The central thesis of this series is that the 21st century will not be yet another "American Century." However, one listening to the palaver of many of the current presidential candidates could come to believe that America was somehow in decline. It isn't.
Instead, what is happening slowly, almost glacially, is that the United States is becoming less "exceptional" as other countries, and the world in general, make progress. In other words, the benefits of the "newness" of being the first new nation are slowly but surely eroding; so it is not the United States in decline, but other countries on the rise.
It seems that in this world of 24/7 news cycles, sound bites, 140 character communications, and worldwide access to just about everything, news coverage of an event that underlies or indicates a tectonic shift in international political economics can be entirely overlooked. For example, late last year the IMF accepted the Chinese Yuan as a world reserve currency.
Commencing in October of this year, the IMF has decided that the Chinese Yuan will represent 10.92% of the world's reserve currency "basket," along with the dollar, the euro, the yen, and the pound sterling. Even when the Yuan's ascension was reported, along with its practical and psychological implications, it attracted very little press.
Nevertheless, the United States dollar is, and will continue to be into the foreseeable future, the dominant world reserve currency representing approximately 64% of that basket prior to the inclusion of the Yuan. As a practical matter, nearly 90% of world transactions are denominated in dollars. Of course the abstruse workings of world currency markets are not as newsworthy as the usual kitten stuck in the usual tree, but suffice it to say that we all instinctively know that currency is a formidable power, second only to a plenipotent military (at least at the moment.)
Former Congressman Ron Paul (remember him?) has long been touting the fall of the United States dollar and the attendant apocalyptic results to the American economy. He points out, correctly, that the dollar being the dominant reserve currency gives enormous power to the Federal Reserve, and enables the US to borrow cheaply and ubiquitously. Therefore, it enables the Fed to print more money in the face of burgeoning debt, without the Weimar Republic-like consequences of rampant inflation. Those consequences would indeed be drastic if the world decided that the US dollar should be debased overnight, but that is something that has never happened, and will not happen now. It took decades for the pound sterling to lose its status as the dominant world currency, even after it was obvious that the UK was no longer the dominant world economy.
Recently, and not surprisingly, China, Russia, and several others have proposed replacing the dollar with some alternative form of reserve currency. More surprisingly, however, both the UN and the IMF have also suggested that the dollar should be replaced with the use of "special drawing rights," which is essentially a synthetic or derivative currency based upon some mix of the existing world reserve currencies. The important postwar institutions such as the UN and the IMF are based in Washington and New York, but the centers of influence over them appears to be moving east.
In fact, there were two reasons that the media did not cover the ascension of the Yuan in any significant way; the first being, as we said earlier, currency news is not the stuff of popular culture. However the second reason is more telling-- among the cognoscenti, it is not major news because it is already assumed. Since the fall of the price-fixing Bretton Woods agreements in the early 70s, currencies have been floating, in a 24/7 open market with huge amounts of trading and speculation on the part of individuals, institutions, and central banks. In the face of such large volumes it is not easy for anyone to control a particular price, but ever since the little red book became green, the Chinese have been quite adept at manipulating their currency so as to maximize their exports. Everybody knows this - and complains about it - but no one is really sure what to do about it; Except China, that is.
Currency manipulation is a two edged sword; on the one hand a relatively cheap currency ensures that pricing of Chinese goods in world markets will be attractive, thereby ensuring continuously growing exports. But on the other hand, a cheap currency also makes for the export of the currency itself. It has been estimated that over $900 billion left China in 2015 because of its precipitous drop against the dollar. If one is following a plan where the primary goals are decades away, these are minor setbacks, if they are in fact setbacks at all.
Just last week China decided to make a $6 billion loan to Nigeria. Miraculously, Nigeria subsequently announced that it would include the Yuan in its currency reserves. There were a series of agreements between the two countries, which in sum gave the Chinese central bank a branch office in Nigeria. If you are familiar with banking regulations in Nigeria and other African nations, this is quite a remarkable achievement. China has similar arrangements with other countries, giving it a prodigious ability to dump goods around the world in markets that others cannot penetrate. It was not lost on the Nigerians and additional others that China has now become the world's fourth largest exporter of weapons and armaments. All of this serves to make China's currency "harder" even though it continues to be underpriced relative to the dollar.
All of this serves to indicate that the world is slowly coming to accept China, and that China is shrewdly capitalizing not only on the fact of its economic prowess, but also on the perception that it is inevitably "coming."
None of this is by chance. In 2015 I had the privilege of having dinner with Mulatu Teshome, the president of Ethiopia, who was accompanied by his ministers. President Teshome had previously resided in China where he received a good portion of his education. He speaks the language fluently - without even a detectable accent to my untrained American ears. During dinner we discussed many topics relating to Ethiopia's current and future plans, and his disappointment in the "relative" lack of investment from US sources. President Teshome explained the considerable investment being made in Africa now and planned for the next 20 years by China, much of which related to major infrastructure and energy projects. Mr. Teshome went on to note that labor in Africa was currently as much as 50% cheaper than in China, signaling his plans to co-develop with his Chinese partners certain low skilled manufacturing and agricultural endeavors in Africa.
China's presence in Africa and other important territories is not by chance. As detailed in Pillsbury's book "The Hundred-Year Marathon: China's Secret Strategy to Replace America as the Global Superpower" (as well as countless other books and writings), China's strategy is one which works in the shadows, and if anything encourages the world to think China is in trouble, when it is not. A review of western stock markets would confirm the success of this plan. Reports of minor declines in the growth of the Chinese economy have resulted in wild market downturns, even though an objective view of these reports should have made no difference at all. By contrast, America trumpets its economic and geopolitical plans--perhaps, it would seem, to little avail.
While it is a matter for a different time, GDP's and other statistics as currently measured or reported don't provide the whole picture - a problem that is further frustrated by Government agendas. Despite the "reported" recent drops in China's GDP growth rate, it is still nearly 5 times that of the US. Though I am not a statistician, I follow numerous mid and large cap stocks, and specific industries, all of which have reported remarkable growth in their sales in China. Last year the number of billionaires in China surpassed those in America and a staggering number of new businesses have sprung up. While none of this may not be baked into a GDP statistic, it ought to be telling us something about what is really happening in China.
Justified by various agendas or moral objectives America has been giving up economic relations and alienating other territories, which voids are quickly being filled by China. They have considerable momentum both internally and all over the world. Though we remain a democracy, our political structure, judicial system, social services and economy have moved us towards socialism while China has been moving in the opposite direction. American companies struggle to be able to complete outside of their own territories as a result of self-imposed US regulations, while Chinese and other companies flourish here.
Over the course of the coming decades, things will change. There was a time when the US and the USSR were thought to be comparable powers, principally because of nuclear warheads. There will come a time where the US and China, and possibly India as well, will be thought of as comparable economic powers. What is necessary is that American leaders must recognize this, and perhaps start behaving differently in terms of their perception of America's place in the world. As time goes on arrogance will become more expensive.
No nation today lives alone, but all are part of one world order. While America still remains strong and may grow in absolute numbers, other nations, like China are growing internally and expanding into the world at a higher rate. After all, there is nothing more relative than the relative power of nations; it's the ultimate zero-sum game.