TOPICS > Economy

Is the U.S. the Latest World Power in Decline?

March 2, 2010 at 12:00 AM EDT
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As part of his continuing series of reports examining the country's economic future, Paul Solman sits down with Yale historian Paul Kennedy to discuss the rise and fall of the U.S. and other great economic powers.

PAUL SOLMAN : Historian Paul Kennedy, famous at Yale for, among other things, the course he helped found a decade ago on grand strategy, military and political.

PAUL KENNEDY, historian, Yale University: One of Philip II’s counselors says, to sustain yourself as a great power, you need three things: money, money, and money.

PAUL SOLMAN: Kennedy’s fame in the world outside the Ivy Tower derives from a book on grand strategy, “The Rise and Fall of the Great Powers.” Written in 1987, it’s having a grand revival of sorts 23 years later.

Paul Kennedy, welcome.

PAUL KENNEDY: It’s good to be with you.

PAUL SOLMAN: The book got attention in the late ’80s, when Japan was presumed to be number one, or becoming such, and has now experienced a revival because of the idea that America is the great power that has risen and is now falling, yes?

PAUL KENNEDY: I would agree with that, yes. There were indicators of an overstretch in defense spending and an overstretch in the budget deficits which were enough to send out a cautionary message that the U.S. might be now — it might have reached its cusp.

PAUL SOLMAN: What is the thesis of the book?

PAUL KENNEDY: Over time, there’s a general correlation between the rise and fall of a nation-state relative to its economic and technological power and others, and its — its military strength and its capacity to influence world events.

PAUL SOLMAN: Its relation to other states, you mean.

PAUL KENNEDY: Yes. So, this is all about relative power over the long term.

PAUL SOLMAN: Why, in 1988, did you think America was moving towards decline?

PAUL KENNEDY: When I moved from the United Kingdom to Yale in 1983, and I started to listen to the contemporary debates about, you know, how much defense spending do we need, are we being overtaken by Japan?

The dustcover of the original hardback edition of “Rise and Fall” has one of those medieval wheels of fortune or clocks of fate. And, at the top, at 12:00 noon, there is Uncle Sam tentatively taking one step off towards 1:00. And coming up from 9:00 hour is an Oriental-looking gentleman bearing the flag of the rising sun.

PAUL SOLMAN: But Japan didn’t become number one, didn’t get above, I don’t know, 9:30 on your clock, and then sank back down the dial. So, you were wrong.

PAUL KENNEDY: I got that wrong.

What happens in the early ’90s is, mysteriously, A., Japan stops growing, and then in fact goes into recession. Miraculously, the Soviet Union collapses, peacefully, and Gorbachev dissolves the Soviet Union and dissolves the Warsaw Pact.

So, your bugaboo of the 1980s, is the Soviet military threat worse than the Japanese economic threat, both of those clouds on the horizon go well over the horizon. And then we get this really interesting seven or eight years of productivity increases in the ’90s, which seem to be driven by more clever use of computers and electronic knowledge.

PAUL SOLMAN: What’s happening now that is again making the notion of the fall of the United States plausible?

PAUL KENNEDY: There’s a number of elements at work here.

One was the war in Iraq, which has now moved on to Afghanistan, and the very evident signs that, A., it was straining our ground armed forces in particular, and it was being budgeted off normal national budgets, military commitments, which, over the long term, are going to be harder to pay for and harder to fulfill.

The second thing was the fiscal crisis and the banks crisis and the housing crisis of the past 18 to 20 months, and the response of both the late Bush, and then the early Obama administration to try to kick-start this through massive amounts of deficit spending.

PAUL SOLMAN: But an economic theory is, if you have idle resources, you borrow or print money to put those resources back to work, you’re better off in the long run.

PAUL KENNEDY: Sure. Keynes is alive and well.

PAUL KENNEDY: The question is twofold. Can this be done in the — to the enormous, sheer enormous size of the deficits now recently projected not to be for one or two years, but to go all the way through to 2025?

The second question is the one which has concerned me as a military strategic historian much more is, how long can you get away with printing your sovereign money supply and accepting, hoping that foreigners will accept it continually into the future?

PAUL SOLMAN: So, you might have been wrong back in 1987, or you might have only been off by about 23 years, is it now?

PAUL KENNEDY: The idea that this is all deterministic, and it’s all mechanistic, these shift in the world balances, and the power at the top is going to go over like the guy on the — on the wheel of fortune, in a very long sense, it’s true. We all know it, that there are shifts in new — new forms of productivity, new forms of growth, shifts in the global economic balances which, over time, affect the global diplomatic and power and military balances.

I think most people would assume that because, even if you’re a proud American, you have to assume you only got to be a proud American because the balance of economic power and technological power shifted to us in the second half of the 19th century.

That said, the trick for American policy-makers is how to find clever ways of managing relative decline, so that you preserve your position as long as possible, you preserve your — your prosperity as long as possible, you preserve the things in the world you want as long as possible.

PAUL SOLMAN: But it wouldn’t surprise you if 23, 25 years from now, China, five times the number of people as the United States, was number one, and we’re number two and gracefully managing that role?

PAUL KENNEDY: We can think that there’s a certain power which was number one 100 years ago, and then gracefully backed off to a country which had five times its population. And that’s Britain in regard to the rising United States.

So, there’s — there’s management there. There’s — there’s ways of compromising. There’s ways of acknowledging. But here’s one — one further final thought for people to think about. In fact, there are longish periods where you have three or four contenders, and you go back to not a bipolar world, not a unipolar world, but a multipolar world.

I can see in possibly 25 years’ time, you have got — you have got a U.S., you have got a Brazil, interestingly, coming up fast, you have got a China, you have got an India, and a possibly consolidated E.U., and you’re looking at something like Metternich’s Congress of Vienna system, a concert of big powers.

PAUL SOLMAN: That’s 1815.

PAUL KENNEDY: That’s 1815. What goes around could come around.

PAUL SOLMAN: That wouldn’t necessarily be so bad?

PAUL KENNEDY: I don’t think so. In fact, it would — what it would do, though, is to put the emphasis on diplomacy. I hope we will be able to keep the diplomats to do it.

PAUL SOLMAN: Paul Kennedy, thank you.

PAUL KENNEDY: You’re most welcome. Thank you.

JEFFREY BROWN: For the record, our Paul Solman has participated in Paul Kennedy’s grand strategy course at Yale as one of several teachers.