Niall: US today is dangerously close to the situation of the interwar British Empire
For more than 20 years, the federal government has run an unsustainable fiscal policy, with excessive spending and inefficient taxation causing deficits to become the norm, even at full employment, and the federal debt to rise rapidly above total GDP (to say nothing of the unfunded liabilities of welfare programs).
This is a major vulnerability, given US reliance on foreign investors and the Federal Reserve to buy the bonds and other paper issued by the Treasury.
The rise in real interest rates since 2022 has significantly increased the cost of servicing the debt, to the point that it is close to exceeding the total defense budget.
Finally, we must look at legitimacy at home and abroad.
It is perhaps harder to quantify than any other attribute, but “soft power” clearly matters in two respects. First, it is beneficial if the US is perceived in a positive light by actual or potential allies. Second, it is crucial that American power should be regarded as legitimate by US citizens themselves.
The US prides itself on being a democracy, and the phrase “leader of the free world” is still occasionally heard in an election year.
However, the electorate’s relative impatience with prolonged conflicts has, since Vietnam, acted as a constraint on American power.
Pax americana is another term for the rules-based international order,
A reasonable hypothesis is that the US today is dangerously close to the situation of the interwar British Empire, above all because its electorate and elite are no longer willing to bear the costs of deterrence.
Niall Ferguson Bloomberg 14 januari 2024
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