America: the debt deal doesn't have to lead to long-term decline

As it could inspire rejuvenation.

It may not seem like it now, but the debt-reduction deal might spur the United States of America to take a long, hard look at itself.  Much has already been written in the media about the negative impact this deal will have on the superpower.  Of course, immediate book-balancing will have been achieved, yet concerns have been raised about future prospects.

Writing in the New York Times, Paul Krugman warned: "For the deal itself, given the available information, is a disaster, and not just for President Obama and his party. It will damage an already depressed economy; it will probably make America’s long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status."

I wrote of this on July 24 in "Britain:  vindicated Cable?" when I suggested: "The American political system requires review perhaps if every time in the second half of a presidential term the Head of State is unable to press through legislation needed to govern effectively.  The Republicans might have the chance to reverse such decisions if and when they resume power.  Until then, wouldn't it be better to simply allow the Democratic President to get on with the job of running the country he was elected to govern?"

Great nations, it seems to me, are forged through re-invention.  Re-engineering processes, even revolution, have enabled countries like Germany, France, Britain and China to shine again after periods of long-term decline.


The rise of Prussia as one of the Five Great Powers under Frederick the Great and the unification of the Germans under Chancellor Bismarck were followed after WWI by the last Kaiser's fall.  Hyperinflation and economic collapse ensued as the Weimar Republic struggled to retain German dignity as it attempted to repay reparations to the victors of the war.  So, the rise of Hitler to fight communism and regain global status, his government's imperialistic aggression and slaughter, and ultimate defeat and devastion.  Collapse was followed by post-war rejuvenation leading to the industrial and economic powerhouse that is the modern Federal Republic.  Germany's global (particularly European) position today is arguably as key as was Otto von Bismarck's in the 19th century.  Germany sports a huge economy, the 5th in GDP (PPP) terms, according to the World Bank.  In a sense, it is again one of the Five Great Powers.


Louis XIV's sun-kingdom in France with the glory and influence which that entailed - French was the international diplomatic language and French culture and cuisine prized above all others - was followed by the French Revolution (and all those guillotined aristocrats!).  Then came Napolean's domination of Europe, years of political stagnation under countless, useless 'republics'.  Yet General, later President Charles de Gaulle re-instated French national pride.  La France may have lost its African Empire (though not its influence there) yet it is today a bright beacon of civilisation in a dumbed-down world.  On the World Bank list, France has the 8th biggest economy by GDP (PPP).


The collapse of the British Empire, possibly the greatest imperial power ever to have existed, led to a loss of national identity and a strike-ridden economy.  During the '60s and '70s, the Germans were describing Britain as the 'sick man of Europe'.  Then Margaret Thatcher - the 'Iron Lady' - for all her faults, returned the UK to world-centre stage.  The work-ethic returned to the bulk of the population and, while manufacturing capacity declined, its development of a global financial services centre in The City (the world's biggest non-dollar activity) enabled it to generate untold national wealth and countless personal fortunes.  The Algarve, Tuscany and Costa del Sol have almost been bought up by British retirees or ex-pats.  After an inconclusive 2010 election, a binding Coalition was formed in record time to deal with debt-related crises and deliver what The Economist called a "radical" administration taking a "a great gamble" that "sooner or later, many other rich-world countries will have to take".  The UK is the 7th biggest economy by GDP (PPP), states the World Bank.


In the 18th Century, China was arguably the most powerful country on earth.  But the Industrial Revolution enabled Britain to claim the 19th as its Century and China fell into industrial, economic and political decline.  The fall of the Qing or Manchu Dynasty , the rise of the Republic and the spread of egalitarianism was followed by a metamorphosis after 1949.  Communists took power, the country altered out of all recognition - withdrew into naval-gazing, Cultural Revolution and the stamping of state authority onto the every-day lives of its citizens.  Today, China is possibly the greatest success story on the planet with economic and political clout far exceeding that which the country possessed three hundred years ago.  The World Bank lists the Chinese economy as 2nd largest by GDP (PPP).  It should overtake America's by 2027 predicted Goldman Sachs, an investment bank.


So, while Paul Krugman might have a point, America doesn't need to decline into Banana Republic status.  Undoubtedly, the Founding Fathers would look down kindly on efforts made to progress the United States into something more sophisticated, more dynamic and less globally interventionist.  A successful America might be possible if the Americans themselves appreciate that fundemental changes to their political system are essential to avert future catastrophe.  And the sun will once again shine on the Land of the Free and the Home of the Brave.

For such change to take place, the strength of the American character must assert itself.  And a President of historical significance has to steer the nation to good fortune, in my view.  The precedants, in the form of those countries I've mentioned, are there for that Head of State to emulate.  And history will judge his or her success.

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