Wednesday, September 24, 2008

Collapse of Empire America Incorporated

Nearly every empire has proven subject to the laws of physics: what goes up, must come down. And just as the Romans and Mughals witnessed their fortresses crumble, so too shall the United States. Historical chronologies of empire make a strong case for America’s expected demise. The question of when and how the United States will no longer front supremacy remains unanswered.
Empire America?
Some might argue that America does not constitute an empire in the conventional sense. Empires of the past have been characteristically geographic and/or militaristic. Much unlike Britain, for example, the American empire does not extend nearly as far as had the British dominion. Perhaps, then, a stronger case of American empire can be made on the basis of military power. Aside from Israel, no other country in the developed world allocates more dollars towards their military budget than the United States; amounting to 4.1% of their annual Gross Domestic Product (UNDP, 2007). In the past century, the United States has had a military presence in seven wars, including Iraq and Afghanistan in recent years.
Empire Economy?
Most significant, though, has been America’s ubiquitous economic presence felt on numerous global platforms, including the World Bank and the International Monetary Fund. As the world’s largest economy, financial movers and shakers constantly monitor Wall Street, the New York Stock Exchange, and fluctuations in the American dollar to inform their next steps. As compared with empire in the past, empire in the 21st century seems to be less constructed strictly by acquisition of land or victory in the resolution of transformative conflict, and more by sweeping forces wrought through the matrix of coordinated market economies.
As such, the dissolve of Wall Street might be signal to the collapse of Empire America Incorporated. A summary of the financial crisis now follows. If you are at all uninterested in the details, skip to the last paragraph:
On September 14th, two of America’s financial giants, Merrill Lynch and Lehman Brothers, closed shop. Lynch was bought out by the Bank of America while the latter firm filed for bankruptcy protection. One week prior to the downfall of Lynch and Lehman, the American federal government overtook control of the nation’s two largest mortgage companies, Fannie Mae and Freddie Mac. To add further insult to injury, America’s two largest investment banks, Goldman Sachs Group Inc and Morgan Stanley, are slowly being bought out by both domestic and international investors; namely, Warren Buffet’s stake in Goldman and Japan’s Mistubishi UFJ's purchase of 20% of Morgan Stanley.
Empire Expire?
The financial big wigs that drive and thrive off of America’s economic order appear to be taking their final bows. The taxpaying audience is not tossing any roses and (hopefully) the American Congress will disallow an encore by heavily regulating the Federal Reserve’s pitch for a $700 billion bailout towards American banks. Of course, it is not yet clear if and when the American economy will recover, and whether this ‘one nation under God’ has entirely fallen off their economic throne. In the meantime, it is becoming rather fun playing Nostradamus.
*image courtesy of


Anonymous said...

i really don't think the recent crashes in wall street mean that america's position as supreme economic power is going to vanish. with the 700 million dollar bailout (which you neglected to mention), there will probably be a recovery.

besides, even without the economy, america is an empire in cultural dominance; mainstream television, film, radio, books are all authored by americans. seems like you forgot the cultural aspect of empires. Check out Amy Kaplan's "The Anarchy of Empire In the Making of US Culture", 2002.

I am a global citizen said...

hey anonymous,

In complete honesty, i do not think the recent collapse of wall street alone will wipe out America's economic might. But I think increasing share ownership of American firms from non-domestic actors, such as Mistubishi, may be signal to America's weakening and possibly irreversible demise.

In terms of cultural empire, I agree that America is unquestionably influential. But many other nations have also been and continue to be culturally influential, despite no longer being (or possibly never having been) economic/geographic/military empires: China, Greece, India, Italy etc.

(By the way, I made mention of the 700 billion dollar bailout in the last paragraph).

I am a global citizen said...

Quoted from The Economist, "The doctors' bill", Sep 25th 2008:

"Ben Bernanke, the chairman of the Federal Reserve...'told us that our American economy’s arteries, our financial system, is clogged, and if we don’t act, the patient will surely suffer a heart attack, maybe next week, maybe in six months, but it will happen,” according to Charles Schumer, a Democratic senator from New York."

My doctor told me that hear attacks are fatal :S

Anonymous said...

What I find most ironic about the current state of financial affairs in the US of A is how closely this collapse fits in with Keynesian criticism of pure capitalist market systems. One such criticism being that in the long term, capitalist or pure market systems are no more economically "responsible" (as republicans and most conservatives would put it) than say socialist systems, as inevitably market systems fly in to crisis after crisis, requiring financial governmental intervention.

The 700 billion dollar bail out is like the biggest intervention in the history of economic interventions (haha - to put it simply) and the argument that it is necessary to save America's economy seems rather silly, especially when it comes from the biggest proponents of pure capitalist markets.

And in regards to America's economic might, I think that an American recession will have global economic repercussions in the form of a downturn of global trading. Pre-recession, America was the largest consumer of goods and supported many peripheral economies by being the dominant consumer state. Without these consumers (i.e. American citizens having little/no buying power) we will see a change in global economic strategy, from predominantly export based economies, to (hopefully) those that are more nationally based for all countries.

I am a global citizen said...

Hey Anonymous (Sept 29),

I am also fascinated by the current economic collapse because it resembles longstanding criticisms put forth by Keynes and, of course, let us not forget, Marx! The free hand that belongs to one of the world's most orthodox free market economies is now reaching out for state support. The nature of the 700 bailout plan and the degree of regulation that will follow will speak volumes about free market economics in America for decades tp come.

In terms of the global economy collapsing due to an American economic recession, I am not so sure I would necessarily agree:
1. Italy's economy demonstrates how they've been comparatively less affected than other nations by the collapse of Wall Street because they've always been rather insular; relying more on their own manufacturing industry rather than investing heaps abroad.
(Source: The Economist, September 25 2008, "Creeping Along")

2. And, of course, the most pronounced non-domestic beneficiary to America's collapse is demonstrably becoming the Japanese:
-Japan's largest bank, Mitsubishi UFJ Financial Group (MUFG) purchased 20% of Morgan Stanley
-MUFG purchased 35% of UnionBanCal (which is San Francisco-based bank)
-Japan's largest broker, Nomura, purchased divisions of Lehman Brothers that were previously owned by Asia, Europe, and the Middle East
-Japan's other two large banks, SMFG and Mizuho, invested around $1 billion in Barclays (Bank in the UK) and Merrill Lynch
(Source: The Economist, September 25, 2008, "The Big Boys are Back")

davman said...

It's inevitable that our presence as an economic superpower will be diminished. To what extent remains to be seen. I would compare it to the downturn of the British empire. We will continue to have to have powerful influence, but other nations will gradually gain some higher degree of economic independence. Our economies will still be intertwined, but our influence will be reduced.

This may not necessarily be a bad thing. An inept administration here won't be able to drag down other democratic economies with misguided unilateral decision making. We might be better served if we have to work more closely with other democracies.

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