Why the world hates America: the economic explanation.

• Author: Zoakos, Criton
• Position: United States

Since September 12, 2002, the day President Bush delivered his "League of Nations irrelevance" speech at the United Nations, the United States has used the Iraq issue as a fulcrum to revamp the way it relates with the rest of the world. The UN has been put on probation, Germany and France into the outer darkness, NATO east of the Oder-Neisse, North Korea in the cross-hairs, the al-Saud and Moubarak families on a forced march to perestroika, etc.

At the same time as the United States reshuffled world military and political power relations in this way, it also reshuffled world economic relations, a fact largely unnoticed in the excitement of the Iraq debate. The emerging "new guard" at the Federal Reserve (e.g., Ben Bernanke) and John Snow's emerging team at the Treasury have served notice, first to the European Union last September and then to the G-7 at the end of February, that the world's number one imbalance is not the U.S. current account deficit but their capital account deficit. This imbalance can only be redressed by lifting the rates of return on capital in Europe and Japan and in no other way. At the end of the day, either Europe and Japan will execute "Anglo-Saxon"-style reforms to lift their rates of return, or the United States will become the "sole financial intermediator" of the world, with the current account deficit becoming the equivalent of file currency-issuance function of the world's "sole central bank." With 40 percent of industrialized-world GDP, 50 percent of total world defense spending, 60 percent of the total world growth rate, 70 percent of tradable world financial wealth, and 80 percent of world military R&D, the United States could handle this.

Before we proceed further with the specific implications of this emerging situation, a parenthesis is necessary to deal with the misplaced and rather naive charge of "American imperialism." America's critics are facing a far worse problem than a mere "American Empire" that exists only in their imagination. They are facing the possibility of Europe and Japan becoming "failed states," thus surrendering to the United States the status not of "sole superpower" but that of "sole non-failed state."

NOT AN EMPIRE

The classic western empires of the past--Athenian, Roman, and British Empires--all acquired and maintained their power through possession of overseas resources (economic, military, etc.) and used that power to preserve and augment these overseas resources. This experience of twenty-five centuries has distilled two criteria for judging whether a great power is empire: (1) it must depend for its existence upon overseas resources (economic, military, etc.); and (2) its ruling elite must be more or less unencumbered by the constrains of domestic self-government in the pursuit of its overseas interests. The United States today does not meet these criteria. Examples of other great powers of the past that did not meet these criteria and, therefore, are not ranked as empires were the Spartan power that defeated Athens and the France of Louis XIV. Despite their repressive internal features and despite their overwhelming power, neither of these powers was at the time, nor is now, thought of as "empire."

The Athenian Empire depended upon the collection of taxes, military conscription, and land grabs from allied/subject states. In its heyday, the Athenian Empire was collecting taxes from its foreign subjects sufficient to subsidize each Athenian citizen to the tune of a $15,000-per-year modern equivalent. The Roman Empire depended upon land grabs, taxes, and military conscription of its subject populations. Senatorial families and imperial favorites controlled the state monopolies of food staples, metals, and other raw materials supplied by the subject nations. The British Empire depended upon land grabs, military conscription of subject populations, overseas raw materials, and overseas markets. The British East India Company and other royal franchises were the greatest single influence over the government budget and the Bank of England.

None of these criteria apply to the United States. The United States expends its own treasure to provide security for its allies. It does not engage in land grabs. It does not conscript foreign populations into its armed services. It does not depend upon others for raw materials and markets, but rather others use it as their market of last resort. American international involvements are such that they do not, generally speaking, lend themselves to the special enrichment of particular political elites that handle these involvements. There is no American equivalent of the British East India Company that managed colonial resources and markets for the British Empire, or of commercially enfranchised Roman Senatorial families and imperial favorites who administered imperial monopolies, or of Athenian "helle notamiae," the "empire-treasurers" who collected and managed the taxes of the subject states.

Put in modern terms, the sources of wealth of the Athenian, Roman, and British empires--their "capital accounts"--were overseas. Empires run capital account deficits as they depend upon claims on overseas-generated wealth. The sources of U.S. wealth are domestic. The United States runs capital account surpluses that...