Germany, China have will to power

[unhappycamper]

Germany, China have will to power
By Martin Hutchinson
Feb 2, 2011

The US Congressional Budget Office's report last Wednesday that the US budget deficit was to run close to 10% of gross domestic product for a third successive year, together with President Barack Obama's refusal to face the need for major public spending cuts in his State of the Union Address on Tuesday night, finally opened the possibility of a lengthy period when the United States' debt nightmare no longer allowed it to play its customary leading role in the world.

The natural heirs to its hegemony will be Germany and China, the two powers that have retained a sense of fiscal responsibility in the 2008-11 economic meltdown. Needless to say, a world dominated by those two powers will have very different characteristics.

A full abdication by the United States, as distinct from its gradual subsidence into a leading position within a "multi-polar" world order, may at first glance seem unlikely. Yet there is a clear precedent for it in the fate suffered by Japan since its market bubble burst in 1990. The world's second-largest economy for most of the last two decades, Japan has been traumatized by prolonged recession and spiraling debt and has gone into its shell, punching consistently below its weight in international negotiations, except for a transitory period under prime minister Junichiro Koizumi. Russia, a far poorer country with a GDP one-third the size, riddled with corruption and cruelty, is of much more consequence at the world's geopolitical top table.

It may be objected that since World War II Japan has kept a low profile, whereas the United States has been used to throwing its weight around and would wish to continue doing so. However, in 1989-90 Japan was showing much more assertiveness - the best-seller The Japan That Can Say No was published in 1989 by Shintaro Ishihara, now governor of Tokyo, and Akio Morita, the founder of Sony. Two decades of spiraling debt and lackluster growth sap a nation's ability to take foreign policy initiatives as well as its domestic policy.

Since the Congressional Budget Office's forecast is for a US debt trajectory deteriorating rather more quickly than Japan's in the 1990s, and the country's recent foreign adventures have been met either with failure or at best qualified success, it does not take much imagination to imagine a world in 2020 where the United States has retreated largely to isolationism, cutting off the greater part of its international commitments, slashing its participation in multilateral institutions, retreating into "anti-dumping" protectionism and struggling to bring its fiscal position and economic performance under control.