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Nader Mousavizadeh : A smaller America
could be a stronger America


Last week, China quietly launched the aircraft carrier Varyag from the port of Dalian. The ship is expected to be deployed to Hainan province in close proximity to the strategic regions of Taiwan and the South China Sea. Amidst an atmosphere of existential gloom triggered by the debt-ceiling debacle and the deeper economic crisis, the reaction in the United States was dominated by the fear of a rising, militarist China challenging America's global superiority. What few in the United States bothered to mention, however, is that the new Chinese carrier was built from an unfinished Ukrainian hull purchased in 1998 – and is the first and only aircraft carrier China has ever had. The United States, meanwhile, has eleven.

The real problem with the U.S. response was not, however, that it exaggerated the Chinese threat. It is that it greatly overestimates the benefits, to America, of the country's continuing quest for global supremacy – politically, economically and militarily. To lament America's decline from a dominant position of unaffordable and unsustainable strategic burdens is, in fact, to mistake an opportunity for a threat. For all of the past decade's concerns around the world about the reach and military assertiveness of U.S. unilateralism, it seems increasingly clear that its principal casualty has been the U.S. itself. America is choking on the edifice of empire and the sooner it's dismantled, the easier will be America's return to a leading – not the leading – position as a dynamic, innovative economy.

Consider briefly what the past decade's economic policies, military interventions and strategic priorities have brought the country: a Great Recession, debts that are fundamentally irrecoverable, a credit crisis, a housing collapse, and two wars with immense costs in lives and treasure. A country that employs more than one million people within its intelligence community, and still is surprised by the Arab Spring, is not being efficient with its resources. Waste and corruption are endemic to any enterprise of this size – and the U.S. military-industrial complex has been no exception.

Six numbers tell the story of empire's price in stark terms: federal deficits, gross debt, military spending, infrastructure investment, income inequality and now endemic joblessness:

  • Seen over a ten-year span, federal revenue has largely stayed constant, rising from $2.02 trillion in 2001 to $2.17 trillion in FY 2011. Expenditures, meanwhile, more than doubled from $1.85 trillion to $3.82 trillion producing a deficit this year of $1.65 trillion.
  • Over the same period, gross U.S. debt has ballooned to over $14 trillion (roughly 100% of GDP) with net debt standing today at $9 trillion (of which 50% is held by non-U.S. entities).
  • Defense expenditure over the same period has risen from approximately $300 billion in the year prior to 9/11 to $700 billion in FY 2011, and the figure is hundreds of billions higher if military spending outside the Defense Department is included. The total costs (estimated and very likely low-balled) of the Wars of 9/11 in Afghanistan and Iraq now stands at some $1.5 trillion, financed of course entirely by deficit spending.  The result is that the U.S. now spends more on its defense budget than all other countries combined.
  • The U.S., which once led the world in infrastructure development, now spends just 2.0% of GDP in such investments, as opposed to 5% in the EU and 9% in China. Of the 30 largest infrastructure projects globally, half are in developing economies and just five are in the U.S.  A single Chinese project (the $150 billion North-South water diversion plan) involves more than double in total investment ($65 billion) of all five current U.S. projects.
  • Looking at the U.S. gini coefficient , the most commonly used measure of inequality, no country in the developed world today has a greater gap between rich and poor.  U.S. inequality is currently at levels not seen since the first decade of the 20th century – and greater even than in 1929.
  • Finally, last week's payroll report for July showed that nearly fourteen million Americans are now out of work, and more than six million of them have been jobless for more than six months. For more than two years, the unemployment rate has been close to or above nine per cent – and if you include those people who've given up looking for work it's nearly double that.

If this is what global dominance looks like, who needs it?

Not that such a recognition appears anywhere on the horizon when listening to U.S. politicians or policy-makers – from either side of the political spectrum. Instead, reactions appear divided between those on the far right who appear to wish for perpetual hegemony while blithely defaulting on the full faith and credit of the U.S.; and those on the left who are hoping that the present crisis could trigger a second “Sputnik moment” – one that will shock America into redoubling its efforts to achieve global leadership through responsible policy-making. What this hope – fanciful as it seems today – assumes is that restoring the country to its pre-eminent global position is actually a good thing for America. It isn't.

A nation that thinks it can do anything will do everything – deploy its military to wars of questionable strategic value at a vast cost in lives and treasure; issue IOUs in the trillions to finance consumption; turn the advantage of international reserve currency status into a curse by spending far beyond what creditors are likely to tolerate in the long term; and sustain the fiction of entitlements that no serious observer thinks will be honored.

A victim of strategic gluttony, America has gorged itself for the past two decades on unbridled consumption and military expenditure. And now, like an aging prize-fighter mounting the scales in advance of a major bout only to find that he's disqualified on grounds of weight, the U.S. will need go on a crash diet.

None of this is to ignore the unique threats and responsibilities that the United States faces today – largely, though not completely, as a consequence of its hegemonic status. 9/11 was an attack on the country that required a strong and sustained global response. Nor is it to discount the future need for the U.S. to help provide essential global public goods – in trade, economy, and security.  It is rather to say that even those challenges will be met more successfully by a rebooted and re-sized America that engages with the world as a strategic partner, and not as patron.

From Brazil to Indonesia, Turkey to South Africa, the rising pivotal powers are not looking to replace U.S. hegemony with Chinese dependency.  In fact, as they focus on strategies of inclusive growth that sustain accountability and legitimacy, the mobile networked younger generations of these countries will continue to look to America as a model in many respects.  A new partnership with a right-sized America disciplined by limitations and constraints is there to be forged – if only U.S. political leaders are willing to rethink the value of empire.

In an Archipelago World defined by the fragmentation of power, capital and ideas where the winners will be those states able to vertically integrate public and private interests, America's present global posture is more a curse than a blessing. Competitiveness, growth, innovation, and influence are today more a function of intellectual capital and a high-tech infrastructure built to navigate a resource-constrained future. And if you're asking yourself who will stand up for the victims of aggression and human rights abuses around the world, an exhausted, over-extended, deeply indebted America “leading from behind” it is not.

Rid of the burdens of empire, mentally and physically, the United States will remain a singular country in the world – with its openness, ingenuity, diversity, rule of law, moral purpose and ability to renew itself. An object lesson in the paradox of power, the decline of the American Empire may well be the best thing that can happen to the American Republic – and the sooner the better.

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Nader Mousavizadeh is CEO of Oxford Analytica, the global analysis and advisory firm. Previously, he was an investment banker at Goldman Sachs. Petroleumworld does not necessarily share these views.

Editor's Note: This news story was originally published in Reuters wires service, on Wed Aug 25, 2011. The opinions expressed are his own . Petroleumworld reprint this article in the interest of our readers.

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Petroleumworld News 08/29/2011

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