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.