The decline and fall of the American empire

Filed in archive risk on July 29, 2010

Economic historian Niall Ferguson warns that the American empire is on the brink of collapse.

He says that all empires, no matter how magnificent, are condemned to decline and fall. Nothing lasts forever. More to the point, imperial decline is most often associated with fiscal crises where there are imbalances between revenues and expenditures, and governments are faced with the mounting cost of servicing a mountain of public debt. It happened with the Ottoman Empire where debt servicing ran out of control and with the British Empire after the Second World War when most of its debt fell into foreign hands.

"Alarm bells should therefore be ringing loudly in Washington, as the US contemplates a deficit for 2010 of more than $US1.47 trillion - about 10 per cent of gross domestic product, for the second year running,'' Ferguson writes. "Since 2001, in the space of just 10 years, the US federal debt in public hands has doubled as a share of GDP from 32 per cent to a projected 66 per cent next year. It is projected that debt could reach 344 per cent by 2050. These sums may sound fantastic. But more terrifying is to consider what continuing deficit finance could mean for the burden of interest payments as a share of federal revenues - up to 85 per cent in 2050. The fiscal position of the US is worse than that of Greece. But Greece is not a global power. In historical perspective, unless something radical is done soon, the US is heading into into Bourbon France territory. It is heading into Ottoman Turkey territory. It is heading into postwar Britain territory."

It's important to note that the non-partisan Congressional Budget Office has just released a dire warning that the US faces a scenario similar to the crises that confronted Greece, Ireland and Argentina. The problem, however, is that Greece, Ireland and Argentina are not global powers so this one will have a more devastating impact.

So what lies ahead? A gloomy scenario is painted by infowars.com. Fast forward to 2017, the year America dissolved. Militarized police forces are now roaming the streets, the dollar collapsed as world reserve currency in 2012 when the worsening economic depression made it clear to Washington's creditors that the federal budget deficit was too large to be financed except by the printing of money and faced with hyperinflation, the US government stopped paying social security and started confiscating pensions.

The writer Paul Craig Roverts warns: "When hubris sent America in pursuit of overseas empire, the venture coincided with the offshoring of American manufacturing, industrial, and professional service jobs and the corresponding erosion of the government's tax base, with the advent of massive budget and trade deficits, with the erosion of the fiat paper currency's value, and with America's dependence on foreign creditors and puppet rulers. The Roman Empire lasted for centuries. The American one collapsed overnight. Rome's corruption became the strength of her enemies, and the Western Empire was overrun. America's collapse occurred when government ceased to represent the people and became the instrument of a private oligarchy. Decisions were made in behalf of short-term profits for the few at the expense of unmanageable liabilities for the many."

It's a frightening scenario. But as the US struggles to extricate itself from its climbing debts, it's one that looks increasingly likely.