[THS] Historian warns of sudden collapse of American empire

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Historian warns of sudden collapse of American ‘empire’

By Brent Gardner-Smith

July 14, 2010 "Aspen Daily News" -- Harvard professor and prolific author Niall
Ferguson opened the 2010 Aspen Ideas Festival Monday with a stark warning about
the increasing prospect of the American “empire” suddenly collapsing due to the
country’s rising debt level.

“I think this is a problem that is going to go live really soon,” Ferguson said. “In that
sense, I mean within the next two years. Because the whole thing, fiscally and other
ways, is very near the edge of chaos. And we’ve seen already in Greece what
happens when the bond market loses faith in your fiscal policy.”

Ferguson said empires — such as the former Soviet Union and the Roman empire —
can collapse quite quickly and the tipping point is often when the cost of servicing an
empire’s debt is larger than the cost of its defense budget.

“That has not been the case I think at any point in U.S. history,” Ferguson said. “It
will be the case in the next five years.”

Ferguson was conscious of opening the Ideas Festival on such a stark note.

“Walter Isaacson, the leader of this great institution said, ‘Don’t be too dark!,’”
Ferguson said.

The affable British scholar tried to keep it light. He used a stage whisper to tell the
Aspen Institute audience, “I know you’re not comfortable with the word ‘empire,’
especially just after the Fourth of July, but you are the Redcoats now.”

He said the U.S. is now deeply in the red as a country because of a combination of
the Great Recession, the resulting federal stimulus and financial bailout programs,
two wars, the Bush tax cuts, and a growth in social entitlement programs.

And economic debt can lead to a sudden loss of military power and global respect,
Ferguson said.

“By combating our crisis of private debt with an extraordinary expansion of public
debt, we inevitably are going to reduce the resources available for national security in
the years ahead,” Ferguson said. “Because as a debt grows, so the interest payments
you have to make on it grow, even if interest rates stay low. And on current
projections, the federal debt is going to be absorbing around 20 percent — a fifth of
all the taxes you pay — within just a few years.

“The item of discretionary federal expenditure most likely to be squeezed is of course
defense. And there are lots of historic precedents for that,” said Ferguson, who is the
author of “Empire: The Rise and Demise of the British World Order and the Lessons
for Global Power.”

Ferguson said the financial crisis that started in 2007 has “has accelerated a
fundamental shift in the balance of power,” with the U.S. shedding power and China
absorbing it.

“I’ve just come back from China — a two-week trip there — and the thing I heard
most often was, ‘You can’t lecture us about the superiority of your system anymore.
We don’t need to learn anything from you about financial institutions and forget
about democracy. We see where it has got you.’”

David Gergen of CNN, who moderated the discussion, which also included billionaire
Mortimer Zuckerman, asked Ferguson whether it made a difference if the U.S.
declined as a world power.

“Having grown up in a declining empire, I do not recommend it,” Ferguson said. “It’s
not a lot of fun, actually, decline. To be more serious, a world in which the United
States is no longer predominate is not likely to be a better world, actually.”

In what he called his “light moment,” Ferguson said, “I think there is a way out for
the United States. I don’t think its over. But it all hinges on whether you can re-
energize the real mainsprings of American power. And those two things are
technological innovation and entrepreneurship.

“Those are the things that made the United States the greatest economy in the world
and the critical question is, ‘Are we going to get it right?’ Can we revive those things
in such a way that in the end we grow our way out of this hole the way the United
States grew its way out of the 1970s and of course out of the 1930s?”

bgs at aspendailynews.com