Niall Ferguson on why the end of America’s empire won’t be peaceful
The Economist
'It is all too easy to see a sequence of events unfolding that could lead to another unnecessary war,' warns historian Niall Ferguson
As it leaves Afghanistan in chaos, America’s decline mirrors Britain’s a century ago. It may also invite wider conflict, warns a historian |
“THE MULTITUDES remained plunged in ignorance… and their leaders, seeking their votes, did not dare to undeceive them.” So wrote Winston Churchill of the victors of the first world war in “The Gathering Storm.” He bitterly recalled a “refusal to face unpleasant facts, desire for popularity and electoral success irrespective of the vital interests of the state.” American readers watching their government’s ignominious departure from Afghanistan, and listening to President Joe Biden’s strained effort to justify the unholy mess he has made, may find at least some of Churchill’s critique of interwar Britain uncomfortably familiar.
Britain’s state of mind was the product of a combination of national exhaustion and “imperial overstretch”, to borrow a phrase from Paul Kennedy, a historian at Yale. Since 1914, the nation had endured war, financial crisis and in 1918-19 a terrible pandemic, the Spanish influenza. The economic landscape was overshadowed by a mountain of debt. Though the country remained the issuer of the dominant global currency, it was no longer unrivalled in that role. A highly unequal society inspired politicians on the left to demand redistribution if not outright socialism. A significant proportion of the intelligentsia went further, embracing communism or fascism.
Meanwhile the established political class preferred to ignore a deteriorating international situation. Britain’s global dominance was menaced in Europe, in Asia and in the Middle East. The system of collective security—based on the League of Nations, which had been established in 1920 as part of the post-war peace settlement—was crumbling, leaving only the possibility of alliances to supplement thinly spread imperial resources. The result was a disastrous failure to acknowledge the scale of the totalitarian threat and to amass the means to deter the dictators. headtopics.com
Does Britain’s experience help us understand the future of American power? Americans prefer to draw lessons from the United States’ history, but it may be more illuminating to compare the country to its predecessor as an Anglophone global hegemon, for America today in many ways resembles Britain in the interwar period.
Like all such historical analogies, this one is not perfect. The vast amalgam of colonies and other dependencies that Britain ruled over in the 1930s has no real American counterpart today. This allows Americans to reassure themselves that they do not have an empire, even when withdrawing their soldiers and civilians from Afghanistan after a 20-year presence.
Despite its high covid-19 mortality, America is not recovering from the kind of trauma that Britain experienced in the first world war, when huge numbers of young men were slaughtered (nearly 900,000died, some 6% of males aged 15 to 49 died, to say nothing of 1.7m wounded). Nor is America facing as clear and present a threat as Nazi Germany posed to Britain. Still, the resemblances are striking, and go beyond the failure of both countries to impose order on Afghanistan. (“It is clear,” notedThe Economist in February 1930, after “premature” modernising reforms had triggered a revolt, “that Afghanistan will have none of the West”.) And the implications for the future of American power are unnerving.So many books and articles predicting American decline have been written in recent decades that “declinism” has become a cliché. But Britain’s experience between the 1930s and the 1950s is a reminder that there are worse fates than gentle, gradual decline.
Another key difference is the great shift there has been in fiscal and monetary theories, thanks in large measure to John Maynard Keynes’s critique of Britain’s interwar policies. Britain’s decision in 1925 to return sterling to the gold standard at the overvalued pre-war price condemned Britain to eight years of deflation. The increased power of trade unions meant that wage cuts lagged behind price cuts during the depression. This contributed to job losses. At the nadir in 1932, the unemployment rate was 15%. Yet Britain’s depression was mild, not least because abandoning the gold standard in 1931 allowed the easing of monetary policy. Falling real interest rates meant a decline in the burden of debt service, creating new fiscal room for manoeuvre.An important difference between the United States today and the United Kingdom roughly a century ago is that theaverage maturityof American federal debt is quite short (65 months), whereas more than 40% of the British public debt took the form of perpetual bonds or annuities. This means that the American debt today is a great deal more sensitive to moves in interest rates than Britain’s was.
Such a reduction in debt-servicing costs seems unlikely for America in the coming years. Economists led by the former treasury secretary, Lawrence Summers, have predicted inflationary dangers from the current fiscal and monetary policies. Where British real interest rates generally declined in the 1930s, in America they are projected to turn positive from 2027 and rise steadily to hit 2.5% by mid-century. True, forecasts of rising rates have been wrong before, and the Federal Reserve is in no hurry to tighten monetary policy. But if rates do rise, America’s debt will cost more to service, squeezing other parts of the federal budget, especially discretionary expenditures such as defence.
That brings us to the crux of the matter. Churchill’s great preoccupation in the 1930s was that the government was procrastinating—the underlying rationale of its policy of appeasement—rather than energetically rearming in response to the increasingly aggressive behaviour of Hitler, Mussolini and the militarist government of imperial Japan. A key argument of the appeasers was that fiscal and economic constraints—not least the high cost of running an empire that extended from Fiji to Gambia to Guiana to Vancouver—made more rapid rearmament impossible.
It may seem fanciful to suggest that America faces comparable threats today—not only from China, but also from Russia, Iran and North Korea. Yet the mere fact that it seems fanciful illustrates the point. The majority of Americans, like the majority of Britons between the wars, simply do not want to contemplate the possibility of a major war against one or more authoritarian regimes, coming on top of the country’s already extensive military commitments. That is why the projected decline of American defence spending as a share of GDP, from 3.4% in 2020 to 2.5% in 2031, will cause consternation only to Churchillian types. And they can expect the same hostile reception—the same accusations of war-mongering—that Churchill had to endure.
Power is relative. A relative decline compared with other countries is another point of resemblance. According to estimates by the economic historian Angus Maddison, the British economy by the 1930s had been overtaken in terms of output by not only America’s (as early as 1872), but also Germany’s (in 1898 and again, after the disastrous years of war, hyperinflation and slump, in 1935) and the Soviet Union (in 1930). True, the British Empire as a whole had a bigger economy than the United Kingdom, especially if the Dominions are included—perhaps twice as large. But the American economy was even larger and remained more than double the size of Britain’s, despite the more severe impact of the Great Depression in the United States.
America today has a similar problem of relative decline in economic output. On the basis of purchasing-power parity, which allows for the lower prices of many Chinese domestic goods, the GDP of China caught up with that of America in 2014. On a current-dollar basis, the American economy is still bigger, but the gap is projected to narrow. This year China’s current-dollar GDP will be around 75% of America’s. By 2026 it will be 89%.
It is no secret that China poses a bigger economic challenge than the Soviet Union once did, since the latter’s economy was never more than 44% the size of America’s during the cold war. Nor is it classified information that China is seeking to catch up with America in many technological domains with national-security applications, from artificial intelligence to quantum computing. And the ambitions of China’s leader, Xi Jinping, are also well known—along with his renewal of the Chinese Communist Party’s ideological hostility to individual freedom, the rule of law and democracy.
American sentiment towards the Chinese government has markedly soured in the past five years. But that does not seem to be translating into public interest in actively countering the Chinese military threat. If Beijing invades Taiwan, most Americans will probably echo the British prime minister, Neville Chamberlain, who notoriously described the German bid to carve up Czechoslovakia in 1938 as “a quarrel in a far away country, between people of whom we know nothing”.
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