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The Economics of Great Powers From Ancient Rome to Modern America
by Glenn Hubbard and Tim Kane
Of all the proponents of human agency against the constraints of geography, culture and historical experience, economists are the most incisive. They obey scientific rigor rather than mere civilizational tendencies. And while the laws of economics yield a determinism all their own, adherence to such laws and the limits they impose, Glenn Hubbard and Tim Kane suggest, will allow any state or people to avoid tragic outcomes, regardless of geographical or other limitations.
“There is no German physics distinct from French physics, just as there is no Chinese economics that will make its rise fundamentally different from those of Russia and Japan,” they declare. "A large, poor country growing quickly will soon approach the productivity frontier." Thus China, despite sustained growth, urgently requires institutional reform, even as the threat facing America originates not from China or any other foreign bogeyman, but from within. The authors see America’s decline as real, continuing and yet reversible, provided American leaders apply human agency, not to bend timeless principles of economic behavior but to learn from them.
In Balance: The Economics of Great Powers From Ancient Rome to Modern America, Hubbard, the dean of Columbia Business School, and Kane, chief economist of the Hudson Institute, see the history of empires - Roman, Chinese, Spanish, Turkish, Japanese, British and American - not as a sumptuous narrative of individual passions, achievements, mistakes and intrigues, not even as an informative chronicle of trade routes and natural resources, but as a dry record of political-economic blunders. Rome did not perish from too many territorial conquests - or, contra Edward Gibbon, from the triumph of Christianity - but, Hubbard and Kane say, from the debasement of its coinage, the nationalization of the Mediterranean grain trade and the growth and expansion of an inflexible bureaucracy. Imperial Spain foundered on land confiscations, anti-growth property rights and economic incentives that encouraged unproductive careers like soldiering and the priesthood (not to mention the expulsion of hundreds of thousands of commercially innovative Jews). Ottoman Turkey's demise was rooted in an overly centralized government and a rent-seeking bureaucratic class. And if only Britain had expanded its concept of full citizenship to encompass overseas subjects, they write, then the American Revolution might not have happened and a British world empire might have gone on and on.
Covering so much history in so relatively few pages, the authors employ a narrative shorthand that periodically betrays not a mastery of subject but a lack of depth. For example, Diocletian did not exactly establish order in the Roman Empire in the way that Stalin established order in the Soviet Union, as Hubbard and Kane claim. Rather, Diocletian partially ceded power by creating a decentralized, tetrarchic structure and then set a precedent by voluntarily abdicating the throne several years before his death. Gibbon's assault on Christianity in his Decline and Fall of the Roman Empire, rather than having been largely debunked as they claim, remains the essential thesis on the subject, seething as it is with a delicious irony and a full-bodied, philosophical evocation of how modernity emerged from the classical past. If anyone has successfully challenged Gibbon recently, it is not some economist but the Princeton historian Peter Brown, with his concept of late antiquity as an intermingling of both paganism and monotheism.
While the authors frequently refer to books by like-minded contemporary economists like Daron Acemoglu and Carmen Reinhart, Fernand Braudel's landmark, two-volume work on the geography, economics and culture of the Spanish Empire, The Mediterranean and the Mediterranean World in the Age of Philip II, is neither in the text nor the endnotes of their chapter on Spain, nor in the bibliography. Hubbard and Kane leave unmentioned that the end of medieval Chinese sea power, upon which they dwell, owed much to the mid-15th-century defeat of a vast Ming army at Tumu by Mongol forces, which helped quicken the decline from which the dynasty never recovered. This lapse undermines their assertion that the yearning for territorial conquest is, in fact, not a cause of imperial collapse.
Indeed, a central motive of the book is to challenge the Yale historian Paul Kennedy's theory of imperial overstretch as a source of superpower decline, which he made in his 1987 best seller, The Rise and Fall of the Great Powers: Economic Change and Military Conflict From 1500 to 2000. It is a polite challenge, since Hubbard and Kane acknowledge the continued scholarly impact of Kennedy's work. But they reject his idea that military adventures create huge liabilities, and seek to show that it is not barbarians at the gates, but self-inflicted economic imbalance that sinks empires.
Consequently, in their view, a reduction in military budgets would not necessarily translate into higher growth rates, as the examples of Britain and the United States in the 1970s demonstrate. In any case, despite George W. Bush's war on terror, military spending, they write, went down from 10 percent of G.D.P. in the 1950s to around 4 percent in the past decade. The cumulative cost of Bush's wars relative to the G.D.P. was actually less than a third that of World War II. But contemporary entitlement spending is five to 10 times larger.
Yet because the authors assail Kennedy's thesis mainly through numbers, they miss a larger, more subtle point: that the cost of foreign military adventures saps a nation's energies, and particularly the intellectual energy of its leaders, in critical ways. Even top decision makers have only a limited amount of time in a day, and if they are spending that time conducting a war, they may be neglecting issues like tax and entitlement reform. Administrations run on big themes, leading to a diminution in the thinking on other issues that do not make the list. Iraq and Afghanistan were basically what almost a decade of governance in Washington was about. President Obama knows that if he intervenes on a major scale in Syria, even if he is successful, the war will be what determines his daily schedule for the remainder of his second term. Thus Kennedy's theory is correct in ways that economists' charts cannot reveal.
To take the authors at their word, Obama should be concentrating less on Syria and more on entitlement reform. After all, they say, whereas previous debt spikes were tied to specific wars, the current debt crisis has been building for decades. The failure to deal with it is linked to what they call empty partisanship, which they describe as the partisanship of entrenched political interests rather than authentic, philosophical principles. This, in turn, is tied to our calcified, two-party system. Hubbard and Kane would like to see a third, fourth, maybe even a fifth party, including a radical faction like the abolitionists of 1860. They also want more federalism, limited central government and a return to 'honest budgeting.' Such measures, they insist, constitute the real riposte to declinism.
Though Hubbard and Kane are clearly not ready to blame the wars in Iraq and Afghanistan for America's imperial-like troubles, they are, nevertheless, part of a growing group of experts, most notably Richard Haass, the president of the Council on Foreign Relations, who believe - without being isolationists - that the future of American power will be decided at home, not abroad.
It is true that overseas dangers have been overrated. China and Europe face deep structural problems to their economies and political arrangements that dwarf those of America. Chaos in the Middle East and a potential nuclear Iran present secondary, rather than primary, threats to the United States. Russia edges toward demographic collapse, even as its energy sector faces challenges from natural gas discoveries elsewhere. Meanwhile, shale gas deposits, coupled with Canadian oil, could make the United States energy independent within North America. So even if Hubbard and Kane's recitation of imperial history is one-dimensional, their overall focus on domestic issues is dead-on.
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