Great Empire or Grand Illusion?

Re: Sameer, #8

Sameer,

Peter Drucker, Business Guru/Philosopher, expressed the fear of White population decline in an interview in Harvard Business Review a few years ago as a catastrophe for the White race and, perhaps more subtly, for the world.

I also fear the Balkanization of the United States due to large minority groups with rigid value-systems and cultures that do not integrate. Balkanization is the reason I am dead-set against introducing Spanish as a “second” language in the US. This country speaks only English and shall remain so. Language is very divisive, especially in heterogeneous societies, but at the same time it bridges the gap between two people if they speak the same language. In the US, everyone MUST learn how to read, write, and speak English. Learning all other languages should remain a personal choice.

However, I also believe that the US is a different country. There has been nothing like it in the world history. It is still the most wonderful experiment humans have ever conducted. The mechanism and resilience of its economy, and its general tolerance towards others who are different leads me to believe that the non-white groups, born and bread in the US, would see how good a secular system works that protects all equally and the stability and prosperity it subsequently brings to all. I am very optimistic about the US. Looking around the world, I don’t have much of a choice.

Stuka #17: Thanks for the info.

SR: Thanks for the reply.

Some more questions:

- Do you think US invasions and targets are specifically based on the use of Euro by the Iraqis and Iranis?

- I would have to disagree with your comment about invading other countries and not sitting pretty.

I think the defining line for an economic superpower is its ability to invade other countries, openly or subtly, and control their resources, somehow or the other. This has been the natural reaction of all superpowers. They have just done it in different ways.

The Arab Muslims, from Umar`s caliphate onwards, expanded as fast as any empire in history. Their motivation was primarily, according to Armstrong, a desire to indulge in the common Arab tradition of raiding caravans to make money. They were growing so fast that they had to take these raids into other countries. In the process, the citizens of those countries became Muslims. And thus those areas were effectively colonized.

Other superpowers did so by invading and outright killing, and threatening. Much like Genghis Khan. Others did so by becoming a part of the society, but at an elite level, like the Mughals. Still others did it by controlling the trade of the country and its govt., without too much violence and internal interference, like the British in India. Still others do it through supporting autocratic govts., like the USA, and then invading outright when needed.

The key is the ability to invade, when things don`t go your way, in the directly or indirectly controlled colony. The moment a country has lost this ability, it has ceased to be an economic superpower, regardless of what is happening within its own society. The British, French and German economic systems internally are probably more efficient they ever were, yet they are no longer superpowers of any sort. Primarily, because they do not have the power to directly or indirectly colonize others, i.e. their military (specifically Navy) isn`t big enough to successfully invade, when required. If the British still controlled India, and their other territories, they would still be an economic superpower to rival the USA. And that would translate into them having a military to match the USA, also.

The British left India when they knew they did not have the power any longer to invade India successfully and quelch forcefully any kind of independence movement. That is when they ceased to be a superpower also, regardless of what was going on within their own country.

The quickest way to make money, increase production etc. is to take it from others thru force. I think the USA still has the power to do that. And it has been doing that, openly, since WWII. The only mistake it made in Iraq was to attempt to do so in a crude and unilateral manner, primarily since it under-estimated the opposition of the European citizens.

If what you have highlighted in your article is correct, then there is a lot of logic behind the US govts.` current actions in threatening the world. It needs to control international resources even more desparately, to make up for the shortage in its own production (as per your thesis). To do so, it needs an even larger military than it currently has, which is already $250-$300 billion larger than it currently needs to protect itself, in my opinion.

I think the USA will milk the terrorist threats for all it can, and continue to raise its military budget. The main aim will be to bring more and more international economic resources under its control, much like superpowers of history. I also think it can continue to do successfully, much to the loss of the other citizens of the world, provided it does so its traditional subtle manner, rather than its neo-con-advised open manner. All US Presidents have invaded other countries. They just have done it in a more intelligent and less blunt manner than W.

The US needs to do the above to maintain its superpower status. As long as it can sucessfully do so, it will be able to compensate for any internal economic shortcomings. Historically speaking, the moment superpowers lose their ability to colonize is the moment they cease to remain superpowers.

[#23 by einsteinwallah on July 3, 2003 7:50am PT
...
Is INR so bad? ]

Correction. I wanted to say: Is GBP so bad?

Basis of calculation is this: as per website: http://money.cnn.com/markets/currencies/crosscurr.html, 1 INR can buy 0.012850 GBP. So, 1000 INR can buy 12.85 GBP. So I spend 11.99 on purchase of 1000 INR and sell it at 12.85 GBP. Or, am I missing something here?

SR #25 you write ``“Invest” in a new SUV and “invest” in US bonds or better still buy US bond mutual funds and buy tech stocks, particularly semi-conductors and internets. Better yet tech stock mutual funds. Go on and leverage yourself to the hilt. ``

Now we are talking! Actually, what would you think about investing in real estate? I understand real estate is overvalued worldwide, but far more overvalued in UK and Europe than in the US (this is per the series of articles on real estate values recently in the Economist). Given the great leverage one gets in real estate (i.e. cash down may be your own, but the rest is mortgage), and given the natural barriers to entry (more people can invest in mutual funds than in investment properties), I would think real estate should be the place to invest. Any advice, Warren Buffet (I mean Sohail Rabbani)??

SR #20,
(Inquirer and Sameer too)
I should have said `` Saam, Daam, Dand, Bhed``, translation - Coaxing, bribing, threatening, spying.

The fundamentals of business, before colonialism were mutual benefit. But the europeans, gave a new model to it, viz. colonize, enslave, exploit to ensure win-lose condition in business. A tiny minority of british due to their shrewdness and manipulation of mass psyche could fill their coffers with loot beyond the imagination of Nadir shahs and gaznavis, without the unneccessary murder and mayhem. Perhaps the europeans then were not the first, arabs too acted like mercenaries.

Do you believe the nations in business with US are getting appropriate values for their goods/service? Who decides those values? Is it just the market?
Why do you believe puppet regimes are installed by US in various countries? Is it not for exploiting their natural resources too without having to look like an imperial power?

SR, you can ge the best darjeeling tea in UK for an affordable price. That tea being a product of india is non-existent for indian consumers. You can get cheaper gasoline in US than many other oil producing nations. I don`t have a financial acumen, but if you can respond to me on these questions, It will clear my misconceptions.

Adios

re SR #20:

The reason I brought up the question of ``real`` assets was that you believe that a country`s currency needs to be backed up by something tangible like the love of your life(if you pardon the expression) gold. Both of us know that a balance sheet is simply an attempt at an abstraction. DCFs and what not do not tell us that Microsoft is worth 26 bucks. On a macro level, the same principal holds for global economies. If one were to use debtor/creditor nation criterion, everyone would be buying yen and yuan. Yet there is still a capital flow towards the US.

I agree with you that American deficits and spending are a malaise that need to be checked. However it is precisely a disregard for the future in favor of the present that has served America so well. While the socialist economies were drawing up their 10-year plans and the Japanese were using their MITI to propel them forward, the Americans were typically not worried about anything but the next quarter. That great man Reagan ran up huge deficits and ran the Soviets into the ground. Would anyone who cared about the implications 30 years later have done that? Granted this focus on the short term has come back to bite America with its Enrons and Worldcoms but this is the price one has to be prepared to pay for maximizing short term gains. Tomorrow is another day. If you don`t believe in it, then shut the hatch, hoard gold and get ready for Armageddon.

Its a charade, both you and I know it but I am content to bury my head in the sand and put my faith in the ingenuity and inventiveness of the human race. We can talk all day about dangerous debt levels and spiralling deficits but I am sure there is a butterfly out there in your backyard that is ready to flap its wings that will put to rest any argument on the subject.

later
-sac

[The world may not think so yet, but America may be getting ready to depart. ]

Departing to where? Planet Mars?

Anyways... once upon a time Indian currency notes used to have a promise (I guess from Governor of Reserve Bank of India) as follows: ``I promise to pay the bearer the sum of x rupees on demand at any office of issue``. New currency notes have abbreviated promise: ``I promise to pay the bearer the sum of x rupees``. I wonder what these promises mean.

Right now on eBay somebody in UK is selling 10 hundred Indian rupee notes for 9.99 GBP with 2 GBP for posting to a UK address. Which makes 1000 INR = 11.99 GBP. Is INR so bad? The notes are brand new but not what collectors call UNC (for uncirculated).

#1 Inquirer [“…One needs to honestly look at the achievements of US …”]

There is no argument about it. As I also wrote in the essay, “America was, by far, the world leader in industrial production, investment capital, energy production and exports. The GDP was more than 40% of the entire world’s GDP. America had the financial power to dwarf anyone else’s in the rest of the world. Everyone was in awe of the United States of America. In less than two hundred years this young nation had become the greatest of Great Powers.”

The thrust of my argument revolves around the consequences of “new” economic paradigm that has been in place for the last 30 years and that is fundamentally flawed because it is short sighted and cannot be sustained. What made America great was whatever happened from after the War of 1812 and until the Vietnam War. Thereafter nasty brown stuff started hitting the fan and splattering around. Now we are beginning to smell it.

#2 temporal [“…aapki baatain humari samajh say bala haiN:) …”]

josh-e-janooN say kuch nazar aata nehiN Assad
sehrah hamari aankH meiN musht-e-khaak hai

(O Assad, we can see nothing in the ferment of frenzy
In our eyes the desert waste is naught but a handful of dust) :)

#4 rsaxena [“...solow uncle has answers to all these problems...we just need to look carefully...”]

Only some of us wouldn’t know where to start looking.


#5 by sac [“…Hope you are doing well. …

Does the US own any assets that may be considered ``real`` ... include ferderal lands, forests, Mount Rushmore etc. in your estimation. …”]

sac:

I am beginning to feel a lot better now. Almost back to status quo ante. Thank you very much for asking.

The US, of course has vast quantities of “real” assets. No one can deny that. I certainly don’t. Supposedly, the world’s largest over-ground gold reserves are also in US hands (and ultimately that may end up being the final salvation). But I don’t understand why you would even bring it up? Was it anything I wrote in the article? I never implied America is a poor country. It does concern me though that, the way things are going, if fundamental structural readjustments are not made, a day will surely come, perhaps even as early as middle half of this century, when America will be reduced to the status of a second rate power, as Britain is today for instance.

My gripe is with (1) wasteful over consumption, (2) debt-driven out-of-control spending, and (3) government interference and manipulation of the economy. These are not the things that made America great, but they will certainly lead it down the path of trouble.

#6 SaimaShah

My sympathies also genrerally incline in the same direction and I have no dispute with anything you wrote, except that I get the impression that you are looking towards government intervention for solutions. I believe that already there is way too much government intervention. Entirely too much. Government, and particularly big government, in my world view, is the greatest of curses that can befall any economy. When America was young, government was small, and the enterprising sprit was unmolested. That gradually changed as government assumed greater and greater power and started mucking things up. The mega corporations also became a sort of demi governments and the weight of bureaucracy (both government and corporate) started crushing the free entrepreneurial spirit of society and we’ve seen this great country which could have been a model of paradise on earth become another juggernaut imperial machine. Small is beautiful.

The old leftist of my youthful days may balk, but I shall say it because it’s undeniable. I’ve come to the sober realization that any social program dealing with income redistribution is fundamentally doomed and will take the system down with it. I wish it were otherwise, but it isn’t.

#7 Maharana [“…it can only maintain its living standards through weilding its danda on the weak and kindness of stronger nations…”]

I think that “danda” is over rated. Power comes in many shades. Military power is only one kind of power. Not all problems can be solved by military power. But ever Great Power of its day makes the mistake of over stretching itself militarily. It works for a while but then the law of diminishing returns kicks in. Today, America still have the greatest military might the world has ever seen. But America’s problems are multi faceted and cannot be solved by military might.

Thank you for your kind appreciation.

#8 Sameer [“…the biggest threat to US economy would come from demography. The demographic changes of three groups in particular, central Americans, African Americans and Muslim Americans threaten US economy like nothing else...”]

I fully concur with the first half of your statement that demographics are America’s BIG (if not biggest) problem. But I wouldn’t blame the browns. Yes, a lot of social polarization and cultural strife can be anticipated due to the ‘browning’ of America. But I fail to see how this shift in the ethnic mix will ultimately be the downfall. It could very well be a strength of America to have the diversity. The problem actually comes from the age cohort distribution. The flood of the elderly is what threatens the medium term future, i.e., next few decades.

#8 tahmed [“… predictions of the demise of the US have been made. …Didnt happen…

Kennedy`s book where he predicted the imminent decline of US economic strength. That book was written in 1986. This was just before the US went into the longest period of economic expansion.

… due to innovations, these being in the hi-tech industry… adjustment of the economy at a higher plateau, with the results of the high tech firmly embedded in the economy… technology driven expansion has changed the world and given rise to Globalisation…. getting ready to … change not just the world economic structure but the face of mankind itself. … the US remains a dynamic nation … you concern yourself with water ripples on the surface, while ignoring the seismic events that give rise to tsunamis. …”]

First, I only borrowed one phrase (“imperial over-stretch”) from Paul Kennedy’s book and that phrase has actually entered the mainstream English language. The book though written in 1986 and was not precise in its conjecture about the Japanese economic ascendancy (though I wouldn’t write the Japanese off altogether), is nonetheless a brilliant book with a lot more depth to it than this superficial criticism that one reads in reactionary magazines. I suggest you read it. I promise you won’t poo-poo his scholarly masterpiece after actually going through it.

Second, I am not one to deny some of the positives that you and others refer to regarding America. But I do not share your blind and unfettered faith. Decent people can disagree and come to different conclusions.

However, I dare you to put your money where your mouth is. Meaning that you should go ahead and take out a mortgage on your house if it is paid for. If you have a mortgage already, then go ahead and re-finance it and draw out all the equity you can. “Invest” in a new SUV and “invest” in US bonds or better still buy US bond mutual funds and buy tech stocks, particularly semi-conductors and internets. Better yet tech stock mutual funds. Go on and leverage yourself to the hilt. And yes, don’t even touch gold or mining company stocks. But remember, when you make your millions after the Great Boom that is coming just around the corner, don’t forget to send a few bread crumbs to poor folks like me who will be lined up in the Salvation Army soup kitchens.

#10 arjun_m [“…blame the jews and i`d be sure you were Pat Buchanan in disguise…”]

Nothing wrong with good ole Pat? He’s a heck of a lot better than your Dubbya.

#11 Romair [“… The US military budget will soon be higher than the military budget of the rest of the world combined. …it will touch a total of $400 billion soon.

How can the US military make money?

- Is there any other reason (other than control of international natural resources) involved in spending $350 billion dollars more on a military, than needed?

- What would happen if the oil producing countries switched to the Euro? Can they do that? Why don`t they do that? And was Iraq about to initiate something like that? …”]

As far as military spending is concerned, it comes down to my same old pet peeve, that is, government spending. I don’t care if it is farm subsidies, S&L bail out, prescription drug benefit or building air craft carriers, its all government spending and it’s all wasteful and rotten. Regardless of the morality of it, I am against big government spending projects and military is right up there along with debt servicing and just behind Social Security.

Military does not make money it wastes money. It is a mistaken notion to think that US could take over other people’s natural resources and sit pretty. In Iraq for instance, a few corporations will surely profit big, call it crony capitalism if you want, but the US as a whole only loses. It’s not a profitable venture. It is a stupid venture and Dubbya is a moron to have gotten the country involved in the muck of Middle East. It’s not good for the Iraqi people nor for the American people.

Coming to the Euro issue, yes, Saddam Hussain had signed his own death warrant when, three years ago he started insisting on getting paid for oil exports in Euro instead of the USD. Now Iran is talking about it. The biggest Indonesian oil company three months ago started selling some of its oil in Euros and Venezuela is also going that route. There are rumors that OPEC may be considering such “diversification” also.

All this is dragging the exchange value of the dollar further and further down. Low interest rates and the red hot printing presses at the US mint are adding to this gradual decay of the dollar and that is exactly what this article is about and everyone living in or invested in America should be alarmed and scandalized about this coming fiasco.

…SR

#13 by arjun_m on July 2, 2003 7:29pm PT

Cannibalism still exists in Modern India

http://www.paktribune.com/news/index.php?id=29678

I know you guys are use to drinking urine, but Cannibalism?
I guess the powerty in India, who can blame you people.
does it taste like CHICKEN?

It was all going great for US.

But with this unilateral attack on Iraq, I think the die has been cast.

In history, the decay of all great powers began when they reached reached this stage of power and culture - and began to appear unjust.

#9, tahmed 32: I agree with your assessment of the article. As long as America remains true to the American Constitution, Jeffersonian spirit (He had mass social acceptance of Am Indians!) and retains a sense of fiscal responsibility in that the nation`s laws should benefit the masses rather than selected few, it will be an ascendant nation.
It is true that India, China and European Union (if it can gel to be a coherent power) have similar potential but it is also real that all of these powers have `the incubi`` that oppress them. All of these nations have two weaknesses which are almost disintegrating. All of them believe in elitist form of community. Great emphasis on greats rather than evolving methods that would use the leadership of greats to further the cause of the common, average humans. These nations may also fail because they may not be able to integrate their diverse elements.
#8,Samerjb: I think we need to desist from ethnicising the issues we discuss.
#7, Maharana: I think it is not right that America rests on other nations. There is always international politics which is a tool of using other nations as suppliers, allies, and even as enemies to further their own benefit. It is misleading to theorize that America is standing on the sacrifices of other nations. If that were the case why don`t the other nations withold that support? The current anti-Americanism is due to the increased emphasis by US on Wolfowitz Doctrine. There is some truth in it and there is no harm in employing it as long as the salient principles I pointed out to tahmed32 are not grossly violated.

At last a well-researched, cogently argued article on chowk that rises above petty length comparisons.... somehow I get the feeling that while the author`s argument works at a macroeconomic level, it may not be true for the microeconomic scenario--- in short, it`s a bit of conspiracy theory paranoia happening!
Chill dude--Amreeka still rich---we still poor--- that`s the bottomline! :))

Romair:

``The US military budget will soon be higher than the military budget of the rest of the world combined.``

As per Newsweek, it already is.

13 by arjun_m on July 2, 2003 7:29pm PT

Leave it to our Hindu Boy to make it a Pakistan centric issue.
So much hatred in your vains for Pakistanis, did one of us
ran off w/your wife?

Empire or illusion, they seem to be having great fun while they are at it.

Which is more than what can be said for other parts of the world.

And with the population of young people dropping drastically in Europe, they can probably take over?

Romair:
Most of the military spending in USA comes back to the economy through military industrial complex and personel spendings. Actually much smaller share of 300 billioin dollars is used in importing items from China than Wal-Mart , Home Depot and Loews of this world. These 3 chain stores alone are adding huge percent in trade defict with China or trade surplus for China. Military on the other hand pays too much for the same Chinese made items but produced within USA. All the congressmen, senators and governors lobby with the military to spend in their constituencies.

I am not supporting this level of military spending because less military spending means less budget deficit. I am strictly talking about trade deficit here.

Maharana:
I don`t think danda can improve economy. Actually using danda on smaller weak countries costs money. What have USA gotton from Afghanistan for 10 billion dollars or more it spent on war? The pipleline is a pipe dream and recovering 10 billion 10 years later mean breaking even with recovering more than 20 billion dollars. That will be the day! Same is true for 80 billion dollars spent on Iraq war. The biggest challenge to US economically is coming from Europe and Euro in particular.