Musings on The End of Empire

He has seen it all come and go…

This morning’s New York Times carried a headline that should have been in much bigger type.It should have read, the end of America as we knew her.

All empires come and go. Nothing lasts forever.

And if there is one lesson to be learnt from history, it is the banal one that history repeats itself, over and over and over.

The news that the Federal Debt is now 11% of the country’s entire economic output, and that it is projected to last pretty much forever, is the official announcement that the US has now turned the corner and has begun its inexorable slide into ….what shall we call it? mediocrity? banality? poverty?

Throughout history, all great empires, all of them, have followed exactly the same path.

They grow big and rich, they over expand and over extent, they borrow to cover the difference between their costs of operation and their incomes, and that borrowing becomes a habit, like heroin.  When the borrowing becomes too great, they collapse of their own weight.

We are seemingly on the same path.

Britain is the most recent example.

For more than 300 years, Britain ruled the waves, and also ruled one-fourth of the planet’s land mass and one-fourth of the planet’s population.  They did a much better job than we did.  The basis of their empire was not their navy, that was just the protector of trade. The basis of their empire was their astonishing industrial base.  The British were the first to invent and embrace the industrial revolution. They built factories before anyone else and they dominated the industrial world of the late 19th Century.  Ships, steel, manufacturing, automobiles (Rolls Royce, Bentley, Rover, MG, Triumph  – they put Detroit to shame), airplanes, cloth, furniture – you name it, it came from Britain.

The Empire was almost an after-thought.

But what happened?

The Empire, the physical empire, began to suck money out of Britain.  I just finished Nial Fergusson’s book on the decline of the British Empire.  The Empire, the physical empire, took out more money than it brought in.  Lots more.  Sustaining it was expensive. It sucked a lot of the wealth out of the British economy, and instead of re-investing their wealth in updating and modernizing their industrial base and investing in new technologies, the British poured their wealth into Empire – and eventually began to borrow to cover the shortfall.

By the time the Second World War came around, the British Empire was bankrupt.  They had to borrow from the Americans to keep afloat.

Here’s Fergusson on a fascinating talk about how America is now the Bankrupt Empire.

Fergusson, a Harvard historian, says that economic bankruptcy, always preceded by massive borrowing, is the tell-tale sign of the End of Empire.  Always has been.

The US is now living way beyond its means.  And to cover the shortfall, we are borrowing massive amounts from the world economic powerhouse – China.

When we get to the point at which 20% of our income goes just to servicing our debt, we will have effectively reached the end. We will have nothing to invest in the future.

And we are nearly there now.

All great empires have followed the same course.

Spain once ruled the world, but debased its currency, became over extended in foreign adventures and today is still an economic basket case.

Even Egypt was once the nexus of global power.

And where have we poured our fortune? Where have we built our Empire on sand?

Ah… this only takes me back to Lara Logan and Afghanistan.

If only we sent journalists to report who knew something…. something… about what was really going on.

But we don’t.