There are six factors that play into power:
They are all inter-related. Here are the major factors affecting the future of US power at the present time.
1) The United States has a strategic geographic location, is a large country, and has quite a few natural resources. These factors are is enough to ensure relative importance in global affairs.
2) The USA (along with the germanic countries) is reasonably free of government corruption, and it’s judiciary can be counted on to resolve contracts. Therefore it has commercial investment strengths that are difficult to duplicate. There is no other place to put risk capital anywhere close to that of the USA.
3) The liquidity provided by the USA stock market creates a ‘lottery’ that encourages high risk ventures, which is why so much commercial experimentation happens in the states. But statistically speaking, it looks very much like wall street in general produces ‘noise’ and little else. With the collapse of demand for complex financial products, and the rising awareness of the nature of the financial system, plus the backlash against the crash in order to increase taxes on the wealthy, this system appears fragile.
4) The USA has the highest corporate taxes in the world which encourages companies to invest and make money overseas rather than domestically. Combined with the incentive to use overseas labor, these are strong incentives to create jobs elsewhere.
5) The USA is plagued by an educational system designed for converting farmers to industrial laborers, and the rest of the advanced economies have converted to systems designed to create a more advanced labor force. Meanwhile a lot of cheaper labor has come online, putting pressure on the lower classes (unskilled labor).
6) The USA benefits from a) status as a reserve currency, b) price stability in oil caused by threat of military intervention, c) status as a petro-currency, and d) the ability (because of these factors) to accumulate significant debt, then inflate it away rapidly. These benefits are all waning due to the USA’s relative decline in world economic power.
7) USA’s budget is about 1/3 for Social Security and Medicare benefit programs, 1/3 for the military, and 1/3 for the entire rest of the budget. Taxes only cover 2/3 of the budget. 1/3 must be borrowed and inflated away. So, in practice, the USA cannot maintain the military complex necessary for world power unless it maintains an ability to generate debt, and inflate that debt away.
8) The military infrastructure built up for the cold war is aging, and modern programs to produce innovative technology have been plagued with technical failures and very high costs. The wars in the middle east have ‘consumed’ existing ‘capital equipment”. The USA will have to invest in new technology and equipment in order to maintain and project power. In particular, the surface navy, which the USA relies upon to project its power worldwide, is an extremely vulnerable technology. We also lack the type of equipment to fight urban warfare, which dominates the future of life and warfare. And it is possible that the structure of the army is unsuited for the future of warfare (and the marines are correctly structured.) Western civilization has generally been more successful at war than other cultures despite being poorer and in smaller numbers, because of its reliance on technology, and willingness to rapidly adapt to technology. Technology is expensive. It is coming into question whether we can endure: a) a racially divisive domestic political ’empire’ which is clearly polarizing along racial and cultural lines. b) an aging population that requires high health and support costs. c) an unemployable unskilled class, and unemployably expensive low skilled working class d) a loss of relative economic power needed to pay for power projection, e) our status as a reserve currency, and our status as a petro currency, creating demand for US debt which is used to accumulate dollars which in turn is used for reserves and for the purchase oil. f) a decline in our abilty to issue and inflate debt as a means of paying for our military program that is not covered by taxes.
9) Given the size of the economy and its geographic location, the USA will continue to hold onto relatively strong world power. It will however, be increasingly unable to project power, and its abilty to pay for programs necessary to modernize and keep pace with changing world powers is waning.
10) In particular there are two scenarios that are obvious:
a) if the Iran is successful in creating an Iranian/pakistani/syrian/iraqi block that becomes a nuclear enabled military force that is capable of dictating world oil prices, and therefore capable of demanding the use of any given currency, the USA will not be able to fund its military program, because all ‘profits’ from reserve currency status, and petro-dollar status, will be captured by Iran. (If I could only get Tom Clancy to write a book on that story. Because that’s the story people might desire to understand.)
b) China is a geographically vulnerable country (with a huge chip on its shoulder due to its loss of position in world history, and its failure with communism.) It would be very, very, easy to starve chinese citizens and foment civil war there by simply controlling the south china seas. The chinese know this and are very concerned about the ‘conquered’ provinces as well as the conflict between rich and poor and south and north. China also has a significant advantage in IQ distribution and literacy that gives its economy an advantage in spite of endemic poverty. The USA does not have this advantage because of a different (lower) IQ and literacy distribution. The “bottom” quintiles of chinese society are much better than the ‘bottom’ quintiles of american society. As impolitic and unpleasant that fact may be.