Economic Chaos and the Decline of Western Power

Bret Stephens
Speech to the JINSA Fall 2010 Board Meeting
November 16, 2010

The West is in a period of retreat that appears to have two main interrelated components. One is the financial component and its effect on the ability and the will of Western powers, chief among them the United States, to project power. The second, to be dealt with later, is the profound effect America’s flawed thinking about the world has had on our pursuit of policy.

World Economic Chaos and the Decline of Western Power

Bret Stephens
Speech to the JINSA Fall 2010 Board Meeting
November 16, 2010

The West is in a period of retreat that appears to have two main interrelated components. One is the financial component and its effect on the ability and the will of Western powers, chief among them the United States, to project power. The second, to be dealt with later, is the profound effect America’s flawed thinking about the world has had on our pursuit of policy.

World Economic Chaos and the Decline of Western Power

Europe is moving very swiftly towards a series of cascading sovereign debt crises. I doubt that Spain is going to come out of this current crisis in one piece. The health of German banks may be considerably worse than is commonly believed. I think France is in a much weaker position, financial position, than it realizes.

The most worrisome issue of all is that the United States is proceeding to aggravate the health of the global economy through a huge new infusion of money, which is going to devalue the dollar and set off a war of competitive “beggar thy neighbor” devaluations. It is certainly not going to improve America’s employment situation and it’s going to massively worsen the current fiscal crisis. The state of the economy, national as well as global, has a material effect on America’s ability to project power.

The Britain of today has ceased to be a military power of any description whatsoever. I believe that what has happened to the British military is, in effect, the proverbial canary in the coalmine for what might soon befall the U.S. military.

It is striking to think of the arc of British naval history and to say that in 2010 it more or less came to an end. It was a long, slow decline. As recently as 28 years ago, the British Navy was able to deploy a major flotilla, consisting of some 60 to 70 ships for the liberation of the Falkland Islands from Argentine occupation. The entire British Navy is now less than half that size and consists of some 30 major surface combatants.

The UK intends to build large aircraft carriers that will have no air component for offensive strike missions. In effect, the aircraft carriers will actually amount to a kind of Keynesian jobs program.

It is typically the case that dictatorships, when offered the choice between guns and butter, always choose guns, which gives them the outsize influence that they have in the world. That’s what the Iranians are doing by their massive investments in their nuclear program. But it’s also true that, with very few exceptions, and those exceptions being imminent threat of war, that every single Western democracy, given the choice between guns and butter, chooses butter. That is, they choose the welfare state over a robust military. They justify this choice by claiming, as most European countries do, that they no longer play a global role in the world, and that they can substitute military hard power with cultural soft power or foreign aid.

These are the choices that Western Europe made over the past 40 and 50 years to the point that now Europe is now, as far as global power politics are concerned, a very charming irrelevancy. Well, if you’re in the right arrondisement, it’s a very charming irrelevancy. If you’re in the wrong arrondisement, if you’re in one of the banlieues in suburban Paris, it’s not so charming. But anyway, that’s the experience of Western Europe.

Now, the United States is in a period in which people are beginning to talk of military cutbacks, and I fear they’re going to be severe. They are going to be particularly severe because of the choices that the United States has made militarily in its recent history, especially procurement choices.

Note the following bits of data – for most of the second half of the 20th century the workhorse fighter plane of the United States Air Force was the F-4 Phantom.

The F-4 Phantom’s fly-away cost, which excludes research and development, is about $16 million a plane in 2009 dollars. The United States built more than 5,000 Phantom jets, most of which were flown by the United States Air Force and Navy while hundreds were sold abroad.

Fast forward to the next generation of twin-engine fighters, the F-15 Eagle. The F-15 is a magnificent war machine. Its fly-away cost in 2009 dollars was about $35 million – a little more than twice the costs of an F-4. The United States built, at least in the fighter variant, about 630 F-15s.

Now go from the fourth to the fifth generation of fighters, the F-22 Raptor. The F-22’s fly-away cost is about $150 to $180 million. We’re building 186 F-22s. The United States is expected to build somewhere in the order of 2,000 of the fifth generation F-35 Lightning II, which was supposed to be the cheaper alternative to the F-22. It is a single-engine aircraft and is not quite as effective a fighter as the F-22.

The expected fly-away cost of the F-35 also about $150 million. We will never build 2,000 F-35 fighters. Not going to happen. And that is a frightening development. Why is it frightening? Because the average age of a fighter jet in the inventory of the United States Air Force is 24 years. Two years ago we had to ground our entire fleet of F-15 fighters because structural faults were discovered. If you look at other planes that are inventoried, especially tankers and bombers, you’re talking about an average age of up to 50 years for some of the planes that we are flying. The United States Air Force is nearly the aerial equivalent of a parking lot in Havana.

It is the same if you look at the other services, with the likely exception of the Army. The United States Navy, for example, in 1989, at the end of the Reagan arms buildup, nearly managed to get to the 600 ship fleet level, a significant accomplishment. The United States Navy today consists of 287 ships, less than half of the old force that we were able to field. What does this mean? It means that now, in the Western Pacific, the United States Navy has fewer ships at sea than the Chinese Navy does. Interestingly enough, in 2007, a diesel electric Chinese submarine surfaced right in the middle of an U.S. Navy aircraft carrier battle group. The Chinese military sent a message that it can take out a $5 billion aircraft carrier with a $500,000 torpedo fired from a submarine that maybe costs $100 million.

This is going to be very significant in terms of what American military might is going to look like, or how it’s going really to diminish on account of exorbitant costs, limited means, and increasingly diminished will.

How does all of this start to affect the strategic picture? Where does the world crisis begin?

It begins in a place called Agadir in Morocco. The Agadir Crisis of 1911 concerned a threat to the Moroccan Bey. The French want to come to his defense but Germany sails one of its gun boats into the harbor of Agadir in an effort to break up the entente cordial between France and Britain, and to test whether Britain would really come to France’s defense, in terms of defending her interests in Morocco. Britain ended up doing just that. Britain would rather lose the peace and defend the national honor than the other way around.

What I find interesting about the Agadir Crisis is how you hear echoes of it today almost exactly 100 years on. I’ve been fascinated by the series of crises that the Chinese are attempting to provoke in places like the Paracel Islands, the Spratly Islands, the Senkaku Islands (which they call the Diaoyutai Islands,) and a separate crisis also between Japan and Russia over the South Kurile Islands. But what are the Senkaku Islands? The Senkaku Islands are essentially uninhabited rocks. So why are the Chinese attempting to gain control of them? Beijing is testing its power through small crises.

Now, 15 years ago, when China attempted to do similar things, the United States had such a preponderance of power in the Western Pacific that President Clinton could simply send two aircraft carriers through the Straights of Taiwan, and send a clear signal to the Chinese that we were serious, and that we were the preponderant naval power in the South China Seas, and in that part of the Pacific.

Now America’s capacity to do that is diminishing. And so you are going to start to see this sort of “small” crisis become commonplace. You are going to find yourself becoming familiar with names like Senkaku.

I would prefer to have the United States be the preponderant military power in every theater in the world. The alternative to that is Japan or some other current U.S. ally squaring off with China. You end up with spheres of influence and spheres of competition. And that’s a source of tremendous instability.

We have had Pax Americana for 60 years, and it has worked out pretty well for the world. I would like to see that continue. And by the way, it should be noted that the United States today spends about four percent of its GDP on defense. During the Reagan era, which was a prosperous era, we spent about 6 percent. During the Johnson Administration, most of which was a prosperous era as well, we spent about 10 percent.

So, what appears from the outside to be a minor South China Sea territorial dispute is much more. We have to be alert to the fact that on the very far peripheries, American power is being consistently tested and challenged, and consistently we are not rising to those small challenges out of the combination of financial weakness, political insecurity, and diminished military clout. And those are the things that are deeply concerning to me.

Seismic Shift in American Thinking About the World

The history of the past 100 years shows that an inflationary economic environment encompassing unstable or failing regimes produces profoundly negative results: the collapse of the Weimar Republic into the Nazi regime; the collapse of Czarist Russia into the Soviet Union. What will happen in China as it experiences rising inflation? I don’t know. But we are living in a period in which I think we are increasingly finding ourselves having to confront serious threats on an almost constant basis. And I think partly those threats are a function of kind of millenarian ideologies or beliefs that take root in periods of economic dislocation or insecurity.

Therefore, the third component is the change in our ideas about the world. There are many bad ideas about how to approach challenges to America’s place in the world. China and the Palestinian conflict with Israel are but two examples. We need to think about the structure, devices, and rhetoric needed to combat these bad ideas.

I’m astonished by the amount of rubbish that is written about the Middle East, just to name one part of the world. I’m concerned that it is growing without sensible people noticing that it is rubbish. The U.S. government is attempting to get Israel to agree on a 90-day settlement freeze based on the idea that: a) There are negotiations to be had; b) the Palestinians are anywhere near recognizing Israel in any shape or form; c) Israel is willing to make major concessions to the Palestinians when the Iranian issue hasn’t been resolved; d) that the Iranian issue can be resolved by any means short of some kind of military action, and so forth and so on. There is a kind of cascade operating here that becomes an almost unstoppable force.

China is another area where the United States is just getting it wrong. There are two ideological pillars to the regime in Beijing. One is nationalism and the other is economic growth. The interest of the United States is to do everything we can to promote China’s economic growth, to integrate it into the world economy, to bring it into the WTO and other types of dispute settling mechanisms while discouraging expressions of nationalism.

We have been adopting almost precisely the opposite policy under this Administration. We have been browbeating China and stupidly hitting them where we shouldn’t, on their currency valuation. We have wrongly imposed trade sanctions, such as tariffs on Chinese tires. All of this risks a trade wars with China while, at the same time, we haven’t been standing up to Beijing with sufficient force on such questions as freedom of the seas or denying their preposterous position that they have an exclusive economic zone in the far off waters of the South China Sea, or standing up more forcefully when they declare that the United States cannot deploy military forces on the western side of the Korean peninsula when we’ve been sending aircraft carriers up there for decades.

So, we’ve been adopting precisely the wrong kind of policy, a policy sort of tailor-made to get the worst out of China rather than the best. China is a competitor, but it is not a mortal enemy, or it’s not a mortal enemy yet, and we have a real interest in preventing that from happening. And we should do so by having collaborative economic efforts with them, getting over this insane obsession about their currency and begin working to reduce trade barriers. And then trying to work out our trade frictions while saying no to them over their territorial claims to far off islets or when it comes to the Korean peninsula. Painting in very broad strokes, that’s the right the policy mix for China. This administration has it exactly backwards.

— Bret Stephens is Deputy Editorial Page Editor and Columnist at The Wall Street Journal.