Choices governments make and the economic consequences
“What ever happens we have got
The Maxim Gun, and they have not.”
(British poet Hilaire Belloc, “The Modern Traveller”, 1898)
At the height of the British Empire, the confidence expressed in the superiority of the most advanced weaponry to gain and control the power needed to hold onto the British Empire sounded quite realistic, but fast forward a few years, about 60, and the Empire had disintegrated, the last out-post in East Asia was the return of Hong Kong to China at the expiration of their lease that territory.
My how things change, and in terms of history, how quickly things can change.
The American Empire
The latest empire is the American Empire, now in the not so steady hands of Donald J Trump.
The growth of the American Empire started slowly with the steady westward push of European settlement, the purchase of Louisiana from the French, the battles against Mexico for the border between Texas, New Mexico, California and Mexico in 1846-48, more battles in the Philippines, purchasing Alaska from Russia in 1868 and the acquisition of Hawaii in 1898 leading up the military expansion as the US reluctantly joined the allies in WWI, retreating back into isolation until Pearl Harbour was attacked in 1941 and with its industrial capacity constructed the machinery of war which led to the ultimate victory both in Europe and in the Pacific, acquiring military bases in all theatres where the war had been fought.
Still today, 80 years after the conclusion of WWII, America has a military presence of some 800 military bases in over 70 countries, on every continent except Antarctica.
To maintain that presence and ensure that the military hardware is the best in the world, the US spends over $900 billion per year, about 40% of the total spent globally.
Since the conclusion of WWII in 1945, the US has engaged in nearly 200 military interventions including major wars in South East Asia, Middle East, and Africa, revolving around economic opportunities, social and political ideologies, territorial expansion, formenting regime change, nation building and enforcing international law.
In the April 15, 2019 edition, Newsweek reported on a talk former President Jimmy Carter gave to a church congregation. He had spoken to President Trump about China the previous day. Trump, he said was concerned that China was ‘getting ahead of us’.
The fear of China appears to be much of what is behind the ‘beautiful tariffs’ the president is currently imposing on goods imported from there. While the President is accusing China and other nations of taking advantage of the US, it is interesting to review the America/China relationship over time, going back to 1972, when President Nixon met with Mao Zedong.
American business interests welcomed the opportunities rapprochement and opening up of ties with China offered, and this was embraced, allowing heavy industry and manufacturing to develop and were quick to take advantage of the cheap labour and encouragement from the Chinese government, expanding over time to becoming the second largest economy in the world. Some examples of American companies manufacturing in China include consumer goods such as Nike, Gucci, Abercrombie & Finch, Nabisco, Kellogg’s, and many more, in Technology, Apple, Tesla, Automotive, General Motors, Harley Davidson. The list is extensive. And while being American interests, they are privately owned American interests.
As such an enemy within the empire?
And while the tariffs on those goods coming into the US will be high, many of them will go to other countries. About 15% of China’s production goes to USA.
The current crisis, that America is increasing the price of imports from China and that she feels threatened by China’s military expansion in the South China Sea is of particular interest, and can best be seen through a longer lens of history.
Military defensive or offensive?
Despite China’s economy being the second largest in the world, and quickly closing in on the dominance of the US economy, China has no military bases outside its mainland, no military bases on foreign soil to have soldiers stationed on. While there has been a dramatic increase in military spending by China, and an increasing presence in the South China Sea, the expansion is defensive, not offensive. Seventy US military bases form a shield around the South China Sea, effectively monitoring all Chinese activity, both military and trade based.
On the current growth trajectories, comparing US and Chinese economies, it is anticipated the China will overtake the US by about 2036. Carter staled that he did not fear that time, but it seemed to bother Trump.
Carter normalised diplomatic relations with China in 1979, and in the article cited from Newsweek, he asked Trump a very relevant question:
“Since 1979, do you know how many times China has been at war with anybody?
None. And we (the US) have stayed at war.”
The US, he noted:
“… had only enjoyed 16 years of peace in its 242 year history, making it the most warlike nation in the history of the world.” This was he said because of America’s tendency to force other nations to ‘adopt our (American) principles.”
The time Carter was reflecting on was the years since 1979, and the economic expansion China enjoyed, but the reflection was not just about the economic growth so much as how the riches that growth produced were used in the development of infrastructure and social well being.
“How many miles of high speed rail do we have in this country?” He asked.
The answer is ‘none’, while China has about 18,000 miles (28,800km), and he then went on to reflect on the crumbling infrastructure and the reluctance for the then Republican controlled Congress to spend money on infrastructure building and maintenance. Further comparisons were in spheres of education and other social benefits.
Poverty in China has drastically reduced since 1979, with an estimated reduction of over 770 million to 2020 due to the rapid economic growth and targeted poverty reduction programmes. In the meantime, in the US, the sharing of the spoils of the economy has shrunk, with more going to the already rich thanks to the Chicago School of Economics trickle down theory of economics, Reaganomics, where now about 25% of the available workforce is earning less than a living wage, either because they are on the minimum wage which is $7.25. per hour, or $15,000 a year, or in casual/part time employment.
The US poverty line is considered to be $15,650 for a single person.
The savings the Trump administration have found through DOGE by cost cutting measures as reducing the number of government employees, increasing the number of people unemployed. By adding tariffs to the cost on imports costs of most basic items will increase, even many fresh food items are imported, mainly from Mexico which will have a 20% tariff added. The cost of living will rise substantially, especially felt by those earning the minimum wage, or near it.
For eighty years, since the end of WWII, the USA has had a strong measure of control over the world’s economy, through the establishment of the US$ as the trading currency of the world, but that too has given the US more favourable trading conditions, since it is the lender currency for trade, selling its bonds but borrowing at lower costs to finance its deficits. With the advantages the US has had in that time, it has not used the power effectively for its domestic economy, for its own people.
It seems a bit short-sighted to effectively blame every one else for its weakening market position, for its trade imbalances, and then by imposing tariffs, effectively a sales tax, punishing its own population.
The financial crisis America finds itself in is one of its own making. As with all empires, the good times end. It did for the British and it will for America. The cost of maintaining the presence to ensure domination is a high price to pay. And that burden will no doubt fall on those least able to afford, impoverished Americans.
In the mean time, China’s retaliatory actions are being felt by other exporters. At least in the short term, items such as meat, wines, seafoods, barley which were coming from the US are being sourced from other nations, including Australia.
The belt and road initiative which includes direct rail links to Europe and sea links through to Africa and into Europe through the Suez have opened up very efficient trade routes. The fuss over China’s use of the Panama Canal may not be all that significant with a declining American market.
I wonder how the hole in Trump’s foot is looking.
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BERT HETEBRY
What a terrific read dear Bert. Learned so much ! Thanks for writing it. Carter is so underestimated.
xxx
Here’s one loser from the trade war…
https://www.youtube.com/watch?v=bmUs6sL4vwc
Michael Hudson has written a great history of the role of tariffs in the US economy, and how Trump has it wrong:
https://michael-hudson.com/2025/04/trumps-inverted-view-of-americas-tariff-history/
From the intro — America’s remarkable industrial takeoff from the end of the Civil War through the outbreak of World War I has always embarrassed free-market economists. The United States’ success followed precisely the opposite policies from those that today’s economic orthodoxy advocates. The contrast is not only that between protectionist tariffs and free trade. The United States created a mixed public/private economy in which public infrastructure investment was developed as a “fourth factor of production,” not to be run as a profit-making business but to provide basic services at minimal prices so as to subsidize the private sector’s cost of living and doing business.
The logic underlying these policies was formulated already in the 1820s in Henry Clay’s American System of protective tariffs, internal improvements (public investment in transportation and other basic infrastructure), and national banking aimed at financing industrial development. An American School of Political Economy emerged to guide the nation’s industrialization based on the Economy of High Wages doctrine to promote labor productivity by raising living standards and public subsidy and support programs.
Well put Bert
T-Rump through his own warped predilections and ignorance and via the political initiative of ‘Project2025’ of the appalling FRW ‘Heritage Foundation’ expressed as ‘MAGA’ sees him enact a severe regression to the days of power-player hubris and the antediluvian ideologies of the ‘Monroe Doctrine’ and ‘Manifest Destiny’. Whilst Carter and a few others saw part those stupidities, it didn’t last long, and the brainwashing of the US populace persisted, and their psychopathy of blame and arcane brutality re-arose as their nation continued to crumble via its own inequities. T-Rump pumps it to leverage his kleptocratic authoritarian desires.
In the face of its origins rooted in hostility, their dysfunctional Constitution and bent political system, it appears that self-harm is their sine qua non. That they take down anyone else outside the post-colonial USA is of little consequence to their blown minds.
Albeit, homegrown dislike of T-Rump and his flunkies and their collective actions is growing. The way its going there could be a lynching come the mid-terms.