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Tuesday, 30 November 2010 16:08

America is suffering a power outage

The peak US moment as the sole superpower is now well past -- and there’s no overall recovery in sight, only a marginal chance of success in areas such as the Israeli-Palestinian conflict.

Given the growing economic strength of China, Brazil, and India, among other rising powers, US influence will continue to wane. The US power outage is, by any measure, irreversible.

“Make poverty history!” A catchy slogan, and an admirable aim, it was adopted by world leaders at the United Nations summit in New York on the eve of the New Millennium. A decade later, it is America which has made history -- even if in the opposite direction. The latest US Census Bureau statistics show that, in 2009, one in seven Americans were living below the poverty line, the highest figure in half a century. Last month’s 95,000-plus home foreclosures broke all records.

These were only two of the recent glaring signs of the sagging might of the so-called globe’s “sole superpower,” now heavily indebted to Beijing. Other recent indicators include its failure to corral China into revaluing its currency, the yuan, against the dollar, and to compel Russia, China, India, or even Pakistan to follow its lead in suppressing the oil and natural gas trade with Iran. With Washington failing to impose it's monetary or energy policies on the rest of the world, it has entered a new era in history.

The economic “recovery” is proving anemic. An already weak gross domestic product (GDP) growth figure, 2.4% for the second quarter of 2010, was recently revised downward to 1.6%, and the Organization for Economic Cooperation and Development, consisting of the globe’s 30 richest countries, has predicted a paltry 1.2% US expansion in the fourth quarter of the year.

Consider one measure of the depth of that hole: between December 2007 -- the official start of the Great Recession -- and December 2009, the American economy made eight million workers redundant. Even if the job market were to improve to the level of the boom years of the 1990s, it would still take until March 2014 simply to halve the present 9.6% unemployment rate and return it to a pre-recession 4.7%. By now, the Obama administration’s 862 billion dollars stimulus plan has largely worked its way through the system without having had much impact on job creation. And keep in mind that the high official unemployment rate is significantly less than the real figure. It doesn’t take into account part-time workers who would prefer full-time jobs, or those who have stopped seeking employment after countless failed attempts. In the end, the administration’s policy makers seem to have failed to grasp that a recession caused by a banking crisis is always much worse than a non-banking one.

Just as the Obama administration revised those anemic GDP growth rates downward, China’s economy was passing Japan’s to become the second largest on the planet. While the Chinese GDP is steaming ahead at an annual expansion rate of 10%, Japan’s is crawling at 0.4%.

China’s leaders responded to the 2008-2009 recession in the West that led to a fall in their country’s exports by quickly changing their priorities. They moved decisively to boost domestic demand and infrastructure investment by sinking money into improving public services.

While Western governments tried to overcome the investment slump at the core of the Great Recession indirectly through deficit spending, China raised its public expenditures through its state-controlled banks. They provided easy credit for the purchase of consumer durables like cars and new homes. In addition, the government invested funds in improving public services like health care, which had deteriorated in the wake of the economic liberalization of the previous three decades.

On the ideological plane, the spectacular failure of the Western banking system on which the private sector rests revived socialist ardor, long on the wane, among China’s policymakers. In response, they decided to bolster state-controlled companies, proving wrong Western analysts who bet that public-sector undertakings would lose out to their private-sector counterparts. The upsurge in government spending and generous bank lending policies led to increased investments by state-owned companies. Whether engaged in extracting coal and oil, producing steel or ferrying passengers and cargo, such companies found themselves amply funded to upgrade their industrial and service bases, a process that created more jobs. In addition, they began to enter new fields like real estate. As China’s third biggest supplier of petroleum (after Saudi Arabia and Angola), Iran figures prominently on Beijing’s radar screen. So far, Chinese energy corporations, all state-owned, have invested $40 billion in the Islamic Republic's hydrocarbon sector. They are also poised to participate in the building of seven oil refineries in Iran.

When, earlier this year, European Union (EU) companies stopped supplying gasoline to Iran, which imports 40% of its needs, Chinese oil corporations stepped in. That was how in 2009, with a $21.2 billion dollar two-way commerce, China surpassed the EU as Iran’s number one trading partner. It is estimated that China-Iran trade will rise by 50% in 2010. As promised publicly and repeatedly, the Russians finally commissioned the civilian nuclear power plant near Bushehr, which they had contracted to build in 1994. It meets all the conditions of the International Atomic Energy Agency. Russia will provide it with nuclear rods and remove its spent fuel which could be used to produce weapons.

Little wonder, then, that Russia and China appear on the list of the 22 nations that do “significant business” with Iran, according to the White House. What surprised many American analysts were the appearance of India on that list, which reflected their failure to grasp a salient fact: “energy security trumps all” is increasingly the driving principle behind the foreign policies of a variety of rising nations.

In whole regions of the world, US power is in flux, but on the whole in retreat. The United States remains a powerful nation with a military to match. It still has undeniable heft on the global stage, but its power slippage is no less real for that -- and, by any measure, irreversible. Whatever the twenty-first century may prove to be, it will not be the so-called American century.

Those familiar with stock exchanges know that the share price of a dwindling company does not go over a cliff in a free fall. It declines, attracts new buyers, recovers much of its lost ground, only to fall further the next time around. Such is the case with US “stock” in the world. The peak American moment as the sole superpower is now well past -- and there’s no overall recovery in sight, only a marginal chance of success in areas such as the Israeli-Palestinian conflict, where the United States remains the only major power whose clout counts.

For almost a decade, Washington poured huge amounts of money, blood, military power, and diplomatic capital into self-inflicted wars in Afghanistan and Iraq. Meanwhile, the US lost ground in South America and all of Africa, even Egypt. Its long-running wars also highlighted the limitations of the power of conventional weaponry and the military doctrine of applying overwhelming force against the enemy.

As the high command at the Pentagon trains a whole new generation of soldiers and officers in counterinsurgency warfare, which requires the arduous, time-consuming tasks of mastering alien cultures and foreign languages, "the enemy," well versed in the use of the Internet, will forge new tactics. Given the growing economic strength of China, Brazil, and India, among other rising powers, US influence will continue to wane. The American power outage is, by any measure, irreversible.

(By Dilip Hiro, a political writer, journalist, historian and analyst specializing in India and the Islamic world; Huffington Post)

 

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