Why the World Hates America

On September 12, 2002, President Bush delivered his "League of Nations irrelevance" speech at the United Nations. Since that day, the United States has used the Iraq issue as a fulcrum to revamp the way it relates with the rest of the world.

In the process, the UN has been put on probation, Germany and France into outer darkness, NATO east of the Oder-Neisse line, North Korea in the cross-hairs — and the al-Saud and Egypt's Moubarak families on a forced march to perestroika, to mention but a few effects of President Bush's speech.

At the same time, as the United States reshuffled world military and political power relations in this way, it also reshuffled world economic relations. That fact has gone largely unnoticed in the excitement of the Iraq debate.

The emerging "new guard" at the U.S. Federal Reserve and John Snow's emerging team at the U.S. Treasury Department have served notice — first to the European Union last September and then to the G-7 at the end of February — that the world's number one imbalance is not the U.S. current account deficit, but the capital account deficit of the EU and Japan.

This imbalance can only be redressed by lifting the rates of return on capital in Europe and Japan — and in no other way. At the end of the day, either Europe and Japan will execute "Anglo-Saxon"-style reforms to lift their rates of return — or the United States will become the "sole financial intermediator" of the world.

The U.S. current account deficit would then become the equivalent of the currency-issuance function of the world's "sole central bank."

With 40% of industrialized-world GDP, 50% of total world defense spending, 60% of the total world growth rate, 70% of tradable world financial wealth, and 80% of world military R&D, the United States could handle this.

Before we proceed further with the specific implications of this emerging situation, a parenthesis is necessary to deal with the misplaced — and rather naïve — charge of "American imperialism."

America's critics are facing a far worse problem than a mere "American Empire" that exists only in their imagination.
They are facing the possibility of Europe and Japan becoming "failed states," thus surrendering to the United States the status not of "sole superpower" — but that of "sole non-failed state."

The classic western empires of the past — Athenian, Roman and British empires — all acquired and maintained their power through possession of overseas resources (be they economic, military or other) and they used that power to preserve and augment these overseas resources.

This experience of 25 centuries has distilled two criteria for judging whether a great power is empire.

First, it must depend for its own existence upon those overseas resources. Second, its ruling elite must be more or less unencumbered by the constrains of domestic self-government in the pursuit of its overseas interests.

The United States today does not meet these criteria.

Examples of other great powers of the past that did not meet these criteria — and therefore are not ranked as empires — were the Spartan power that defeated Athens and the France of Louis XIV.

Despite their repressive internal features and despite their overwhelming power, neither of these powers was at the time, nor is now, thought of as "empire."

The Athenian empire depended upon the collection of taxes, military conscription — and land grabs from allied/subject states. In its heyday, the Athenian empire was collecting taxes from its foreign subjects sufficient to subsidize each Athenian citizen to the tune of a $15,000-per-year modern equivalent.

The Roman empire also depended upon land grabs, taxes and military conscription of its subject populations.

Senatorial families and imperial favorites controlled the state monopolies of food staples, metals and other raw materials supplied by the subject nations.

The British empire depended upon land grabs, military conscription of subject populations, overseas raw materials and overseas markets.

The British East India Company and other royal franchises were the greatest single influence over the government budget and the Bank of England.

None of these criteria apply to the United States. The United States expends its own treasure to provide security for its allies.

It does not engage in land grabs. It does not conscript foreign populations into its armed services. It does not depend upon others for raw materials and markets — but rather others use it as their market of last resort.

American international involvements are such that they do not, generally speaking, lend themselves to the special enrichment of particular political elites that handle these involvements.

There is no American equivalent of the British East India Company that managed colonial resources and markets for the British empire.

Nor is there an equivalent for the commercially enfranchised Roman Senatorial families and imperial favorites who administered imperial monopolies — nor or of Athenian "helle notamiae," the "empire-treasurers" who collected and managed the taxes of the subject states.

Put in modern terms, the sources of wealth of the Athenian, Roman and British empires — their "capital accounts" — were overseas.

Empires run capital account deficits as they depend upon claims on overseas-generated wealth. The sources of U.S. wealth are domestic.

The United States runs capital account surpluses that represent overseas claims on U.S.-generated wealth — the exact opposite of the imperial financial arrangement.

In strictly classical economic terms, the capital account surplus of the United States alone would qualify her not as "empire" — but rather as "colony."

Her status as importer of last resort would have the same effect.

Is there a possibility that the United States might someday become an empire? It cannot be ruled out.

But it is not likely, so long as there exist no overseas sources of wealth creation that are greater than domestic U.S. sources of wealth creation.

If (a) such great overseas sources were to emerge in future; and if (b) they were to become greater than domestic U.S. sources; and if (c) they were to come under the control of U.S.-based political elites, then and only then might some future American elite emerge to subvert domestic institutions of republican self-government — and create the conditions for an American Empire.

Today, such overseas sources do not exist. And those sources of modest wealth that do exist (China, Japan, the eurozone) are securely beyond American control — and, just as securely, beneath American aspiration.