New Order
David Rothkopf wonders “whether America’s run is up, the American Century is over?” The answer appears to be a definitive yes. If it is not, it will only be due to the inertia of our allies and the ineptitude of our enemies. Empires usually collapse to a combination of internal division and external overreach. These often feed on each other as internal divisions in the central state create political instability which feeds concerns of external clients who worry about the commitment to protection the empire provides as well as opening opportunities for those internal and external foes of the client state to advance their cause.
For much of the American Century we were an unrivaled military and economic power that operated more as a hegemon than an empire. But that hegemony was really built on the use of soft power and the creation of international institutions that provided benefits to its members but also worked to advance American interests and enhance its power. It was through those institutions – the UN, World Bank, IMF, WTO, even, in its own way, NATO, and the like – that the US exported its ideology of liberal democracy, market capitalism, and, to a lesser degree, human rights. These institutions were implicitly and explicitly backed by the economic and military power of the US.
It was an enormously alluring and successful system, especially for those countries struggling to recover economically after World War II and those seeking to throw off the yoke of colonialism and totalitarianism. It was also hugely beneficial for America, initially creating markets for American products and later as a source of cheaper imported goods. In addition, when the interests of these institutions and the US were not aligned, the US was always given significant leeway, including the option of going it alone.
But there was always a tension between the combination of liberal democracy and market capitalism that US leaders intentionally glossed over, especially with their emphasis on market capitalism as a key to democratic expansion. To succeed, it needed a strong enough central government to not only sustain national cohesion but also to restrain the capitalist excesses of inequality and oligarchy. The inability to address this core conflict led to remarkable catastrophes like the Russian oligarchs divvying up the assets of the post-Soviet world and the rise of Putin, the “democratization” of Iraq, and the collapse of the Arab Spring, and in the process created unmitigated human suffering.
Starting in the Reagan era, that tension and the overemphasis on markets as a solution began to erode America internally. Add to that disastrous, endless, and costly interventions in Iraq and Afghanistan and the external shock of the global financial crises, and we finally began to see some real internal political instability with the rise of the Tea Party, the backlash against a Black president, resurgent xenophobia, and the increasing radicalism of the Republican party with its brinkmanship on government shutdowns and debt ceiling fights, as well as a refusal to abide by democratic norms. At the same time, the US was facing an economic power probably equal to its own with the rise of China and its ability to exert its own soft power internationally, initially focusing on areas long ignored by the US like Africa and South America and critical infrastructure like rail, shipping, and air ports.
Trump’s first term brought US instability to the fore for US allies and those international institutions that had been the bedrock of American soft power. Rather than support those institutions, Trump attacked them – withdrawing from TPP, Paris Climate Accords, World Health Organization, the UN Human Rights Council, and Open Skies. He reneged on the nuclear agreement with Iran, threatened tariffs on Mexico and Canada if they did not renegotiate NAFTA, refused to explicitly endorse NATO’s Article V, extorted an ally to help him retain power domestically, and embraced Putin and Kim Jong Un. He exposed both US and allied intelligence sources to an enemy, revealed US intelligence capabilities to the world, and possibly led to the death of dozens of US intelligence assets around the world.
Unsurprisingly, most of our allies and aligned members of these international institutions were relatively unprepared for such a shift in US approach. But they immediately started making adjustments while hoping that the Trump term was just an aberration. Australia, for instance, almost immediately started hedging its position between the US and China and the EU began to compartmentalize some of its dealing with the US. Countries around the world began entering into trade deals that explicitly excluded the US. The EU has inked deals with Japan, South America, and Mexico. With Trump’s withdrawal from TPP, Asian countries formed the CPTPP which has been so successful that the UK, Canada, and Mexico have joined it, and China and South Korea are looking to do the same. If Trump’s loss in 2020 slowed this process down, it was not noticeable.
Trump’s re-election is surely the final nail in the international order that the US has relied on for decades. It has shown that the first term was no aberration, and the US can no longer be trusted to provide the stability that American hegemony requires. Any agreement with the US is now no longer worth the paper it is written on. The US government is already violating contracts with private companies all over the world. They are openly violating judicial orders. And countries now have every expectation that the US President will now try to extort them for his own personal or political interests.
Of course, threatening to invade your allies and neighbors, so much so that the EU talks about sending troops to defend against a US attack; reneging on a trade deal for the second time with our two closest neighbors that Trump himself successfully demanded to be renegotiated six years ago; threatening enormous tariffs on allies; endorsing ethnic cleansing for private development deals; and generally fueling American isolationism; all of these acts, with the understanding that worse is probably yet to come, will just hasten the re-ordering of these international systems, with China only too happy to fill the US void where it can. Musk’s abrupt and illegal termination of USAID, perhaps the most prevalent embodiment of US soft power, provides the perfect opportunity for them.
America’s soft power is gone, probably forever. The governmental capacity that Trump and Elon are destroying and/or privatizing will take years to rebuild, if ever. Increasingly the US will have to rely on the military to project power abroad. That has never ended well for us or our targets. Moreover, it’s quite possible US economic dominance may wane more quickly than we imagine. The downgrading of the US credit rating is eventually going to happen, raising borrowing costs. Obviously, the tariffs are an enormous tax on the American people. But the Trump plan is to use the revenue from tariffs to offset tax cuts for higher income Americans. This process will shift us from a progressive income tax to a highly regressive consumption tax. That will make most Americans on the whole poorer but the emboldened American oligarchy richer. We may not be as economically weak as Russia – although at the rate Musk is destroying state capacity with the clear intent of privatizing it, we may be closer than we think – but we will increasingly look like Putin and his oligarchs. There will be an increasing brain drain as talented workers refuse to come here or leave here for greener pastures. The destruction of the administrative state and the ensuing lack of stability in the rule of law that business requires may start a wave of foreign divestment.
Perhaps what should frighten the international community most of all is the danger of a US default, either intentional or unintentional. With Musk and his goons not only having gained access to critical payment systems and reports that they are already making untested changes and connecting unsecure servers to those systems, the chances of an interruption or hack of those systems seems enormously high, especially when considering Musk’s track record. While missing or delayed Social Security or Medicare payments will create an almost existential internal crisis, missing coupon payments on US debt would shake the global financial system to its core.
There has always been a small but increasing group of Republicans who have always been totally sanguine with a US debt default. With the debt ceiling set to be breached sometime in the first half of this year and powerless Democrats seemingly reduced to refusing to provide votes for government funding and raising the debt ceiling, it’s quite possible Republicans in Congress may not be able to raise the debt ceiling on their own. Trump says he wants to abolish it, but that would mean defying Congress and probably ousting the Federal Reserve. Instead, he may rely on Elon to implement a strategic default where only certain bondholders get paid
Either scenario would be catastrophic. With the US increasingly uninvolved in global trade, fewer countries with currencies pegged to the dollar, and the full faith and credit of the US no longer a guarantee, the search for a global reserve currency will intensify. Already the BRICS countries are floating a multi-currency system to replace the dollar and are being threatened by Trump with retaliation. It’s almost certain the crypto creeps have their own proposal waiting in the wings. Replacing the dollar as the reserve currency will become increasingly urgent as the US goes farther and farther off the rails and the end of dollar dominance will only hasten America’s economic decline.
Empires collapse slowly, but the end is always quick and are usually driven by dissolution from within the central state. It took only 12 years from Estonia’s declaration of sovereignty inside the USSR to Putin’s ascension as leader of what by then had become a second-rate power with nuclear weapons in the shell that remained of the Soviet Empire called Russia. At the rate that Trump and Elon are moving, we appear to be following a similar timeline.