Great Power
America’s Empire is Declining. Where does that leave Canada?
A social media post by Katusa Research includes this chart and a quote by historian and author Niall Ferguson saying "No great power has survived once debt servicing costs exceeded defense spending. Britain. Habsburg Spain. Now America."
The chart looks back fifteen years comparing the United States interest payments (red) against defense spending (blue). While defense dipped then returned to growth, interest has been climbing rapidly in the last few years, because of higher deficits combined with increased interest rates applied to the existing and new debts.
The chart and Ferguson’s quote echo the findings of Ray Dalio in his Principles for Dealing with the Changing World Order research and book. As discussed in History Rhymes (1), Dalio’s 500 years of research finds that a cycle of bad finances is one of the three primary reasons for change of great powers.
In their book Why Empires Fall, Peter Heather and John Rapley (2) make numerous references to excessive levels of government debt, often from war, as a relevant factor in the decline of an empire. They also point out as a great powers decline, the need for defense spending tends to increase as new rivals challenge the declining superpower. A vicious circle.
Ferguson, Dalio, Heather & Rapley provide us with three references to debt and interest as indicators of a great power (or empire) in decline. Will this crossover continue or reverse? It is common knowledge that the US government continues to run large deficits each year, growing their debt ever faster. Concurrently, interest rates remain elevated a few percent above the near zero lows of the 2010’s. Higher interest rates applied to servicing larger debts results in higher interest payments.
Could defense spending outpace the growth of interest payments and reverse the crossover? It could, however the vicious circle of increased defense spending is done with the use of deficits and debt to pay for it. I’d suggest the probability of the crossover permanently reversing is relatively small.
Decline does not necessarily mean the end of the US, rather a transition from a great power to a smaller, lesser power. Think of the British Empire, whose great power military and financial dominance waned after WW1 and dropped rapidly after WW2. Nonetheless, they remain, generations later, as a significant middle power on the global stage.
What does this mean for Canada?
Canada is a geographical neighbor to the world’s current great power. Prior to that we were a colony of the since-declined British Empire. What a favored, perhaps even spoiled, existence we’ve lived for some 200 plus years. We have benefited from the military and economic might of these great powers. This appears to be changing.
It is reasonable to assume that as the US declines, we will need to become more responsible to defend ourselves, grow our own economy and diversify our trade. There are early positive steps in these directions being taken by our government, their timeline measured in months. We as citizens and voters need to understand that for Canada to Be Prepared we need do our part to keep our country on the right path towards greater self-sufficiency through the coming decades.
1. History Rhymes, Be Prepared blog 8 July 2024, https://www.bepreparedcanada.net/
2. Why Empires Fall: Rome, America, and the Future of the West, Heather & Rapley, 2023