Volume 44, Number 174,
July-September 2013
The Decline of the United States:
Global Historical Context
Alejandro Dabat and Paulo Leal

Since the beginning of the current century and even more since the beginning of the ongoing international crisis in 2008, the United States has entered into a clear stage of global historical decline. As described here, this is related to its immediate circumstances, as well as the specific features of its current financial system and the unsustainable speculative capital money upon which it is based. But these more evident factors cannot be separated from other underlying elements that affect the productive structure of the country, the operational capacity of the national State and the erosion of its global hegemony, which has been severely damaged by international economic competition from China and other developing countries, as well as the political and financial incapacity of the US to confront the costs of an increasingly threatened global leadership.

At the root of this phenomenon is the contradiction between its enormous techno-productive strength and the consequences of its increasingly parasitic and lagging socio-institutional regime. The United States is still the principal global economic power due to its enormous scientific, technological and business capacities (although these are declining). As a result of its domestic economic and socio-institutional systems as well as the decline described here, the economic surpluses of productivity are squandered by speculative financial investment, the short-term outlook of productive business investment, the costs of the productive displacement of jobs and fiscal revenue, high levels of sumptuary over-consumption from a large portion of the population, enormous military spending and the growing external debt. These factors have led to a huge fiscal debt, growing public debt significantly above gdp and debt service that will reduce future economic growth by 1% as a result of its size and trends (Rienhart and Rogoff, 2010).

Independent of the achievements of the United States, the situation is leading to a historic low in the nation’s public investment capacity, as well as its ability to confront necessary spending for infrastructure, cutting edge technology, the environment, jobs, social services and even political-military hegemony (see footnote 31). In addition, these losses are creating stronger socio-political tension and conflict as a result of drops in employment, salary decreases, social security, health and education spending, mass evictions and the expulsion of millions of migrants. Strong fiscal restrictions will impede solving these problems in the short or medium term, which may require devaluating its debt through an inflationary process that The Economist (2012) estimates will be no less than 5%, or through a major adjustment in public spending and taxes.31

Due to the enormous global weight of the US, its decline and relative loss of hegemony in conjunction with the fall of Eastern Europe will affect the overall world economy in various ways, as proposed in other works, giving rise to a new global order of a strong, multipolar and conflictive nature, whose specific features will depend on varied and complex factors, and whose study goes far beyond the scope of this work. This will also affect Latin America and Mexico, as described in Dabat 2009 and Dabat, Leal and Romo, 2012.

31 The Economist believes that eliminating the deficit would require cutting spending and increasing taxes by 35% in each case, with major political and social consequences. In keeping with Rogoff, the magazine proposes the alternative of inflationary debt devaluation, with annual inflation no les than 5%. Although it would seem like a feasible alternative, it would severely impact international financial capital and US creditors, as well as what is left of the global monetary system.

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 195 October-December 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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