The Reckoning: Debt, Democracy, and the Future of American Power
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The Reckoning: Debt, Democracy, and the Future of American Power
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Overview
A leading forecaster of economic and political trends takes a sharp look at the decline of American influence in the world, and how it can prepare for the new reality.
The age of American global dominance is ending. Today, a host of forces are converging to challenge its cherished notion of exceptionalism, and risky economic and foreign policies have steadily eroded the power structure in place since the Cold War. Staggering under a huge burden of debt, the country must make some tough choices—or cede sovereignty to its creditors. In The Reckoning, Michael Moran, geostrategy analyst explores the challenges ahead -- and what, if anything, can be prevent chaos as America loses its perch at the top of the mountain.
Covering developments like unprecedented information technologies, the growing prosperity of China, India, Brazil, and Turkey, and the diminished importance of Wall Street in the face of global markets, Moran warns that the coming shift will have serious consequences not just for the United States, but for the wider world. Countries that have traditionally depended on the United States for protection and global stability will have to fend for themselves. Moran describes how, with a bit of wise leadership, America can transition to this new world order gracefully—by managing entitlements, reigniting sustainable growth, reforming immigration policy, launching new regional dialogues that bring friend and rival together in cooperative multinational structures, and breaking the poisonous deadlock in Washington. If not, he warns, history won't wait.
Product Details
| ISBN-13: | 9781137000422 |
|---|---|
| Publisher: | St. Martin's Publishing Group |
| Publication date: | 04/10/2012 |
| Sold by: | Macmillan |
| Format: | eBook |
| Pages: | 256 |
| File size: | 1 MB |
About the Author
Michael Moran is an author and analyst of international affairs, a digital documentarian and Managing Director, Global Risk Analysis at Control Risks, a global political risk and security consultancy. A foreign policy journalist and geostrategist for investment banks and financial consultancies, he is author of The Reckoning: Debt, Democracy and the Future of American Power and co-author of the 2012 book The Fastest Billion: The Story Behind Africa's Economic Revolution. Moran served as Editor-in-Chief at the investment bank Renaissance Capital and has been a collaborator of renowned economist Nouriel Roubini as well commentator for Slate, the BBC and NBC News. He is also an adjunct professor of journalism at Bard College and was the founding editor of the Emmy award-winning Crisis Guidesdocumentary series for the Council on Foreign Relations.
Moran's career has included periods at major media outlets: Senior correspondent, MSNBC.com (2003-05); senior producer, International News and Special Reports, MSNBC.com (1996-2003); U.S. affairs analyst, BBC World Service (1993-96); senior editor, Radio Free Europe (1990-93), former reporter for Associated Press, St. Petersburg Times, Sarasota Herald-Tribune(1985-88).
Moran also served as Hearst New Media Fellow at Columbia University Graduate School of Journalism and was a longtime board member of the Overseas Press Club, as well as a judge of its annual awards. His work has appeared in the New York Times, The Washington Post, Newsweek, The Economist, The Spectator (UK), The Guardian, The New Leader, and has spoken on National Public Radio and in many other outlets. He has lectured at dozens of universities and think tanks around the world.
From 2005 to June 2009, he served as executive editor of CFR.org, the website of the Council on Foreign Relations. Moran is also a foreign affairs columnist for Globalpost.com, and a member of the communications advisory board of Human Rights Watch. From 2009 to May 2011, he served as vice president, executive editor and senior geostrategy analyst at Roubini Global Economics, the macro/strategy consultancy founded by economist Nouriel Roubini.
Michael Moran is an author and analyst of international affairs, a digital documentarian and Managing Director, Global Risk Analysis at Control Risks, a global political risk and security consultancy. A foreign policy journalist and geostrategist for investment banks and financial consultancies, he is author of The Reckoning: Debt, Democracy and the Future of American Power and co-author of the 2012 book The Fastest Billion: The Story Behind Africa's Economic Revolution. Moran served as Editor-in-Chief at the investment bank Renaissance Capital and has been a collaborator of renowned economist Nouriel Roubini as well commentator for Slate, the BBC and NBC News. He is also an adjunct professor of journalism at Bard College and was the founding editor of the Emmy award-winning Crisis Guides documentary series for the Council on Foreign Relations.
Moran's career has included periods at major media outlets: Senior correspondent, MSNBC.com (2003-05); senior producer, International News and Special Reports, MSNBC.com (1996-2003); U.S. affairs analyst, BBC World Service (1993-96); senior editor, Radio Free Europe (1990-93), former reporter for Associated Press, St. Petersburg Times, Sarasota Herald-Tribune(1985-88).
Moran also served as Hearst New Media Fellow at Columbia University Graduate School of Journalism and was a longtime board member of the Overseas Press Club, as well as a judge of its annual awards. His work has appeared in the New York Times, The Washington Post, Newsweek, The Economist, The Spectator (UK), The Guardian, The New Leader, and has spoken on National Public Radio and in many other outlets. He has lectured at dozens of universities and think tanks around the world.
From 2005 to June 2009, he served as executive editor of CFR.org, the website of the Council on Foreign Relations. Moran is also a foreign affairs columnist for Globalpost.com, and a member of the communications advisory board of Human Rights Watch. From 2009 to May 2011, he served as vice president, executive editor and senior geostrategy analyst at Roubini Global Economics, the macro/strategy consultancy founded by economist Nouriel Roubini.
Read an Excerpt
The Reckoning
Debt, Democracy, and the Future of American Power
By Michael Moran
St. Martin's Press
Copyright © 2012 Michael MoranAll rights reserved.
ISBN: 978-1-137-00042-2
CHAPTER 1
EXCESS BAGGAGE: THE WEST'S STRUGGLE WITH REALITY
Many people watching tonight can probably remember a time when finding a good job meant showing up at a nearby factory or a business downtown. You didn't always need a degree, and your competition was pretty much limited to your neighbors. If you worked hard, chances are you'd have a job for life, with a decent paycheck and good benefits and the occasional promotion. Maybe you'd even have the pride of seeing your kids work at the same company. That world has changed.
— President Barack Obama, State of the Union speech, January 25, 2011
The 2012 presidential election will go down as the moment when the rise in wealth, influence, and power of the rest of the world finally made an impression on the American voter. It will not be the result of some sudden surge of public interest in foreign policy, or even the two wars raging for the past decade. Rather, the United States has reached a point in its history where the spread between its growth trajectory and that of its rivals can no longer be hidden. The debt-fueled model is imploding. The gap between US government obligations and revenues cannot be bridged by simple cuts or even by a return to the steady growth of its gross domestic product (GDP). What's more, the even larger gap that lies between this economic reality and what passes for "truth" in the American political debate may prove an insurmountable obstacle as psychological and strategic adjustments accompany efforts to get control of national accounting. The blanket security guarantees the United States provides to other countries all over the planet, the poorly structured and even more poorly funded promises it has made to its poor and elderly, and most importantly its inflated self-regard and sense of global entitlement, all must be tackled simultaneously to arrest the slide in America's global power, influence, and relative wealth. The narrow gauge prescriptions of the current Washington debate — ranging from spending cuts targeting social welfare programs to huge infusions of stimulus funding — will fail to slow the arrival of America's day of reckoning if the larger context remains unchanged.
This book aims to broaden the current debate with its focus on spending cuts, marginal tax rates, and "shovel ready" infrastructure into a true look at the trajectory of American power in a radically changing world. This means facing the costs of overstretch abroad as well as at home and confronting the psychological implications, too. Once again, after a period of hyperactivity abroad and bubble-fueled growth at home, America has realized its power is finite. This time, however, for the first time in its history, that healthy realization is accompanied by evidence that America's binge years have damaged its future prospects. To borrow the language of economics, there will be no "V-shaped" recovery for US global influence. Yet an honest assessment of America's situation, followed by clear policies based on the country's actual realities rather than the hopeful bromides of its creation myth, can ensure the dominant power of the last century continues to shape its own destiny in this one.
Rethinking America's global role is an essential part of this formula. Ever since the United States entered World War II, the dollar costs of sustaining "global stability" and keeping the more dangerous elements of the outside world at bay have been, at best, secondary considerations for politicians on the campaign trail or Americans sitting around their dinner tables. Of course, debates did occur over the wisdom or morality of foreign entanglements, and the cost in the blood of the young Americans sent to war. But to question the actual dollar outlay was considered unseemly if not unpatriotic. "National security," the rubric under which the government lumps together defense spending, intelligence, wars, and diplomacy, existed in a world beyond accounting. With the exception of the recent wars in Iraq and the campaign in Libya, the vast majority of Americans have shrugged off the financial aspects of foreign and defense policy over the past seven decades as the price of doing superpower business.
In the second decade of the twenty-first century, however, this approach no longer works. As the S&P downgrade of America's sovereign credit rating recently underscored, the United States faces a series of tough questions about the burdens it has imposed on its taxpayers, soldiers, citizens, and allies. The answers will determine the trajectory of the world's most important country for decades to come, as well as the fortunes of smaller economies all over the planet. This will pose a huge challenge to a public accustomed to a reassuring drone from its politicians about its manifest destiny and divine anointment as the last, best hope of the civilized world. At times in the past century, these words rang true enough: American power tilted the scales against authoritarian monarchs in World War I, genocidal fascists in World War II, and finally revolutionary communists during the Cold War. But America today has lost both the financial and moral standing to claim that its interests automatically coincide with the interests of the rest of the planet. America's interests are its interests alone — the rest, as they say, is coincidence.
No one is sure just how long the United States has to get its fiscal house in order, and of course, the domestic ideological divide, deepened constantly by runaway "gerrymandering" of electoral districts at all levels to suit fringe elements, will make the process harder. Most economists estimate that the US government must chart a convincing course that would slowly reverse the size of the national debt and show tangible results within a decade. Yet this "medium-term" reprieve only works if, much sooner than that, the United States convinces its largest foreign debt holders and the international bond markets (along with the credit agencies that stand guard on their behalf) that Washington has the political and financial will to act rationally — to neither ignore the debt peril, nor collapse in supplication to it and start gutting those parts of its government that support growth, innovation, education, and military excellence.
The recent behavior of American politicians — from the obstructionist nihilism of the Tea Party to the overly indulgent, cerebral aloofness of President Obama — was precisely the wrong way to instill confidence. The aforementioned grace period for American policy makers can only exist if the United States avoids a cataclysmic sell-off of US Treasury bonds, the vehicles through which the country borrows money abroad to fund its deficit spending. In the next several years, as these politicized negotiations continue to produce theater of the absurd like the failed "Super Committee" debacle, it will not be hard to imagine another ratings agency downgrade or perhaps a major creditor — China, Russia, Japan — deciding that America is not, after all, good for the money it owes. That nightmare scenario is to be avoided at all costs. Yet the current political behavior — particularly on the American right — is all but inviting it. Congressional leaders — and perhaps the White House, too — seem to think the United States is still in a position to control the outcome of political brinksmanship on these issues. The truth is, America lost its financial credibility when it drove the global economy toward oblivion in 2008; no one, at least outside the Beltway, has forgotten that. The only thing preventing America's creditors from dumping their Treasury bonds is a lack of alternatives. Rest assured that economic policymakers and the investors who control the sovereign wealth funds of the emerging world are working furiously from Berlin to Beijing, Rio to Riyadh, Moscow to Mumbai, to create those alternatives.
But let's say the center does hold and US creditors remain calm as fiscal reform begins to brighten the long-term debt picture. That still leaves in place new challenges that American policymakers had taken for granted for decades. Increasingly, for instance, the health of the US economy depends not on American political decisions but on the goodwill and investment strategies of other nations. Some of its major creditors — the British, the Canadians, the Japanese — would prefer to preserve a world in which the dollar remains the global reserve currency and the United States the most influential actor in political and military affairs. But other nations, especially China, Saudi Arabia, the United Arab Emirates, and Russia, who together have even more invested in US Treasury bonds than our allies, are less eager to perpetuate America's influence, let alone underwrite a second "American Century."
America stood for decades as the "indispensable nation," to quote former secretary of state Madeleine Albright. That, too, has changed. The ground is shifting away from American dominance, and the United States must either adjust to that reality or lose control of its own fate.
Why has this moment of truth arrived today, in the twelfth year of the twenty-first century? Four important trends have forced the tipping point. These trends predict an era in which the United States will in many ways still be the most powerful country on the planet but will no longer set the agenda unilaterally:
• A crushing national debt will force the United States to run a cost-benefit analysis on the enormous size of its global defense and foreign policy footprint, as well as the promises made to its next generation of retirees. Abroad, the influence of the old G7 (Group of 7) — Canada, Britain, France, Germany, Italy, and Japan — will fade further, as the huge sums it spends on defense, intelligence, diplomacy, and policing world trade routes come into direct conflict with the sacred cows of US domestic politics: Social Security, Medicare, and Medicaid. The growing costs of social programs cannot be wished away. Unlike for the troubles of Greece or Ireland, both of which have recently collapsed into the arms of richer European Union (EU) partners when their debt burdens became unsustainable, there will be no "rescue" for America. A bankrupt American treasury goes far beyond "too big to fail"; it's "too huge to contemplate." A US default would precipitate the mother of all fire sales, as foreign money would rush in to snap up distressed US companies, properties, and other national treasures. As the Greeks, Irish, Portuguese, and now the Spanish and Italians, too, understand all too well, default means that monetary and fiscal policies are suddenly dictated from abroad. A sovereign default in America also would negatively affect dozens of countries that have based their own financial policies, investment strategies, and defense calculations on the stability upheld by the United States over the past several decades. No "advanced economy" would emerge unscathed; countless emerging nations would lose important customers and sources of foreign direct investment (FDI); and in many subsistence societies, where the United States is the largest aid donor and provider of implicit stability guarantees that hold fragile fault lines together, the risks of war, famine, and anarchy would rise.
• Unprecedented information technologies will blunt America's global influence. New technologies, including software-laden cell phones, peer-to-peer social networks, and widespread wireless Internet access, pose challenges not just for dictators but for all governments. While America's technological prowess has rendered its military unbeatable for the time being, this very reliance on technology represents a vulnerability. Indeed, open democracies are even more vulnerable to disruptive technology than their authoritarian rivals. Software, digital, and network innovations have placed power in the hands of once-powerless people, giving them the ability to circumvent censorship, challenge taboos, and even bring down repressive regimes. SMS text messages coordinated the actions of demonstrators in Tehran and Tibet, Facebook "flash mobs" rose in Tunis and Cairo, and WikiLeaks released thousands of classified pages of American diplomatic traffic that shook the halls of the superpower. America's global influence since the collapse of the Soviet Union has rested on the notion of "maintaining stability" — in effect, the status quo. Technology will short-circuit this function, inevitably unseating some unsavory characters, including those propped up by United States over the years, and it also will diminish Washington's ability to influence events.
• Rising prosperity, ambitions, and confidence among emerging nations will create a power vacuum that will encourage reckless behavior and, if truly mishandled, a horrific war. Nations as diverse as India, China, Brazil, Turkey, Indonesia, South Africa, Iran, India, and Venezuela now wield real influence on the world stage, and some will have serious influence on the future of the American economy. The diversity of interests among this group augurs ill for global stability. Neither the so-called Group of 2 (G2) — the United States and China — nor the old G7 or even the new G20 lacks the clout or internal consensus to coordinate global responses to megacrises. Moreover, many of these states, particularly in Asia, absolutely reject the concepts of multilateral diplomacy or collective security that kept the peace in Europe since World War II. As economist Nouriel Roubini and political analyst Ian Bremmer wrote recently, "We are now living in a G-Zero world" — a planet where "no single country or bloc of countries has the political and economic leverage — or the will — to drive a truly international agenda. The result will be intensified conflict on the international stage over vitally important issues."
• The cumulative damage of a lost decade of policy mistakes and misconduct in American economic and political life has discredited American leadership and lowered the US economy's long-term GDP "speed limit." These lethal mistakes, based on messianic fallacies, have burdened the United States with a national debt nearing historic levels, GDP growth that has collapsed to near zero, and diminishing political and economic credibility. These errors have also destroyed a global consensus about the quality of American leadership and the resilience of the American financial system. The fallout of the disastrous Iraq War drove even close allies away from American initiatives. And quick on the heels of the Iraq fiasco, US-inspired economic policies that encouraged global capitalism to run riot brought the world to the brink of a second Great Depression. Bold but thankless action by Western governments and central bankers, including the Bush and Obama administrations, managed to forestall that fate. Yet this should be cold comfort for those concerned about America's international reputation — a bit like a drunk driver who causes a multicar wreck and then expects thanks for administering first aid to its victims. Sadly, the admiration Americans worked for decades to create — the reputation for economic dynamism and the triumph of a relatively bloodless victory in the Cold War — was squandered in a matter of five years between 2003 and 2008. The damage will haunt America for a generation.
A world in flux is hardly news. But can the United States weather these changes? No one should glibly assume the worst; after all, the United States has regularly defied predictions of decline in recent decades, from Sputnik to the aftermath of Watergate, through race riots and the oil-fueled inflation of the 1970s right up to the present. But today's particular thin ice threatens not only the United States but everyone who depends on the global systems, markets, alliances, and relative stability the United States fashioned after World War II.
The crisis is manageable if American politicians set aside outdated and discredited orthodoxies and properly plan for the wrenching decisions ahead. These choices will exacerbate existing political divisions among Americans over issues as varied as financial regulation, immigration policy, defense costs, scientific research, free-trade agreements, and education funding. Difficult as the journey may be, the tough decisions must be tackled while time remains. But the United States could permanently damage its standing in the world and accelerate its decline if the crisis is mishandled — for instance, if the White House and Congress continue to prove incapable of agreeing on both short-term and long-term plans to fire up GDP growth, make a dent in the appalling jobless figures, and limit deficit spending over the medium term. Such a failure would not merely delay a return to prosperity; it would hurt the living standards of its citizens, the security of its allies, and prompt the next generation of great powers — India, Turkey, Brazil, Indonesia, and others — to rethink the need for close, warm ties with a superpower whose star seems to be dimming. This is the fate Americans must avoid.
(Continues...)
Excerpted from The Reckoning by Michael Moran. Copyright © 2012 Michael Moran. Excerpted by permission of St. Martin's Press.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents
Contents
Foreword by Dr. Nouriel Roubini,Introduction,
1 Excess Baggage: The West's Struggle with Reality,
2 As the World Turns, Gravity Bites,
3 A "Boiling Frog" Moment for America's Middle Class,
4 From Shortwaves to Flash Mobs: Technology Speeds the March of History,
5 In the Middle East, the Writing Is on the Wall,
6 China and America: The Perils of Codependency,
7 The Not-So-Pacific Rim,
8 India, Brazil, and the New American Dream Team,
9 Europe: PIIGS, Canaries, and Bears — Oh My!,
10 In the Game, or in Denial?,
Acknowledgments,
Notes,
Index,