Why Great States Decline

Jack A. Goldstone, George Mason University

There is no question that in the second half of the twentieth century, the world’s dominant economic and military power was the United States of America.  By 2050, however the U.S. is will almost certainly be only one of several major states in a multi-polar world.

Historians will face an interesting challenge in trying to date the apogee of American power and the beginning of its decline.  The apogee was likely in 1989-1991, with the collapse of the Soviet Union, the ending of communism in Eastern Europe, and the overwhelming victory in the first Gulf War.

But dating the signposts of decline will be more difficult.  Was it when the US first switched from being a creditor to being a debtor nation in 1988?  Was it when the winding down of the decade-long conflicts in Iraq and Afghanistan devolved into the US seeking simply departure with honor, leaving the First Gulf War as America’s last clear military victory?  Or was it this week, when the U.S. lost its AAA credit rating?

I would have to say, regarding 1991, that the seeds of US decline were already apparent even at it moment of greatest triumph.  I say this now because I can point to several perhaps surprising passages in a book that I published in 1991 – Revolution and Rebellion in the Early Modern World – which analyzed the rise and fall of great nations and empires in world history from 1500 to 1860.

Here is a direct quote from several passages from pp. 485-488.

“The Decline of the United States” [Yes, that was the title of this section]

“It is ironic that precisely when the above ideas [individual rights, pluralism and a dominant economic role for capitalist organization] are gaining wide acceptance, the leading exemplar of these ideas—the United States—is troubled by intimations of decline. Some symptoms are familiar from the preceding discussion of state crises—rising government debt and a polarization of incomes.”

I then noted that one popular theory of the decline of hegemonic states was Paul Kennedy’s argument about “Imperial Overstretch.”  One could certainly argue that, given the US wars in Afghanistan and Iraq, and the growth of US defense spending, the US is falling victim to the same problem.  But that would not be accurate.   Even as the French monarchy headed toward its collapse in 1789, impelled in part by the debts it rolled up in the American War of Independence, its problem was NOT that its debts or military had become too large to support.  As recent scholarship has shown the French economy had grown more than enough during the prior decades to repay the debts and support the French military (see From Deficit to Deluge: The Origins of the French Revolution, by Thomas Kaiser and Dale Van Kley) Indeed, as Napoleon showed just a few years later, France had sufficient resources, if properly marshaled, to conquer all of Europe!  Rather, the French monarchy failed because its elites could not agree on how to balance taxation and spending to restore fiscal stability.  The same is true of the U.S., which has a GDP of $14 trillion dollars.  Our spending on both Iraq and Afghanistan combined, in 2007, at the height of the conflicts, was $147 billion, or only about 1% of GDP.  The US has a great deal of accumulated debt, but even so, the cost of servicing that debt is still only $143 billion in 2009, again only about 1% of GDP.  So it is preposterous to say that the US’s fiscal troubles are primarily due to wars or accumulated debt.

No, our problems–including the loss of our AAA credit rating—are mainly due to political problems that create an inability to agree on tax and spending plans that will prevent our debts from growing rapidly in the future.   Here is how my book continued:

“Selfish Elites and National Decay”  [Yes, that was the title of the next section]

“The answer is that these [once-leading] regimes fell because they had used their nation’s resources poorly.  Inefficient tax systems failed to capture a growing share of national wealth. … These persistent efforts by elites to resist or evade taxation, despite being massively undertaxed, led to excessive state debts and reduced the state’s ability to respond to domestic demands and foreign threats….

“In short a key difficulty faced by regimes in decline was selfish elites.  Nations that were the richest countries in their day suffered fiscal crises because elites preferred to protect their private wealth, even at the expense of a deterioration of state finances, public services, and long-term international strength.  By ‘selfish elites’ I do not mean, of course, simply elites’ aspirations to maintain disproportionate shares of wealth and power.  That ambition is a universal constant. What I wish to emphasize is that in some eras in history, elites have identified their interests with the national state and the public weal, and they have been willing to tax themselves heavily to expand the influence and  resources of their nation and their government.  At other times, … elites have turned into competing factions, driven by self-enrichment at the expense of their rivals and opponents, even when that meant starving the national state of resources needed for public improvements and international competitiveness.

“In addition, declining regimes were beset by factionalism within the elites that paralyzed decision-making.  Struggles for prestige and authority took precedence over a united approach to resolving fiscal and social problems.  Among English gentry in Parliament, within the French Estates General and the National Assembly, among Ottoman officials, and within the ranks of Chinese scholars, partisanship prevailed over consensus—with disastrous results.”

I then continued – and remember that this was in 1991:

“It is quite astonishing the degree to which the United States today is, in respect of state finances and its elites’ attitudes, following the path that led early modern states to
crises.  As in the past, inability to sustain international influence is merely symptomatic of deeper internal decay.

“For example, lack of consensus among U.S. elites has virtually immobilized efforts to deal with a persistent federal budget deficit, and has hamstrung state action in many foreign policy theaters and in much domestic policy planning. The only consensus that has prevailed in the last decade is precisely that which history tells us is the most disastrous, namely, the consensus that private consumption should take precedence over all public expenses, and that raising taxes to realistic levels to meet state obligations should be fiercely resisted.  Hence the U.S. has been running a growing debt, sustained only by foreign borrowing.

“The result has been just what the history of earlier states who have been denied adequate taxation and relied on debt would lead us to expect: private individuals among the elite have become enormously richer, while basic public services that support the economy as a whole—primary and secondary education, airports, trains, roads, and bridges—are neglected, overburdened, and deteriorating.

“The United States thus enters the 1990s with several evident problems: factional divisions among elites that undercut policy consensus, widespread resistance to realistic taxes, an overreliance on debt and a polarization of private incomes while public services … are grossly underfunded and losing their ability to support the economy.  … It is certain that the long-term results, which now only slightly apparent but will accumulate rapidly in the coming decades, will be a relative decline in the living standards freedom of decision, and international position of the United States as compared with
other industrialized nations.”

For those of you who do not believe these words were published 20 years ago, please go out and buy Revolution and Rebellion in the Early Modern World (it is still in print and now available in Kindle) or check your library.  The seeds of US decline were indeed visible at the very same time we reached the height of our power.

Why did we not see these problems then, and do more to prevent their accumulation?
Despite the vicious factional battles of the 1990s, our vision was clouded by the speculative dot-com boom, our unsustainable binge of borrowing, and the surge of low cost manufacturing and services into the world economy from China and India that kept down prices for American consumers.  These trends for a while veiled the longer-term trends and put off their effects.  Basking in the glow of the “End of History” and at the peak of our global power, we were more inclined to treat the temporary boom of the 1990s as our endless destiny, rather than simply as a period of excess that postponed a reckoning with our long-term behavior.

But as Ian Bremmer notes in the current issue of Foreign Policy, the growth of U.S. consumption and debt from the 1990s to the mid 2000s were only sustained by major imbalances in global capital and trade flows that are now being balanced with a vengeance.

The good news is that because these problems are mainly political, they are in theory fixable.  The US is an extremely wealthy nation, well able to care for its poor, pay its debts, and balance its future spending.  But many other great nations have perished as global powers because of politics, and an inability to achieve consensus to make the necessary adjustments to their fiscal conditions.

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About jackgoldstone

Hazel Professor of Public Policy at George Mason University
This entry was posted in The Global Economy. Bookmark the permalink.

15 Responses to Why Great States Decline

  1. I think the events of the past few years, including the rise of hard-right political candidates who trade in simplicities based in soft fascism, the recent food fight over the federal debt and its effect on S&P’s downgrade of the U.S.’ credit worthiness, the obscenely expensive resource wars we are stuck in, the collapse of the real estate bubble, and the hollowing out of many parts of U.S. cities from disinvestment and neglect (e.g., many parts of Detroit) indicate the robustness of your thesis. I wish it weren’t so, but I’m not really very bullish on the future of America, or at least that part that is under the control of the elites. We may be wealthy, but like many previously wealthy American families, it really doesn’t take much to burn thru the family fortune.

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  4. Excellent article placing current problems in historical context.
    1. Leading regimes of the past fell because they had used their nation’s resources poorly. Inefficient tax systems failed to capture a growing share of national wealth. … persistent efforts by elites to resist or evade taxation, despite being massively undertaxed, led to excessive state debts and reduced the state’s ability to respond to domestic demands and foreign threats….
    2. Our problems we completely predictable but we treated the boom of the 1990s as our endless destiny, rather than simply as a period of excess that postponed a reckoning with our long-term behavior.
    3.The US is an extremely wealthy nation, well able to care for its poor, pay its debts, and balance its future spending.

  5. Mr. Gladstone–

    You may be interested in DynamicShift, http://dynamicshift.org/ a cross-partisan, multi-sector initiative I started in 2009, due to concerns very similar to yours here. Glad you are working the problem. And, as I do, see nascent possibilities for change.

    DynamicShift helped inform We the People, a much larger national movement led by Harry Boyte, director of Center for Democracy and Citizenship in partnership with American Democracy Project, American Association of Colleges and Universities and bi-partisan leaders.

    You likely know Boyte, who has written on themes of “selfish elites” or, what he calls the “cult of the expert.”

    Andrea Morisette Grazzini
    Founder, DynamicShift

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  7. Gus says:

    If you’re looking to pump up sales of your book, mission accomplished. 🙂

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  9. Barath says:

    Jack – Interesting post. Although he doesn’t run in your circles, John Michael Greer is an extremely well-read and thoughtful writer who has made a strong case for 1974 as the tipping point. The crux of his argument is that 1974 was the first year in which the fact that we were no longer energy independent hit us, and hit us hard, fundamentally changing our nation’s industrial core and creating the Rust Belt.

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  11. russell1200 says:

    The tax to limit demand is probably what was needed. It certainly was discussed at the time. But the Democrats had gone to the well too many times previously on the tax issue, and the Republicans were using it as big stick to beat them up with. The redistribution mindset of the day (on the Democrats side) backfired. Arguably this is exactly what has happened to the Republicans and their no-tax mantra. They are so locked into the verbiage, they have no flexibility in their tactics.

    Sailing ships work very well in long distance commerce. If the u-boats had not sunk so many of them in WW1, they likely would have held on longer. They are as vulnerable as any other ship to missiles and drones: 8 knots versus 30 knots is still pretty much motionless versus Mach 2. Granted really long range targeting is easier, but sailing ships are not as bottlenecked by fueling points as coal/oil ships. The big change in naval tactics because of steam power came in the British naval campaign off of Finland (Crimean War) where the auxiliary steam power allowed the sailing ships to operate off shore without being run onto the rocks by a change in wind. The Finish operations are arguably what actually brought Russia to the bargaining table. It was the use of armor (see Monitor and Virginia/Merrimack) that did away with sails- only later the desire for very high speeds. Ships generally are not as heavily armored today. Speed in a warship, particularly over long time periods, is still useful.

  12. russell1200 says:

    You make some very good points. I have read your 1991 book. Your comments in it about academic credentialing I think are even more frighteningly prescient.

    One area I think I might disagree with (I am willing to be proven wrong) is in where the lack of political consensus has hurt us.

    Our current problems are not because of the current silliness, embarrassing as they may be, but go back to at least the flattening of “real” incomes in the 1980s. Some portions of this trend can actually be extended into the rust-belt era of the 1970s. It was in the 1980s that the push toward consumer debt started, along with the continuing government debt problems that lead to our becoming a net debtor as you mentioned. With Clinton upping the ante, and then Bush W. doubling down, we are faced with a classic bubble situation that has turned a bad situation worse.
    The last responsible President, with regards to caution in finance, was probably Bush Sr. with his deal with Tip O’Neal to reign in the budget. I did not like him at the time, but I am willing to concede that I was likely wrong.

    The other tipping point is the U.S. reaching peak oil in the 1970s. If the United States was self sufficient in oil, it is highly questionable that we would feel the need to have so many overseas basis and be so quick to intercede in places like Libya. Carter, another president I did not like, got us started on the road to energy conservation, but we abandoned as soon as the price dropped again. If we had kept the momentum from the 1970s going, we would be in a much better position today.

    If someone was going to come up with an adult solution, it likely would have needed to happen in the 1970s. The most likely people to do that would have been the Democrats who had been in power forever, backed by any status quo (of the time) president. I think historians will look at the Nixon-Ford-Carter era as the key period. Nixon set the table. Ford broke his promise not to run in the election. And the simultaneously brilliant-saintly-megalomaniac Carter was left a pretty poor hand.

    As for what the world will be like in 2050, I suspect you are more optimistic than I. With world population pushing somewhere around 10 billion by then, and likely our being well past world peak oil (an argument for another day I grant you), we are going to have at best a whole bunch of regional powers, because sailing/solar powered ships are likely to be slow.

    • You are right about Bush senior, and his ability to work with Tip O’neil, marking a time of admirable cooperation and progress. Peak oil could have been a problem, but a reasonable energy tax to limit demand might have offset that to some degree. And if we are reduced to sailing/solar powered ships, I hope someone has also drained all the missle fuel. Or everyone else will be vulnerable to whoever can fuel the last drone or rocket.

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