Harvard historian Niall Ferguson is at it again. In the latest issue of Foreign Affairs, Ferguson's Complexity and Collapse warns that the fall of the American Empire may occur rapidly, perhaps over the course of the next decade.
If empires are complex systems that sooner or later succumb to sudden and catastrophic malfunctions, rather than cycling sedately from Arcadia to Apogee to Armageddon, what are the implications for the United States today? First, debating the stages of decline may be a waste of time — it is a precipitous and unexpected fall that should most concern policymakers and citizens. Second, most imperial falls are associated with fiscal crises. All the above cases [in the article] were marked by sharp imbalances between revenues and expenditures, as well as difficulties with financing public debt. Alarm bells should therefore be ringing very loudly, indeed, as the United States contemplates a deficit for 2009 of more than $1.4 trillion — about 11.2 percent of GDP, the biggest deficit in 60 years — and another for 2010 that will not be much smaller. Public debt, meanwhile, is set to more than double in the coming decade, from $5.8 trillion in 2008 to $14.3 trillion in 2019. Within the same time-frame, interest payments on that debt are forecast to leap from eight percent of federal revenues to 17 percent.
These numbers are bad, but in the realm of political entities, the role of perception is just as crucial, if not more so. In imperial crises, it is not the material underpinnings of power that really matter but expectations about future power. The fiscal numbers cited above cannot erode U.S. strength on their own, but they can work to weaken a long-assumed faith in the United States' ability to weather any crisis.
Perceptions are very important indeed. For example, the markets are telling us that it's safer to lend money to Warren Buffet than it is to lend money to the United States. The market's assessment may be wrong, but the perception is there nevertheless.
More interesting to me is the gradualist approach to Imperial problems. Ferguson believes the historical precedents say we are quickly running out of time. He may be right. It's not OK to dismiss such scenarios out of hand, as I discussed in my post Washington, You Have Been Warned. The longer you think you have to solve a problem, the more you'll procrastinate instead of fixing it. If you wait long enough, the problem is no longer solvable and after a tipping point, the shit hits the fan. Here's Ferguson again—
For now, the world still expects the United States to muddle through, eventually confronting its problems when, as Churchill famously said, all the alternatives have been exhausted. Through this lens, past alarms about the deficit seem overblown, and 2080 — when the U.S. debt may reach staggering proportions — seems a long way off, leaving plenty of time to plug the fiscal hole. But one day, a seemingly random piece of bad news — perhaps a negative report by a rating agency — will make the headlines during an otherwise quiet news cycle. Suddenly, it will be not just a few policy wonks who worry about the sustainability of U.S. fiscal policy but also the public at large, not to mention investors abroad. It is this shift that is crucial: a complex adaptive system is in big trouble when its component parts lose faith in its viability.
The Congressional Budget Office (CBO) routinely publishes graphs like the one in my It's Health Care Weekend! in which projections are made out to the year 2080. These long-range forecasts are surreal. Their only apparent "advantage" is to tell a gradualist story that condones dangerous "muddling through" scenarios.
The world's conventional oil situation is analogous to Ferguson's "collapse soon" scenario based on fiscal (debt) considerations. No one knows what the ultimately (economically) recoverable resource (URR) will turn out to be—most estimates are in the range of 2 to 3 trillion barrels. This leaves us with 1 to 2 trillion barrels still to produce. That sounds comforting but it is not. If the URR is closer to the bottom of that range, and considering current production trends outside the Persian Gulf, it seems very likely that the peak of world oil production is just around the corner—if we have not turned that corner already. We will still be producing oil in 2080, but only a trickle, not the mighty flow we are accustomed to today.
Ferguson's article is available for free at Foreign Affairs with a quick & easy registration. He illustrates the gradualist view of Imperial crisis, which he is arguing against, through 5 paintings by Thomas Cole.
There is no better illustration of the life cycle of a great power than The Course of Empire, a series of five paintings by Thomas Cole that hang in the New-York Historical Society. Cole was a founder of the Hudson River School and one of the pioneers of nineteenth-century American landscape painting; in The Course of Empire, he beautifully captured a theory of imperial rise and fall to which most people remain in thrall to this day.
I'll conclude with the five paintings.
The Consummation of Empire. Now, the landscape is covered by a magnificent marble entrepôt, and the contented farmer-philosophers of the previous tableau have been replaced by a throng of opulently clad merchants, proconsuls, and citizen-consumers. It is midday in the life cycle