Toward the end of his The Rise and Fall of the Great Powers (1987), “[Yale Historian] Paul Kennedy expressed the then-controversial belief that great power wars were not a thing of the past.
One of the main themes of Kennedy’s history was the concept of overstretch – that is to say, that the relative decline of great powers often resulted from an imbalance between a nation’s resources and its commitments”, writes Professor Francis Sempa.
Few in the western Ruling Class even accept that we have reached such a point of inflection. Like it or not, however, great power combinations are fast rising across the globe. U.S. influence already is shrinking back to its Atlanticist core. This shrinkage is not simply a matter of resources vs commitments; that is too simplistic as an explanation.
Metamorphosis is occurring both as the result of the exhaustion of the political and cultural dynamics which powered the previous era, as much as is energised by the vitality of new dynamics. And by ‘dynamics’ is meant too, the exhaustion and coming demise of underlying mechanical financial and cultural structures which in, and of, themselves are moulding the new politics and culture.
Systems follow their own rules – the rules of physical mechanics too – as in, what happens when a further grain of sand is added to a complex, unstable sand pile. Thus, unlike in politics, neither human opinion, nor election outcomes in Washington, will necessarily have the capacity to mould the next era – any more than the opinion of Congress alone can reverse a cascade in a financial sand pile – if big enough – by pouring more sand grains on its top.
The fact is that any expiring groupthink – beyond a certain point on the down-curve – cannot reverse long-term dynamics. In the transition phase from one era to another, it is ‘events’ – ‘events’ which loose-off the truly transformative artillery shells.
In this context, President Xi’s message to the Gulf and other energy-producer states is such an ‘Event’ – one that neatly ‘flips’ an old-entrenched dynamic for a new one. Soltan Poznar has highlighted the framework underlying the proposals made by XI to the Gulf states’ mechanics and implications in his piece, Dusk for the Petrodollar (paywalled):
The old dynamic of oil in dollars in return for American security guarantees gives place to oil for transformative inward Chinese investment, funded in yuan. In some 3–5 years, the petrodollar may be gone, and the non-dollar landscape radically re-worked.
The dominant Élite (Panglossian) view however exudes disdain that the world will change: 2023 maybe be economically difficult for the U.S., due to a mild recession, but this will be nothing more than a run-of-the-mill affair – and that very soon, all the world will return to an U.S.-on-top ‘normal’.
Nonetheless structures – whether psychic, economic or physical (i.e. those related to energy dynamics) are in radical transition. And, consequently, components presently defined as ‘normal’: i.e. two decades of zero interest rates; zero inflation and oodles of newly ‘printed’ credit – turn out rather, to be the abnormal. Why?
Because two twin anomalous structural dynamics were exhausted: Cheap inflation-killing consumer goods coming from China, and cheap inflation-killing Russian energy, both underpinned competitive western production. Consequently, the West lived ‘high on the hog’ of its credit-led expansion, whilst enjoying near zero inflation.
Plainly put, endless cost-free ‘money’ of course is a short-term aberrant condition – one that gives a semblance of prosperity, whilst concealing its distorting pathologies.
Paradoxically however, it was the West that killed its own ‘normal’:
The Trump Administration’s strategists re-discovered the notion of ‘great power competition’ to contain and diminish China, whilst the Biden Administration has gone full throttle on regime change in Russia. The result: Interest rates are spiking and inflation has taken a firm hold – absent those former two ‘inflation-killer’ dynamics.
The real game-changer is rising interest rates which existentially threatens the ‘golden decades of easy, free money’.
The point here is that those former dynamics are not about to U-turn. They have fled the scene. Western classical economists predict either inflation or recession – but not both. When both inflation and recession are present, the economists neither can explain it, nor does it accord with their computer models.
Nonetheless, the phenomenon exists. It is known as cost-push inflation (triggered not by excess demand, but by supply-line dynamics in a schismatic global economy).
Again, the direction of structural dynamics associated with America’s decision to attempt to prolong its hegemony, may temporarily pause, yet are not gone: Inflation-generating energy price hikes (resulting from the separate ‘war’ on fossil fuels, and its attempt to make do on less productive energy sources) will continue.
More pertinent is the structural dynamic of the separation of the world into two trade blocs, which is held (by Washington) to be key to weakening rivals, rather than weakening the West (as it looks to everyone else). One bloc (Eurasia) already is making strides in dominating fossil energy in long-term contracts with producers’ it has too abundant raw materials and a huge population, and access to the colossus of China’s industrial workshop. It will be a cost-competitive, low-cost economy.
The other will be … what? It has the dollar (but not forever), yet what will be its business model? The loss of competitiveness (energy poverty in Europe), coupled with the policy of ‘friend-shoring’ its supply lines, means only one certainty: High costs (and further inflation).
What are the options facing, say, a ‘competitively-challenged’ Europe? Well, either it can protect its now uncompetitive industries through tariffs – or subsidise them through inflation-generating money creation. Most likely the EU will do both. Subsidies inevitably will magnify dysfunctionality in western economies (whether intentionally done, in pursuit of societal control objectives); or as a result of system dilapidation. But both essentially are inflation-generating.
Current western groupthink however, insists on an imminent return to a 2% inflation ‘normal’ – “It will just take a little longer than they originally thought”. But for now, the palliatives of tamping down inflation expectations (managing sales from the U.S. strategic oil reserve) and hyping the messaging of Russia being on the brink of failure, the group-thinkers suggest signals that price normality will return soon.
The pillars to this analysis rest on sand: when Pozsar asked a small group of inflation traders in London this summer about how the market (they) comes up with their five-year forward inflation forecasts, he was told that “there is no top-down or bottom-up work that we do to come up with our estimates; we take central banks’ inflation targets as a given and the rest is liquidity”. In other words, inflation calculations are based on models that are flawed – and which do not ‘price-in’ any shifts to geopolitical dynamics.
On the other hand, if the messaging is contingent on the narrative of an imminent Russia collapse, and in denial of the implications arising from the BRICS+ “paradigm of all-dimensional energy co-operation” – market sentiment in the West may soon experience ‘heart failure’.
Of course, at some point of crisis the Fed will likely ‘pivot’ – when faced with a market ‘medical emergency’ – and will return to the printing presses. “The inconvenient truth however, is that policies of monetary stimulation invariably end with the impoverishment of everyone”.
Complex dynamic systems however follow their own rules, and a ‘butterfly wings’ effect can suddenly overturn comfortable settled expectations: Alasdair Macleod, a former Bank Director, writes:
“What is really happening is that bank credit is now beginning to contract. Bank credit represents over 90% of currency and credit in circulation – and its contraction is a serious matter. It is a change in bankers’ mass psychology, where greed … is replaced by caution and fear of losses [a psychological dynamic that can arrive out of the blue]: This was the point behind Jamie Dimon’s speech at a banking conference in New York last June, when he modified his description of the economic outlook from stormy to hurricane force. Coming from the most influential commercial banker in the world, it was the clearest indication we can possibly have of where we were in the cycle of bank credit: The world is on the edge of a major credit downturn”
“Even though their analysis is flawed, macroeconomists are right to be very worried. Over nine-tenths of U.S. currency and bank deposits now face a meaningful contraction…Central banks see these evolving conditions as their worst nightmare. But because this tin-can has been kicked down the road for far too long, we are not just staring at the end of a ten-year cycle of bank credit – but potentially at a multi-decade super-cyclical event, rivalling the 1930s. And given the greater elemental forces today, potentially even worse than that…
“The private sector establishment errs in thinking that the choice is between inflation or recession. It is no longer a choice, but a question of systemic survival. A contraction in commercial bank credit and an offsetting expansion of central bank credit will almost certainly take place”. It will only make matters worse.
It is against this backdrop of geo-political tectonic plates slipping and sliding, that a new geo-political global landscape is coming into clear view.
What is the operative dynamic at play here? It is that Culture – old ways of managing life – run deeper in the long run than (ideological) economic structures. Commentators sometimes note that Xi’s China of today is much like China of the Han Dynasty. Yet why should that be a surprise?
Then there are geo-political events – psychic events – that shape the collective psychology of the world. The Independence movement in the wake of WW1 and WW2 is one example, though the Non-Aligned movement that emerged – ultimately – was ‘normalised’ through a new form of western financialised colonialism.
‘The event’ of our era, however, is again the U.S. strategic decision to take on both China and Russia in an attempt to preserve its unipolar moment – relative to other great powers. Yet, brief moments in history do not erase long term trends. And the long-term trend is that rivals will emerge.
Again, in retrospect, whilst America’s cultural and economic ascendency is portrayed as an End of History ‘normal’, it represents an obvious anomaly – as seems obvious to any outside spectator.
Even the leading British Establishment journal from the deep-state-linked Anglosphere, the Daily Telegraph, occasionally ‘gets it’ (even if, for the rest of time, the journal remains in aggressive denial):
“This is the summer before the storm. Make no mistake, with energy prices set to rise to unprecedented highs, we are approaching one of the biggest geopolitical earthquakes in decades. The ensuing convulsions are likely to be of a far greater order of magnitude than those that followed the 2008 financial crash, which sparked protests culminating in the Occupy Movement and the Arab Spring …
“This time, élites cannot shirk responsibility for the consequences of their fatal errors … Put simply, the emperor has no clothes: The Establishment simply has no message for voters in the face of hardship. The only vision for the future it can conjure up is Net Zero – a dystopian agenda that takes the sacrificial politics of austerity and financialisation of the world economy to new heights. But it is a perfectly logical programme for an élite that has become unhinged from the real world”.
Today’s western ideology was fundamentally cast through the radical shift in the relationship between state and traditional society – first promoted during the French revolutionary era. Rousseau is often taken as the icon of ‘liberty’ and ‘individualism’, and remains widely admired. Yet here we already experience that ‘nuancing’ of language that metamorphoses ‘liberty’ into its converse – an anti-political, totalitarian colouring.
Rousseau explicitly refused human participation in non-political, shared life. He saw human associations rather, as groups to be acted upon so that all thinking and daily behaviour could be folded into the like-minded units of a unitary state.
It is that unified state – the absolute state – which Rousseau upholds at the expense of the other forms of cultural tradition, together with the moral ‘narratives’ that provide context to terms – such as good, justice and telos.
The individualism of Rousseau’s thought, therefore, is no libertarian assertion of absolute rights against the all-consuming state. Rousseau did not raise the ‘tri-couleur’ against an oppressive state.
Quite the reverse! Rousseau’s passionate ‘defence of the individual’ arises out of his opposition to ‘the tyranny’ of social convention – the forms and ancient myths that bind society: religion, family, history, and social institutions. His ideal may be proclaimed as that of individual freedom, but it is ‘freedom’, however, not in a sense of immunity from control of the state, but in our withdrawal from the supposed oppressions and corruptions of collective society.
Family relationship is thus transmuted subtly into a political relationship; the molecule of the family is broken into the atoms of its individuals. With these atoms today groomed further to shed their biological gender, their cultural identity and ethnicity, they are coalesced afresh into the single unity of the ubiquitous State.
This is the deceit concealed in the ideologues’ language of freedom and individualism. It portends rather, the politicization of everything into the mould of an authoritarian singularity of perception. The late George Steiner said the Jacobins “abolished the millennial barrier between common life and the enormities of the historical [past]. Past the hedge and gate of even the humblest garden, march the bayonets of political ideology and historic conflict”.
The rest of the world ‘gets it’. They can see the “primitive psychological mechanisms” which need to be present for the western ‘distributed narrative’ to evolve into an insidious ‘mass formation’ that destroys an individual’s ethical self-awareness, robbing them of their ability to think critically – thus conditioning a society to acquiesce to foreign ‘colonial’ hegemony.
Then they look up to observe states standing up for their own culture and values (against any western imposition).
This is fiery symbolism. It has an ecstatic component. It is a long-term structural dynamic that only a major war may – or may not – derail.
Alastair Crooke: Former British diplomat, founder and director of the Beirut-based Conflicts Forum.