Monday, September 24, 2012

Christopher Presley's Question: Long-Waves, the United States, and the End of the Pax Americana?

The Good Dr. Kondratieff
Mr Chris Presley, a former student of mine who is reading law at the Florida Coastal School of Law, wrote me on Facebook, saying:

Back in '08 we discussed some sort of graph. Something like a bell curve that repeats throughout history with whoever is the world leading superpower. I remember Rome, Spain, two English (or British) cycles, then the U.S. The curve goes amazingly high, drops down quite a bit, then humps back up before falling off and giving the title to other nation. At the time of our class, we were debating whether or not we were about to be entering our little hump up. Do you think we have yet? Are we still making our way up, are we still dropping off the main curve, or are we on our way off the hump, in which case it's time for someone else to lead or do you think we're primed to be the leader again as Britain was after their dropoff?
Fascinating subject, Mr. Presley! First things first - the theorist you're thinking about is Nikolai Kondratieff (alternatively Latinized as Kondratiev) and the model you're thinking of is the Kondratieff Wave. Kondratieff was a Soviet economist who worked up until his purging and death in 1938 at the hands of Stalin.  I like his picture.  He seems like a nice man.
 
Kondratieff was interested in scientifically describing long-term political-economic patterns in the capitalist world-system.  His theories were and remain controversal but fascinating.  Where to begin, eh?
I.

First it is worth knowing that Kondratieff was a materialist, like Marx and (particularly) Engels - he believed that the material conditions in which human beings find themselves predictably determine the behavior of human societies.  Certain types of political, economic, or social decisions are unlikely or even impossible until we reach certain levels of technological development, and similarly, other decisions of that sort are inconceivable once we pass certain levels of technological development.  Certain technologies empower certain groups while other technologies empower, well, other groups. 

Secondly, Kondratieff observed a few simple truths about the capitalist world-system itself.  To begin with, though it was a single system, it was not a unified system, nor was it a system of equals, but rather a system in which certain powers derived greater benefits relative to other powers which were exploited for the benefit of the greater powers.  If there was a single preeminant power, a hegemon, then the system as a whole would be ordered by that power for its particular benefit, maximizing its power and wealth as a product of it having critical control over the most important technologies at that time.  Obvious enough, perhaps, but it Kondratieff insisted as well that this system be understood as a dynamic one - hegemons were on the rise or on the fall, as it were, and as such were always beset with other contenders for hegemony. 

Third, Kondratieff built upon Marx's understanding of the internal contradictions of capitalism.  This one will take a minute.  We need to start with how capitalism ideally works:
 
(1) Both consumers and suppliers are selfish and rational - that is to say (a) they want some things and want to avoid other things, (b) they can rank order the things they want, establishing preferences, and (c) they can do cost/benefit/risk analyses with regards to strategies and tactics that might be employed to acquire things they want before they begin pursuing those things. 

(2) As such, consumers want goods of the best quality for the lowest cost and risk while suppliers want to maximize their profits at the lowest cost and risk. 

(3) In an inelastic market suppliers have no motivation to improve the quality of their goods or to lower the cost of their goods since this will not result in higher profits. On the other hand, as elasticity increases firms have to compete more, which encourages them to seek advantages relative to their competitors - greater efficiency to lower costs, higher quality goods, manifestly more ethical work conditions and so forth. Maximize competition and you maximize the benefits to both individuals and society. 
Well, that is just super.  Except for one thing.  The goal of every supplier is to maximize their profit while minimizing costs and risks.  In order to do so, they must maximize their market share and, if possible, use social or political mechanisms of reinforcing that market share at the expense of competitors.  Put simply: economies are at their most ethical and their highest social utility when they are at their most elastic and competitive, but it is the rational goal of every supplier to minimize elasticity and competition through whatever means necessary.

Damn, eh?

The result is that firms will seek to maximize their profits not merely by improving quality or efficiency.  They will seek to fill new space, for instance, entering into previously unexploited markets.  They will seek to displace other firms, driving them into extinction by any means necessary, including the liberal use of propaganda - cough - excuse me, public relations and marketing (which disrupts the rational process of consumers through propaganda); by allying with and intimidating firms providing necessary services to them in order to exclude or limit competition and to artificially decrease their costs or to artificially increase costs to consumers (all by eliminating elasticity); by passing on costs and risks to members of the "commons" (e.g. firms that discharge pollution rather than properly managing it, thereby limiting their costs but increasing those of people affected by the pollution who are not receiving benefits of the cost-limiting strategy); or by enlisting the aid of one or more political systems to compel conditions that decrease costs and/or elasticity. 

Double damn, eh?

Fourth, Kondratieff noted that the combination of these preceding truths led to phases or epochs in the global political-economy.  Consider - a new bundle of technologies emerges - typically concentrated around particular sources of energy and methods of exploiting that energy in a manner that yields benefits in transportation, communication, and military techniques at minimum.  The first political-economies whose suppliers adopt that bundle are the ones which then contend to be hegemon at the expense.  The disturbing thing is, the suppliers of the contemporary hegemon often will neglect of adopt the technological bundle until it is far too late.  Why?  Because such an adoption necessitates the massive costs and risks, costs and risks that will inevitably benefit the hegemon as a whole, but which will damage profits for and risk the survival of particular firms within that hegemonic state.  As such, the firms which dominate the hegemon typically will seek to guarantee existing profits and increase them as possible, while allocating risks and costs to other parts of their political-economy.  The result is that the most powerful elements of the hegemony fail to respond to the crisis of competing technologies and those parts of society which are disempowered and therefore have a strong financial and political motivation to pursue the new technologies are actually undermined in their efforts by either the firms or a co-opted state.  As the political economy becomes less competitive and more beset by the perception that it is "under siege" it responds, tragically not by improving its technology and maximizing elasticity, but by engaging in adventurism, typically military, which benefits only members of the state and the ruling firms.  Eventually these lead to a radical decline in the relative power, influence, and economic strength of the political-economy in question and the emergence of a new hegemon. 

Fifth, this is cyclic.  It is not cyclic because it is instinctive or because humans lack volition.  Rather, it is cyclic because human beings of all times share certain characteristics - we form states to defend our political-economies, we are rational, we are selfish, we are technologically driven, and so forth.  Add the patterns of intrastate political-economics to the patterns of interstate political-economics and you get yet more patterns. 

Sixth, this is worrying, because when hegemons become highly inelastic they become insensitive to the needs of the global political-economy and the costs necessary to offset emergent risks.  As such contenders to the hegemony gain opportunities to grow in influence and they do so by seeking to undermine the extant hegemon and their competitors.  This is done through the careful application of violence - sometimes in the form of economic and ideological disruption, sometimes in the form of supporting enemies of their enemies, sometimes in the form of wholesale interstate war, but most commonly in a combination of these. There is a theory that experts in international relations often turn to - the theory of hegemonic stability.  It asserts, simply put, that those times when a single great power dominates a system are the most peaceful of times - effective hegemons know that violence increases costs and risks while decreasing benefits.  As hegemons decline, violence reemerges. 

II.

This leads us to the another question - who have the hegemons been?  Well, there is some debate over how far back we can talk about our system, the modern world-system, has existed.  I typically argue it emerged in the late 15th Century.  This time is astounding because Europe went, virtually overnight, from a backwater into the center of global cosmopolitanism.  That isn't to say that the Europeans were the only dance, nor that their system was the only system, nor that it was even the biggest system.  But this is when it became nationalist, when it became individualist, and when it became expansionist. The Reconquista ended with a united Spain and a united Portugal, respectively, and these nations, with their impressive military capacities, set out to establish transcontinental trading systems which would allow them to dominate Europe.  In the process they would "discover" the Americas and, conquering vast proportions of these continents, would precipitate the Columbian exchange.   Above all, Iberian conquests were dependent upon a combination of European and Islamic technologies to create sailing, navigational, and cartographic technologies that would allow voyages around the horn of Africa and transoceanic trade. 

Eventually, however, the Spaniards and Portuguese had lost their domination of the nascent capitalist world system.  They had overly depended on bullion, which they themselves devalued, and had spent exhorbiantly on warfare which would yield few permanent benefits in Europe proper.  The Dutch would emerge to dominate the European investment landscape, innovating modern banking technologies and industrial technologies that utilized both reclaimed land and windpower.  Again, however, the hegemon found itself drawn into destructive war after destructive war and, eventually the Dutch were superceded by the British.  The British developed modern bureaucracies and created truly modern industry that harnessed coal-driven steam power for the first time. The British built an empire based largely upon value-adding - buying cheap raw materials, processing them, then selling them for a profit. 

The British nearly lost their hegemonic domination with the near perpetual wars against France and her allies in the late 18th and early 19th Century - from the French and Indian Wars through the Napoleonic Wars the British nearly lost everything.  That they didn't is a testament to both poor economic choices by the French and the unadulterated luck of the British (being on an island therefore having difficult-to-damage infrastructure).  This was reinforced by radical reforms and improvement of the British industrial, communications, and transportation infrastructure.  British domination, however, would ultimately collapse under the costs of maintaining a massive intercontinental empire (both colonial direct rule and neocolonial domination in nature) and the reemergence of great power warfare in the first half of the Twentieth Century.  At this moment it was American industrial infrastructure, microtechnology, industrial chemical technologies, logistical capabilities, and multisource energy exploitation (high efficiency coal, internal combustion engines, and nuclear fission technologies) that led to the newly emergent hegemon. 

So, what patterns are emergent (if we buy into the model proposed by Kondratieff)? Hegemons tend to engage in imperialism and expensive wars, activities that benefit only a narrow proportion of their population and often have no political-economic value in and of themselves while resulting in unmanageable costs in the period which we can roughly describe as their declines from principality. These occur because firms that dominate the economy seek to maintain their relative wealth and power while displacing costs and risks popularly - they harness the state, in other words to increase inelasticity for their own ends.  There are reform movements in these states, demanding a return to elastic markets and the adoption of new, superior technologies and a reiteration of non-kleptocratic policies, but in only one instance (that of Britain in the late 18th and early 19th Centuries) have these ultimately proven successful and even then it was at enormous cost.

We also see that the replacing hegemons typically gained their new power through radical, substantial reforms to their infrastructure and uncorrupt, highly competitive legal and economic systems.  Notably, these  infrastructural improvements tended to include significant improvements in energy-to-action efficiency, improvements to industrial technique, improvements in logistics, and simultaneous concurrent improvements in social infrastructure - notably the improvement of bureaucracies, banks, and educational institutions. 

III.

So, now to the meat of things.  If, and it is a big if, we are to accept Kondratieff's long-wave model, then we must ask ourselves, to what degree are we following the decline patterns, to what degree are we following the reform patterns, and to what degree are there contenders for our position following the reform patterns in and to such a degree that they have potential to displace the United States.

Well, clearly the US has engaged in many questionable wars of extraordinary cost - this does not denigrate the service of our servicemen and women, but it does seem fairly clear that several of our most recent conflicts where of marginal utility at best - most notably the Second Iraqi-American War.  The result has been skyrocketing costs.  Also, since the 1980s the United States has steadily deregulated a number of markets, leading to, if not trusts, then many industries that are trust-like - telecommunications, transportation, military-industrial, and banking/investment most prominent among them.  The United States has also demonstrated a curious unwillingness to maintain and expand its infrastructure - our communications infrastruture, wireless and internet, is far less developed than many comparably wealthy states, our medical infrastructure is profoundly uneven, our highway, airport, and seaway infrastructure is in many places crumbling, and the US has shown a deep unwillingness to divert funds away from traditional methods of energy generation towards research and investment in less polluting and more efficient forms of energy production.  Corporate welfare is rampant while only minimally increasing benefits to the nation and its citizens in general.  So, yup.  There are big, huge, terrifying problems. 

That said, in the last few years investment in new energy technologies is way up, watchdog organizations demanding infrastructural redevelopment are expanding their efforts radically, and American biotechnological and microtechnological industries have continuted to expand.  American higher education is beginning to seriously assess its own problems - notably cost-to-benefit ratios for students, and demands for drug and prison reform are becoming more mainstream.  America has virtually ended its occupation in Iraq and is systematically aiming to the same in Afghanistan.  There is also increasing demand for appropriate expenditures-to-taxation ratios, though whether this will hold out remains to be seen.

As for our competitors, the other great powers must be acknowledged to be Russia, China, India, Japan, and the European Union.  Russia is militarily powerful, but even so apparently ineffective and increasingly dependent on exports of non-value-added goods, never a good sign.  China and India are rapidly developing, and their gross power is increasing radically, but their per capita wealth remains a serious impediment, and their technological capabilities, while impressive, remain extremely uneven.  Japan and the European Unions have vast, modern, high-tech, clean economies, but also have deep inefficiencies and limited transnational influence, as well as even more confounding domestic economic problems than the United States. 

Conclusion.

This is of course a bare-minimum application of a controversial model of political-economic transformation, but what seems to be the dance is this: the United States is very much in danger of a decline from the status of hegemon if it fails to press for massive investment in high technology, reform of its primary and secondary educational systems, radical improvement of its energy, communications and transportation infrastructure, and significant trust-busting reregulation and support for small- and medium-sized, hyper-competitive businesses.  It also needs to retain its military capability but use it only when in the national interest, that is to say far more conservatively than it did throughout the last 60 years.  That said, it can hardly be counted out yet and clearly need not be, as its competing political-economies all have substantial weaknesses of their own.  I suspect the next decade and a half to two decades will tell the tale, for better or for worse.
If you want to get fancy, I'm going to recommend two articles that I use with my kids in my 400-level international relations course:

N.D. Kondratieff and W.F. Stolper. (1935) “The Long Waves in Economic Life.” The Review of Economic Statistics. 17/6: 105-115.

Joshua S. Goldtein (1985) “Kondratieff Waves as War Cycles.” International Studies Quarterly. 29/4: 411-444.