American Theocracy

the peril and politics of radical religion, oil, and borrowed money in the 21st century

by Kevin Phillips

Penguin Books, 2006, paperback


... the 2000 and 2004 presidential elections marked the transformation of the GOP into the first religious party in US. history

Today's United States ... has organized much of its overseas military posture around petroleum - a new emphasis on protecting oilfields, pipelines, and sea lanes.

... the United States is running out of its once overflowing oil resources, a military solution to an energy crisis is hardly lunacy. Neither Caesar nor Napoleon would have flinched, and the temptation, at least, to grab land with prime energy resources is understandable. 'What Caesar and Napoleon did not face, but what overtook the inept and religiously diverted George W. Bush, is that bungled overseas military embroilment, dangerous in its own right, often also boomerangs economically. The federal budget went from balance to a cumulative additional deficit of $1.3 trillion over six years of Bush. Meanwhile, the United States, as of 2006 some $4 trillion in hock internationally, had deepened its peril as the world's leading debtor, increasingly subject to worry that some nations will sell dollars in their reserves and switch their holdings to rival currencies or even gold. Washington keeps printing bonds and dollar-green IOUs, which European and Asian bankers accumulate-at least until for some reason they lose patience. This is, the debt Achilles' heel, which stands alongside the oil Achilles' heel.

... Christian evangelicals, fundamentalists, and Pentecostals ... muster 40 percent or more of the [Republican] party electorate. Many, many millions believe that the Armageddon described in the Bible is coming soon. Chaos in the explosive Middle East, far from being a threat, actually heralds the awaited second coming of Jesus Christ. Oil-price spikes, murderous hurricanes, deadly tsunamis, and melting polar ice caps lend further credence.

Defense Secretary Donald Rumsfeld, November 2002

"It [Iraq invasion] has nothing to do with oil, literally nothing to do with oil."

British Prime Minister Tony Blair told Parliament in early 2003

"Let me deal with the conspiracy theory that this has something to do with oil. There is no way whatever that if oil were the issue, it wouldn't be simpler to cut a deal with Saddam Hussein"

President HW Bush, 1991, Desert Storm, Iraq

"Our jobs, our way of life, our own freedom and the freedom of friendly countries around the world would all suffer if control of the world's great oil reserves fell into the hands of Saddam Hussein."

Dick Cheney, President of Halliburton, 1991

"By some estimates, there will be an average of two percent annual growth in oil supply demand over the years ahead, along with conservatively a three percent natural decline in production from existing reserves. That means by 2010 we will need on the order of an additional 50 million barrels a day"

Newsweek polling ... in 1999 found 45 percent of American Christians believing in Armageddon and the end times, and almost as many saying that the antichrist was already alive and on the earth. Because such beliefs concentrated among the heavily proBush evangelicals, fundamentalists, and Pentecostals, my estimate is that some 55 percent of the people who voted for Bush in 2000 would have told pollsters about believing in the end times and Armageddon. Poll taker John Zogby concluded several years back that conservative Christians accounted for 58 percent of all Republicans. Let me bring forward another pivot. Richard Cizik of the National Association of Evangelicals noted in 2003 that since the breakup of the U.S.S.R, "evangelicals have substituted Islam for the Evil Empire. The Muslims have become the modern-day equivalent of the Evil Empire." According to University of Wisconsin historian Paul Boyer, by the 1990s prophecy believers saw Saddam Hussein as the antichrist or his forerunner, partly because Saddam was rebuilding the ancient evil city of Babylon. The Left Behind series, by fundamentalist preacher Tim LaHaye, fictionalized the whole RaptureTribulation-Armageddon sequence so successfully that it sold a whopping sixty million copies in book and tape form. Indeed, LaHaye located New Babylon and the seat of the antichrist right in the middle of-where else? - Iraq.

... the US. military is being converted into a global oil-protection service"

GW Bush to members of the Southern Baptist Convention, in 2000

"I believe that God wants me to be president"

GW Bush to a Houston, Texas minister

"I believe I am called to run for the presidency.

Lt. General William Boykin, the deputy undersecretary of defense,. proclaimed of Bush

"He's in the White House because God put him there."

Henry Kissinger
"Control energy and you control the nations.

.. the East [is] expected by 2020 to have two-thirds of the world's remaining oil resources.

In the 1930s and 1940s five of the seven sisters that dominated international oil were American. Now only ExxonMobil (2) and Chevron (7), both of which gained needed scope through 1999 mergers, fly the Stars and Stripes. The other eight leading firms are Saudi Aramco (1), the National Iranian Oil Corporation (3), Petróleos de Venezuela (4), British Petroleum and Royal Dutch/Shell (tied for 5), Total (8), Pemex (9), and PetroChina (10).

Four of the ten are government-owned oil companies empowered by various reorganizations and nationalizations: Pemex, formally Petróleos Mexicanos (1938), the National Iranian Oil Corporation (1979), Petróleos de Venezuela (1976), and Saudi Aramco (1980). PetroChina, principally state owned, is the largest oil company in the People's Republic. That gives Asia and Latin America five out of the top ten, a major comedown for the former seven sisters. From the 1930s to the 1960s, the seven counted much of this oil production their own, but after nationalization spread across the Middle East and Latin America the share of global oil reserves held by the four American and British giants fell to just 4 percent in 2000. Not surprisingly, the companies deeply resent this turnabout and would like to see it reversed by privatization, especially in the Middle East.

In the 1960s commentators described the big American and British firms as "integrated" oil companies because they controlled the whole sequence of production from oil field to pump. But the rise of the rival state-owned companies over the last four decades prompted some US. analysts to coin a new term for the Western behemoths: obsolescent "supermajors." Forced into seeking more strength through mergers during the 1990s, the resulting megafirms, also including French Total, soon found themselves consumed with the challenge of replacing every million barrels sold with a freshly discovered million. Finding small fish was not enough; the behemoths needed the latter-day equivalent of giant sperm whales, and the hunting grounds were shrinking.

Experts saw only a few options. The majors could tilt more toward natural gas, made easier because overseas gas producers had no OPEC-type quotas to constrain output. Alternatively, they could hope to gain oil resources by relying on Washington pressure to break up the state-owned firms guarding the spigots in the Persian Gulf. In the years before the 2003 U.s. invasion left Iraq's oil production in disarray from disrepair and insurgent attacks, ExxonMobil and Chevron had both smacked their lips over sharing access. ExxonMobil, foreign observers reported, hoped to get the Majnoon field, with its twenty to twenty-five billion barrels." As early as 1995, The Wall Street Journal reported a consensus that Iraq, with its huge resources and very low production costs, was "the biggie" in terms of future production and oil-firm global pecking order."

Those stakes took dollar form in early 2004 when the New York-based Global Policy Forum published calculations of how much the U.S. and UK. oil giants stood to make from control over Iraqi oil reserves estimated at close to four hundred billion barrels: "In order to understand the magnitude of these profits, it is useful to know that the worldwide profits of the world's five largest [private] oil companies in 2002 were $35 billion. Our estimate of the 'most probable' annual profits in Iraq are $95 billion, three times this sum!"

Against a backdrop of declining national oil and gas output, Americans consume 25 percent of world energy while holding just 5 percent of its energy resource. As the new century began, Americans enjoyed a lifestyle roughly twice as energy intensive as those in Europe and Japan, some ten times the global average.' Of the world's 520 million automobiles, unsurprisingly, more than 200 million were driven in the United States, and the US. car population was increasing at five times the rate of the human population.

Peter Dale Scott, 2003

The need to dominate oil from Iraq is also deeply intertwined with the defense of the dollar. Its current strength is supported by OPEC's requirement (secured by a secret agreement between the U. S. and Saudi Arabia) that all OPEC sales be denominated in dollars.

Fadel Gheit, a prominent New York-based oil analyst, used words more appropriate to a movie publicist: "Think of Iraq as virgin territory .... This is bigger than anything Exxon is involved in currently... It is the superstar of the future. That's why Iraq becomes the most sought-after real estate on the face of the earth .... Think of Iraq as a military base with a very large oil reserve underneath .... You can't ask for better than that."

[A] transformational company of the nineties ... manned by prominent figures from the departing Bush administration-George H. W Bush himself and Secretary of State James A. Baker Ill-was the Carlyle Group, partly funded by rich Saudi investors. Military and Pentagon contractors were conspicuous on the list of Carlyle subsidiaries. One was the Vinnell Corporation, close to the CIA, which held contracts to train the security and internal police forces of countries including Turkey and Saudi Arabia.

[George HW] Bush's decision to intervene in Somalia in late 1992, supposedly for humanitarian reasons, was later proved by the investigative journalism of the Los Angeles Times to have been substantially oil driven. Four large US. oil firms-Chevron, Amoco, Conoco, and Phillips-had exclusive concessions covering two-thirds of Somalia that were put at risk when the nation's pro-Western government was overthrown. Although the US. government spoke of "peacekeeping' and company spokesmen denied motivations of oil rather than of humanitarian relief as "absurd" and "nonsense," the newspaper noted that Bush himself in 1986 had dedicated a Texas-run oil facility in nearby Yemen, an occasion when he emphasized regional oil development. Equally to the point, Conoco had allowed its corporate compound in Mogadishu to be made into a de facto US. embassy a few days before the marines landed in the capital. These circumstances, the Times concluded, led "many to liken the Somalia operation to a miniature version of Operation Desert Storm."

Oil-based foreign policy persisted under Bush's Democratic successor, Bill Clinton. Captivated by mid-nineties assessments of the energy potential of the Caspian Sea region, Clinton in 1995 announced "strategic partnerships" with Uzbekistan and several other newly independent republics in former Soviet central Asia. Several US. companies had already negotiated oil or gas deals with Kazakhstan and Azerbaijan. In a 1998 book, The Grand Chessboard, Zbigniew Brzezinski, a former Democratic White House national-security adviser, touted the Caspian and central Asia as a strategic pivot in much the same way Britain's Mackinder had before World War Brzezinski's strategic recommendations, to be sure, had a more specific oil and gas focus.

Because the landlocked Caspian was inaccessible to oil and gas tankers, pipelines became an early petro-imperial focus. Along with Britain's Blair, Clinton became a patron of the Baku-Tibiisi-Ceyhan pipeline. He also promoted a route from the Black Sea across the Balkans to Albania. Meanwhile, General Anthony Zinni, the US. Centcom (Middle Eastern) commander, opened military conversations with the new republics. By the time Clinton left office in January 2001, he could point to other minor Kipling-esque innovations: the Silk Road Strategy Act of 1999 and the April 2000 launching of the Central Asian Border Security Initiative. But by 2002, oil companies drilling in the Caspian and finding little began to conclude that its energy potential had been overblown."

In 1997-1998 observers had generally dismissed petroleum-related interpretations of Clinton's commitment of U.S. military forces to the Balkans. The principal allegation was that European and US. intervention was really about making southern portions of the former Yugoslavia safe for pipelines bringing Caspian oil from Bulgaria on the Black Sea to Albania on the Adriatic. In 2002 the Asia Times offered an even broader indictment: 'All countries or regions which happen to be an impediment to Pipelineistan routes towards the West have been subjected either to a direct interference or to all-out war: Chechnya, Georgia, Kurdistan, Yugoslavia and Macedonia."" Few in the West listened.

In fact, oil-transportation considerations must always have lurked in the background. Late 2004 saw Albania, Macedonia, and Bulgaria sign a pact to begin the trans-Balkans pipeline's construction. Much of the financing came from the US. government's Overseas Private Investment Corporation and private American firms, as originally proposed in 1996, when the corridor involved had been laid out as part of the Clinton administration's South Balkan Development Initiative.

Whatever Clinton's expectations for the Caspian, he more than maintained the oil-related status quo in Iraq. He launched major attacks with aircraft and cruise missiles in January 1996, June 1996, and December 1998; he deployed troops near Iraq's borders in 1997 and 1998 (Operations Phoenix Scorpion and Desert Thunder) after Baghdad had proposed oil concessions to Russia, China, and France; and on October 31, he signed the Iraq Liberation Act of 1998, calling for regime change in Baghdad. Two months earlier Clinton had signed another finding (PL 105-235) that accused Iraq of building weapons of mass destruction, failing to cooperate with the United Nations, and being "in material and unacceptable breach of its international obligations."" This insistence, as we have seen, was essential to keeping Saddam Hussein hogtied by UN sanctions and thus unable to implement the French, Russian, and Chinese concessions.

For boldness, though, none of the Clinton-era actions could compare with the far-reaching Great Game propositions of the onetime strategists for the first Bush administration gathered around Cheney and the Project for a New American Century. "Regime change" in Iraq became code for a second invasion. The Bush-Cheney administration, on taking office, embraced an oil "forward strategy" with instant intensity. Plans were discussed in the spring and summer of 2001-well before the events of September-for hamstringing Iraq and convincing the Taliban in Afghanistan to accept construction of an American (Unocal) pipeline from Turkmenistan through Kabul to Karachi, Pakistan. Talks with the Taliban continued in the summer of 2001 but apparently soon collapsed. Duplicity seems to have been in the catbird's seat. Multiple press reports from sources in Pakistan and elsewhere, all officially denied in Washington, had the American government planning to attack Afghanistan sometime in the autumn .

Then the world changed. Besides intensifying existing oil and Middle Eastern pressure, September 11, the attack on the World Trade Center gave Washington policies a convenient new all-inclusive justification: fighting terror was about everything, and everything was about fighting terror. Oil motivations, rarely a popular or easy foreign-policy justification, could now be submerged within a primal response to a deep-seated national combination of fear, loathing, and outrage. Petroleum strategy could now become only a minor facet of an antiterrorist mobilization.

In 2003, former White House speechwriter David Frum wrote in his Bush political biography, The Right Man, that "the war on terror" was designed to "bring new stability to the most vicious and violent quadrant of the Earth-and new prosperity to us all, by securing the world's largest pool of oil."

The Pentagon's 2003 Global Posture Review. To sticklers, the 2003 report understated the new oil and gas preoccupation by omitting de facto bases in Afghanistan, central Asia, the Balkans, and the Persian Gulf. From west Africa to the Strait of Malacca, evidence aplenty suggested that future US. base locations would be tied to oil resources and oil-transport considerations. Several commentators used the term "base mania" to describe the string of installations guarding the pipeline corridors and oil-production centers of the anew imperial frontier.

... where Nigeria, Chad, Cameroon, Gabon, Equatorial Guinea, São Tome and Principe, Congo, and Angola cluster along or near west Africa's Atlantic coast. São Tome's importance-the islands have become a U.S. focal point-lies in the output expected as international oil companies explore and develop promising offshore fields in the waters between these islands and Nigeria." Controllable by US. naval power, west Africa and its waters could be a middling rival to OPEC-or at least it could help stave off a supply crisis for another four to six years.

... the American military is being used more and more for the protection of overseas oil fields and the supply routes that connect them to the United States and its allies. Such endeavors, once largely confined to the Gulf area, are now being extended to unstable oil regions in other parts of the world. Slowly but surely, the US. military is being converted into a global oil-protection service.

Some oil watchers later contended that Cheney let the cat out of the Iraqi-invasion bag in a 1999 speech to the London Institute of Petroleum. He observed: 'By some estimates, there will be an average of two percent annual growth in global oil demand over the years ahead, along with conservatively a three percent natural decline in production from existing reserves. That means by 2010 we will need on the order of an additional fifty million barrels a day."

James Paul of the Global Policy Forum
"Iraq's oil is the world's cheapest to produce, at a cost of only about $1 per barrel. The gigantic 'rent' on Iraq's oil, during decades of production, could yield company profits in the range of $4-5 trillion .... Assuming fifty years of production and 40% royalties, Iraq could yield annual profits of $80-90 billion per year, more than the total annual profits of the top five companies, even in the banner year of 2003."

James Akins, the former US. ambassador to Saudi Arabia, commented in early 2003 that what they [the Bush administration] have in mind is denationalization, and then parceling Iraqi oil out to American oil companies. The American oil companies are going to be the main beneficiaries of this war."

From the US. standpoint, Iraq by 2002 and 2003 was a rogue nation not just because of hidden weapons or attempts to undercut the United States in the oil arena but also because Saddam Hussein sought to un- horse the dollar in the global financial markets. Closely on the heels of the euro's 1999 introduction, Baghdad had started trading its oil for euros, not dollars, a policy that became official in late 2001. There are no records, but Cheney's reported early 2001 plotting against OPEC may well have touched on the related peril to the dollar. Indeed, shortly after Iraq was occupied, US. administrators put it back on the dollar standard for its oil transactions in June 2003. Moreover, had the hoped-for flooding of world markets by Iraqi production been able to weaken or break OPEC, that would simultaneously have undercut any chance that Iran, Venezuela, and Indonesia might convince the cartel to drop the dollar for the euro or a so-called basket of currencies.

Although the newly hatched European currency had lost ground against the dollar in 2000 and 2001 as rising US. interest rates drew foreign investors, the euro gained in late 2002 as U.S. rates fell and Washington mobilized against Iraq. Some currency analysts in Europe, however, preferred to credit OPEC members' antidollar machinations instead of the US. interest rate changes. Venezuela, for one, promoted barter arrangements instead of dollar transactions in selling its oil to Western Hemisphere nations, in response to the alleged 2002 US. coup attempt against Venezuelan president Hugo Chavez. Iran's central bank began shifting its reserves from dollars into euros.

Christianity in the United States, especially Protestantism, has always had an evangelical-which is to say, missionary-and frequently a radical or combative streak. Some message has always had to be preached, punched, or proselytized. Once in a while that excitability has been economic-most notably in the case of the Social Gospel of the 1890s, which searched through Scripture to document the Jesus who emphasized caring for the poor and hungry. In the twentieth century, though, religious zeal in the United States usually focused on something quite different: individual pursuit of salvation through spiritual rebirth, often in circumstances of sect-driven millenarian countdowns to the so-called end times and an awaited return of Christ. These beliefs have often been accompanied by great revivals; emotionalism; eccentricities of quaking, shaking, and speaking in tongues; characterization of the Bible as inerrant; and wild-eyed invocation of dubious prophecies in the Book of Revelation. No other contemporary Western nation shares this religious intensity and its concomitant proclamation that Americans are God's chosen people and nation.

American People: A Biblical Worldview

The Bible - A Literal Truth

Is the Bible literally accurate?

National sample: Yes, 55%
Evangelical Protestants: Yes,
83% Non-evangelical
Protestants: Yes, 47%
Catholics: Yes, 45%



Belief in Highlights of the Bible"

Are these descriptions literally true?

Noah's Ark: Yes, 60%
God's creation of earth in six days: Yes, 61%
God parting the Red Sea for Moses: Yes, 64%



The Book of Revelation and the Coming of Armageddon

Will events in the Book of Revelation occur sometime in the future or not?

All Christians: Yes, 59%; no, 33%

Born-again, fundamentalist and evangelical categories: Yes, 77%; no, 15%



Will the world end in an Armageddon battle between Jesus Christ and the Antichrist?

All Christians: Yes, 45%; no, 39%
Evangelical Protestants: Yes, 71%; no, 18%
Other Protestants: Yes, 28%; no, 54%
Catholics: Yes, 18%; no, 57%

Economic conservatives often warm to sects in which a preoccupation with personal salvation turns lower-income persons away from distracting visions of economic and social reform.

... about one in four Americans (or 25 percent) are now affiliated with a church from this network of conservative Protestant churches (that is, fundamentalist, evangelical, holiness, or Pentecostal) not quite one in six (around 15 percent) are affiliated with the older denominations that used to b called the Protestant mainline." Still, the conservative ratio may, understated by leaving out America's million Mormons and million Jehovah's Witnesses, and perhaps also by pegging Pentecostals at a cautious ten million adults ...

The Roman Catholic Church claims some sixty million members, but only half are frequent churchgoers. The sharp decline from 1965 to 1990 in church ability to recruit priests, nuns, and seminarians in the United States has been charted from the Official Catholic Directory by Stark and Finke. From 10.6 enrollments in seminaries for every ten thousand US. Catholics in 1965, the number plummeted to 1.1 in 1990.

For centuries Americans have believed themselves special, a people and nation chosen by God to play a unique and even redemptive role in the world. Elected leaders tend to proselytize and promote this exceptionalism ...

Richard Land, chief Washington representative of the Southern Baptist Convention, 2003

George Bush is an evangelical Christian, there is no doubt about that. The president's evangelicalism means he believes in the truth of the Bible, with a capital T: the virgin birth, the death of Christ on the Cross for our sins, the physical resurrection, and most important, a personal relationship with Jesus.

David Domke, God Willing, 2004

The Bush administration's worldview is one grounded in religious fundamentalism - that is, it emphasizes absolutes, authority, and tradition, and a divine hand in history and upon the United States. Such a worldview is disastrous for a democratic system.

Bill Moyers, 2004

One of the biggest changes in politics in my lifetime is that the delusional is no longer marginal. It has come in from the fringe, to sit in the seat of power in the Oval Office and in Congress. For the first time in our history, ideology and theology hold a monopoly of power in Washington

Episcopal minister and former Republican senator John Danforth, 2005

By a series of recent initiatives, Republicans have transformed our party into the political arm of conservative Christians. The elements of this transformation have included a constitutional amendment to ban gay marriage, opposition to stem cell research involving both frozen embryos and human cells in petri dishes, and the extraordinary effort to keep Tern Schiavo hooked up to a feeding tube.

Harry S Truman

The only thing new in the world is the history we don't know.

Thomas C. Donlan, Barron's, 2005

The lesson of history is that we don't learn the lessons of history.

... Germany, Switzerland, and Japan. All three nations have wages or overall production costs higher than those in the United States. All have reasonably successful financial sectors and postindustrial accomplishments (tourism, ecological awareness, and renewable-energy emphases-wind in Germany, solar power in Japan). However, they balance these with highly developed manufacturing industries. For Germany, machinery, vehicles, chemicals, and metal products are the great exports; for Switzerland, chemicals, metal products, machinery, and mechanical-engineering products (especially clocks and watches); and for Japan, vehicles, electronics, and computers. Each nation's products command global respect for quality.

Indeed, German, Japanese, and Swiss export prowess puts the once-mighty United States to shame. In 2003 and 2004 the US. trade deficit in manufactured goods rose from $470 billion to $552 billion. The three better-balanced economies, by contrast, enjoyed huge surpluses in trade in manufactured goods and large ones in their overall current accounts. A set of statistics will demonstrate the point. Estimates for 2004 provided by the CIA in mid-2005 put Germany first in the world with $893 billion in exports (mostly manufactured goods)-this from a national population of 82 million. The United States placed second with exports of $795 billion, not exactly a triumph because (1) the United States had a population of 296 million and (2) these exports were dwarfed by $1.3 trillion worth of imports. The Japanese, chalking up the world's third-highest export total, $538 billion, did so with a national population of 127 million. Pocket-sized Switzerland was even more of a per capita powerhouse: with a national population of only 7.5 million, it exported $131 billion worth of goods in 2004.56 Keep in mind the entire equation: the Germans, Japanese, and Swiss do this with workforce wages and benefits and industrial-production costs as high as or higher than those in the United States.

Needless to say, all three countries are net creditor nations, enjoy strong current-accounts surpluses, and have citizens who achieve relatively high savings rates. During the quarter century after 1980, while the US. economy was undergoing financialization, the Organization for Economic Cooperation and Development (OECD) credited all three with stronger growth rates than the United States." One would not guess that from American media coverage; "Old Europe," in particular, is supposedly verging on economic palsy.

Even Britain, as it happens, has avoided the reckless deindustrialization allowed in the United States. Although British manufacturing exports lack the comparative heft they registered in 1870 or 1900, economic historians underscore that in 1990 merchandise exports represented 21 percent of British GDP, whereas in the United States they amounted to only 8 percent. 18 Between 2000 and 2003, the share of US. GDP represented by manufactured exports dropped from 7 percent to 6 percent, and it is chilling to contemplate what the ratios might be in 2010 or 2020.

... in light of the trends in manufacturing and the credit markets alike, there is little doubt left about the next dominant continent, Asia, and the next leading world economic power-China, possibly in the 2030s, barring some extraordinary disruption. This prospect, coupled with China's emergent role as a leading US. creditor, is part of what has to warn Americans, just as the surging economic growth of both the United States and Germany became a warning to Britain in the 1890s.

Globally, the prospect has two faces. The first, of course, is the threat to the United States and the well-being of its people. The final act of a Volckerian opera, in which the fat lady of misfortune finally does sing, could be tragic not just for many in the United States, but conceivably for world stability. At the same time, there is a fascination-not least in the United States-with the implications of a new economic supremacy in Asia. Every year brings more attention to the rising skyline of Shanghai and China's extraordinary industrial growth, to the emergence of India as the communications back office of the English-speaking world, to the emergence of South Korea as the world's most advanced broadband telecommunications society, to the location of the world's tallest buildings in Kuala Lumpur, Malaysia, to the world's first "seven-star" hotel in Dubai, to the urban model of Singapore, to the money being made in Middle Eastern stock markets, and to the growing belief in the West as well as the East that global leadership will pass to Asia by 2040 or even 2030. The belief held in some Asian circles-that the balance of power and wealth is shifting back to Asia for the first time since unbeatable Western warships passed through the Strait of Malacca in the fifteenth century-could well turn out to be true. Not a few Asian Americans, educated or even born in the United States, are returning to grasp a future in Taiwan, Korea, India, and China.

In the Middle East, the oil price surge that grew in 2003-2005 after the Bush administration failed in its Iraq-centered oil policy has elevated what was already a major new wave of regional economic development. Industrialization is growing, bolstered by oil and natural gas availability. Finance is becoming more locally oriented-Middle Eastern stock markets were among the world's best performing in 2004-2005-and less tributary to the United States and Britain. Cities and resorts are becoming sophisticated enough that tourism and duty-free shopping are booming from Bahrain to Abu Dhabi. The next decades should be extraordinary.

The economic realignment favoring southwest and central Asia that flows from recent and projected oil and natural gas prices already resembles that occurring in East Asia because of the migration of manufacturing, not least from North America. If, as some believe, some 30 to 35 percent of world energy will come from natural gas by the 2020s, the principal beneficiaries will be major gas producers-Qatar, Iran, Turkmenistan, and Russia hold more than half of the known reserves, but Venezuela and North Africa are also important. The energy outflow of American dollars, in short, can only burgeon under an oil and gas regime. Besides the currency flowing to East Asia and the Middle East, two other buildups deserve note: Russia's international reserves ballooned from $18 billion at the end of 1997 to $124 billion as 2004 closed, principally because of oil and gas, while India's jumped from $24 billion to $126 billion in the same period." Computer software and office-job outsourcing played major roles for India and probably will continue to do so. Even in biotechnology, India is surging, with local publications crowing about how secular Hinduism is compatible with science while evangelical constituencies cripple US. stem-cell research. With all of these transfers occurring or anticipated, by the 2010s it is hard to see what forces-except possibly military forces-could keep the no-longer-almighty dollar enthroned as the world's reserve currency.

By the 2020s, if not earlier, China is expected to become the principal economic rival of the United States.

In late 2003, Goldman [Sachs] anticipated that China would pass Japan in GDP by 2015 and would overtake the United States by 2040; in 2005, HSBC calculated that bank assets in China would overtake those of the United States by 2034. None of this is far-fetched. Based on 2003 data, one analyst pointed out that China consumed half of the world's cement and one-third of its steel, and is now the world's biggest market for mobile phones and the second biggest for personal computers."

The above estimates may be conservative. At Washington's Economic Strategy Institute, Clyde Prestowitz, citing the Goldman Sachs analysis and a kindred set of evaluations by the International Monetary Fund, suggested that if analysts eschew converting Chinese yuan and US. dollars based on exchange rates and instead calculate "in terms of China's domestic purchasing power.. . its GDP could be effectively as large as America's by 2025."82 This could bring a serious US.-China contest by the 2010s.

As of 2005, China had a savings rate in the 43 percent range, while the savings rate in the United States had turned negative-savings were being drawn down. On top of which, in 2003, China passed the United States as the top global recipient of foreign direct investment." Another important factor is China's long-standing talent for technology. As one U.S. business publication set forth, "History shows that inventiveness is firmly planted in China's DNA: gunpowder, rocketry, wheel-barrows, cast iron, compasses, paddle-wheel boats, block-printing, stirrups, papermaking and mechanical clocks-all came from China, often centuries before they appeared in the West."

Within a generation or so, China may well resume its pioneering. A 2005 study by Harvard economist Richard Freeman, director of the Labor Studies Program at the National Bureau of Economic Research, documents how US. technology is threatened by a dramatic realignment of scientific specialists and research facilities away from the United States to Europe and especially Asia. In 2001, he says, the European Union gave 40 percent more doctorates in science and engineering than the United States did, and China's gains are even steeper: "China is expected to surpass the United States in numbers of engineering doctorates by 2010. At the college level, statistics show a waning interest among US. students in science-related careers; in 2001, only 17 percent of all bachelor degrees in the United States were in natural science and engineering, compared to a world average of 27 percent and a Chinese average of 52 percent." Equally to the point, Freeman worries that a combination of advanced science and low-cost labor, which he calls "human-resource leapfrogging" will weaken the US. global trade position, forcing difficult adjustments in the US. economy and labor force."

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