Fiscal Crisis and American Globalism

The fiscal crisis rocking Greece will be soon occur in other European countries. In a few years, it will occur in the US, where government spending and the national debt have risen in an effort to counter the recession. President Obama and economic advisor Paul Volcker have expressed grave concern over the national debt and signaled that deep budget cuts will be needed.

Just where the cuts will come is unknown, but for many citizens and observers, reduced military presence around the world will seem a likely place for the budget axe to fall. For a number of reasons, however, a marked reduction in US commitments around the world is unlikely.

National Identity
Globalism is a basic part of America’s understanding of itself and will not be abandoned easily. A military presence in some 84 countries around the world came as a surprise to Americans born before WWII; it was a fundamental part of the national identity to those born after the intoxicating victory of 1945. It greatly exceeded the nation’s dabbling in colonialism in the previous century and the American identity of prosperity and virtue became infused with global power and mission.

The disaster of Vietnam damaged the appeal of globalism yet brought no withdrawal, only indeterminacy and paralysis. The helplessness of the Iranian hostage ordeal led Americans to feel that restored military might was essential; small, easy campaigns in Grenada, Panama, and the first Iraq war (1991) re-acquainted them with the romance of war.

The September 11th attacks charged the nation with the mission of defending itself through various campaigns across the world and bringing light to darker parts of it. Relinquishing this mission, and the national identity behind it, will be difficult, especially now that terrorism is returning to America.

Bipartisan Support
The American political system is deeply divided along party lines. Each party opposes almost anything advocated by its foe. Presidents endure vicious partisan attacks in congress and the media. Healthcare, gun laws, abortion, and now immigration ”“ highly partisan issues all.

Not so global military commitments and the defense spending upon which they rely. Squabbles over domestic issues are put aside and majorities in both parties support globalism. Little wonder: defense funds pore into most congressional districts, providing jobs in facility support, R&D, and manufacturing.

Indeed, military spending provides an important and high-paying part of the country’s troubled manufacturing sector. And the next few years are not going to be an advantageous time to cut jobs.

Foreign Influence
There is widespread foreign opposition to US globalism. Leaders complain of US policies and various people demonstrate against them, peaceably or not. Indeed, opposition to the presence of US bases is a rallying cry for terrorist groups as well.

But despite public and private demurrals, many governments wish to see American globalism continue. Eastern Europe is eager to place itself under the wing of the US and NATO. Saudi Arabia and other states in the region expect the US to guarantee the free flow of oil from the Gulf ”“ and even to defend them as it did Kuwait in 1991. Israel’s expectations of continued arms supplies and defender of last resort is obvious.

Taiwan, India, S. Korea, Japan, the Philippines, and other countries wary of China’s military build-up look upon the US navy as part of their defense strategies. Vietnam now welcomes American destroyers in the Gulf of Tonkin.

Even countries with considerable differences with the US in certain parts of the world are willing to abide US forces in others. Russia is angered by the US-driven expansion of NATO into Eastern Europe, but concerns with Islamist militancy spreading into its sizable (and growing) Muslim population make Russia reluctant to see the US abandon Afghanistan. Similarly, though circumspect of the US navy patrolling offshore, China does not want to see Islamist militancy spread into its western provinces.

Historically, deep recessions have led to political instability, demagogues, and war. That was certainly the case during the Depression of the 1930s and the present downturn is thought to be the worst since then. Many countries will look upon the US as a guarantor of stability. Americans will see it their duty.

US casualties in various theaters, without attendant accomplishments, will increase domestic pressure to reduce globalism. That was the case with WWI and Vietnam, where senseless battle deaths appalled the public and ushered in periods of lessened involvement in world affairs.

Casualties in Iraq, even at their peak back in 2006, were comparatively light; presently they are negligible. Fighting in Afghanistan is seasonal, as insurgent fighters return home for winters and harvests. In other times, insurgents initiate most engagements, leaving them in control of fighting and casualties ”“ and to some extent western support as well.

Unlike previous American wars, casualties fall largely on working-class groups, who are more inclined than the public at large to support wars and accept the deaths of family members and neighbors. Privileged strata may protest, but only in muted ways. For most Americans, the re-acquaintance with the romance of war during the Reagan years had the condition that their children know nothing of it.

Ongoing Cost Cuts
Reductions in military expenditures in certain spheres are already underway and will ease the cost of global commitments. The war in Iraq once cost $10 billion a month, but with fighting down and the US scheduled to be completely out by the end of next year, the cost will soon be negligible.

The Obama administration has reached an agreement with Russia to reduce each country’s nuclear arsenal, which require elaborate security and maintenance systems. Similarly, the scrapping of much of the SDI missile defense system slated for Eastern Europe will spare the country this expenditure.

Much larger savings will come from the Pentagon’s shift from conventional warfare to counter-insurgency operations. Conventional forces require armored vehicles, fighter aircraft, and immense logistical systems. Counter-insurgency warfare eschews most of those big-ticket items and rely instead on small, lightly-equipped teams.

In one telling change of priorities, the Pentagon has reduced purchases of the latest generation of fighter aircraft ($361 million per plane) and increased purchases of drones ($10.5 million per plane). In other words, a Reaper drone used for reconnaissance and assassination costs 3% of an F-22 Raptor used for air superiority and attacks on armor columns ”“ neither of which is relevant in Afghanistan or Yemen or Somalia.

Financial Institutions and Foreign Policy
Soaring debt is alarming bondholders. They will seek to use their fiscal power to influence national policy: no fiscal discipline, no more money. Debt-plagued democracies are relinquishing their sovereignty to outside powers, and just as European countries have forced Greece to make reforms, those who hold the US debt ”“ the Federal Reserve Board, US banks, and countries such as Japan and China ”“ will be in a position to force changes on Washington.

It is unlikely, however, that the financial powers will want the US to markedly decrease its global presence. They recognize that US globalism facilitates and guarantees world commerce and that withdrawal will bring instability or at least uncertainty.

There is the possibility, however, that the Fed and US banks will introduce a measure of cost-benefit analysis to the country’s foreign policy and military posture around the world. Such a framework has scarcely entered into the national debate since the heady aftermath of WWII.

* * *

The unlikelihood of a fundamental change in globalism will be welcome to some, but unwelcome to others. The burden of maintaining forces in 84 or so countries will do nothing to aid the faltering American economy. Nor will it increase national security, only the more ethereal and misleading notion of national prestige.

©2010 Brian M. Downing

Brian M. Downing is the author of The Military Revolution and Political Change and The Paths of Glory: War and Social Change in America from the Great War to Vietnam. He can be reached at

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  • I have heard for the past 50 years that big deficits were going to bring ruin to the US and yet it really hasn’t happened.
    I recently encountered MMT, Warren Mosler, Randall Wray through their April 28th their Fiscal Sustainability Teachin and Counter Conference held at the same time as the Catfood Commission.
    I learned that I was worrying about the government deficit because of the logical fallacy of composition. I was thinking that the government budget was much like my personal one. Debts have to be paid or ruin will follow. Not necessarily true for sovereign governments with non convertible currencies.
    Greece and the Europeans do have a problem because their currency is the Euro and no individual country can control it.
    Inflation and deflation are what the MMT people consider important and that can be controlled by tax policy or increasing money supply.
    It amazes me that there is so little discussion about this.
    What really amazes me is that Dick Cheney who says, “deficits don’t matter” apparently understands this quite well….along with a number of other bait and switch no tax Republicans.
    Could you please comment on this?

  • This sums it up nicely: “Nor will it increase national security, only the more ethereal and misleading notion of national prestige.” The identifiable value of the overseas presence is found in its emotional impact.

    It will be interesting to see how long the public tolerates substantial cuts in services and general deprivation while the presence elsewhere continues. Do we really need to protect the Fulde Gap or whatever else we’re protecting in Germany and other European nations?

  • somewhat more complicated.

    It is absolutely true that the EU lacks a strong central Fed that can effectively control money supply, interest rate, and other factors that may contribute to inflation. That is a HUGE part of their problem. One that the US does not have in the present structures.

    As far as deficits not mattering. It is more complicated. The inputs to those debts do matter. For deficits to not matter it requires 1) A growing national economy; 2) the ability to control money supply and low inflation which allows for a known, stable and low interest rate; 3) a sufficiently large tax base and economic base to cover interest costs in the present moment.

    In the case of Europe they are in trouble on all three counts:

    1) The economies are not growing, so they have no ability to leverage future growth to future deficit spending.
    2) They lack the ability to control their money, inflation or interest rates because the various countries are independently deciding. Hence no ability to support the Euro.
    3) Their current interest debt costs are eating up a huge portion of the tax base and of GDP. Greece interest spending is at 6% of the countries GDP, that is larger than US spending on Defense!

    The United States is nowhere near Europe in their crisis situation
    1) The economy is growing at 3% annually on a $15 trillion dollar economy. More than $500 billion is being added to GDP each year.
    2) A strong Fed provides excellent support to the dollar, providing low inflation and low interest rates. This keeps interest on debt low and affordable.
    3) The US current interest costs are at the lowest point in post WWII history. And future GDP growth provides for continued leverage for deficit spending.

    I would add that the tax burden of the US is far lower than Europe with the US at about 1/3 of the economy, while Europe is over 1/2 of their economies. Europe’s population is also declining, which is a component of GDP growth, so they have a built in structural decline as well.

    Deficits matter when you do not grow, when you cannot control inflation, when your current interest debt costs begin to consume GDP. The US has the best position on all of these factors, not only relative to Europe, but also relative to most of Asia and South America. There is a reason the US is considered the worlds safe haven.

  • I think you pretty well nailed it.

    Enough other countries are invested on the status quo to want to keep America in their role as a stabilizing force.

    I’m not making a value judgment here whether that’s good or bad. It’s just that some things have become ubiquitous features of the international community, and America is seen as the presence that guarantees some of these ubiquitous, stabilizing features.

    Also, the fact that the American Empire arose pretty much on the heels of the descending British Empire guaranteed some continuity.

    These ubiquitous features are: The English language as the international language of politics, business, science, and the arts; the dollar as the worldwide recognized currency; certain cultural contributions – western classical music, rock’n’roll, jeans and t-shirts as casual wear.

    And the whole concept of tolerance of different religions, skin colors, and cultures co-existing together is truly an American thing inflicted on the rest of the world.

    Think about it: before the rise of the American Empire, the idea that different religions and cultures should have anything at all to do with each other’s people was pretty much unheard of.

    Yes, it’s a mythology. Yes, these things are abstractions. Yes, they were propped up on the backs of horrble wars, Machiavellian political scandals, coup-de-tats, massive CIA “destabilization” programs and other unsavory economic tactics.

    And yes, the USA has, even in it’s brightest days, discriminated against it’s own minorities and poor people, got involved in wrong wars for the wrong reasons, and generally caved-in to greed for the resources of third-world nations it could exploit.

    Nonetheless, it has propagated a global culture, a global currency, and a global language, and the class of people that has profited handsomely from that colonialization (or empire-building, if you prefer) have a big investment in keeping that culture entrenched if they can do it.

    And they have the armies, banks, and corporations to give it their best shot.

    So predictions of imminent collapse of western civilization has to be tempered with the knowledge that some of the same most destructive players will, in the end, have a deep investment in saving the system from which they derive all their profits.

    So it will be very interesting.

    Because what is certain is it will change at least as much in the 21st century as the 20th century changed from the 19th century.

    In other words, hella big change. Get ready.

    One strategy that’s sure to fail: trying to do everything the old ways in a vain effort to make the world look like it used to.

  • I would add that America also gained control of the Atlantic Basin from the British at the end of WWII, it was the lend lease program. Britain gave America all their Naval bases in the world in exchange for military equipment to fight the war. We have retained control of the Atlantic since then.

    We also gained control of the entire Pacific Basin from the Japanese as part of the terms of their surrender, and gained control of every Japanese naval base.

    Why is this significant. America controls all the shipping sea lanes around the world. And America retains dominant trade status in the world because of its unique position that fronts two oceans. It has the cheapest trade with Asia and with Europe. That is a fact of geography that nothing will change.

    A Maritime Power always has hegemony over a land based power, with the result that America came out ahead in the Cold War against the Eurasian land power of the Soviet Union. Maritime powers can use carrots and sticks, land based only sticks.

    The 20th century is often referred to as the American Century, but it is not so. Britain was the global power in the first half of the century, America had little involvement in world affairs. And hegemony was challenged in the Cold War Period after WWII so with American dominance emerging only after the collapse of the Soviet Union in 1991. So it is the 21st Century that would be the American Century in the same sense it was the British Century in the 19th Century. The 20th Century was a period of transition with first Germany and then the Soviet Union vying for hegemony. Both land based powers, defeated by a maritime power.

    Now we can add absolute hegemony of the skies by the United States which has basically occurred in the period of 1970s to the present, as the space technology of the 60s was integrated into aviation.

    What is most remarkable to me of anything, is that the United States has accomplished this with a military budget that has continually declined as a percentage of GDP in the post war period. Military spending is now at almost its lowest level in the history of the US as a percentage of GDP, yet it is higher in absolute terms than the rest of the world combined.

    I would not start forecasting imminent collapse until it is something like 1/3 of GDP.

    I think the only entity that could possibly be vying for hegemony against the United States in the 21st Century will be Mother Earth.

  • The question, however, is whether hegemony (like monopoly or oligopoly) is consistent with and/or conducive to the sort of competition that we believe (or so I thought) underlies the success of capitalism and democracy? I would add that the British insistence on maintaining its hegemonic position was a, if not the most, significant factor in all of the violence of the 20th century and the fall of their Empire.

  • leading to the high death rate from warfare, apart from a booming population that supplied far more bodies to die in the 20th century than any of the prior centuries was the emergence of political philosophies that became in themselves religions which jettisoned the historic judeo christian restraints on political behavior, and within the muslim world the same thing has been happening.

    Hitlers Germany created a pseudo religion around its fascist ideology that ignored and disdained both Catholicism and protestantism. Religion was used to infuse their ideology (much as the right in the US does today), but the violence emerged from ideology with no moral underpinning or restraint. In the same way the deaths and carnage in the Soviet Union emerged from the same movement of ideology into a religious position, with the organization of the party centered around a cabal of individuals, and there was absolutely restraint. I mean the numbers of people killed in those Pogroms will never be known. In like manner, China moved away from its longstanding religious traditions and emerged with a similar secular ideology that led to countless deaths.

    Al Qaeda is not an Islamic sect in any sense. It has walked away from the restraint of violent behavior outlined in the Quron. It originated a secular ideology of violence that has nothing to do with Islam.

    No one will ever get me to the point that the whole of Europe was defending itself from Germany in WWII. Soviet Pogroms were crazy in their cruelty. And anyone wondering what the secular chinese do to religious people need only read about their Tibetan strategy.

    Secular ideology is what was dangerous in the 20th century.

  • The point of my response above was in the context of yogi-ones comment above to which you were responding. To the extent we pursue hegemonic goals we undermine the supposed message of our form of civilization from which we derive our strength. Rather than pursuing hegemony we should be pursuing the values of competition.

    In response, though to your above entry I would suggest that the ground for the rise and misinterpretation of the secular ideology you seem to have trouble with was set by the obvious hypocrisy of British manipulation of world politics and economics to preserve its role as hegemon. In this respect I would offer that Hitler’s rise was only possible in response to WW I which I believe was foisted on Europe through the British policy of containment at all costs of the rising competition emerging from a liberal German state in the center of Europe. Similarly, primarily British, destruction of Chinese culture at the end of the 19th century led to the chaos ultimately resulting in the ultimate restoration of chinese imperial order under the communists. I don’t think I need go into the chaos engendered by Britain through its actions in the Mideast and south asia.

  • is correct in that it was a response to their ‘presence’

    However, the British did not ‘destroy’ Chinese culture, in fact they did not go so very far into China. They established trading posts in key cities and organized some modern governments. There was not so much killing and mass murder of Chinese at all. Nor India, nor the Middle East.

    The ‘response’ is a pulsing one in China that has occurred many many time over the centuries, and easily could happen again. With China there are really two, an interior land based China and a coastal sea based china. The sea based china wants trade and contact with the outside world, the land based is conservative, anti-trade and composes the sleeping-giant culture of china. Trade and contact with the outside world ALWAYS angers the interior, as it is now, as it did in the 15th century. Mao Zadong organized a military response to destroy trade, contact with the outside, and dependency on foreign ideas like education, capital formation, manufacture, paid labor etc. These cities were sacked, people taken out of schools and sent to farms to purify themselves. It was a secular ideology that led to the mass starvation of 10’s of million of chinese in the 1960s. It was culture to culture conflict in China, between the two China’s.

    British rule was always Roman in its philosophy, of accepting the cultural aspects of the societies they inhabited. With Britain offering organizational structure, education and training to natives so they could be administrators. They wanted trade, not hearts and minds. There were no mass killings, or Pogroms, or any of that within the context of British rule. There was no such ideology in its support.

    Britain had very little understanding of the interior/coastal relationship that led to this cultural, powerfully cultural, response.

    China today has backed away from the Mao Zadong model, for the time being, and engaged in a coastal, maritime, capital formation model that was originally brought to them by Britain. And I would wager there will one day be an interior response once again.

    Yes, Germany was a response to WWI which was not well handled without a doubt. The reparations were lunacy. However, WWI was itself a response to the Franco-Prussian war in the 19th Century. In this sense WWI is really WWII and WWII is really WWIII, because in my view the Franco-Prussian war is really what set the stage for the 20th Century.

    The Treaty between France and Germany gave Germany the city of Strasbourg, the fortification at Metz, and possession of Alsace and the northern portion of Lorraine, an area that contained 80% of French iron ore and machine shops. The loss of these territories contributed to French resentment and contributed to public support for World War I, in which France vowed to take back control of these areas lost to Prussia. They succeeded in WWI, but then the pendulum swung back again in the resentments and hostility. You see this resentment has been a two edged sword and in my view Britain had little to do with it, other than grow weaker through the twentieth century. But the ideological fire of WWII was what made it so outrageously deadly, and that was MY point in this.

    this was a battle that had all the cultural vestiges of the Carolinian Kingdom of Charlemagne, in that glorious past when Germany and France were one. That is what played out, and in my view WWII ended up being Germany warring America for control of the spoils of Britain.

    I would call WWI the War of Succession for the British Empire.

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