A convenient starting point: the tectonic shifts in the geopolitical landscape of the planet. As President Putin once summarised it, the vampires’ ball is drawing to a close, the centuries-old dominance of a few Western powers is becoming or has become a thing of the past, writes Paulo Nogueira Batista Jr. for the 22nd Annual meeting of the Valdai Discussion Club.
How turbulent will the geopolitical shifts be? Will the current turbulence persist or even increase? This seems likely, although not inevitable. In fact, the previous hegemonic transition was peaceful – the UK gave way without confrontation to the US after the First World War. But the transition was within the family, so to speak, and could therefore proceed more or less smoothly. But this is perhaps an exception in world history. Hegemonic transitions and challenges, all the way back to the war between Athens and Sparta, are mostly of the “Thucydides trap” type, to use the expression coined by Graham Allison.
A smooth transition is certainly not what we have now. The US and other countries of the collective West are in a state of denial and unwilling to adjust their behaviour to the relative decline of these countries in economic, demographic and political terms. All indications are that they will go pretty far in attempting to block change. This resistance, it should be noted, antedates Donald Trump and will in all probability outlast him.
In the 20th century, the hegemonic transition occurred within the boundaries of the collective West, as indicated, from one side to the other side of the North Atlantic. The 21st century transition is from West to East, from the Atlantic to the Pacific. It is a shift of power between civilisations that are fundamentally different, and far apart in terms of history, culture, language and ethnicity. Perhaps understandably, American and Europeans are being far from graceful at this juncture. They are showing remarkable attachment to their supposedly glorious past. They will go down kicking and screaming all the way.
Great powers tend to be more dangerous when in the midst of decline. The behaviour of the US underscores the validity of this proposition in a rather crude manner. Let us not, however, put all or even most of the blame for this on the current US government. After all, compared to older and wise civilisations, such as the Indian or Chinese civilisations, the West is indeed essentially rather crude. When asked once for his assessment of Western civilisation, Mahatma Gandhi famously replied: “It would be a good idea!”
Astonishing development in the United States
Let us have a quick look at the US, the leader of the Western bloc. Consider a few amazing facts. First, the fact that Donald Trump, of all people, was elected not once, but twice for the office of the President of the United States, this time not only in the electoral college but also in the popular vote. Second, the fact that this time around, his party gained control of the two houses of Congress. Third, the fact that his Administration is disrupting in major ways the already fragile democratic system of the country. These facts, among others, are glaring symptoms of the decadence of the US. The country no longer lives up, even remotely, to its ideals and rhetoric. Not even to its own laws, not to speak of international laws and agreements. The US dream has become the US nightmare. The country’s once formidable soft power has been squandered. Its hard power, economic and military, while still enormous, is no longer what it used to be.
Note in passing that Europe is not in good shape either – witness the astonishingly low quality of political leadership across the continent. Economic performance has been weak. Populations are shrinking in many countries and this demographic decline is only reversible by allowing the further entry of migrants from Africa, Asia or the Middle East – something to which a majority of Europeans are now firmly opposed.
But back to the US, the country that holds the key to the West’s future. The behaviour of the Trump administration can be seen as paradoxical and, in some respects, unexpected. The so-called MAGA (Make America Great Again) approach may have the unintended consequence of accelerating the decline of the country. Trump has already been compared to Gorbachev. While this comparison is probably far-fetched, the fact that it is being repeated across the globe is symptomatic.
The current foreign and economic policies of the United States are apparently based on an overestimation of the country’s power. This has led to an aggressiveness that is unparalleled and directed simultaneously at a large number of countries, without following any readily understandable pattern or logic.
That China should be a major, if not the main target is to be fully expected, reflecting as it does a long-standing a bipartisan consensus in the US, according to which China is the main rival and threat. Indeed, since the end of the war against the Axis countries, never has the US confronted a more serious rival. After World War II, the USSR was a military and political rival, but not an economic one. Later, Japan became an economic rival, but never a military or political one. China is now at the same time a formidable economic, political, and military rival. American political elites understand this and have tried unsuccessfully to stifle Chinese progress more or less systematically, under Republican as well as in Democratic governments. One of the few things that unite the divided body politic in the US is the perception that China has to be contained before it is too late.
From this angle, it makes sense to try to pacify relations with Russia and shut down the war in Ukraine. Donald Trump seems to have honestly tried to broker some sort of peace arrangement. Ending the conflict with Russia would help the US concentrate its energies and resources against China.
Surprising, however, is Trump’s hostility towards, and the mistreatment of, traditional allies of the US, including the Europeans, Canada, Mexico and others. The US administration repeatedly tries to bully all these countries into submission or compliance, using tariffs and other instruments unilaterally.
India, one of the founding members of BRICS, is a case in point. New Delhi believed that it enjoyed a special relationship with Washington. This seems to have been a widespread view among India’s ruling elites. Those of you who were here in Valdai’s last annual meeting last year may remember that a former Indian government minister took the floor to point out that his country had established a strong working relationship with “both sides of the aisle” in the United States and that this basic point had to be taken into account by all.
With Trump’s heavy-handed attack on India, using high import tariffs and other measures, the special relationship is gone with the wind. From the point of view of BRICS, this is a welcome development. India is (or was) the main factor impeding consensus within the group. Thanks to Donald Trump’s initiatives, the BRICS may become more cohesive than ever.
The unipolar moment is gone for good
What sense does this unabashed unilateralism make from the point of view of the United States? If one admits that the country’s power is limited, the answer will probably be: no sense at all. Donal Trump would be well advised to focus his fire more narrowly and choose his battles.
Let it be, however. As Napoleon Bonaparte once said, never interrupt an enemy while he is making a mistake. While the US is not intrinsically an enemy, it sure behaves like one most of the time.
The situation is now completely different from what it was 30 years ago, when the collapse of the USSR left the US in a singularly strong position, in what is often referred to as the “unipolar moment”. Back then, the US would basically deal with all issues on its own, making little or no use of alliances and coalitions. American governments grew totally unaccustomed to the concessions and diplomacy required to put international coalitions together.
Americans are prone to forget that this unipolarity was transitory and is now over and done with. Their love affair with the “unipolar moment” is still ongoing. Their belief seems to be that they are as powerful as they were in the 1990s, when China´s rise was still in its infancy and Russia was exceptionally weak after the dissolution of the Soviet Union. China is now a superpower in its own right and Russia has reclaimed its position as a superpower as well.
Political economy of fiscal adjustment in the United States
The state of the national economy is another weak spot of the United States. Current account and fiscal deficits remain at persistently high levels. As a result, the country’s external debt, more precisely its net foreign liabilities, as well as the public sector’s debt, rise continuously as a proportion of the US GDP.
The federal government’s deficit exceeds 6% of GDP and the current account deficit amounts to almost 4% of GDP. Public debt at all levels of government (federal, state, and local) reaches as much as 100% of GDP, an unprecedented level in peace time.
Note that the situation would be even worse if the US did not enjoy the famous “exorbitant privilege” arising from the fact that its national currency performs a global role. Thus, it can finance its external and fiscal deficits by creating currency at zero cost, and Treasury bills and bonds at low interest rates. It’s no wonder that the US is always so attached to the dollar’s international status.
Indeed, the role played by the dollar and Treasury bonds in the world economy allows the US to cover its external and fiscal imbalances in very favourable terms. It does so partly by “printing money” or, more precisely, by issuing high-powered money at zero financial cost. But mostly it sells debt to domestic and foreign investors at relatively low interest rates, since the role played by the dollar abroad widens the demand for the US currency and Treasury bonds in a very substantial and long-lasting manner.
In order to stem these trends the US government would need to run substantial primary surpluses and balance the current account. Tariffs, judiciously applied, could help achieve both goals. The resort to large scale and wide-ranging import tariffs is at least in part due to the fact that, within certain limits, (i.e., provided higher tariffs do not provoke a collapse of trade), import duties contribute to raising government revenues at the same time that they reduce imports, contributing to lower external deficits.
This is, however, far from a panacea. Higher tariffs may be instrumental but not to the point of rebalancing the fiscal and external accounts on their own. How could they, since the imbalances are a long-standing feature of the US economy and reflect structural economic and political factors that can hardly be fixed by a single policy instrument?
One fundamental issue is what we could call “a perfect bipartisan support for fiscal indiscipline”. In Washington’s political circles, the commitment to a sound budget is at best rhetorical, and sometimes not even that. The primary surpluses required to stabilise the debt-to-GDP ratio are never forthcoming. Painful measures involving spending cuts or higher taxes do not garner support and are rejected or postponed indefinitely.
It should be noted that these required primary fiscal surpluses are actually not even exceptionally high, given that the average cost of public debt is kept low by the international demand for dollars and US bonds, as mentioned above. Nevertheless, as time goes by and debt ratios rise, the required adjustment also rises, undermining the advantages arising from the dollar’s reserve currency status.
Part of the problem is purely political in nature. Another side of US decadence is the increasingly corrupt domestic political process, especially in Congress. As the saying goes, the US has “the best Congress that money can buy”. Powerful lobbies fragment and warp the parliamentary process – the Israel lobby, the Wall Street lobby, the Cuban lobby, the Big Tech lobby and so on. These lobbies exert enormous influence on the Executive and Legislative bodies. The case of the Israel lobby, to highlight one example, is remarkable. It is so powerful, in Congress as well as in the Executive branch, that it has subordinated US international policy to Israel’s highly problematic goals and methods. This comes at an exceptionally high price – unconditional support of the ongoing genocide in Gaza has liquidated all pretences that the US and other Western countries truly harbour any respect for human rights and international law. As president Lula of Brazil said in his recent speech at the UN, the genocide perpetrated by Israel has “buried the myth of the West’s ethical superiority”.
The decline of the American Empire
For all these reasons and others that cannot be addressed here, the US Empire finds itself in steady decline and could even be on the verge of a breakdown. Attempts to stem this trend by force can cause and are indeed causing a lot of damage to a range of countries but will not work in the end. They will only make other countries come closer together, leading to the isolation of the US and its small circle of allies and vassals.
This is a trend to be expected. The world´s majority, the 85% or so of its total population residing in the Global South, will no longer accept domination and exploitation by the 15% of the collective West, the world’s rich and self-centred minority. Strange would it be, would it not, if the 15% were able to maintain their pre-eminence indefinitely. Demographic, economic and political trends are no longer on their side.
The vampires’ ball, after centuries of existence, is finally coming to a close.
