Rotting Within, Tremors Without:
The State of the Empire, 2006 By
January 14 / 15, 2006
In 2005 the US economy defied all the known tenets of economic theory:
In the face of record high trade deficits, monstrous budget deficits, a failed war and major political scandals involving
presidential aides, the dollar strengthened against the Euro and the Yen, the economy grew at 3.4% and all the major investment
houses had record profits. It seems the US economy defied the laws of gravity, floating above the political turmoil and structural
vulnerabilities. But the point of 'prophesy' is not to specify the day and hour of sharp decline and recession but to identify
the deep structural vulnerabilities and the possible trigger events, which could detonate a crises.
The US economy
will continue to diverge in a double sense. The financial sector will expand overseas, especially the major investment
houses like Goldman Sachs, J.P. Morgan, Citibank while the manufacturing sector led by the 'Big Three' automobile sector will
decline even further, with a good chance that General Motors will go into bankruptcy. The US multi-nationals will expand on
a world scale, buying into major banks and industries, especially in China, extending the economic reach of the empire, while
the domestic economy will suffer as the housing and real estate speculative bubble collapses, high energy prices undermine
export competitiveness, resulting in sharp decline in consumer spending. The US empire will increasingly become identified
with its economic giants as its failed wars will lead to a withdrawal of combat troops and a reliance on airpower, local military
forces, economic sanctions and accommodating to social liberal regimes.
The domestic social crisis will deepen as overseas
profit opportunities expand. In 2006, over 90% of US workers will be paying for their costly individual health and pension
plans or, if they cannot pay, they will lose coverage. Precarious work contracts are the norm for all but a small sector of
public employees. Real inflation (including increased health, education, energy and pension costs) will rise to about two
times the consumer price index and contribute to the further decline in actual living standards. A rapid deflation of the
housing bubble would reduce the "paper value" of homeowners by half and force many who are heavily indebted into bankruptcy.
Nevertheless, as happened in recent decades (after the Savings and Loan, Dotcom, Enron and other speculative failures), while
millions of small speculators and investors in real estate will lose billions of dollars, their discontent will not find any
political expression. The greater the inequalities in income, property and wealth between the financial and imperial economic
elites, on the one hand, and the domestic wage and salaried classes, on the other, the lower the level of organized political
and social opposition.
In 2006 the US will become the developed country with the greatest inequalities, with the most
sustained decline in living standards and the nation least able to organize a defense of social rights let alone an
alternative - against the empire-centered model of capitalist accumulation. In a word, the domestic crisis of living standards
will finance further economic empire building rather than challenge it.
US global expansion is sustainable because
of fundamental changes taking place in India, China, Indo-China and the oil kingdoms of the Middle East. These countries have
lowered many barriers to foreign investment, joint ventures and even majority ownership of high growth industries, banks and
energy sources. US , European and Japanese MNCs and banks will accelerate their entry beyond initial beachheads and move across
all sectors of the economy, with greater depth: 2006 will mark China's transition from "national capitalist" to a model of
imperial and national led capitalist growth.
The US will continue to substitute an air war for a ground war in Iraq:
For every 10,000 troops withdrawn, there will be hundreds of added air attacks. The US policy toward Iraq is a classic case
of "rule or ruin" of Biblical proportions. Since the US or its puppet regimes cannot rule, Washington's policy is to regress
the country into an "Afghanistan" of warring clerical and ethnic warlords and tribal chieftains based on min-fiefdoms. The
debate over a new war against Iran is still not resolved because of the deep divisions in Washington, Israeli military threats
and the spy trial of two leaders of the major pro-Israel lobby, the American Israel Public Affairs Committee). Washington
can be expected to push for Security Council economic sanctions, which will likely fail because of a China/Russia veto. Subsequently
it is possible, especially if Netanyahu is elected Prime Minister, that Israel will attack Iranian experimental nuclear energy
sites, with the complicity of their partners in the White House and Congress. Israeli aggression will likely unleash a series
of proxy wars in Lebanon, Iraq (including "Kurdish" Iraq) and beyond, leading to an escalation of US casualties and weakening
Washington's client regimes (Saudi Arabia, Jordan, Egypt etc)
In Washington, Congress and both political parties will
be further discredited as Jack Abramoff, the self-confessed lobbyist-swindler will implicate dozens of Congress members, party
leaders and government officials in an enormous bribery scandal. The trial and prosecution of Congressional leaders, especially
Republican heads of Congress, may prevent any new regressive and repressive legislation from being enacted, but may spur the
President to engage in an overseas military adventure(bombing Iran) to paper over the crisis.
On the other hand, another
failed military intervention by the White House in the context of a discredited Congress led by felonious party leaders could
ignite a grass roots movement for impeachment.
A weakened US military, the decline of orthodox neo-liberal clients,
and failed diplomatic initiatives in regional forums, is forcing the US toward "accommodating" center-left politicians in
Latin America. Washington's greater flexibility will find expression in the continuing good working relations with the Presidents
of Brazil, Uruguay, Argentina and probably Bolivia. The State Department's hostility toward Venezuela's President Chavez will
be tempered by its loss of internal levers of power, and the close working relations between the US and Venezuelan oil companies.
The US will likely not intervene in the elections in Colombia, Chile, Mexico or Brazil, because each of the major candidates
are well within the US neo-liberal orbit.
The improbable outcome in Peru, where a 'nationalist' former military officer
close to Chavez is a major contender, will likely result in heavy backing for the conservative candidate. Washington will
probably engage in some rear-guard 'dirty tricks' in the Venezuelan Presidential elections, knowing in advance that Chavez
is likely to win by a substantial majority.
In other words, Washington will lose its automatic voting majority in
Latin America and be forced to shelve some of its most blatant attempts to impose economic dominion,. Nevertheless none of
its strategic military bases, extensive financial and resource holdings and lucrative debt payments will be threatened by
the election of 'center-left' Presidents. The major caveat to this potential 'co-habitation' outcome is a successful popular
uprising if the center-left fails: In that case Washington will likely intervene with local proxies, detonating regional opposition.
In summary, 2006 will certainly be an extremely volatile and uncertain year for the Empire. The military defeats,
internal crises , a big decline in the dollar and a general weakening of domestic economic fundamentals are juxtaposed to
growing overseas economic expansion, high rates of financial profits, extremely weak internal opposition and accommodating
elites in Asia and South America. The greatest threat to empire building is not domestic nor in the competitive marketplace
but in a possible war against Iran either a US or Israeli attack could set in motion a series of severe economic political
and military shocks which would radically change all previous predictions and outcomes regarding the state of the Empire for
The second big shock in the making is the growing popular revolt against the monstrous inequalities and terrible
working conditions imposed by the Chinese ruling class in alliance with foreign capital. A further shock could emerge beyond
2006 if and when the current commodity boom collapses and undermines the export strategy of the center-left regimes in Latin
and Central America.In that context it is likely that there will be a new wave of extra-parliamentary, anti-imperialist movements
that could send tremors throughout the Empire. James Petras
, a former Professor of Sociology at Binghamton
University, New York, owns a 50 year membership in the class struggle, is an adviser to the landless and jobless in brazil
and argentina and is co-author of Globalization Unmasked (Zed). His new book with Henry Veltmeyer, Social Movements and the
State: Brazil, Ecuador, Bolivia and Argentina, will be published in October 2005. He can be reached at: firstname.lastname@example.org