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
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?
... the US. military is being converted into a global oil-protection
GW Bush to members of the Southern Baptist Convention, in 2000
"I believe that God wants me to be
GW Bush to a Houston, Texas minister
"I believe I am called to run for
Lt. General William Boykin, the deputy undersecretary of defense,.
proclaimed of Bush
"He's in the White House because
God put him there."
"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
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
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,
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
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
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
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,
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
... 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
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."