The sudden Death of the American Empire

Observers of the current American hegemony will recognize the transformation of the global system to suit American interests.

The maintenance of an ideologically charged ‘rules-based’ order – ostensibly for the benefit of everyone – fits neatly into the category of conflation of national and international interests.

Meanwhile, the previous hegemon, the British, had their own version that incorporated both free-trade policies and a matching ideology that emphasized the wealth of nations over national sovereignty.

Essentially, by embracing financialization, Britain played the last card it had to stave off its imperial decline.

Beyond that lay the ruin of World War I and the subsequent instability of the interwar period, a manifestation of a ‘systemic chaos’ – a phenomenon that becomes particularly visible during signal crises and terminal crises.

The process of financialization emerging from a signal crisis was repeated with startling similarities in the case of Britain’s successor, the USA.

The 1970’s was a decade of deep crisis for the USA, with high levels of inflation, a weakening dollar after the 1971 abandonment of gold convertibility and, perhaps most importantly, a loss of competitiveness of US manufacturing.

With rising powers such as Germany, Japan, and, later, China, able to out-compete it in terms of production, the USA reached the same tipping point and, like its predecessors, it turned to financialization.

The 1970’s was, in the words of historian Judith Stein, the pivotal decade that sealed a society-wide transition from industry to finance, factory floor to trading floor.

This allowed the USA to attract massive amounts of capital and move toward a model of deficit financing – an increasing indebtedness of the US economy and state to the rest of the world.

But financialization also allowed the USA to reflate its economic and political power in the world, particularly as the dollar was ensconced as the global reserve currency.

This reprieve gave the USA the illusion of prosperity of the late 1980’s and ‘90’s, when there was this idea that the United States had ‘come back’.

No doubt the demise of its main geopolitical rival, the Soviet Union, contributed to this buoyant optimism and sense that Western Neo-liberalism had been vindicated.

However, beneath the surface, the tectonic plates of decline were still grinding away as the USA became ever more dependent on external funding and increasingly ramped-up leverage on a diminishing sliver of real economic activity that was rapidly being off-shored and hollowed out.

As Wall Street rose in prominence, many quintessential American companies were essentially asset-stripped for the sake of financial profit.

By the late 1990’s, the financialization itself was beginning to malfunction, starting with the Asia crisis of 1997 and subsequent popping of the dotcom bubble, and continuing with a reduction in interest rates that would inflate the housing bubble that detonated so spectacularly in 2008.

Since then, the cascade of imbalances in the financial system has only accelerated and it has only been through a combination of increasingly desperate financial legerdemain – inflating one bubble after another – and outright coercion that has allowed the USA to extend its hegemony even a bit longer beyond its time.

The USA, they believe, has even greater capabilities than Britain did a century ago to convert its declining hegemony into an exploitative dominion.

If the system does eventually break down, it will be primarily because of US resistance to adjustment and accommodation.

And conversely, US adjustment and accommodation to the rising economic power of the East Asian region is an essential condition for a non-catastrophic transition to a new world order.

Whether such accommodation is forthcoming remains to be seen, but this strikes a pessimistic tone, noting that each hegemon, at the end of its cycle of dominance, experiences a final boom during which it pursues its national interest without regard for system-level problems that require system-level solutions.

A more apt description of the current state of affairs cannot be formulated.

The system-level problems are multiplying, but the sclerotic ancient régime in Washington DC is not addressing them.

By mistaking its financialized economy for a vigorous one, it overestimated the potency of weaponizing the financial system it controls, thus again seeing ‘spring’ where there is only ‘autumn.’ This will only hasten the end.

RT. com / ABC Flash Point Global Economy News 2024.