Starting in 1944, the U.S. guaranteed its Allies – and later the entire world - that the American taxpayer would bear the burden for securing the global supply chain. It has been one of the most effective and longest-held promises in history. American assurance of the free, unfettered flow of goods around the world has been a pillar in the global capitalist system. Now, it is on the wane.
At Bretton Woods, the U.S. laid out its plan for the post-war world. The vision was as stunning as it was elegantly simple. The unchallenged dominance of the U.S. had most nations assuming the Americans would borrow a page from the playbook of the past: establish overseas colonies and exploit them to sustain a global empire.
Instead, the Americans threw everyone a curveball.
In simple terms, the American deal was this: In exchange for willing participation in the global capitalist system, the U.S. would provide three things: a security blanket of protection against your enemies; assured movement of your goods across the world’s oceans; and, open access to the largest single market anywhere the USA.
It was shocking to the world. Rather than go down the well-worn path of the British, Romans and Carthaginians, the U.S. chose to absorb all of the costs - and assume the bulk of the risks - associated with maintaining global peace and stability.
The Allies in 1944, and later the Germans, Japanese, Indians, Chinese, Russians, Uzbeks, and, everyone else- except the North Koreans- went “all in” to what the Americans were offering.
Americans across the political spectrum are asking: What is our return-on-investment for the trillions we have spent to build and maintain the global capitalist system?
—Andrew R. Thomas
The results of America’s gambit are clear: Over the past 70 years, more people have lived safer, richer and healthier lives than ever before. Wars between major powers are a distant memory. Extreme poverty –the scourge of human experience- has been reduced by more than 60% and is still falling!
After the War, nations who in “normal times” would have needed to spend tremendous sums to rebuild their armies and navies, instead were able to invest in improving the lot of their populations: schools, electricity, sanitation systems and innovation. The American military assured the peace. The American taxpayer paid the bill.
Foreign companies and workers benefited immensely as well. The U.S. Navy secured the world’s shipping lanes. Products moved seamlessly around the world, unlike any time in the past.
Nations and businesses built the “American cost savings” into their forecast models. Traditional expenditures on national defense and supply chain security – historically huge costs only digestible to the richest countries and firms - became minor line items for everyone.
And, yet, it is all coming to an end.
Paradoxically, one nation that has come up short in enjoying the tremendous benefits of the American-led system is the United States itself.
The U.S. is overwhelmingly a domestic-focused economy, and always has been. Today, only about 12% of all U.S. GDP is tied to international trade, with around half of that energy imports. This is in alignment with historical trends over the past 150 years.
As the shale revolution continues apace, American energy imports will decrease in coming years. Moreover, concerns about burgeoning entitlement costs as the baby boomers continue to exit the workplace have American leaders worried about ballooning deficits and obligations.
It should not be surprising that America’s withdrawal from the world – regardless whom the next President is - will continue.
The U.S. Army is quickly returning to pre-World War II levels. Trade agreements are stalled. Public opinion polls reveal that globalization is now viewed by a vast majority of Americans as harmful to their lives.
In short, Americans across the political spectrum are asking: What is our return-on-investment for the trillions we have spent to build and maintain the global capitalist system?
Answers are hard to find. There are benefits to America’s engagement with the global economy, yet they are not as profound as many believe and quite difficult to articulate for the supporters of globalization.
A more compelling paradox on top of the earlier one is that as America withdraws from the same global system it created in 1944, the consequences to the U.S. will be negligible. Safely ensconced in its continental “dominion from sea to sea”, the U.S. will enjoy the fruits of its seemingly endless bounty without disruption
Meanwhile, the rest of the world will return to “normal”. Minus the American security blanket, ethnic and regional antipathies will flare once again. Wars and rumors of wars amongst major nations will return. Large powers will bang into each other as they scour the world for ever-scarcer resources. Business costs will rise and disruption will reign.
The pause button of the past 70 years is being released. Hold on tight!
