Thursday, August 02, 2007

Whatever Happened to the New American Era?

Last superpower standing In 1991 the Soviet Union collapsed. The USA was left as the world’s only superpower, dominant not only in the military and diplomatic domains, but also economically, politically and culturally. A New American Era (NAE) was supposed to begin. The first decade following the collapse of the USSR appeared to confirm that a new American hegemony had indeed started. Around the middle of the 1990s, the era of low productivity growth in the US, which had started with the oil crisis of 1973, transformed into an era of high productivity growth, driven by what became known as the New Economy (the application of information and communication technology (ICT) to a growing number of manufacturing and services products and processes). Nobel Laureate Robert Solow’s quip that “You can see the computer age everywhere but in the productivity statistics”, at last ceased to be true, at any rate in the US. The stock market found itself launched on a massive ‘hausse’.

The collapse of the Soviet Union was more than the defeat and disappearance of a rival power – events like that litter the history books and are of no great interest except for those living through them. The collapse of the Soviet Union represented the death of a political and economic system, and of the quasi-religious ideology associated with it. Communism and central planning in the former Soviet Union and in Central, Eastern and South-Eastern Europe, were defeated by, and made way, for market economics and pluralistic, democratic political systems. It was viewed by many in America as the triumph of the American Way over the forces of darkness.

Globalisation The triumph of capitalism over communism and of liberal pluralistic democracy over totalitarian one-party rule appeared a natural complement to the wider processes of globalisation that were transforming the global economic, political, social and cultural domains. During the 1990s, globalisation looked to many commentators, not only American, as though it was made for (and in the views of some even made by) the United States. By globalisation I mean the steady decline in importance of national boundaries and geographical distance as constraints on mobility. A new phase of this process began following the end of World War II and picked up speed and widened its scope relentlessly. People, goods and services, factors of production and their owners, financial capital, enterprises, technology, brand names, knowledge, ideas, culture, values and religious beliefs all move more easily across national frontiers than at any time since the beginning of World War I.

This process of globalisation affects virtually every nation or region in the world. The phenomenon is driven, first, by technological advances reducing the cost of transportation, mobility and communication, and second, by deliberate political decisions to reduce or even to eliminate man-made barriers to international mobility.

The first of these two driving forces is irreversible, barring a catastrophe on the scale of the fall of the Roman empire that causes major technical regress. Setbacks to the processes reducing the cost of transportation, mobility and communication can occur. An example is the global increase in the cost of air travel and in other costs of engaging in international trade resulting from the 9/11 terrorist attacks on the US. The recent proposals for inspecting (and scanning) every container entering the US by sea is an example of negative productivity growth caused by the response to a terrorist threat.

The political forces driving the lowering of man-made obstacles to international trade and mobility cannot be taken for granted. They have been reversed in the past. They can be reversed again. Between 1870 and 1914, international trade in goods and services was as free as it is today. International lending and borrowing were also highly developed and subject to few official restrictions. The range of financial instruments traded internationally was of course much more restricted than it is today. However, mobility of people, including international migration, was less restricted during the Gold Standard days than it is today.

Pathological globalisation In 2000, the election of George Bush and Dick Cheney as President and Vice-President of the USA represented the high-point of American economic, political and cultural triumphalism. Its expression in foreign policy and international relations was a form of high-handed unilateralism not seen before in the annals of the country.

Then the worm turned. The horrors of 9/11 suddenly brought home to America the fact that globalisation meant that everything has become more mobile: the good, the bad and the ugly. For a country that had not been attacked at home by agents of foreign powers since 1812, the trauma and fear created by the events of 9/11 was quite without precedent, both for the leaders and for the people. Globalisation became increasingly seen, also in the USA, as a source of problems and threats rather than as an opportunity.

The events of 9/11 brought home to America the negative side of globalisation, what I have called elsewhere pathological globalisation. Some dimensions of pathological globalisation were, of course, already familiar to the American public and leadership.

  • The international spread of contagious diseases affecting humans has accompanied the increased mobility of humans and animals. Historically, smallpox and measles have destroyed societies. Today, TB, HIV-AIDS, Ebola virus, Nile virus and flu virus can spread with alarming speed. So can BSE and foot and mouth disease.
  • The threat of international contagion in financial markets, manias and panics, irrational euphoria and despondency is but a phone call, news flash or e-mail message away.
  • Many conventional criminal activities (the drugs trade, money laundering, human trafficking, tax evasion) hare now organised on a global scale.
  • Global warming, or global climate change in general, results from CO2E emissions anywhere affecting the climate everywhere.
  • Threats to national or regional cultures, religions and identities whether posed by materialist consumerism or an aggressively proselitising Saudi-financed Wahhabi form of Islam, made more acute because of the global reach of the modern media, including the internet.

The events of 9/11 added international terrorism to this little shop of horrors - a global threat perpetrated by loose global networks of terrorists and those who support them.

All these pathological forms of globalisation can only be tackled effectively through global action, that is, through world-wide co-ordinated actions by governments, international organisations and civil society. Safety and security through withdrawal, exclusion or isolation is not an option. Neither is shouting “he who is not with me is against me” and charging ahead, guns blazing (literally or metaphorically) to confront enemies you don’t understand.

It was a double tragedy that the leadership of Bush and Cheney, fed by a mixture of ignorance about the world beyond the US, overconfidence alternating with irrational fear, arrogance and plain stupidity, came to guide and lead the most powerful nation in world at the very moment that creative, intelligent multilateralism was more necessary than ever.


In future posts on this subject, I plan to discuss (not necessarily in this order), some of the reasons behind the swift decline of American power and influence. At the moment I plan posts on the following topics:

  • Limits to what can achieved with military firepower.
  • High-handed unilateralism and ignorance of the world beyond the 49 contiguous states.
  • Economic weaknesses
    • Lower productivity growth
    • Rent-seeking vs. wealth-creating entrepreneurship: cronyism, corruption and myopia
    • Oil and energy-dependence
    • External indebtedness
    • Tax distortions
    • Weak economic institutions
      • Monetary policy
      • Financial sector regulation and supervision
      • Distorted fiscal federalism
    • Weak political institutions
      • A nation run by and for lawyers
      • Checks and balances or paralysis?
      • Inequality of wealth and income and the erosion of representative democracy and the rule of law.

  • The unholy alliance of Christian fundamentalism and market fundamentalism

  • Loss of moral authority: Guantanamo Bay and extraordinary renditions

  • The rise of Chindia and the rest of the Bricks and of the N11

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