Decadence


What does it feel like to live in a declining empire?

That’s the question I’ve had ruminating in my mind. To understand what living in a declining empire feels like we should understand the economic and societal shifts that are likely to happen during such an event. 1 Lets start with the economics.

Economic dynamics

The economic conditions of the last two leading empires of record before their decline — the British and the Dutch — are a good place to start to understand what to watch for. Lets look at what was going on in the Netherlands and U.K.

  • Loss of competitiveness in trade and industrial production — Britain faced increasing competition from the U.S. and Germany, whose industries benefited from larger domestic markets, greater access to raw materials, and more advanced mass production techniques. For the Dutch, it was the loss of much of the European market from increasingly protectionist policies.

In the U.S., trade and manufacturing are literally at the forefront of political policy as I write this. This includes issues around raw materials (e.g., rare earths) and debates on protectionist trade policies.

  • Rising public debt — In Britain it was World War II driven. In the Netherlands it was the Anglo-Dutch Wars and the War of the Spanish Succession. In general, Britain and the Netherland were likely sitting at a debt to gross domestic product (GDP) ratio of 200% plus.

For the U.S, we sit on a debt to GDP ratio right around 120%. Okay, relatively good standing but far less than ideal.

  • The vastness of the empire flips from a strength to a weakness — In the case of Britain and the Netherlands this was in the form of the colonies. They became far flung and unmanageable.

Current Day: For the U.S., it’s not so much the physical geography that’s the problem. In fact, that might be the United States’ greatest piece of luck. Rather, it feels like there is something to be said about overreach in being western world’s bank and also it’s military. Being the bank is a luxury that Britain and the Netherland also enjoyed. I think that second dynamic — the world police — is the one to watch. It’s costly. Costly in both actual dollars and also in reputation when things don’t go well.

Overall, each of these elements present in the decline of the last two superpowers are undeniably present today in the U.S.

What does the government do in response?

A logical and thoughtful government would have a multi-pronged economic strategy. Having such a government is not a foregone conclusion, though. Things to watch for include:

  • Spending cuts — This has not materialized at all. Democrat. Republican. The checkbook is open.
  • Tax increases — This has not meaningfully materialized either.
  • Relatively low interest rates — They are already relatively low compared to the long arc of history, but I think this will only get more dramatic if things decline. Today, the stock market is at all-time highs and we are about to get into a Fed cutting cycle in the U.S. It does look like this will be the first of the three policy levers to materialize. That’s because it’s the easiest one for elected officials to implement. Right or wrong, people like low interest rates.

Societal dynamics

When the idea for this post got started in my head, I wanted to know what it is going to feel like if the country hits a tipping point. Going beyond the economics of it all, some key elements are likely in the following buckets.

  • Job security and wage stagnation, and cost of living — It would likely get noticeably harder to keep a job let alone get a raise. At the same time, costs are likely to increase due to inflation. 2
  • Public services — When government spending is cut, as contemplated above, public services must be cut. This creates a large whole in the economy, making it hard to grow GDP, and something of a self-fulfilling prophecy of recession.
  • Polarization and inequality — This is the one that many people say is running pretty hot. I don’t completely disagree, but I think it might be slightly overstated. It’s an easy narrative, but are we collectively literally at each others throats? I am not so sure. Are we closer to that than we should want? Yeah, absolutely.

Current Day: Starting with that last bullet, in the U.S., it’s a trope at this point to say we are much more polarized than decades past. More tangibly, on the job front, the U.S. is going through a major shift in the job market while living through higher inflation, driven by government spending, than has been seen in decades. This drives inequality which leads back to more polarization.

Predicting the future

Yes, the U.S. is the dominate global empire today. It would be advantageous if we can predict the forwardlooking indicators to the decline. A few of the key events would include:

  • It becomes clear the U.S. military is no longer the most powerful in the world.
  • The U.S. dollar loses its position as the one and only global reserve currency.

Before those major political and economic events were to occur, there are other lesser societal events that are likely in the leadup.

  • There is a tipping point in the U.S. overstretching its global influence.
  • Tied to that, the U.S. becomes less effective in influencing other governments on multiple important initiatives.
  • Maybe the way we will first notice this is via cultural exports from the U.S., like music, movies, and sports, becoming less popular outside the U.S.

Without even opining on the positives and negatives of Liberation Day, there has been a consumer reaction from several countries that has tangibly decreased what their country’s people purchase from the U.S. and whether or not they spend their hard earned money on a visit.

Maybe it always feels like the end…

We’ve written before about the proclivity for otherwise intelligent people to have an overly pessimistic view of the modern world.

Fittingly, we are in the 25th anniversary year of the classic punk rock opus by NoFx called “The Decline” — an 18 minute EP consisting of one track entirely about the decline of America.

In it Fat Mike writes:

Lost the battle, lost the war
Lost the things worth living for
Lost the will to win the fight
One more pill to kill the pain

The going get tough, the tough get debt
Don’t pay attention, pay the rent
Next of kin’s pay for your sins
A little faith should keep us safe

The crazy thing is that, in 1999, the vibes were good. Unless you look into the counter-culture, where a band like NoFx operates, these were good times. That makes these statements rather prophetic — the Afghanistan war was yet to kick-off, the opioid epidemic was on the horizon, the federal debt was under $6 billion, and the notion that this is all someone else’s problem was nascent if not nonexistent as the federal government has just passed a balanced budget starting the prior year.


The foresight goes right down to the last line quoted; “A little faith should keep us safe.” I think that’s about to look prophetic, too.

  • It’s likely there will be a continued rise of Americans embracing of religion in the U.S.

This also happened with the Dutch and to some extent in Britain. If we as a culture can no longer put faith, literally, in the markets or the government, then we will turn to a higher power.

FIN

The previous leading empires discussed above became powerful. No doubt. They also become decadent as I’ve hopefully made clear. Possibly due to that decadence, they declined. But it’s a fact they declined. It’s a tough sell to believe that the U.S. empire will be any different. It’s finding that line between maintaining power and becoming decadent that is most indicative of a decline. When will it be crossed? What is the tipping point?

In the end, the longest term context is that this society that we hold so dear is of little consequence in the cosmic picture. As Edward Abbey said, “Men come and go, cities rise and fall, whole civilizations appear and disappear—the earth remains, slightly modified.”

That’s scary to some. The scarier thing, scarier than even looking forward to the heat death of the universe, is how easy it is to look back and see the remains of the prior leading empires. At least with the end of our galaxy, we won’t have to look at the dead bodies.