The changing international balance of power

2005/05/04 at 11:21

In a recent article in the Austin Chronicle, Michael Ventura predicts the impact that rising oil prices will have on American society and America’s relations with other countries. Ventura’s predictions for changes in American society are as controversial as James Howard Kunstler’s, but I think Ventura’s view of how our international relations will change is right on target:

Gas prices can only go up. Oil production is at or near peak capacity. The U.S. must compete for oil with China, the fastest-growing colossus in history. But the U.S. also must borrow $2 billion a day to remain solvent, nearly half of that from China and her neighbors, while they supply most of our manufacturing (“Benson’s Economic and Market Trends,” quoted in Asia Times Online) – so we have no cards to play with China, even militarily. (You can’t war with the bankers who finance your army and the factories that supply your stores.) China now determines oil demand, and the U.S. has no long-term way to influence prices.

There’s only one section of our economy that has [the] kind of money [to invest heavily in mass transit and other infrastructure changes]: the military budget. The U.S. now spends more on its military than all other nations combined. A sane transit to a post-automobile America will require a massive shift from military to infrastructure spending. That shift would be supported by our bankers in China and Europe (that is, they would continue to finance our debt) because it’s in their interests that we regain economic viability. What’s not in their interests is that we remain a military superpower.

Ventura recognizes that China (and, to a lesser degree, Japan, South Korea and the larger European countries) hold our future in their hands. So far, it’s been in their best interest to finance our over-extended lifestyle: we fuel their economic growth as the biggest market for their goods. But if something beyond the lenders’ control affects America’s ability to buy their goods–say a serious U.S. economic downturn caused by high oil prices–then at some point, it may no longer be worth their while to continue to finance our debt. At that point, the whole house of cards comes tumbling down.
I’m convinced that it will happen sometime. The current situation is just not sustainable indefinitely. It’s just a matter of when, how quickly and how severely it reduces our American lifestyles.