Sharp drop in the dollar over the past few weeks has led to considerable concern about the status of the United States as the dominant force in the global economy. With these fears are closely related to the constant concern about the rise of China and is traditionally difficult relations between Beijing and Washington.
Most people now realize that China has become the largest creditor owes this status to a greater extent, thanks to all heavily indebted U.S. government. China holds about a trillion dollars of U.S. Treasury state bonds, and invested more than $ 100 billion in private companies in the United States. Even though these facts are recognized, politicians and pundits continue to underestimate the consequences of these relations.
Consider the situation that occurred in 1946, when Britain turned penniless to the United States for a loan. For 30 years or more, the main cost item of Great Britain was linked to the growing power of Nazi Germany. Were under two wars, millions of lives were lost, and the British treasury badly depleted in the process. Britain has survived, but the costs were enormous.
Despite its global empire, armed forces, and enviable position in world trade, in early 1946 the British government was facing a serious risk of default on its financial obligations. So the British Government as well as many times in the previous decade, turned for help to the closest ally – the United States. Britain has asked the U.S. loan for $ 5 billion under the zero interest with repayment over 50 years. Such generous terms to date at the time were acceptable. To the surprise and shock the British, Washington refused them.
Unable to accept such an answer, Britain explained that if she did not receive those funds, then praviteltvo become insolvent. Americans in response to this suggested a number of conditions. They provide the UK $ 3.7 billion under 2% per annum, as well as the British government was obliged to adopt a plan of the Bretton Woods Agreement of 1944, which is the dollar, not the pound sterling became the main reserve currency, and the British pound makes freely convertible. Even more importantly, that Britain had to abandon their imperial preference, which meant the abandonment of duties and taxes on goods for the colonies and from them, for example, for India. These were not just financial sanctions, all together, this meant the end of the British Empire.
Within two years, the British withdrew from India and conducted the process of decolonization in Asia and Africa. Unable to compete with the U.S. in economic terms and are no longer being able to enjoy the benefits of colonial trade, the British armed forces have also begun the process of reduction, and trade declined sharply. Later, the British quickly moved away from its dominant position in the global market and has entered a phase of several decades of economic malaise. In 1980 Britain finally became a prosperous country, but it was only a shadow of the last flowering of economic power.
U.S. replaced Britain as the guardian of the West. As one British official Evelyn Shakburg at the end of 1940’s “impossible not to realize that we are playing a secondary role.” And this is exactly what they wanted the United States. Supporting Britain for decades, becoming a banker and manufacturer for the needs of the Second World War, the United States intended to end the British Empire. Request for a loan provided an excuse, but by the time the balance has switched sides and England have very little could be done to change something.
By 2030, if not before, China will probably overtake the U.S. economy in size, although, given its size per capita, China will remain a very poor society for many years to come. Trajectories may change, but the recent explosion of the U.S. financial system, only accelerated the growth of China.
Given the lesson of the end of the British Empire, it would be foolish to build the current policy with the hope that China would strike a blow before he replaced the U.S.. And while the current debt level manageable United States and, in fact, only binds the Chinese to the American economy in ways that may benefit both countries, in fact, if at the moment, these economic systems are linked, then it does not mean that these interests will be synchronous and in the future.
In this case, the British counterpart is also sobering. For decades, relations between Britain and the U.S. have been mutually beneficial, while Americans were outraged over the status of “junior partner”. As the tension was low intensity, the British were fully focused on the immediate threat from Germany. But in the end, it is the U.S. dealt a devastating blow.
Americans have not had to deal with this economic competitor, after the UK more than half a century ago. USA today as unaccustomed to global economic competition, as were the British, while at its peak. United States often seem to be huge and unsuitable to the conditions of economic competition.
The only way to avoid the fate of England and solve the problem with China is to enhance economic life. This multi-year effort that must be done primarily through innovation, rather than legislatively. United States should modernize the domestic economy to be based on the global success of many American companies. United States should be oriented to the invention of new products and generate new ideas, rather than deal with the protection of corroded industries yesterday. Battles over health care and climate change – is a kind of cultural equivalent of the game, and he was fiddling, while Rome burns.
China is flourishing because he is hungry, dynamic, afraid of failure and is convinced that there must be a leading nation in the world. Is why the U.S. prospered a century ago. Today, by the way, hunger and dynamics seem to be the least obvious factors in the lives of Americans than the annoyance of the fact that the world does not want to negotiate with them.
The United States is in danger of assuming that because they are the dominant nation on the world stage – this fact will remain unchanged. All their actions – a way to repeat the fate of Britain.
By m-p Karabell (Karabell) by “Superohlazhdenie: how China and America became one of the world economy and why prosperity depends on it”, recently published by Simon & Schuster.