What Decline of Western Civilization?

11/29/2011 05:59 pm ET | Updated Jan 29, 2012

It's hard to say whether Harvard Historian Niall Ferguson means what he says in his new book, Civilization: The West and the Rest; that the Western World's 500 years of predominance is over, thanks to growing debt problems in the U.S. and Europe, and dwindling populations.

It's true that the rest of the world is catching up to the developed West, and want what we have. For instance, the U.S. with 5 percent of the world's population can no longer count on corralling 25 percent of its resources. Our military -- a major source of budget deficits -- is already stretched thin, for one thing, and can't afford to invade another Iraq for its oil resources.

It's also true that the U.S. has declined -- not as a military power, but in almost all the measures of social and economic well-being. This is reflected in studies just now coming out by sociologists and psychologists, as well as economists. Richard Wilkinson is one such researcher who has managed to bring together a huge amount of research -- especially on how income inequality affects citizens' well-being.

We have discussed how this has affected individual states in past blogs, but never misery at the national level. The list is long. The U.S. has highest prison incarceration rate of any county, and income inequality next to Bulgaria, yet the highest per capital income rate.

But does he really believe that the United States and Europe "will tip over from weakness to outright collapse"? It's true that U.S. public debt has doubled over the last 10 years, but that is due to a very ill-advised shift of wealth to the top-most income brackets by conservative administrations over the past 30 years. It was epitomized by GW Bush's attempt to fund 2 wars and a Medicare drug program without any public sacrifice -- i.e., by borrowing the monies while lowering taxes.

And we know from the #OccupyWallStreet protests and economic historians that the growth in income inequality has reached its limit. It turns out most Americans did have to sacrifice -- the 99 percent whose incomes stagnated because they didn't benefit from the tax cuts, loopholes and such that have also elevated corporate profits as a share of GDP to the highest in history.

So Professor Ferguson really means the West will continue to decline if we continue on the path of Oligarchy, where a few at the top have most of the wealth, and the rest of us have to borrow to maintain our standard of living. Then wealth will continue to be transferred to the developing giants who are willing to lend us money -- China, India and Brazil with their young and growing populations.

But Dr. Ferguson's theme isn't new. Root causes of the rise and fall of western civilizations were earlier explored by UCLA Professor Jared Diamond in his books Guns, Germs, and Steel, and Collapse in far more convincing fashion. Our technological superiority was enabled by having major resources such as oil, benign climates that allowed cultivation of the major foodstuffs, and domesticated animals that gave us immunity to the major diseases that have wiped out native populations where such animals didn't exist.

It follows then that the major reason for the huge debt loads isn't too much government. Governments can easily pay for public services that lift all boats if sufficient growth is kept up. But there has been a steady decline in economic growth rates in the U.S. since the 1970s, at the same time as wealth was being transferred upward and government services cut.

Such a wealth transfer also meant diminished income growth for the majority of Americans -- the wage and salary earners who make up 80 percent of consumers. And so overall aggregate demand, which is the willingness of consumers and businesses to spend, is diminished. We also know that higher corporate profits have in fact created greater market instability, and retarded economic growth rates. In his New York Times Op-ed, "It's Consumer Spending, Stupid", and various blogs, economic historian James Livingston says what has been known to most modern macro economists -- consumer and government spending have driven economic growth over the past century, not corporate profits.

For instance,

The underlying cause of that economic disaster (the Great Depression of 1929-33, 1937-38) was a fundamental shift of income shares away from wages/consumption to corporate profits that produced a tidal wave of surplus capital that could not be profitably invested in goods production -- and, in fact, was not invested in good production... By the same token, recovery from this economic disaster registered, and caused, a momentous structural change by making demand for consumer durables the leading edge of growth.

We know Niall Ferguson has taken the opposite tack. His glorification of empires has made him blind to the results. The west's predominance was at the expense of exploiting underdeveloped countries, and when they began to want more of what we have, our privileged position began to decline. Isn't that what we want? To be an island of privilege among a sea of poverty does not make for a stable, or more peaceful world.

Harlan Green © 2011