Might just come down!

I do not believe that civilizations have to die because civilization is not an organism. It is a product of wills.  Arnold J Toynbee

Yesterday, I explored a number of ideas around the proposition that the USA is in decline.  The case is by no means clear but there does seem to be a preponderance of support for the notion that, as with all great empires, this could be an ‘end time’ for the USA.

One needs to go no further than A. J. Toynbee himself to reflect on that idea.  Who was Arnold J Toynbee?  Here’s his biography as presented on the Gifford Lectures website,  ( Note: A fabulous series of lectures available on YouTube!)

Arnold J Toynbee

The British historian Arnold Joseph Toynbee was born in London on 14 April 1889 and died on 22 October 1975 in York, North Yorkshire, England. He was educated at Winchester College and Balliol College, Oxford. He was the nephew of economic historian Arnold Toynbee, with whom he is sometimes confused. His first marriage to Rosalind Murray, with whom he had three sons, ended in divorce in 1946. Professor Toynbee then married Veronica M. Boulter, his research assistant.

From 1919 to 1924 Arnold J. Toynbee was professor of modern Greek and Byzantine history at King’s College, London. From 1925 until 1955 Professor Toynbee served as research professor and Director of Studies at the Royal Institute of International Affairs. During both world wars he worked for the British Foreign Office. He was a delegate to the Paris Peace Conference in 1919.

While Professor Toynbee’s Gifford Lectures were published as An Historian’s Approach to Religion (1956) he is best known for his 12-volume A Study of History (1934-1961). This massive work examined the growth, development and decay of civilizations. He presented history as the rise and fall of civilizations rather than nation-states or ethnic groups. According to his analysis of civilizations the well-being of a civilization depends on its ability to deal successfully with challenges.

Professor Toynbee oversaw the publication of The Survey of International Affairs published by Oxford University Press under the auspices of the Royal Institute of International Affairs from 1925 to 1977.

A Study of History is the longest book in the English language, described in Wikipedia as, “the 12-volume magnum opus of British historian Arnold J. Toynbee, finished in 1961, in which the author traces the development and decay of all of the major world civilizations in the historical record. Toynbee applies his model to each of these civilizations, detailing the stages through which they all pass: genesis, growth, time of troubles, universal state, and disintegration.

Back to the theme of the essay.  One might propose, therefore, that a decline in the USA could be the ‘leading edge’ of a decline not only of the empire of the USA but of the whole of our present civilisation; the ‘universal rhythm of rise, flowering and decline‘.

Back on the 3rd October, Simon Johnson, one half of the famous duo with James Kwak, over on Baseline Scenario published an essay under the title of Fiscal Confrontation And The Declining Influence Of The United States.  Let me dip into that.  Simon starts off by saying,

It is axiomatic among most of our Washington elite that the United States cannot lose its preeminent global role, at least not in the foreseeable future. This assumption is implicit in all our economic policy discussions, including how politicians on both sides regard the leading international role of the United States dollar. In this view, the United States is likely to remain the world’s financial safe haven for international investors, irrespective of what we say and do.

Expressing concerns about the trajectory of our federal government debt has of course become fashionable during this election cycle; this is a signature item for both the Tea Party movement in general and vice presidential candidate Paul D. Ryan in particular.

Then later, in a reference to my own British history, writes,

Threatening to shut down the government or refusing to budge on taxes is seen by many Republicans as a legitimate maneuver in their campaign to shrink the state, rather than as something that could undermine the United States’ economic recovery and destabilize the world. This approach is more than unfortunate, because the perception of our indefinite preeminence – irrespective of how we act – is completely at odds with the historical record. In his widely acclaimed book, “Eclipse: Living in the Shadow of China’s Economic Dominance,” Arvind Subramanian places the rise of the dollar in its historical context and documents how economic policy mistakes, World War II and the collapse of empire undermined the British pound and created space for the United States dollar to take over as the world’s leading currency.

Then Simon endorses the key point made by Arvind Subramanian, namely,

But Dr. Subramanian also asserts that two other factors were important: the sheer size of the American economy, which overtook Britain’s, probably at some point in the late 19th century, and the United States current account surplus. In particular, American exports were far larger than imports during World War I and by the end of World War II the United States had amassed almost half the gold in the world (gold at that time was used to settle payments between countries.)

In effect, the United States dollar pushed aside the British pound in part because the United States became the world’s largest creditor.

Simon’s essay closes thus, (and you do need to read the full essay, by the way, many important ideas are expressed)

The dollar became strong because American politicians were responsible, careful and willing to compromise. Fiscal extremism, confrontation and a refusal to consider tax increases over any time horizon will undermine the international role of the dollar, destabilize the world and make it much harder for all of us to achieve any kind of widely shared prosperity.

Finally, in a call with my son, Alex, just 30 minutes ago (I’m writing this on the morning of the 4th October), he mentioned an item he had read in today’s Guardian newspaper No recovery until 2018, IMF warns.

The International Monetary Fund’s chief economist has warned that the global economy will take a decade to recover from the financial crisis as the latest snapshot of the UK economy suggested that growth in the third quarter will be at best anaemic.

Olivier Blanchard said he feared the eurozone crisis, debt problems in Japan and the US, and a slowdown in China meant that the world economy would not be in good shape until at least 2018. “It’s not yet a lost decade,” he said. “But it will surely take at least a decade from the beginning of the crisis for the world economy to get back to decent shape.

2018!  That leaves plenty of time for any number of global ‘surprises’ geopolitical and environmental alike!  But my final message is one of caution.  I am as vulnerable as the next person in seeing ‘doom and gloom’ ahead.  However, drop in to Learning from Dogs next Tuesday and watch something that may surprise you.

So on that note, the closing quote is going be one that I have loved for a long time:

“Prediction is very difficult, especially if it’s about the future. “ Niels Bohr

8 thoughts on “Might just come down!

  1. Why did Toynbee (as an ex-pat Brit) always talk about the USA being in decline. The USA may have the greatest sovereign debt in numeric terms, and the greatest average student and average household debt in per capita terms but… This debt crisis is a global crisis… and it is a self-reinforcing crisis.

    The UK government’s latest excuse for not investing in the Green Economy is to point to the mess in Europe and say “You don’t want us to become like Greece and Spain do you?” It is of course a rhetorical question but… Austerity is very clearly a viscous circle – a death spiral – from which the only escape is debt cancellation…. and our financial markets cannot afford to write-off the debts of Greece, Spain, Italy, Ireland and Portugal. This is why David Cameron’s mockery of the Labour Party as “…the Party of one notion – borrowing” will be so effective.
    http://www.telegraph.co.uk/news/newsvideo/uk-politics-video/9598603/David-Cameron-dismisses-Labour-as-party-of-one-notion.html

    Back in the USA, you have law students graduating from college with debts of over $100k who can’t find jobs. As Schalk Cloete has pointed out, the current generation of students are the most recent investors in the Ponzi Scheme of our globalised economy who have clearly been the ones to get their fingers burned. If they cannot get a job, they have no chance of persuading the next generation to invest in the scheme too.

    So, I beg to differ with Toynbee on this occasion, because collapse is the only way out of this mess: This is because there is no one – and no money – left to fix it. The only solution (or hope) lies in people becoming self sufficient (as opposed to State dependent)… so buying a mini ranch in Oregon is unquestionably a very wise move. (Do you need an Estate Manager?)

    1. Thanks for the smile you generated this end a couple of hours ago. Don’t know about an Estate Manager but help around the place in exchange for board and lodging … now there’s an idea!

      1. Thanks Paul. I thought my doom and gloom comment needed a some terminal uplift – like the moraine left by a receding glacier…

    2. Hehe… Yeah, the quiet country life does look quite attractive now, but I am still hoping that we will be able to manage this decline so that it stops short of an actual collapse and, in doing so, preserve many of the advantages of our advanced civilization. Literally all that is needed is the general mindset shift away from consumerism and entitlement and towards contribution and personal responsibility. The only question is whether we can buy ourselves enough time to make this happen.

      Regarding the decline of the USA, well, I don’t think there can be any doubt about that. The USA shows all of the signs of an empire in decline: unpayable debt, total dependence on foreign goods and services, the unbearable burden of global military enforcer, massive social inequality and, most importantly, the unabashed acceptance of living way beyond one’s means as the norm. The one and only reason why America is still afloat is because the dollar is the world’s reserve currency and this will not last much longer.

  2. Schalk, thanks for your input. However, I’m not so sure that the points you and Martin make are of the ‘no doubt’ material. The ‘law’ of unintended consequences is always hard at work! I say that without any insight or specialist knowledge to argue against you.

    But a long conversation that I had last week with a colleague back in England suggests that talk of the death of the USA is premature. Indeed, I have a post coming out next Tuesday that goes through 5 key indicators raised in that conversation that lay out why the USA will remain vibrant and healthy for very much longer.

    OK, back to the packing 😦

    1. I like the optimism, Paul. Looking forward to next Tuesday.

      Note that I am not saying that the USA will collapse (I really hope not!), but I am fairly certain that a long decline in median income and median net worth is on the cards. The fundamental fact is that the USA will have to deleverage (economist speak for “living within your means”) considerably in the years ahead and the process of deleveraging on the scale required by the USA must lead to recession.

      Only time will tell though. I guess the first indication of things to come will be how the fiscal cliff is handled…

      1. As I intimated in my previous reply, I can’t argue with your analysis from any position of knowledge. Plus the overwhelming weight of expert commentary is in agreement with you.

        Interesting times, of that there’s no doubt!

        Thanks for your thoughts, Paul

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