When the Global Financial Crisis hit the world in 2008, he quietly dropped talk of a liberal empire. Instead, he began to promote the notion of America’s imperial decline. This coincided with his new book entitled Civilisation: The West and the Rest plus a complementary television series called Civilisation: Is the West History? He promoted both in a series of newspaper opinion pieces, journal articles and lectures entitled Empires on the Edge of Chaos, in which he advanced the notion that America was on the verge of collapse. He revived the dated arguments of Paul Kennedy and endorsed his theory of imperial overstretch. Ferguson also supported some speculations by the anthropology populariser Jared Diamond, and his book Collapse on the fall of the Maya of Mexico and other early civilisations. Ferguson did seek to put some distance between Kennedy and Diamond and himself, but it was not about the process of decline, only its timing. Rather than give their citizens plenty of warning, Ferguson said, the fall of great powers and empires usually happened very quickly. They did not roll down a gradual slope but fell over a cliff. Despite its thousand-year history as republic and empire, Rome fell to the Goths in a mere five decades, and in that short time the imperial city lost three-quarters of its population. The particular causes that bring down an empire were not exactly the same each time, Ferguson acknowledged, but in the case of the United States the most likely tipping point would come the moment the costs of servicing government debt exceeded the defence budget. He thinks this tipping point is very likely to arrive within the next five years.

This is, however, difficult to believe. In the fiscal year 2010, US government interest payments on debt amounted to $296 billion, just 35 per cent of defence expenditure of $848 billion. This is a long way short of Ferguson’s tipping point, even if interest rates were to rise suddenly. And while the figures have certainly been trending upwards, it is still open to government to reverse them, without affecting defence expenditure at all. The greatest United States government outlays today are for welfare. Together, American budget outlays on pensions, health care and direct welfare payments amounted to $2695 billion in 2010, three times the amount of defence expenditure. Under the Obama administration welfare is the fastest growing sector of government expenditure. Not all of this derives from Obama’s commitment to leftist politics and Keynesian economics. The demographics of an ageing population would expand the pensions budget no matter who was in office. But it is still plain there is plenty of fat left in the system that could be cut instead of defence. Cutting back welfare entitlements no doubt poses political problems. Last year the new Republican governor of Wisconsin provoked opposition by requiring public sector employees to contribute to their own retirement pensions and health insurance. But protests of this kind are quite manageable within any democratic system. Indeed, the Wisconsin proposal was a perfectly reasonable reform. Many other countries, including the UK, require public employees to make payments of this kind. In contrast, Margaret Thatcher’s program of reform in the 1980s was much more formidable, yet eventually became popularly acceptable.

Moreover, we have now entered a new climate in economic policy. The massive Keynesian stimulus spending in the wake of the 2008–09 Global Financial Crisis is now widely recognised as a problem rather than a solution. It left most Western governments with serious debt problems and high unemployment. Indeed, we are now entering a Global Debt Crisis where most responsible governments acknowledge Keynesian solutions cannot work and their budget policy should aim for surpluses, either now or in the near future. So the apparently inexorable acceleration of state expenditure on which Ferguson relies for his tipping point, is not only not guaranteed, but is becoming less likely by the day. In terms of the imperial overreach debate, the only really open question is where the required US government cuts will be made: from welfare or from defence? That is a matter for political debate and political choice, rather than some historically determined destiny.

In other words, Ferguson’s assertion that we have come to the end of 500 years of Western dominance is hard to take seriously. It seems more a marketing ploy and attention-grabber for his new book and television series, Civilisation, than a credible historical proposition. It is disappointing to see Ferguson descend to this level, since his earlier books have mostly been very good value. But this prediction now puts him in the same league of reliability as Al Gore on global warming.

Moreover, his latest analysis of Western civilisation has a serious flaw. Ferguson’s thesis is that the West rose to dominance over the past 500 years thanks to its development of six “killer apps” that were largely absent from the rest of humanity. He names these causes as: competition, science, democracy, medicine, consumerism and the work ethic. In terms of explaining the kick-start required for modern development to take off, these causes are plausible, as far as they go, but there was a phenomenon underlying the whole process—its necessary cause—that needs to be put in place first. Given his engagement in the debate over imperialism and great powers of the past decade, it is surprising Ferguson doesn’t emphasise it more—especially since it was outlined clearly in 2004 by what I think is by far the best book to emerge during this debate: In Praise of Empires by Deepak Lal. 

Deepak Lal is an economic historian whose argument is that empires provide the peace and stability in which economic development can most readily flourish, and that for global prosperity the world needs free trade and a global imperial power to keep the peace. Lal’s book performs the impressive feat of actually creating a new paradigm for the understanding of modern history. Rather than the modern history my generation was taught—a story of revolutionaries overthrowing ancien regimes, and romantic heroes building nations of ethnic and racial communities on the ruins of old royal dynasties—Lal argues the principal driver of modernity in the world was the British Empire. In the nineteenth century it generated a global empire of free trade, enforced by a Royal Navy presence in all oceans and both hemispheres. Britain provided direct rule in its formal empire and indirect rule in much of the rest of the world through gunboat diplomacy to guarantee free trade. Lal calls both the political structure and the era Pax Britannica, the British peace. He also calls it the first Liberal International Economic Order or LIEO.

From 1815 to 1914, it gave Britain a century of peace at home and it provided the rest of the world with far more order and stability than it would otherwise have had. It was an empire not of plunder but of civil order that kept the channels of commerce free of pirates and predators. Britain did not do this because it wanted to conquer or even to civilise the world. It pursued its own interest to trade with the world and to provide its financial services. The industrial revolution produced a surplus of low-cost, factory-manufactured goods for which Britain sought global markets. The City of London set out to become the financier to the world, providing short-term credit for trade and long-term credit for investment.

Despite the nationalist and Marxist cant that still condemns British imperialism as one of history’s great iniquities, the first Liberal International Economic Order was hugely beneficial to all the countries it touched. British investment provided the infrastructure of rail, ports and coaling stations through which comparative advantage could be exploited by local entrepreneurs of many nations. Imperialism encouraged investors to put their money in developing economies, places that would otherwise have been sites of great risk. The extension of empire into the less developed world had the effect of reducing this risk by imposing, directly or indirectly, some form of British rule. Hence when the British Empire was at its peak of influence it was a much greater positive force for international investment in poor countries than any of today’s institutions. In 1913 some 63 per cent of foreign direct investment went to developing countries, whereas in 1996 the proportion was only 28 per cent; in 1913, 25 per cent of the world stock of capital was invested in poor countries but by 1997 it was no more than 5 per cent.

After 1918, with Britain crushed by the weight of war debt and debilitated by class warfare at home, Pax Britannica’s days were numbered. The United States emerged from the First World War the most economically and militarily powerful country, and Britain’s natural successor. Had it recognised its own global interests better, Lal says, it would have taken Britain’s place and produced a Pax Americana. Instead, it embraced the Wilsonian idealism of collective security through transnational associations. This model soon failed, and saw America retreat into isolationism and protectionism. Arguably, Lal writes, the United States’ reluctance to assume the imperial role contributed to many of the disasters of the last century: two world wars, the Great Depression, and the rise and fall of two illiberal creeds, fascism and communism.

Chastened by the experience of international disorder that American isolationism had permitted in the interwar years, by the end of the Second World War the United States’ political elite changed tack. It recognised that its national interest required a strong maritime power to uphold the balance of power in Europe and to maintain an international economic and political order in the rest of the world. Its members surreptitiously took up the task of building a US imperium to maintain the Pax which the British were now both unwilling and unable to support. However, Lal laments that Americans never accepted the correct economic principle that it was in each country’s interest to unilaterally adopt free trade. They instead adopted “fair trade”, and demanded reciprocal trading concessions from each of their trading partners. They nonetheless constructed a new Liberal International Economic Order for the post-war world, using transnational corporations to open world markets to trade in goods and the free flow of capital. Initially, a number of Third World countries, under the thrall of the Soviet Union, either stood outside or only half-heartedly joined the new LIEO. But after the debt crisis of the 1980s and the collapse of European communism in 1989, there was a rush to join. The most notable converts were India and China. The Pax Americana that has since prevailed has brought unimagined prosperity to most of the Third World, especially its poorest. The only countries that failed to join this newest phase of globalisation were those of Africa and the Middle East, which thereby excluded themselves from this era of economic progress.

Pax Americana will no doubt seem to many to be alien to American political traditions. In the midst of the controversy over his invasion of Iraq, George W. Bush told a gathering of military veterans at the White House that America had no territorial ambitions. “We don’t seek an empire,” he said. “Our nation is committed to freedom for ourselves and for others.” Lal argues against this. He distinguishes two different kinds of empires: those that seek to advance certain objects or enterprises, such as taking plunder or imposing an ideology; and those that do not seek to impose any preferred pattern of ends, but rather see themselves as a custodian of laws and seek merely to maintain civil order. The British Empire was the latter kind, a model that is not inconsistent with American traditions, or at least with classical liberal American traditions.

Lal also discusses the relations Pax Americana should have with the rest of the world. Its operative principle should be freedom, but with a focus on civic freedom, or the rule of law, and economic freedom, or laissez faire, both of which are essential for modern development. He is ambivalent on the subject of political freedom, arguing that where democracy is new to local practice and institutions it is unlikely to be a force for progress. Indirect rule by the imperial power is best, and allows the locals to choose their own system of governance, which may or may not be democratic. This does not leave the imperium a mere symbolic hegemon, since it still reserves the right to determine foreign policy and economic policy. Moreover, its commitment to the rule of law would inhibit the emergence of local dictatorial regimes. 

So, to conclude, what would the world of today lose from the decline and fall of the USA? It would lose the Liberal International Economic Order. Lal argues that such a loss can occur without the United States falling over the kind of precipice that ended the Roman empire. It could happen gradually within the current framework of democratic politics simply from an American reluctance to fulfil the role and a preference to withdraw into itself, as it did in the interwar period. If this happens, others may well fill its place. Lal writes: 

If the US public does not recognize the imperial burden that history has thrust upon it, or is unwilling to bear it, the world will continue to muddle along as it has for the past century—with hesitant advances, punctuated by various alarms and by periods of backsliding in the wholly beneficial processes of globalization. Perhaps, if the United States is unwilling to shoulder the imperial burden of maintaining the global Pax, we will have to wait for one of the other emerging imperial states—China and India—to do so in the future. 

The problem with this alternative scenario, however, is that neither China nor India has the political traditions and culture required for the task. If either became the world imperium we might still have an International Economic Order, but it would not be classically liberal. Indeed, it would lose the one thing that made it work in the first place, and the one thing that made it a force for good in the world. 

This was a paper to a symposium entitled “Is America in Decline” held in New York in September 2011 by New Criterion magazine and the Social Affairs Unit of London. It was first published in New Criterion, January 2012.