Thursday, July 17, 2008

Aussies call it like it is: America is screwed

This is a whole lot of no fun, but eye opening:
Nirvana out of American reach [lifted from Mr. Sterling]

The energy, financial and political woes that grip the US signal a decisive shift in world power, mocking the liberal delusion that Barack Obama or John McCain can return American prestige and power to its pre-Bush year 2000 nirvana. There is no such nirvana.

There is instead a new reality: the greatest transfer of income in human history, away from energy importers such as the US to energy exporters; the rise of a new breed of wealthy autocracies that cripple US hopes of dominating the global system; and demands on the US to make fresh compromises in a world where power is rapidly being diversified.

Far from the Obama-McCain contest being America's saviour, it has another dimension entirely: evidence of the generic failure of the US political system. The US struggles but seems unable to confront the world that exists. It slips into pessimism while fooling itself another irresistible revival is just around the corner. But the structural trends offer a different conclusion.

Despite cyclical fluctuations, world oil and energy prices will stay high, driven by long-run changes in supply and demand. This provokes a global wealth redistribution without precedent to oil exporters, mainly in the Middle East and Russia, that marches in tandem with China's export-driven current account surplus. It is an extensive transfer of economic power away from the US to nations that are not mainly democracies, a dynamic that is the subject of agonising review in seminars and debates in the US...

[It was pointed out to me that Detroit has been in a post-apocalyptic state for years. I suppose the consolation there is that we're better prepared. Heck, the impending macro collapse could open up whole new industries! Systemwide Ecological and Fiscal Disaster Consulting has a nice ring to it.]

1 comment:

ben j said...

Sorry, but I'm not siding with the prophets of doomsday yet.

We've already seen that energy prices are affecting demand, right now. Once that happens, the incentives for developing alternative energy sources begin to fall into place. This has happened in the past (with fuel efficiency, if not alternative sources).

At the same time, energy doesn't hit the US like it hits China. China manufactures energy-intensive products. If energy prices shoot up, Chinese products are priced out of the export market, which is really all they're good for - the Chinese themselves don't want it.

In the end, the "sustainable" part in the National Security Strategy that Sterling quotes is the key. Can we sustain our asinine overconsumption indefinitely? It seems pretty unlikely. Will the Chinese be able to avoid a rising expectations scenario when their growth finally slows? Probably not. Will the Russians be able to conquer the potentially crippling demographic crisis that they face in the next couple of generations? Again, it's going to be tough. We just can't predict what will give first with any worthwhile accuracy - this is absolutely Black Swan territory.

This kind of punditry is so frequently wrong that I have a difficult time getting scared about it. Sterling is projecting the current trend lines into the future indefinitely. At some point, every trend line will break, and you'll have to re-examine the system. At this moment, I think potential (both in technology and will) for a shift away from fossil fuels is far greater than it's ever been. If that happens, absolutely all bets are off, as you can imagine.

Sorry for the long-winded post, but I'm fed up with pessimism. The old adage about economists accurately predicting 52 of the last 4 recessions also applies to foreign policy types and predictions of American downfall...