Discussion questions
1. In his first chapter Johnson claims that militarism is threatening American society. He notes how war empowers government, leads to self-censorship of the media, and how regimes use fear to deny liberty. Two issues to discuss: a) is the fear he describes warranted by the realities of the situation; and b) given how Americans have turned against the war and the President, is he perhaps under-estimating the resiliency of Americans?
2. Johnson also talks about the disconnect between our claims that ‘we don’t torture’ and ‘we protect civilians’ to real world instances of the contrary. Obviously, wars are never clean and without atrocities on any side. Still, do Americans fool themselves in thinking we are ‘better’ than others in such things? How might other peoples or countries view our actions? Why do we seem to care very little about Iraqi deaths?
3. What is torture, how far do we/should the US go to get needed information?
4. Johnson argues in Chapter 2 that the Roman Republic failed to adjust to the unexpected consequences of imperialism. Is America adjusting well to the unexpected consequences of being a superpower? How apt is a comparison of the US to Rome?
Other wise, today we should talk about America’s foreign economic policy.
I would argue that there is a shift being made in economic policy akin to
foreign diplomatic or military policy. We are seeing a global rebalancing based
on a reconsideration of America’s role in the world.
Consider this in phases:
1. Unparalleled leadership in the West, 1945-68
The Bretton Woods system of fixed exchange rates and a gold standard ushered in an era of American dominance. The US would dominate the policies of the World Bank and IMF, the major global financial organs, and push for more liberalization in GATT negotiations. US corporations dominated, expanding investment as the US was a net investor, owning more and more international holdings.
Downside: Triffin dilemma, overvaluation of the dollar, inflexibility as global prosperity expanded. By the seventies, the world economy was going through a transition.
2. Uncertainty, 1968 - 1981
This was captured in the 1976 book Power and Interdependence by Keohane and Nye. They noted that the realist notion of state interests and anarchy was being challenged by the success of the American system. Borders were becoming less important, economies interdependent, and power as much economic as political. They labeled this complex interdependence, a term which in recent years was replaced by globalization in popular parlance.
At the same time there were the energy crises of 1974 and 1979, showing the dependence on the world economy to oil, and bringing a short recession and stagflation. Still, the US remained dominant, with debt 30% of GDP (down consistently from a WWII high of 140%), and the US maintaining a current accounts surplus. The US also was still a net creditor, meaning America was investing in foreign countries, and most world MNCs were American.
3. The debt boom, 1981-93
The US in the eighties seemed to rebound, as the economy took off when oil prices went down, and US deficit spending skyrocketed. Debt went to 60% of GDP by 1989, and finally a recession from 1991-93 occurred as debt increases couldn’t continue. However, in 1985 a major change took place. The US went from being a net creditor to a net debtor. The US current account went into deficit. That required the capital account to be in surplus, meaning foreigners were investing more in the US than the US was in foreign countries. The cold war ended.
4. The bubble economy, 1993-2007
The US then rebounded, maintaining the high debt level, but persisting off of bubble economies. In 1993 low oil prices helped end the recession, and soon US stocks took off, especially as the US budget came towards surplus by the end of the decade. Furthermore, the US was running an increasingly high current accounts deficit, bringing more foreign capital to American bond and portfolio markets. The result was a run up in apparent wealth that convinced people the good times were here at least. It was an optimism not seen since the late 20s!
In 2000 the stock market bubble burst, as did the idea that surpluses would increase. The al qaeda attack of 2001 further weakened the economy and increased the debt, but another bubble took over: the property bubble. Like with the stock bubble, people assumed wealth would keep growing. They’d finance homes at 125% value, knowing that the value would go up. They’d take subprime mortgages, knowing that once the value went up they could refinance. With increasing values loans were seen as low risk, so banks became very lax, and even committed fraud to get loans for customers (knowing that as long as the loan was paid, no one would ask any questions).
Impact: high consumer spending and consumer debt. Homes used like ATM machines, people flipping houses and thinking they’d be able to leverage themselves to prosperity.
This bubble finally collapsed in 2007. Result: it looks like a recession coming, as consumer spending is unlikely to resume (high debt, lower property values), and a decrease in the dollar’s value as foreigners no longer want to sustain our current account deficit (down over a percentage since it’s height, to be sure).
5. The rebalancing:
The US is no longer in a position of dominance, and is now the largest net debtor, with a dollar arguably still overvalued. The US dollar is becoming not the "top currency," but one of the major currencies, and the influence of the US is being called into question.
Also main issues:
1. Trade