Guns and butter and what it means in the current debate over Government debt
February 15, 2009 1 Comment
In the late 1980’s Paul Kennedy wrote his New York Times best-selling book, “Rise and Fall of the Great Powers”. As the debate over debt rages in Washington 22 years later I urge any curious person to read it. The book covers the rise and fall of the great military and economic nations from 1500 to 2000. It begins with Spain and the economic dominance it gained from having the world’s most powerful Armada. The title then alternates between France (Napoleon and his cannons, agrarian dominance) and England (her fleet and the Industrial Revolution.) Russia also gets attention due to her massive military and natural resources. And of course the United States with its nuclear arsenal and an economy un-shattered by WWII.
At its heart the book is about the relationship between national wealth and technological innovation and what that means in terms of a State’s ability to militarily deploy and battle over long time periods. As the story goes, those nations that maintained the best balance of guns and butter took the lead. But leads have consequences in the form of “global military obligations” that in the long run their economies can’t afford to support, so they fall. The historical lessons seem clear.
Since the events of 2001 we have seen a doubling of our national debt to extend our military into places like Iraq and Afghanistan. And today we are about to expand our debt again to jump start our failing economy. Curiously, the world’s greatest economic power (as measured in terms of surpluses) is China but their military obligations do not (yet) extend into such places. What does that say about who is striking the best balance between guns and butter?
In 1987 the U.S.S.R. was still around, and America was the undisputed global world power. But Kennedy was already predicting Asia’s ascendency via Japan, China and India. Their ability to focus on butter and not guns, coupled with huge natural resources (e.g. mainland Asia), massive human capital, and technological investment were already beginning to tilt the game in the East’s direction. Today the disparity couldn’t be more obvious as we find ourselves borrowing massively from China and others to solve our guns and butter problems.
In the long run it always comes down to resources (natural and technological), who has them, and how they chose to spend them.
To maintain a significant place on the world stage in the 21st century, the U.S. will need to regain its balance.
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