The Turn of Empire
Installment #1: The Closing West
By Selmon Franklin
tfrankln@gmail.com
In this first installment, I argue that Western Civilization exhibits the traits of a closing society. I analyze this development from historical trends, economic realities, and the political accumulation of power by a dominant minority.
I. “Civilizations die from suicide, not by murder.” ~ Arnold J. Toynbee
Arnold J. Toynbee, a prominent historian during the first half of the 20th century, described the following progression of human society:
Toynbee argues that the creation of a universal state emerges as society loses its creative energy and political authority develops into a dominant minority. Subsequently, an internal and external proletariat emerges. The internal proletariat grows bitter and develops a universal church (unity found in a social order) while the external proletariat grows envious of the universal state and ultimately develops into a Völkerwanderung.
Since the collapse of the Roman Empire, Western Civilization has expanded through Europe into Africa, Asia, and the Americas. Creativity has enabled this expansion as the civilization faced Toynbee’s prototypical challenges of new land, pressure from other civilizations, hard land, and ‘penalizations’. Each period of trouble during its history has been accompanied with a challenge that enabled the resumption of the civilization’s creative capacity. The founding of the United States is a prime example of Toynbee’s ‘new land’ challenge that siphoned the internal pressures of Europe and allowed for the resumption of Western expansion. In the 20th century, World War I and World War II were the time of troubles out of which the universal state of America emerged.
There is evidence that again, Western Civilization has lost its creative capacity and that Western culture has lost strength to expand. Its influence has either slowed or stagnated and increasingly the cultural exchange is from East to West. From a cultural standpoint, the popularity in the West of movies like Slum Dog Millionaire, the success of Bollywood, and the popularity of Japanese anime and manga indicate a decline in the transfer of culture from West to East. From a political perspective, the Beijing consensus threatens to undermine the Washington consensus. Fyodor Lukyanov, editor of Russia in Global Affairs, has stated, “In the Russian establishment there is a growing feeling today that any solution offered by the West is mainly wrong.” Indeed, the emergence of powerful new actors on the global stage such as China, Russia, and India indicate that a modern Völkerwanderung is taking place today.
Toynbee states that previously, the external Proletariat was eliminated not by extermination but by being transferred into the ranks of the Western internal proletariat. The ability of the West to continue managing the external proletariat in this manner is at risk due to the strength of emerging actors such as China, India, and Russia. Western incapacity is seen in exchange rate disputes with China, Venezuelan defiance, and the West’s failure to deal with the Iranian nuclear threat. Countries like China show the initial signs of an interregnum in which elements of the declining civilization are incorporated into the emergent society but at much lower levels of import. Consequently, the Beijing Consensus is content with autocratic capitalism and shows no signs of liberalizing.
Former President Jacobo Guzmán (1951-1954) of Guatemala and Prime Minister Mohammad Mossadegh of Iran (1951-1953) are examples of former external proletariats that were effectively internalized in the second half of the twentieth century. The public relations campaigns in the United States against these men were extremely effective for the expansion and maintenance of Western civilization. However, public relations campaigns that utilize fear, just as those of the 1950s (the Second Red Scare), are now directed inwardly. Toynbee writes, “Fratricidal warfare of ever-increasing violence had been by far the commonest cause of mortality among civilizations of all three generations.” The creation of an external threat such as Al-Qaeda is useful for generating an apparatus not of creative expansion but of a closing society. The passage of the Military Commissions Act, the Patriot Act, and FISA are but a few examples of this new apparatus that is a clear indication of a closing society with fewer freedoms and less economic openness.
As in the past, breakdown in the West is occurring internally as the dominant minority must direct any remaining creative energy at controlling the civilization’s core population. Not only is fratricidal violence occurring politically, but also, there is a fracture socially. Internal proletariat is defined as those who no longer feel psychologically or “spiritually” connected to the civilization of which they find themselves physically a part. Wherever there were masses of people, rural or urban, which felt that the Western social system was not giving them what they were entitled to have, there was an internal proletariat. In the United States, the internal proletariat includes displaced descendants of African slaves, Chinese indentured servants, and poor whites.
Toynbee discusses at length the strength of Christianity in maintaining social cohesiveness and expresses doubt about the ability of Humanism to maintain this level of social order. Toynbee writes, “Alienation of the internal proletariat is the most conspicuous symptom of the disintegration of a civilization.” Since the beginning of decline in the 1970s, Humanism has proven unable to deliver salvation and has led to alienation. Humanism served as an outlet for the 1960s social movements aimed at self-liberation. I propose that it has failed because Humanism offers physical relief in the present life whereas Christianity offers spiritual relief in the afterlife. This is particularly difficult for Humanism due to decline in the middle class and increasing stratification within Western society. The failure of Humanism is evident in a resurgence of spirituality in the West, particularly in the United States where the social safety net is lighter. The West has heretofore bought off these internal groups through welfare programs that it is now struggling to afford.
II. "The budget should be balanced, public debt should be reduced, the treasury should be rebuilt, the arrogance of officialdom should be tempered and controlled, and assistance to foreign hands should be curtailed, lest Rome fall." ~ Cicero
The financial costs of the American Empire have been financed through politically constructed global capital markets. Three-fourths of the US economy is consumption and the US savings rate went below zero in 2005. According to economic theory, such an economy is unsustainable in the long run. The US government is exacerbating the already acute flaws in the Dollar and masking its deficiency with GDP statistics that are based on an unproductive consumption-based economy. Attempts under the Bush administration to devalue the Dollar in relation to creditor currencies were flawed. Devaluation has never worked throughout history as a long-term policy.
US debt is akin to the debt burden of Rome preceding its fall. The United States is burdened with the same government grain relief, heavy tax burden (as Nero stated, “Let us tax and tax again!”), land reform, artificial price supports, and costs of empire that plagued the productive sectors of the Roman economy. As in Rome, debt finances consumption and empire in the United States and is consequently not allocated to productive assets. There are signs that America’s creditors are growingly concerned about the stability of the US Dollar (as a weakened Dollar threatens the value of their investments in Treasury securities). Chinese Prime Minister Wen Jiabao recently stated, "I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets." Recent debt monetization (Federal Reserve acquisition of Treasury securities) shows the prescience of the Prime Minister’s statements.
Problems are developing in the global cycle of capital as fewer funds are returning to finance consumption in the United States. At the core of this cycle is the ‘G-2’ - China and the United States. In 2009 the US trade deficit with China has reached its lowest point in nine years. This means that China is not able to continue investing in US Treasury securities at its previous levels. Thus, the Federal Reserve has been forced to engage in debt monetization, which is historically extremely inflationary. While the bond market still remains strong, there is some indication of weakening as bond rates increased dramatically after reaching a low in December 2008.
Moreover, it is not clear that the G-2 is truly a stable relationship. Reversing its role as the world’s fastest-growing buyer of United States Treasuries and other foreign bonds, the Chinese government actually sold bonds heavily in January and February before resuming purchases in March, according to data released by China’s central bank. China’s foreign reserves grew in the first quarter of this year at the slowest pace in nearly eight years, increasing by only $7.7 billion, compared with a record increase of $153.9 billion in the same quarter last year.
What can we make of the IMF and its predictions of a severe recession while others are calling for optimism in the last quarter of 2009 or 2010? The IMF seems to be trying to gain credibility, for in reality, we can expect currency crises this fall or next year. This seems particularly true in light of recent agreements at the G-20 summit to strengthen the IMF with $1 trillion in additional funds. There is currently a “race to the bottom” by governments attempting to devalue the world’s fiat currencies in relation to one another. As soon as this money moves from the banking system into the real economy, we can expect inflation. The inflation story is particularly evident in the commodity markets. Currently, China is making huge purchases of copper and other industrial metals (perhaps in preparation for a commodity-based currency such as the Bancor, the currency proposed by John Maynard Keynes at the first Bretton Woods meeting).
There are indications of an initiative to create a global regulatory body, which the IMF seems poised to become. Supporters of this theory point to words by Zhou Xiaochuan, governor of China's central bank, regarding an expanded role for the Special Drawing Rights of the IMF and also Gordon Brown’s continual references to a ‘global New Deal’ and an emerging ‘New World Order’. This concept of global governance is actually an older Western conception formulated before its current state of decline and is the logical conclusion of Western expansionism. It represents the ideas of the last creative minority within Western Civilization.
However, the current dominant minority in the West (as Nicholas Sarkozy has aptly identified, the Anglo-American establishment) simply does not have the creative capacity or the necessary political, economic, and social capital to achieve this last expression of Western creativity. The world does not exhibit signs of global convergence but rather divergence. As Prime Minister Gordon Brown and President Barack Obama continue to call themselves ‘global citizens’, Chinese from around the globe are repatriating to China because they seek to be a part of the economic forces at work there. Also, the practicality of using the IMF and its Special Drawing Rights for this global regulatory body is skewed because SDRs are based on flawed fiat currencies. The Dollar has huge debt pressures; the Yen has internal debt pressures; Sterling is under pressure as North Sea oil reserves are weakening and the center of global finance is moving abroad; and finally, the Euro is unstable due to regional debt imbalances.
The dominant minority has revealed itself in the current economic crisis and its lack of creative capacity is evident in current economic policy. Despite government attempts throughout history, markets remain inexorable in their laws. In spite of the economic theory, the United States has chosen to follow the Japanese example of the 1990s during which Japan propped up failing banks and companies and initiated what the Japanese call the “Lost Decade”. The Japanese stock market has still not reached its 1989 high. Contrast this scenario with the 1967 Japanese financial collapse immediately preceding the boom in the Japanese economy. During that collapse, the Japanese let companies and banks fail. The way the system is supposed to work is ‘creative destruction’ in which the competent take over the assets from the incompetent and the system starts over from a sound base. What is occurring in the United States is not merely bad economic policy, but a deliberate attempt to support the dominant minority. The US is not following its own advice to Japan in the 1990s (in which it advocated creative destruction) because it is the core of the shadow banking system. The current transfers of wealth are akin to the stripping of assets in Russia following the collapse of the Soviet Union. The American Empire is in the midst of collapse and must now reformulate itself, as has the new Russia.
There are other structural reasons for the weakening Western economies. Broadly speaking, Western governments have allocated capital to unproductive welfare programs. Western paragons of ‘social progress’ such as Scandinavia and France are failing under excessive debt. The brightest are voting with their feet and leaving on account of high taxes. Despite rich oil reserves, Norway’s spending on public works projects keeps the country with an internal debt burden. Protectionist distortions are growing more acute (farmer gets subsidies, becomes more inefficient but can buy more land, price of farmland goes up so the farmer says he needs more protection). Also, pensions are at risk. The US Pension Benefit Guaranty Corporation invested $64 billion in stocks, real estate, private equity funds, and emerging foreign markets just months before the stock market collapse. Not to mention the risk that governments will confiscate pensions as happened in Argentina.
Professor Carroll Quigley outlines another structural reason for the decline in Western economies. The decline of the middle class has resulted in lower levels of demand. The middle class, rooted in the townships (bourg) of such places as Northern Italy and the Netherlands, has been the leading driver of economic growth throughout history. The middle class mindset associates status with the acquisition of goods resulting in what Carroll Quigley calls the acquisitive society. As the Western middle class grows weary of the acquisitive society, demand for material goods declines. For this reason, the west has not been consuming enough to remain the engine for the global economy. Therefore, reinvestment in the American economy has been diverted into other assets and the United States is left with a huge credit problem.
The world’s capital has moved east. The West must be more creative, more dynamic, and more open if it is to compete. The bloated bureaucracies full of blank faced bureaucrats that have only one response to change – NO!, must be removed if the West is to maintain global leadership. Many have acclaimed the Western institutes of higher learning offer it a strategic advantage; however, a workforce holding degrees in Sociology and Women’s Studies will not prove useful in the current global economy. Regardless, as George Soros has stated regarding life after this crisis, ‘things we’ll never be the same’.
III. "The two parties should be almost identical, so that the American people can 'throw the rascals out' at any election without leading to any profound or extensive shift in policy." ~ Carroll Quigley
“In studying the breakdowns [of civilizations] we found that the cause was, in every case, some failure of self-determination. A broken down society would prove to have forfeited a salutary freedom of choice through having fallen under the bondage of some idol of its own making. Midway through the twentieth century of the Christian era the Western society was manifestly given over to the worship of a number of idols; but, among these, one stood out above the rest, namely the worship of the parochial state.” ~ Arnold J. Toynbee
Contrast these two quotations. These contemporaneous quotations show that at the same time Toynbee realized how civilizations die, Quigley highlighted Western elite ideas of control that follow exactly the preconditions for the destruction of a civilization. Identifying the closing of Western society in the political sphere is not difficult. Professor Quigley demonstrates that even the American political party system is manipulated to serve the preferences of the dominant minority. No longer does the political system serve the people of the United States. For example, the Bush administration tripled the size of government despite running on a platform of small government and non-interventionism. The current Obama administration has increased the size of the Afghan war, increased attacks within Pakistan, and some of his advisors talk of being in Iraq for 50 years. He has moved with much fanfare to close Guantanamo Bay but not commented on renditions or other holding facilities. With General James Jones of the National Security Council openly stating that he “reports to” Henry Kissinger, the dominant minority is clearly in control.
From an economic standpoint, it is convenient for the government to blame the free market for the current crisis because government control can expand through regulation. However, it is a lie. The problems in the economy were due to congressional legislation forcing Freddie Mac and Fannie Mae to issue sub-prime loans, changes in the Glass-Steagall Act under Robert Rubin and Larry Summers, and interest rates that were kept too low too long. These efforts were undergone to maintain the US ‘bubble economy’ that relies on consumption but could only prolong the inevitable. The “inevitable” is the collapse of the global economy that is occurring now as US consumption is unable to absorb the production and capital of the global market.
Also, the derivative markets themselves are illustrative of the dominant minority’s control. These instruments have served to support the US Dollar and transfer risk abroad by collateralizing risk in the global economy. They have been issued by investment banks (the “shadow banking system”) in the dominant center and sold around the world as a type of currency. The repeal of the Glass-Steagall Act and the increase in debt to capital ratios from 10-1 to 30-1 in 2004 (at the behest of Alan Greenspan) allowed the dominant minority in the West to maintain control of global capital markets.
Another example of control, global warming is being used as a tool for political manipulation. As recently as December 2008, William Happer of Princeton University testified before congress saying, “Fears about man-made global warming are unwarranted and are not based on good science. The earth's climate is changing now, as it always has. There is no evidence that the changes differ in any qualitative way from those of the past.” He has added his name to a list of more than 650 dissenting scientists to the mainstream explanation for global warming. These dissenters do not deter the current administration in its push for a ‘cap and trade’ system or carbon taxes. Nor do they deter Al Gore, who has much to gain by such a system through his firm, “Generation Investment Management”, which he co-founded with former Treasury Secretary Hank Paulson.
Both Quigley and Toynbee point to the inevitability of this moment in which a dominant minority is revealing itself in control of the West. Whenever weapons become specialized (atomic weapons), those in control of those weapons accumulate power. This has occurred throughout history with the advent of gunpowder, the longbow, more efficient sailing vessels, etc. For Toynbee, the discovery of atomic weapons necessitates the founding of a World Order to avoid fratricidal warfare that could lead to the destruction of humanity.
IV. “An Ark of Civilization that had traveled a time-distance of some five or six thousand years across the ocean of History was making a reef which its crew would not be able to circumnavigate. This unavoidable danger ahead was the perilous transition between a World partitioned into an American and a Russian sphere and a World united under the control of a single political authority which, in an age of atomic weapons, must supersede the present division of authority sooner or later in one way or another.” ~ Toynbee
Those that foresee global integration support the G-2 because as Toynbee has said, “the UNO seemed unlikely to be the institutional nucleus out of which an eventually inevitable world government would grow. The probability seemed to be that this would take shape through the development, not of UNO, but of one or other of two older and tougher political ‘going concerns’, the Government of the United States or the Government of the Soviet Union [in this case, China].”
However, there is a division between those who suspect a World Order approaching and those who foresee disintegration. I argue that the world is moving toward disintegration. Consequently, I argue that Western Civilization needs a new theory of progress that embraces change and eliminates incompetent allocation of capital. Glaze-eyed bureaucrats who have failed in the private sector can no longer regulate the West. Nor can current neo-statist and neo-feudal models (as propounded by Zbigniew Brzezinski) be accepted lest the West lose its strength for global leadership. The market is the collective will of the people, and the purpose of an elite is to lead people to competency. The current acting elite represents a closing Western Civilization and if they lack creative capacity then they must be thrown out of power.
The current elite believes that political manipulation of the market can overturn economic theory; however, this is untrue. The market is inexorable in the long term. Belief in political manipulation will result in war and conflict. Western leaders need to empower the economic future of the West and not use force to impose political realities that do not match economic realities. John Adams wrote, “I must study politics and war that my sons may have liberty to study mathematics and philosophy. My sons ought to study mathematics and philosophy, geography, natural history, naval architecture, navigation, commerce, and agriculture, in order to give their children a right to study painting, poetry, music, architecture, statuary, tapestry, and porcelain.” It seems that the time to study politics and war is upon us again unless we work swiftly to reconstitute the West. For as in the early 20th century, there are new Berlin-to-Baghdad railways being built…
Installment #2: Why the Chinese are Better Capitalists than the West
Installment #3: Leadership for an Uncertain Century