American economic dominance over?

[wkirby]

Jonathan Rauch of the National Journal has an interesting piece on the growing political and economic force that Europe is becoming.

It's linked on The Kirby File

I consider myself to be well read in the qualifying factors of world power, and while I understand arguments for the dominance of Europe, I find some of them to be quite near-sighted. Romano Prodi, who is a former President of the European Commission has been quoted as saying, “Europe’s time is almost here. In face, there are many areas of world affairs where the objective conclusion would have to be that Europe is already the superpower, and the United States must follow our lead.”

If true that would certainly be a damming statement with regards to American power in the world. The problem is that I have a tough time finding America being truly challenged in the long term. As this is being written, the dollar is weak compared to the Euro. Certainly that’s a case for a rise in European power, but we don’t have to look to far back in economic history to find when it was otherwise. Perhaps by doing so, we’ll be able to put it in historical context.

The reality is this – the American economy, while presently in a downturn has a better outlook than or European neighbors. The slow growth European model looks appealing at the moment, but it certainly didn’t a few years ago, and it won’t a few years from now. I’ll make a wager with you, in a few years when our economy has fully rebounded, you’ll see articles printed with silly headlines such as, “America’s Back!”, or “American economy challenges Europe.” While they’ll be warn stories that’ll be fun to read remember that the reality of it all was that the American economy never left, and undoubtedly it never was truly challenged to begin with.

[McKenzie]

1. if oil is sold in euros all bets are off

that's why the neocons are in Iraq. Don't ask me...ask the economists.

[EVDebs]

2. If you read Kevin Phillip's "Wealth and Democracy" concentration of wealth

is the key determinant of an empire's decline as with Spain in the 1500s, Netherlands in 1600s, and Britain post 1700s, and now with US. Concentration of wealthiest:

"Here is a summary of the statistics for the distribution of wealth in the US as
of 1998, the most recent information available that has been fully analyzed:

% of US Population % of Wealth Owned
==========================================================
Top 1% 38.1%
Top 96-99% 21.3%
Top 90-95% 11.5%
Top 80-89% 12.5%
Top 60-79% 11.9%
General 40-59% 4.5%
Bottom 40% 0.2% "

From http://answers.google.com/answers/threadview?id=2050

It's only a matter of time, unless our leaders wake up and smell the coffee.

[wkirby]

3. I see your point but . . .

I have a tough time finding how a nation, or a group of nations for that matter, can claim power without an economic, or even more importantly military force to defend that power.

While controlling, the European economic machine doesn't dominate the world like the United State's does. Even more importanly, what military muscle could it flex to exert its empirical notions? They have the UN, but in reality, military power that the UN commands is derrived from the U.S., see my argument?

-Will
The Kirby File

[HysteryDiagnosis]

4. You don't have to exert any military power to break a country. All you

have to do is either make a run on the dollar or call in your loans, stop honoring another nation's debt, you know... threaten to take payment in euros instead of dollars and get invaded... you know... the simple stuff.

Then there is the ability of a foreign country to cut off oil supplies to an aggressor nation. That doesn't involve military force, well it might, and that might be why Venezuela is purchasing migs and missiles from I wanna say Russia even as we speak. You also have Russia getting ready to sell to Syria.. and who knows what sort of deal they have cut with the Iranians...

American supremacy is now a myth. The world has had enough of our crap. The hypocrisy that has been displayed with regards to S. American countries and now Iraq is a chink in our armor. We have lost credibility in the world, and rightly so.

[EVDebs]

12. Exactly. OBL's last tape laid out this strategy to bankrupt the US

and that didn't seem to make it to major media's limited attention span (geared to two yr olds).

[idlisambar]

5. Military power is not as significant as it once was

Military power for a variety of reasons both cultural and technological is not that important. The introduction and proliferation of nuclear weapons has made the stakes too high for all-out major power war. Now as relatively small states acquire the bomb, they turn into porcupines that can't be touched by the strongest of armies except at unreasonable cost. There is still a lot of room for military power to operate on the weak, but in our era it has tended only to complement expressions of economic power.

Of course, military power, for what it is worth, tends to follow in the long term from economic power, so economic power is really the central issue to address however you look at it. If, hypothetically, Europe were to gain economic ascendency they would have no trouble developing whatever military they want.

[wkirby]

6. Interesting points . . .

Let me say that I really enjoyed what both of you had to say. I agree that at least on the surface it seems that military power means relatively little these days, but i'd submit to both if you that we feel that way because American has been the sole superpower for such a long period of time with really no country able to check that power.

Reasonably speaking, Europe is rather defenseless, with American being its guarantor of safety. If it became truly adversarial with the United States they’d have to develop a fairly sizeable portion of GPD to compete on a global scale.

Following those lines, I don’t think that Europeans have the individual capital for consumption that Americans do. This notion of “improved capitalism”, that was suggested by that article is one in which personal discretionary consumption by Europeans is relatively low. How can Europe truly compete with America in the long run if we’re willing to out-consume them? Developing nations will continue, as they are now, developing distribution system to get their goods (Wal-Mart for example) to American for Americans to buy. That’s they’re best bet, and I think it’s another reason why much of this European dominance is unfounded.

-Will Kirby
The Kirby File

[idlisambar]

8. "out-consume them"

Ability to produce, not consumption is the root of economic power. Usually these go hand in hand in a healthy economy, but it is the fact that they don't -- our consumption now depends on foreign production -- that is at the root of our structural problems.

[wkirby]

9. Is it really the ability to produce?

I know that this is stretching things a little, but do you think that in the future, and even perhaps today, that real economic power will be not who can produce the greatest quantity of goods, but who can consume the greatest quantity?

It seems that it's been quite some time since we were the best at producing goods. In fact, really non of the economic powers have been good at it. Our wage rates are too high here in American and in Europe.

I think that being powerful economicaly is having a powerful market. No matter where I am in the world, if i'm making a product intended for the mass market, my number one goal is being able to market it here in America. Just look at how dominating Wal-mart is in getting Asain produces to exclusively distribute their goods, at their predetermined prices and specifications.

You're right that in some cases our consumption depends on foreign production, but I think in a way that increases our control over foreign nations economies. Take this scenario for instance. We decided here in America to engage in mass economic protectionism. All economic parties envolved would be hurt, both us, Europe, and Asia, but I think America would be the best suited to work from that point in terms of establishing production/consumption at equilibrium. We have a great market here for goods, domestic producers would flock to it.

Do you see my point?

-Will Kirby
The Kirby File

[idlisambar]

11. Consider this

It seems that it's been quite some time since we were the best at producing goods. In fact, really non of the economic powers have been good at it. Our wage rates are too high here in American and in Europe.

This is not really true. Germany has higher wages than the United States and it has a very strong manufacturing base. The same can be said (at a smaller scale) of Switzerland. Japan also has higher wages and with a population less than half as small it has comparable overall industrial production to the U.S. It is really the wealthy Anglophone nations (U.S., Britain, Australia, Canada, New Zealand) that have the most trouble holding on to their manufacturing base and tend to run large trade deficits.

think that being powerful economicaly is having a powerful market. No matter where I am in the world, if i'm making a product intended for the mass market, my number one goal is being able to market it here in America.

The problem with this is that as one's ability to produce goes down, so does its buying power, and thus its attractiveness as a market. To see this, consider the extreme example in which the U.S. had zero productive capacity in tradable goods. Because there are no longer U.S. goods that a foreigner considers worth purchasing, the value of the dollar falls and so the U.S. consumer can no longer buy the products foreigners produce.

Just look at how dominating Wal-mart is in getting Asian produces to exclusively distribute their goods, at their predetermined prices and specifications.

It's true that Wal-Mart exercises a great deal of power over the individual manufacturing firm, but Wal-Mart's presence in China is dependent on the good graces of the Chinese authorities. The balance could easily be tipped in favor of rival firms if Wal-Mart ever becomes an inconvenient presence. Any such move might do some damage to China's manufacturers in the short term, but the advantage of not having to worry about reelection is that you can take short-term hits if there is thought to be a long-term benefit. Of course, this is just hypothetical, Wal-Mart and the Chinese authorities enjoy a mutually beneficial relationship -- no one has reason to rock the boat.

I posted this a little while back, it dwells a bit more on the effects of the interplay between short-term and long-term...

http://www.economyincrisis.com/modules/news/article.php?storyid=51

[aneerkoinos]

27. No

Typical flat-Earth economics trying to forget that resources are limited and that Earth's human population is allready heavily in the overshoot.

Europe's population is about to turn into negative growth, which in fact will make us stronger, in the long shot it gives us better odds at surviving as civilization of high level of complexity. So unlike US we are allready adjusting at social and cultural level, even though many people and most politicos here too are confused about the priorities. Nevertheless, in regards to envirometalism, which in the reality is the only thing that matters, we are decades ahead of US, without trying to say that we too aren't facing humongous problems. But we still got a fighting chance, US can allready be written of as miserable failure from the annals of history and evolution.

Do you see my point?

[EVDebs]

13. But somebody's got to buy what is produced...

US annual GDP $11 trillion; World annual GDP $33 trillion. Of the US's, two thirds of that $11 trillion or around $7 trillion, better stated as about 20% of world GDP, is 'consumption'.

Cut US consumption, say with outsourcing too many US jobs which aren't balanced with equal consumptions by displaced new jobs and the foreign beneficiaries of outsourcing's consumption -- known to be vastly less than a US consumer-- and you have a recipe for disaster.

Globalization is this: running the engine of the world's economy (US) while draining said engine (outsourcing jobs and capital) ... pretty soon the engine burns out.

[idlisambar]

17. True enough

Once the U.S. consumer is not able to fill its role, there will be big adjustments in the world economy. There will certainly be a general slump in the short term, but out of that leading producer and export nations such as Japan, China, and Korea will have the option of turning their production technology and infrastructure toward themselves a bit more. The U.S., by contrast, will have to rebuild from a much weaker position.

[aneerkoinos]

26. Consumerism and militarism

are the two biggest differences between US and Europe, and it's funny to notice that somebody actually thinks they are US strengths instead of ruining the country and threatening total devastation.

Consumerism - eating more than they can afford, getting fat and addicted.

Militarism - spending stupid, now over half of Federal budget is military related, which is money out of social security and social stability (riots ahead when the bottom soon drops) because of spending too much, getting debted to ears, facing bankrupcy just like Soviet Empire 15 years ago, for the same reason.

[HysteryDiagnosis]

14. In order for many Americans to live like kings (relatively speaking) many

many people in third world nations must go without and worse. In order for America to commit class warfare upon itself, many many Americans must go without, without proper healthcare, schooling, social programs, parks, bridges, roads, town/city projects, etc. All one has to do is look around to see that this is the state of things.

[EVDebs]

15. 4MoronicYears, well said. This is the end result of "supply-side"

economics, based upon Say's so-called Law. This erroneous 'law' says essentially that supply will create its own demand. So a huge production and capital supply mechanism is created to feed the military industrial complex...Feed the beast indeed !

See the essential hypocrisy ? Grover Norquist types screaming 'starve the beast (government)' when what they really mean is starve people-serving portions of government and feed the M/I complex, the people-destroying portion of government.

Let's allow a certain equilibrium to these parts of government. Can one reasonably say that the US defense, actually world defense, spending is anything but 'unrestrained' ? They can't even account for $2.3 trillion dollars (around 20% of annual GDP) see CBS New's article "War on waste"
http://www.cbsnews.com/stories/2002/01/29/eveningnews/main325985.shtml

""According to some estimates we cannot track $2.3 trillion in transactions," Rumsfeld admitted."" Straight from the horse's mouth.

The people of the world 'demand' something other than war materiel.

[HysteryDiagnosis]

16. ""According to some estimates we cannot track $2.3 trillion in transaction

I would love to be able to tell the IRS that I cannot account for 2.3 trillion in transactions..... wouldn't that just chap their ass...

Beyond a shadow of a shadow government, our wonderful nation is addicted to militarism.


http://www.addictedtowar.com/
"Addicted to War should be assigned reading in American schools because it tells the true history of this nation's culture of war. Because of this book, many young students will think twice before considering enlistment in the military. How different things might have been had my son had a chance to read it. However, it is not too late for thousands of young Americans."

Fernando Suarez del Solar, whose son, Jesús, died fighting in Iraq, March 2003


"Addicted to War could not be more timely. It shows that the current war dance by the Bush administration is just the latest in a long series of foreign adventures that cause more damage than reward for us as a country. This book is one of the best tools we could hope for in making a transition from the U.S. being an empire to being just one nation in a community of nations. Use it, and change the world!"

Medea Benjamin and Kevin Danaher
Co-founders of Global Exchange

[EVDebs]

18. Thanks for the tip. You may also be interested in "Endless Enemies"

by Jonathan Kwitny, former writer now deceased of the WSJ of all places.

"Kwitny, Jonathan. Endless Enemies: The Making of an Unfriendly World. New York: Congdon & Weed, 1984. 435 pages.
Kwitny, a long-time journalist with the Wall Street Journal, offers a penetrating criticism of U.S. interventions and meddling throughout the world, mainly during the 1960s to 1980s. He takes a moral stand against U.S. foreign policy, and is very critical of America's failure to support free-enterprise -- e.g., by supporting dictators who run state-controlled economies (which leaves a reduced role for American multinationals), or when multinationals, working with dictators, stifle local capitalism. When dealing with the question of capitalism vs. socialism, Kwitny clearly admires the former. But by equating socialism with Soviet communism he deals from a loaded deck and the discussion suffers accordingly.
The American foreign policy fiascos examined at some length are those in Zaire, the Congo, Angola, Afghanistan, Iran, and Central America. The section on U.S. involvement in the overthrow of Mossadegh in Iran in 1953 was largely excised from a 1986 Penguin Books edition due to a libel suit brought against Kwitny by former New York Times reporter Kennett Love.

-- William Blum" at http://www.namebase.org/sources/FI.html

His other books, "Crimes of Patriots" especially, describe a perverse 'security' apparatus that guarantees anything but.

BTW, your icon is quite fetching.

[HysteryDiagnosis]

19. BTW, your icon is quite fetching.

see her on the Bill Moyers show.. it will be an interview with Arundhati Roy, google her... see the sites dedicated to her and her staunch position on globalism, IMF, etc and what it has meant to her country.

[HysteryDiagnosis]

20. Ooooooh in case you missed this on CSPAN the other night.....

Description
From the introduction of Confessions of an Economic Hit Man:

"Economic Hit Men are highly paid professionals who cheat countries around the globe out of trillions of dollars. They funnel World Bank, US government, and other foreign 'aid' funds into the coffers of international businesses and the pockets of a few wealthy families who control the planet's natural resources. Their tools include fraudulent financial reports, rigged elections, payoffs, extortion, and murder. They play a game as old as Empire but one that has taken on new and terrifying dimensions during this time of globalization.

"I should know; I was one."
Synopsis

In his controversial book, John Perkins tells the gripping tale of the years he spent working for an international consulting firm where his job was to convince underdeveloped countries to accept enormous loans, much bigger than they really needed, for infrastructure development--and to make sure that the development projects were contracted to U. S. multinationals. Once these countries were saddled with huge debts, the American government and the international aid agencies allied with it were able, by dictating repayment terms, to essentially control their economies. It was not unlike the way a loan shark operates--and Perkins and his colleagues didn't shun this kind of unsavory association. They referred to themselves as "economic hit men."

This is a story of international political intrigue at the highest levels. For over a decade Perkins traveled all over the world--Indonesia, Panama, Ecuador, Columbia, Saudi Arabia, Iran--and worked with men like Panamanian president Omar Torrijos, who became a personal friend. He helped implement a secret scheme that funneled billions of Saudi petrodollars back into the U. S. economy, and that further cemented the intimate relationship between the Islamic fundamentalist House of Saud and a succession of American administrations.

Perkins' story illuminates just how far economic hit men were willing to go, and unveils the real causes of some of the most dramatic developments in recent history, such as the fall of the Shah of Iran and the invasions of Panama and Iraq. Confessions of an Economic Hit Man, which many people urged Perkins not to write, is a blistering attack on a little-known phenomenon that has had dire consequences for both the lesser-developed countries and for American democracy.

[EVDebs]

21. Try to imagine that money going to something like the Peace Corps

which is why Kennedy, with all his faults, was loved. A site I found interesting is E F Schumacher Society's local currencies effort. Forget globalization, try to create local economies and keep the capital at home !

http://www.schumachersociety.org/frameset_local_currencies.html

Small scale banking in India appears to be akin to this also.

[idlisambar]

22. That is a great book

I have yet to see a book of the same quality that covers modern developments along the same line. "confessions of an economic hitman" looks interesting though.

[idlisambar]

7. Rauch doesn't get it

He is working with the hypothesis that America's economic problems are cyclical when they are actually deeply structural. The unprecendented trade deficits, concentrated in manufacturing goods, are symptomatic of the U.S.'s inability to produce what it has grown accustomed to consuming. Even our prominent domestic manufacturers tend to engage more in assembly of foreign made components (think DELL).

Even so the idea of a "European Century" is far-fetched. Europe has achieved a level of political maturity and economic realism compared to the United States, and will likely prosper in the new century with a high standard of living. Yet America's relative decline should not be mistaken for European ascendency, as it seems clear that East Asia will be the center of the world for the coming century.

[bemildred]

10. I see a kind of EurAsian multi-lateralism.

Once you give up on colonial games, that's what you are left with,
and war doesn't pay like it once did. The US, if it's rulers had any
brains, would be working on a similar multi-lateral cooperative
economics in the Western Hemisphere, but we haven't gotten over our
racist and colonialist predilections yet, hence the decline in our
fortunes can be expected to continue.

[oecher3]

23. as a European Citizen living in America...

...I love the competition and am glad to see all you great responses!
I declare the Euro the winner in this race, prematurely perhaps, but I have my reasons.
You all have brought up most of my points in this argument, but I think you underestimate one particular thought:

Our foreign policy (and by "our" I mean US, after all I leave here now and am grateful for my home -- even if I despise the current regime governing my home) has pissed of so many nations and people around the globe, even German's who are in their heart eternally grateful for the third chance they got from the US after WWII. IF this continuous and it seems to, than many countries look for alternatives in a stable currency that they can claim for economic reasons (either as safe investment, pegging currency to stabilize your own economy, currency of trade, foreign investment and loan payments and so forth).
So far, and you mentioned it in the beginning in connection to oil, but that is just a part of it. There is SO much US money in hands outside the US, that if this were to change, we wouldn't look so rich as a country anymore. Okay, China will most likely not sell off all their government bonds, but they might consider investing in Europe instead.

As for the discussion point on what is better supply or demand, I have to say neither is well on its own. What matters in my mind, is what has also been pointed out before income redistribution or fair distribution of wealth in general. Think of those Eastern European countries or better Balkan countries were the majority is poor and only a few on top are rich. They produce well, and demand well, but in general nobody can afford to buy anything nor do they get paid decent wages, India is an example of that, too! The more I think about it, you can find them everywhere.

As for the fall of this American Empire, I believe "hubris comes before the fall" and we are too arrogant lately as being the sole superpower and wanting to correct the world according to our believes. So the end might as well be near.

Thanks for all you good remarks, I will have to do some reading on those links supplied!

[Yavin4]

24. Europe Will Dominate the World In The Long Run

What makes a nation dominant is its ability to attract talent from around the world. Talent seeks to live in places that will offer them a comfortable lifestyle, political and economic stability, and the ability to pass on the fruits of their labor to their offspring. As America retrenches into a have/have not society of nothing but consumers, talent will look to live and work in Europe, where value will still be placed on labor.

[tritsofme]

25. I see longer term problems in Europe

Despite spending markedly less on defense than the United States, nations such as Germany and France are racking up budget deficits that are comparable to ours in terms of GDP.

Growth in the eurozone has also been highly anemic for the past several years, unemployment has recently hit a post-WWII high in Germany, with other eurozone countries such as France not too far away from 10% either.

IIRC the unemployment rate for the entire eurozone is over 9%, take that against 5.4% in the United States.

There is also a massive pension crisis in Europe that eclipses totally any problem we have with social security. Add that with the extremely low birth rate. They need to either get to work making a lot more babies or accept a great increase in immigration.

A weaker dollar isn't necessarily a bad thing either. During the Clinton years we kept the dollar artificially high, and while this stamped out inflation, it also hurt American manufacturers. A weaker dollar will help US manufacturers by making our goods relatively cheaper overseas and making imported goods relatively more expensive here at home. This should eventually start to bring our trade imbalance in to line as well. However much of this is prevented by countries such as China pegging their currency to the dollar and other Asian countries artifically propping up the dollar to keep their exports cheap in the States.