Giovanni Arrighi writes in his latest book, Adam Smith in Beijing,
“…just as US difficulties in Vietnam precipitated the signal crisis of US hegemony, in all likelihood US difficulties in Iraq will, in retrospect, be seen as having precipitated its terminal crisis.”
Arrighi is deviating from Braudel in that the “signal crisis”, the sign of autumn, was the switch to trading and real estate speculation in Braudel’s work. The center of gravity shifts to finance because as the cycle reaches maturity, the nature of the juridico-political regime shifts from “rule of business and cultural elites” to “rule of owners”, a rentier economy run by “masters of the universe”, people who make money by owning and deploying capital. I am using “rule of…” in a functional–a de facto sense. Here is Gordon Gekko in the 1987 film Wall Street: “We make the rules pal. The news, war, peace, famine, upheaval, the price of a paper clip–we picked that rabbit out of a hat and left everyone wondering how the hell we did it. Now, you are not naive enough to think that we still live in a democracy, are you buddy? It’s the free market. I create nothing, I own.“
If we effectively live in an oligarchy as I claimed, then presumably Chinese capital will have to become bigger than US capital to credibly challenge US hegemony. But Atlantic capital will remain twice the size of Pacific capital for the rest of this century. The two potential Eurasian hegemons–Germany and Japan–failed to challenge Atlantic hegemony for the same reason. Also, the plumbing of the “world-economy”, the flow of energy and commerce at the heart of all material expansions, is sea based. That is why it is only great naval powers that have maintained the hegemonies that are called the long centuries by Braudel.
We are of course talking about the four cycles of capitalist accumulation–Spanish/Genoese, Dutch, British and American. In all of them, there is a nexus of political and capital power. In fact, capitalist history begins when Genoese capital migrates from the Mediterranean “great power” of Genoa to the imperialist power of the day, Spain, and underwrites the slave trade and the wars in the low countries. (Genoa was one of “great powers” of the Mediterranean world–the four Italian city states of Venice, Milan, Genoa and Florence.) The birth of Capitalism in Renaissance Italy is taken as year zero. The “signal crises” of this zeroeth cycle of capitalist accumulation, is exactly this shift from Genoa to the Iberian peninsula. The Spanish collapse and the shift of the center to Holland was marked by the migration of Iberian capital to Amsterdam, and the next two change of guards were also accompanied by capital migration to the new center of gravity. Spanish and Portuguese Jews, along with Flemish, French and German Protestants moved to the Dutch republic. Similarly, Dutch capital migrated to London and British capital migrated to New York. In fact, they preceded the “terminal crisis” but obviously took place after the “signal crisis”.
Sometime before the “terminal crisis” of the American hegemony, Western capital will migrate to a new metropolitan site. This has yet to become credible for the following decades. Exhibit A is FDI inflows:
The switch to finance is a sign of maturity as the bargaining power of the owners overwhelms that of other ruling groups–as the oligarchy gets entrenched, not of the exhaustion of the Atlantic materialist expansion. As Kevin Phillips records in Wealth and Democracy, this has occurred thrice in the US: the Gilded ages of 1890-1906, 1920s, and the current one that began with the Reagan administration. Capital returns to it’s real home at the end of each cycle of material and trade expansion, and/or a period of rapid technological innovation.
Technological innovation may provide further profitable opportunities for capital deployment in the West and in the US. Many of the booming sectors will be remain here–technology, financial arbitrage, military-intelligence industries, mass media, entertainment, higher education and all sorts of high end work correlated with running the empire. The Atlantic will remain in a period of increasing wealth concentration and persistent unemployment. Business elites and economists point out that the “natural rate of unemployment” may have shifted upward permanently. The plutonomies may prove to be pretty stable, in the words of the Citigroup analysts. Even if material expansion in the West were to slow down dramatically, if we are really living in an oligarchy, then it shouldn’t matter so much. America will remain a muscular Mars ruled by the owners of capital.
The “terminal crises” so far in capitalist history have preceded systemic chaos, revolutionary upheaval and war–before the world-economy got reconstituted under a new hegemon. But all of these have involved both a loss of legitimacy and a loss of a preponderance of military power of the hegemon. The four historical hegemonies are best understood as protection rackets. In all cases capital migrates to the metropolitan heart and provides the raison d’être for the institutions we identify easily as State-capitalist and imperialist. Capitalism, in the sense of Braudel.
The “terminal crisis” in other words would be “losing Saudi Arabia”. If and when China becomes competitive in “balance of power” terms, when it has enough naval power to challenge the US on the high seas, and/or the US loses its veto–control of the Persian gulf, then we would see a “terminal crisis” of the American cycle. [The threat of cutting off access to MidEast energy gives the US a veto over powers like China who depend on these energy supplies.]
It is not unreasonable to think that given the threat of global thermonuclear war, superpower conflict will be cold. In fact, security analysts like Robert D. Kaplan argue that a US-China military conflict will at worst be a localized naval one. China will be contained in the South China sea, it’s “near abroad”. It will not be allowed to deploy its naval power beyond the Bay of Bengal. The naval base at Diego Garcia can feed multiple Aircraft carriers projecting too much force for the Chinese navy to overcome in the coming decades, and per current projections of military spending, the rest of this century.
In fact, I suspect that the “terminal crisis” of American hegemony might take a financial form–Saudi Arabia will start trading in RMB. The collapse of the reserve currency racket might swiftly unravel the American empire. Interestingly, this might come about as revolutionary upheaval in the form of the Arab spring spreading to the Persian gulf where the US supported petro-dictatorships have so far managed to contain it. The threat of democracy in the Persian gulf may be remote but it remains a very real threat.
In my post The Longue Durée, I wrote that all threats to American primacy are internal. I take that back. Thinking about all this some more, it seems to me that “losing Saudi Arabia” is another. But this is still extremely unlikely. This involves questions of the stability of the House of Saud–but it is under US protection. This brings us directly to the realm of balance of power, where all such questions must ultimately terminate–and we must come face to face with the reality that sooner or later we have to talk in straight power terms.
Despite the neoconservative debacles in Mesopotamia, and the threat of democracy inherent in the Arab spring, the Iraq war is not going to mark the beginning of the terminal decline. The attack was a routine exercise of butchery by an imperial metropole at the periphery, a virtual constant though all imperial history. Merely another instance of the “savage injustice of the Europeans” [Adam Smith]. Iraq was chosen because it was defenceless. It was devastated with decades of conflict and crushing sanctions. They knew it would offer virtually no resistance to an American attack. Iran was seen as too difficult, unpredictable and risky a target. The vast majority of foreign policy thinkers are realists who disapprove of the neoconservative debacle. In fact, George Bush’s second term was characterized by a return to the realist consensus, the foreign policy of the Obama, Clinton and Bush senior presidencies.
The realist consensus is that America must maintain overwhelming military superiority against any potential group of challengers in the foreseeable future; that US is ready and willing to project power to protect “US interests” around the globe–control of the sea lanes and energy resources that underpin the “world-economy”. One therefore goes straight to questions of “credibility” and whether other great powers might be willing and able to challenge American dominance. The law of the balance of power then dictates a unique solution. Namely, that American preponderance will remain unchallenged.
US now operates giant “embassies” in Iraq, Afghanistan and Pakistan, mini cities to oversee the vast number of military bases and “equipment sites” now sprinkled all over the region with more on the way. With it’s military bases and client states from the Caspian to the Arabian sea, it has achieved two strategic objectives. One is to completely surround Iran (see map); the other, more important one, is to tighten control over the energy resources in the region.
I think Arrighi doesn’t realize that relative US military power has been increasing rapidly and shows no sign of abating. In fact, military planners are actually aiming to upgrade US airpower to be almost totally unmanned by 2027. Strategic parts of the world are to be garrisoned, with permanent military bases around the entire planet. The task of the US navy is to protect the planet’s sea lanes through which the bulk of oil and commerce flows–the arteries that connect the “world-economy”. JSOC has grown into a secret military force for the White House–highly classified with little or no oversight from Congress–a role earlier and still played by the CIA–an expansion of the covert war and the assassination programme, amid a “revolution in military affairs” that is rapidly transforming the American military. American drones are now deployed in dozens of countries around the globe and covert capabilities are being quietly extended all over the world. [Read The American Way of War by Tom Engelhardt and Wired for War by Peter Singer to follow these developments. Update: I forgot to mention perhaps the most significant one: The Shadow Factory by James Bamford.]
It is understood that US power relative to China will grow over the next two to three decades. Britain and France seem eager to return to the task of policing the world, and join the US in maintaining order. Libya is being already talked about as a model for future interventions. Despite the brouhaha, it’s becoming clear that China will eventually become an economic giant similar is size to the US but remain a regional power and maybe even a “great power” with far flung protection commitments if it plays it’s cards right. Rapid economic growth will taper off to rich world levels in a couple of decades at most. The geopolitical balance of power will return to the old norm as India and China regain their historical relative economic positions in the world economy.
The Long Twentieth Century of Giovanni Arrighi will probably be labelled The Long Twenty-First Century by scholars in the coming centuries.
[Update: The increasing concentration of wealth is also found in all the four cycles after the “signal crisis”. Braudel was only dimly aware of this development in our time. He died in 1985, without observing the same process of oligarchical entrenchment unfold properly. (Check out the New York Times page or read it here by clicking the picture below.) The point of all this conversation about the four cycles of capitalist accumulation is to try to comprehend the dynamics of the system. The notion of a “world-economy” led by a hegemon, with a distinguished core-preiphery structure and specific trade linkages is central to Braudel’s analysis of all major periods of capitalist expansion. The long centuries we label by the dominant power were periods of peace between great powers, material expansion and capital accumulation. They constitute the major epochs through which Capitalism grew up, expanded all over the globe and came to dominate history completely. Interestingly, the internal dynamics of Capitalism has a deep structure which makes it explicable. For that knowledge, we are all indebted to Braudel.]
[Read the next post on this topic: The age of the Genoese.]