History Repeats

Is rise of China inevitable?
We are making it more so by failing to deal with mounting public debt and
deficits, which have ruined other superpowers.

By Jan C. Ting

Philadelphia Inquirer, Nov. 23, 2010

Does the world economic crisis presage the end of the 500-year rise of Western civilization and its replacement by China and a new Asian order? That seems to be the thesis of Scottish historian and Harvard professor Niall Ferguson, who specializes in the rise and fall of empires.

Ferguson recently received the sixth annual Benjamin Franklin Public Service Award from the Foreign Policy Research Institute of Philadelphia, on which occasion he spoke about his alarming conclusions. He noted that five centuries ago, the world's most advanced civilizations might have existed under China's Ming Dynasty or the Ottoman Empire, not in the primitive feudal states of Europe. But Western civilization ascended through technological and scientific innovation - which Ferguson says is not just the most important factor behind one civilization's dominance over others, but the only factor.

One consequence of the current economic crisis is that it limits technological and scientific innovation in the West. Meanwhile, China's growing economy, productivity, trade surplus, and large pool of scientists and engineers are giving it the upper hand.

Ferguson believes the continued ascendance of the West is also threatened by another consequence of the economic crisis: mounting public debt. In their efforts to reverse the job-killing consequences of the Great Recession, the United States and other Western democracies have converted enormous amounts of private debt into public debt by bailing out banks and other failing institutions. And public debt continues to grow as the U.S. government in particular tries to stimulate a struggling economy by spending more than it takes in and borrowing the difference.

Ferguson observes that world history is replete with examples of empires failing in exactly this way - by spending and borrowing too much, inflating their currency, and eventually defaulting on their debt. He cites recent events in Greece as demonstrating that there is in fact a limit to public borrowing, and that when it is reached, a crisis can unfold quickly. In the case of Greece, borrowing costs doubled in days, and only a European Union bailout fended off total collapse, and perhaps did so just temporarily.

Find this article at:
http://www.philly.com/inquirer/opinion/20101123_Is_rise_of_China_inevitable_.html
Jan C. Ting is a professor at Temple University's Beasley School of Law and a senior fellow of the Foreign Policy Research Institute.

My question is, how the rise & fall will look in a time of such interwoven economics and almost global fiat expansionism?