Introduction 

American decline has once again become a fashionable prophecy in academic and media circles. This time, BRIC countries like China and India have replaced the specter of a rising Japan, the country that was often cited by ‘declinists’ as a challenger to American hegemony during the 1980s. This backgrounder will examine both sides of the debate and provide an objective analysis of the causes and possible effects of American decline.

 

 

Decline in context

There is one important point to consider before exploring this debate, and that is the nature of America’s purported decline.  Even the most ardent declinists maintain that America will carry on as a central economic and military hub in any future international order; it will just be one of many.

American decline does not imply that America and China will be changing places, but rather that the United States will be stepping down from its’ current position of sole global superpower.  Of course, such a development would have a variety of spinoff effects: the US dollar would no longer be treated as a global reserve currency, major powers would be forced into cooperation or conflict over transnational threats, and US military power would not be so prolific around the world.  But, even in the most pessimistic projections of American decline, the United States remains a power player in international politics.

Economic Power

Global economics provides abundant ammunition to the proponents of American decline, particularly in the wake of the 2008 global financial crisis. China, and to a lesser degree India, are increasingly viewed as states that will topple American economic domination in the coming decades. Official projections seem to corroborate this as an inevitability. In 2003, Goldman Sachs was predicting that the Chinese economy would overtake the United States in 2043. Six years and a global economic meltdown later and the date was pushed forward to 2027 [1,2].

There are even some that believe the center of gravity in the international economy has already shifted to Asia in the wake of the 2008 global financial crisis. The Chinese economy grew at a rate of 9 percent in the third quarter of 2009. US growth during the same period was 2.2 percent [3, 4].  While US growth recovered to post 5.5 percent in the fourth quarter of 2009, over the course of 2009 as a whole, the US economy contracted at a rate of 2.4 percent [18].

Skeptics are quick to point out the vast difference in Chinese and American GDP per capita- $3,566 and $46, 443 respectively- and the fact that countries like China and India are experiencing such breakneck growth merely because they’re starting from a lower starting point [1, 3].

Current levels of economic power aside, there are indications that a very different set of circumstances will descend over Washington in the coming years.  Massive deficit spending in the United States, financed in large part by foreign governments, will inevitably lead to a higher share of the government revenues being diverted into interest payments. Debt payments should amount to around $196 billion in the 2010 financial year [5]. By 2018 they are projected to reach $700 billion; a figure that exceeds current US defense spending [5].  When these interest payments are added to exploding Social Security and Medicare costs, a picture of massive budgetary constraints over the short to medium term begins to emerge [6].

A high level of indebtedness to foreign governments is another factor that will act as a drag on American economic, military and diplomatic flexibility. As of November 2009, China and Japan hold $789 and $757 billion respectively in US treasury securities [19].  Academics such as Niall Ferguson liken current levels of American foreign indebtedness to those experienced by the British Empire after World War I. At the time, the British government was devoting 44 percent of the federal budget to interest payments [20]. According Ferguson, the financial rot that the American government is currently weathering will one day come to be seen as a primary harbinger of American decline [21].

Military Power

The fiscal health of the federal government determines the resources available to the Pentagon, which in turn dictates the role that the US military can play in international society. According to certain Congressional Budget Office (CBO) projections, defense spending in the United States is set to drop from 4.2 percent of GDP in 2008 to 2.6 percent in 2028 [7,8]. Both declinists and their detractors agree that budgetary pressures will inevitably squeeze out a portion of defense spending over the coming decades. Where they disagree is whether or not this forced austerity will spell an end to American military preeminence in global society.

Skeptics are quick to point out the possibility of the US military maintaining its’ current sizable advantage over rising competitors by increasing efficiency, reforming the expensive and uneven Cold War alliance system and adopting a strategic doctrine more suited to the diffusion of global military and economic power. Indeed, this kind of streamlining has already begun in part by the Overseas Basing Commission- a review of U.S. military bases worldwide- and Secretary of Defense Robert Gates’ efforts to reign in the corrupt and ineffective weapon procurement process. Secretary Gates’ scrapping of the Future Combat Systems- a program running an estimated $100 billion over budget- suggests that the Pentagon is now willing to let procurement be dictated by the wars that America is presently fighting, and not hypothetical wars of the future [9].

Yet, even with these attempts at reform, a fundamental rebalancing of global power remains a possibility; in short, the American decline that declinists predict. If, for example, Washington starts to put pressure on Japan and NATO countries to take on a more equitable share of defense within their respective alliances, then relationships that were formerly unbalanced will be recast on a more even footing.  An independent defense policy begets diplomatic flexibility, and countries like Japan would consequently have a free hand to integrate into Asian regional institutions. Likewise, in the event of a security vacuum caused by a receding American commitment, NATO countries may seek a similar flexibility by seizing their own security independence. This could lead to the development of a collective security framework under the auspices of the European Union. 

Of course, projections like these are always dangerous waters, because thus far, the byzantine political landscape within the EU has failed to materialize any coherent defense policy. Moreover, not only does Asia presently lack a basic institutional framework for fostering regional integration, but most analysts agree that American military power in its present form is the only thing keeping rampant mistrust in the region from exploding into an arms race and eventual conflict. 

Political Power

Of the three covered in this backgrounder, American political power is most likely to endure in its present form.   America’s political system, as well as the relative global popularity of democratic ideals compared to any point in the past, both bode well for American stability and influence moving forward. Political power is one variable that many of the most ardent prophets of American decline tend to overlook- particularly the stability of American politics vis-à-vis rising competitors.

Take China for example. The Chinese Academy of Social Sciences recently released a report claiming that crime and social unrest are spiking in China this year [10].  If the situation were to get out of control and one-party CCP rule collapsed in China, the resulting instability would effectively end China’s challenge to American preeminence in international society.  A stable transition of power is one of the most important benefits of an established democratic system. As most American decline projections span over three decades, the importance of this kind of stability should not be understated.

On top of providing long-term stability and an extremely competitive domestic economy, America’s commitment to democratic and free market ideals affords it several key allies in the international system [1].  The combination of solid allies, soft power, and hard military power suggests that the United States will be able to maintain a powerful voice within the international institutional framework that it created in the wake of World War II; institutions like the United Nations, World Bank, and the International Monetary Fund.

American political power will also help to alleviate some of the demographic shocks that several states will be forced to weather in the coming decades. The United States birth rate remains among the highest in the developed world, and last year a total of 1,107,126 immigrants obtained their permanent resident status [11, 12]. If the birth rate remains stable and the United States continues to draw from a global pool of skilled labor through open immigration, by 2050 the U.S population should be around 439 million people [13].

The cultural homogeneity of several rising powers serves to block immigration flows, thus paving the way for demographic crisis. Since the fall of the Soviet Union, Russia’s population has dropped from 148 million to 142 million, with some experts predicting that it will plummet further to 120 million by 2050 [14, 15]. By 2050, one third of the population of Japan will be over 65 years old. And China, the oft-cited primary challenge to US preeminence, will have a population in which every 10 workers (aged 15-65) must support 7 dependents (aged 0-14, 65+)  by 2050 [17]. All three of the aforementioned countries will have a hard time turning to immigration to smooth out demographic spikes.

In sum, rising ratios of elderly to working age populations will pose a challenge for most developed and BRIC countries over the next several decades. The allure of American society and open immigration will afford the United States an advantage over rising competitors in this regard.

Looking to the future

Looking to past examples of hegemonic decline is little help in predicting the effect American decline will have on global power structures. In the past, rising challengers such as Wilhelm Germany or Imperial Japan were on the outside of an established international system looking in; a situation that set the stage for armed conflict with the established powers. The rising powers that are poised to move into the space created by American decline are all adherents to the present international framework, for it is the one that made them rich. For now, it seems unlikely that China, India, or Brazil will seek to de-legitimize the United Nations or fold the International Monetary Fund. If anything, these institutions will take on a new importance as vehicles for cooperation in an international landscape characterized by several power centers. 
 
Conclusion

The existence of unknown variables makes it hard to accurately predict the impact that American decline will have on the international system. Global recession, climate change, competition for energy resources, domestic politics, and nuclear proliferation are just some of the variables that can affect power balances between states and whether they will band together in coalition or be driven apart. What is sure, however, to anyone that is willing to read the fiscal writing on the wall, is that American power relative to rising competitors is set to decline dramatically over the next several decades.


End Notes

[1] Pei, Minxin. ‘Think Again: Asia’s Rise.’ Foreign Policy. July/Aug 2009. http://www.foreignpolicy.com/articles/2009/06/22/think_again_asias_rise?page=full

[2] Wilson, D. ‘Dreaming with BRICs: the Path to 2050.’ Global Economics Paper 99. Goldman Sachs. 01/10/2003. http://www2.goldmansachs.com/ideas/brics/book/99-dreaming.pdf

[3] Steingart, G & Wagner, W. ‘Global Crisis Makes US More Dependent on China than Ever.’ Der Spiegel Online. 11/11/2009. http://www.spiegel.de/international/world/0,1518,660432,00.html

[4]  Lever, R. ‘US third-quarter Growth Revised Down to 2.2 Percent.’ AFP. 12/22/2009. http://www.google.com/hostednews/afp/article/ALeqM5h8XUI5HS5hkbI-dgqslbZcHo0f3A

[5]  Harrison, T. ‘Looking Ahead to the FY 2011 Budget.’ Center for Strategic and Budgetary Assessments. 01/01/10. http://www.csbaonline.org/4Publications/PubLibrary/B.20100126.Looking_Ahead_to_t/B.20100126.Looking_Ahead_to_t.pdf

[6]  Mintz, P. ‘Recession Hits Social Security Projections.’ Business Week Online. 05/12/2009. http://www.businessweek.com/bwdaily/dnflash/content/may2009/db20090512_408285.htm?campaign_id=rss_daily

[7]  Congressional Budget Office (CBO). ‘The Budget and Economic Outlook: Fiscal Years 2010-2020.’ January 2010. http://www.cbo.gov/ftpdocs/108xx/doc10871/01-26-Outlook.pdf

[8]  Congressional Budget Office (CBO). ‘Testimony of Goldberg, M: Long-term Implications of the Department of Defense’s Fiscal Year 2010 Submission.’  11/18/2009. http://www.cbo.gov/ftpdocs/107xx/doc10730/11-18-FY2010_DoD_Budget.pdf

[9] Shachtman, N. ‘Pentagon Chief Rips Heart out of Army’s ‘Future.’ Wired Danger Room. 04/06/2009. http://www.wired.com/dangerroom/2009/04/gates-rips-hear/

[10]  Chen, S. ‘Social Unrest ‘on the rise’ in China.’ BBC News. 12/21/2009. http://news.bbc.co.uk/2/hi/asia-pacific/8425119.stm

[11]  Department of Homeland Security. ‘2008 Yearbook of Immigration Statistics.’  August 2009. http://www.dhs.gov/xlibrary/assets/statistics/yearbook/2008/ois_yb_2008.pdf

[12]  Central Intelligence Agency. ‘Country Comparison: Birth Rate.’ CIA Fact book. 2009. https://www.cia.gov/library/publications/the-world-factbook/rankorder/2054rank.html

[13]  Bernstein, R. ‘An Older and more Diverse Nation by Midcentury.’ U.S Census Bureau Newsroom. 08/14/2008.  http://www.census.gov/Press-Release/www/releases/archives/population/012496.html

[14]  AFP. ‘Russia Should Cut Abortions to Boost Population: Minister.’ 01/18/2010. http://www.google.com/hostednews/afp/article/ALeqM5hhJEe6ViM4HNODw5vsHlgVc_i5lQ

[15] Radio Free Europe. ‘Russian Demographic Crisis.’ 01/03/2006. http://www.rferl.org/content/article/1066227.htm

[16] National Institute of Population and Social Security Research. ‘Population Projections for Japan: 2001-2050.’ January 2002. http://www.ipss.go.jp/pp-newest/e/ppfj02/ppfj02.pdf

[17]  Qiao, H. ‘Will China Grow Old Before it Grows Rich?’ Goldman Sachs. 02/14/2006. http://www2.goldmansachs.com/ideas/brics/book/BRICs-Chapter3.pdf

[18]  Seager, A. ‘US Economy Races Ahead.’ Guardian UK. 01/29/2010. http://www.guardian.co.uk/business/2010/jan/29/us-economic-growth-surged-q4

[19]  United States Treasury Department. ‘Major Foreign Holders of US Treasuries.’ 01/19/2010. http://www.ustreas.gov/tic/mfh.txt

[20]  Ferguson, N. ‘An Empire at Risk.’ Newsweek. 11/28/2009.  http://www.newsweek.com/id/224694/output/print

[21]  Task, A. ‘Niall Ferguson: US Empire in Decline, on a Collision Course with China.’ Yahoo Finance. 10/20/2009.  http://finance.yahoo.com/tech-ticker/article/357319/Niall-Ferguson:-U.S.-Empire-in-Decline,-on-Collision-Course-with-China