Becoming a Third World Country

In the course of writing last week’s Archdruid Report post, I belatedly realized that there’s a very simple way to talk about the scope of the brutal economic contraction now sweeping through American society – a way, furthermore, that might just be able to sidestep both the obsessive belief in progress and the equally obsessive fascination with apocalyptic fantasy that, between them, make up much of what passes for thinking about the future these days. It’s to point out that, over the next decade or so, the United States is going to finish the process of becoming a Third World country.

I say “finish the process,” because we are already most of the way there. What distinguishes the Third World from the privileged industrial minority of the world’s nations? Third World nations import most of their manufactured goods from abroad, while exporting mostly raw materials; that’s been true of the United States for decades now. Third World economies have inadequate domestic capital, and are dependent on loans from abroad; that’s been true of the United States for just about as long. Third World societies are economically burdened by severe problems with public health; the United States ranks dead last for life expectancy among industrial nations, and its rates of infant mortality are on a par with those in Indonesia, so that’s covered. Third World nation are very often governed by kleptocracies – well, let’s not even go there, shall we?

There are, in fact, precisely two things left that differentiate the United States from any other large, overpopulated, impoverished Third World nation. The first is that the average standard of living here, measured either in money or in terms of energy and resource consumption, stands well above Third World levels – in fact, it’s well above the levels of most industrial nations. The second is that the United States has the world’s most expensive and technologically complex military. Those two factors are closely related, and understanding their relationship is crucial in making sense of the end of the “American century” and the decline of the United States to Third World status.

The US has the world’s most expensive military because, just now, it has the world’s largest empire. Now of course it’s not polite to talk about that in precisely those terms, but let’s be frank – the US does not keep its troops garrisoned in more than a hundred countries around the world for the sake of their health, you know. That empire functions, as empires always do, as a way of tilting the economic relationships between nations in a way that pumps wealth out of the rest of the world and into the coffers of the imperial nation. It may never have occurred to you to wonder why it is that the 5% of the world’s population who live in the US get to use around a third of the world’s production of natural resources and industrial products – certainly it never seems to occur to most Americans to wonder about that – but the economics of empire are the reason.

A century ago, in 1910, it was Britain that had the global empire, the worldwide garrisons, and the torrents of wealth flowing from around the world to boost the British standard of living at the expense of everyone else’s. A century from now, in 2110, if the technology to maintain any kind of worldwide empire still exists – and it can be done with wooden sailing ships and crude cannon, remember; Spain managed that feat very effectively in its day – somebody else will be in that position. It won’t be America, because empire is the methamphetamine of nations; in the short term, the effects feel great, but in the long term they’re very often lethal. Britain managed to walk away from its empire without total catastrophe because the United States was ready, willing, and able to take over, and give Britain a place in the inner circle of US allies into the bargain; most other nations have paid for their imperial overshoot with a century or two of economic collapse, political chaos, and social disintegration.

That’s the corner into which the United States is backing itself right now. The flood of lightly disguised tribute from overseas, while it made Americans fantastically wealthy by the standards of the rest of the world, also gutted America’s domestic economy – the same economic imbalances that funnel wealth here also make it nearly impossible to produce goods or provide services at home at a cost that can compete with overseas producers – and created a culture of entitlement that includes all classes from the bottom of the social pyramid right up to the top. As always happens, in turn, the benefits of empire are failing to keep pace with its rapidly rising costs, and in addition, rising demands for imperial largesse from all parts of society are drawing down an increasingly straitened supply of wealth. Meanwhile other nations with imperial ambitions are circling like sharks; the wisest among them know that time is on their side, and that any additional burden that can be loaded onto a drowning empire will hasten the day when it goes under for the third time and they can close for the kill.

This view of the world situation is not one that you’ll find in the cultural mainstream, or for that matter any of its self-proclaimed alternatives. The contrast with a century ago is instructive. A great many people in late imperial Britain knew perfectly well that the empire on which the sun famously never set – critics suggested that this was because God Himself wouldn’t trust an Englishman in the dark – had had its day and was itself setting; the lines of Rudyard Kipling’s poem “Recessional” –

Far-called, our navies melt away;
On dune and headland sinks the fire.
Lo! All our pomp of yesterday
Is one with Nineveh and Tyre.

– simply put in powerful imagery what many were thinking at that time. You won’t find the same sort of historical sense nowadays, though, and I suspect the role of the myth of progress as the secular religion of the modern world has a lot to do with it. In 1910, the concept of historical decline was on a great many minds; these days you’ll hardly hear it mentioned, because the belief in history as perpetual progress has become all the more deeply entrenched as the foundations that made the progress of recent centuries possible have rotted away.

The resulting insistence on seeing all social changes through onward-and-upward colored spectacles has imposed huge distortions on our perceptions of recent events. One good example is the rise and fall of the so-called “global economy” in recent decades. Its proponents portrayed it as the triumphant wave of a Utopian future that would enable everybody to live like middle-class Americans; its critics portrayed it as the equally triumphant metastasis of a monolithic corporate power out to enslave the world. Very few people saw it as the desperate gambit of a faltering imperial society that could no longer even afford to run its own economy, and was forced to outsource even its most basic economic functions to other countries. Nonetheless, this is what it has turned out to be, and it had the predictable result that several other nations used the influx of capital and technology to build their own industrial sectors, bide their time, and then enter the market themselves and outcompete the very companies and countries that gave them a foot in the door.

More broadly, it seems to have escaped the attention of a great many observers that the day of the multinational corporations is drawing to an end. The struggle over Russia’s energy resources was the decisive battle there, and when Putin crushed the Western-funded oligarchs and retook control of his country’s energy supply, that battle was settled with a typically Russian sense of drama. The elegance with which China has turned international trade law against its putative beneficiaries is in its own way just as typical; a flurry of corporations owned by the Chinese government have spread operations throughout the world, using the mechanisms of global trade to lay the foundations of a future Chinese global empire, while the Chinese government efficiently stonewalled any further trade negotiations that would have put Chinese economic interests at home in jeopardy. More recently, China has begun buying sizable stakes in the multinational corporations that so many well-meaning people in the West once thought would reduce the world to vassalage; the day when ExxonMobil is a wholly-owned subsidiary of CNOOC may be closer than it looks.

The same biases that make such global changes invisible have impacts at least as sweeping here at home. Faith in progress, coupled with the tribute economy’s culture of entitlement I mentioned earlier, have made it nearly impossible for anybody in American public life to talk about the hard fact that America can no longer afford most of the social habits it adopted during its age of empire. It’s almost impossible to think of an aspect of daily life in America today that will not change drastically as a result. We will have to give up the notion, for example, that most Americans ought to go to college and get a “meaningful and fulfilling” job of the sort that can be done sitting at a desk. We will have to abandon the idea that it makes any sense to spend a quarter of a million dollars giving an elderly person with an incurable illness six more months of life. We will have to relearn the old distinction between the deserving poor – those who are willing to work and simply need the opportunity, or who have fallen into destitution through circumstances outside their control – and those who are simply trying to game the system. The great majority of us will get to find out what it’s like to make things instead of buying them, even when that means a sharp reduction in quality; to skip meals, or make do with very little, because the money to pay for anything more simply isn’t there; to treat serious illnesses at home because care from a doctor costs too much; I could go on for paragraphs, but I trust you get the idea.

All these changes, it needs to be said, would be inevitable at this point even if the industrial world depended on renewable resources and had a stable, sustainable relationship with the planetary biosphere that supports all our lives. The United States has played its recent hands in the game of empire very badly indeed, and responded to each loss by doubling down and raising the stakes even higher. If, as a growing number of perceptive commentators have suggested, the US government has been reduced to borrowing money from itself in order to pay its bills – the theme of last week’s Archdruid Report post – the end of that road is in sight. It’s hard to see this as anything but a desperation move on the part of a political and economic establishment that sees no other options for short-term survival and thinks it has nothing left to lose. It’s the exact equivalent of paying household bills by running up debt on credit cards; it can buy a little time, but at the cost of making bankruptcy a certainty once that time runs out.

The global context of the crisis, though, also needs to be kept in mind. The industrial world does not depend on renewable resources, and its relationship with the biosphere is leading it straight down the well-worn path of overshoot and collapse; the endgame of American empire, while it would be taking place anyway, has the additional factor of the limits to growth in play. In an alternate world where energy and resource flows could be counted on to remain stable for the foreseeable future, it’s quite possible that one of the rising powers might offer America the same devil’s bargain we offered Britain in 1942, and prop up the husk of our empire just long enough to take it over for themselves.

As it is, it cannot have escaped the attention of any other nation on the planet that something like a quarter of the world’s dwindling resource production could be made available for other countries, if only the United States were to lose the ability to purchase energy and other resources from outside its own borders. It’s not hard to think of nations that would be in a position to profit mightily from such a readjustment, and nothing so unseemly as a global war would necessarily be required to make it happen; to name only one possibility, it’s by no means unthinkable that the United States, having manufactured “color revolutions” to order in countries around the world, might turn out to be vulnerable to the same sort of well-organized mob action here at home.

Exactly how things will play out in the months and years to come is anybody’s guess. One of the consequences of America’s descent into Third World status, though, is that a great many of us may have scant leisure to contemplate global and national issues amid the struggle to keep food on the table and a roof over our heads. In the long run, this shift in focus may have certain advantages; I have argued in previous posts that those nations that undergo the deindustrial transition soonest, and are thus forced to learn how to get by on the very modest energy and resource flows available in the absence of fossil fuels, may find that this gives them a head start in making changes that everyone else will have to make in due time. Still, making the most of those advantages will require a very different approach to economics, among other things, than most of us have pursued (or imagined pursuing) so far.

Interestingly, this brings us back to the point where this blog’s exploration of deindustrial economics started some months ago: the thought of the maverick economist E.F. Schumacher. Among his other achievements, Schumacher developed a theory of economic development for the Third World that cut straight across the assumptions of his own time and ours alike, and proposed a route toward relative prosperity that took the limits to growth and the failures of empire into account. That route was not taken in his time; it may be the only way left open in ours. We’ll discuss it in detail in next week’s post.