Every major nation-state faces an existential threat in terms of economic viability, partly because the global strategic climate of distrust no longer favors high debt levels.
This isn’t, in hard terms, because economic viability and (therefore) long-term security are no longer achievable, but because the factors of prestige and trust that empower and animate strategic success are being ignored.
The visible dominant threats to most societies result from matured economic tendencies, particularly in the accrual of debt, the constraint of growth, or domestic polarization, rather than from external sources. Inertia often sustains laggard, complex economies until the removal or decline of prestige eventually means that a national currency and national borrowing power become unsustainable.
But, in essence, these threats emerge only when national prestige can no longer paper over managerial ineptitude or failure to adapt. Less complex states collapse even more rapidly and generally have less prestige to begin with.
Globally, we are seeing more than a half-century of wealth growth reaching a psychological—prestige—break point for various evolutionary or cyclical reasons. The after-effect—the hangover—is a legacy of debt in the face of declining markets that will affect inflation and currency values and generate political adventurism.
In the absence of prestige, debt and currency valuations that were sustainable because of trust and faith become no longer acceptable. Loss of trust usually occurs with relative suddenness.
Significantly, we see no governments articulating goals or strategies that generate new approaches beyond the immediate specter of political-economic instability. In other words, we see a tactical response to a framework problem.
The emerging economic transformation strategy has, then, begun to have an unavoidable global effect. In other words, as the world moves away from globalization in supply chain, currency, and investment terms, it faces a very different globalized interconnectivity: the spread of economic dislocation. Since World War II, the mechanism that saw a worldwide tidal surge of prosperity has now reversed to see an ebb tide exposing a pattern of economic decline.
This is the global contextual pattern, rising to override (or subsume) the immediate concerns of such things as the war between Russia and Ukraine or the threat of conflict built around communist China. It is, in other words, of a longer-term and broader context than the immediate crises being confronted.
Strategic equations are usually assessed, almost exclusively, within the visible—tangible—spectrum because humanity, particularly as it has urbanized and become wealthy, thinks primarily in material, transactional terms. And yet, at the crucial point, fates are decided by intangibles: human decisions, human confidence, and the presence or lack of prestige. Absent prestige, transactions are difficult, costly, or impossible, particularly at a strategic level.
Battle orders reflect mostly inanimate—material—objects, which, regardless of artificial intelligence (AI), machine learning, and numbers of personnel, can’t move or be decisive unless properly commanded by a human mind.
That isn’t to deny the importance of physical factors. Still, exclusive reliance on physical offensive or defensive capabilities is an expensive path to survival. It can never fully compensate for the lack of psychological strength in the deployment of hard assets or hard power.
As the great 20th-century strategist Stefan Possony would constantly emphasize: Just as victory is about the imposition of will rather than the destruction of an adversary, so too is defeat engendered in the psychological framework more than in the material world.
It’s embodied by the universal truth, “I have seen the enemy, and it is us.” But, perhaps expressed in positive terms, command of destiny is within our own minds, the core of will.
Ahead of discussions of military technology, then, should be discussions of strategic psychological power focused heavily on the prestige, which sustains the value and acceptance of currency and the leverage of economic dominance (including borrowing power) that prestige can generate. And what we see at present, in a world expressed in terms of relative weaknesses rather than relative strengths, is the growing effect of declining prestige intersecting with statistical economic vulnerabilities.
National debt levels have, for example, become a significant strategic threat to the national security of states. Debt has now reached the point where it seriously threatens the abilities of global powers, such as the United States and China, to act nimbly and to fund critical infrastructural and national security capabilities. For example, the headline statistic for the United States was that, as of February, it spent $307 billion a year to service its $26.13 trillion debt (as of the fourth quarter of 2022). That was 12 percent of total federal spending.
In reality, the debt service cost is much more than that for the United States as a whole, but even that $307 billion represented funds added to the national tax burden—which funds a government’s ability to service debt—diminishes funding for productive purposes. And, to be clear, nothing makes an economy more attractive to investors than a low tax regime and a minimal bureaucratic impediment to productivity.
So the burden on taxpayers and investors of a high debt service bill is stark.
All of that, though, is in “the visible spectrum.” What is of concern for the United States is the reality that declining prestige is beginning to erode the international power of the dollar. This is certainly in its infancy, but it’s occurring nonetheless and is compounding daily. At some point, the United States is left with the challenge of dealing with future debt obligations—unvouchered debt—such as enduring commitments to pay retirement benefit obligations and the like. That U.S. debt is in the area of, possibly, $150 trillion or more.
Significantly, the “decline” of the U.S. dollar isn’t yet expressed in relative exchange rates with most other currencies because options other than reliance on the dollar as a trade mechanism are just beginning to reemerge. Much of this “decline” started with the U.S. government’s weaponizing the dollar during the past two years, so that any trade by anyone, anywhere, using U.S. dollars could trigger a U.S. claim of legal jurisdiction or sanctions over that party. This has driven an urgent sense of the need to find alternatives to using the U.S. dollar.
Deliberate plans by governments hostile to the United States are meant to shake a half-century or more of indisputable U.S. dollar dominance of global trade. Discussions of ideas to replace the dollar as the global reserve currency have been underway for several decades but only now are becoming tangible.
Iran, the United Arab Emirates, and Brazil are key states that have, in 2022 and 2023, begun to denominate some of their trade in terms of China’s yuan (or renminbi). Even France has undertaken a yuan-based settlement of trade with China, and Saudi Arabia has indicated—after first denying it—a willingness to discuss trade denominated in yuan.
More importantly, the Saudi Crown Prince and Prime Minister Mohammed bin Salman Al-Saud has said repeatedly (and as recently as March) that he is no longer interested in “pleasing” the United States, nor in what U.S. President Joe Biden may think of him. He also indicated in April that Saudi Arabia would become part of the Beijing- and Moscow-dominated Shanghai Cooperation Organization.
What is occurring is the loss of trust in, and prestige of, the United States on a scale that is seriously eroding the strategic posture of the United States and its allies globally. Much of this is reinforced by the perception, globally, that U.S. internal political divisions and the political weaponization of the law have now badly damaged the image of the United States as a strong and confident global power.
The question the U.S. leadership must now be asking is whether there is a nation in the world that has more confidence today in the United States than it had, say, four years earlier. And the significance of the loss of prestige and trust is that it occurs rapidly and almost totally, whereas the incremental accrual of those influence factors takes years or decades.
The global image of the United States as a nation now engaged in highly politicized internal warfare, destroying the country’s reputation as a beacon of democratic rigor, has, increasingly over the past few decades, caused a significant decline in U.S. prestige (and therefore influence).
Domestically, one of the significant differences between the two major U.S. political parties is that one party believes that debt “is just a number” and can be inflated away through the unlimited printing of new currency levels, and the other believes that debt inhibits growth and economic nimbleness. But debt sustained by currency credibility (which enables essentially unlimited production of currency) is only viable if the prestige of the currency and its issuing government is sustained.
This trend toward the loss of prestige by the United States seems set to increase, not just in the way that it will likely favor the use of the yuan, but also in favor of the Russian ruble and the currencies of other countries not tied to the United States. And as faith in the United States declines, there will be an acceleration in moves by its allies to hedge their currencies and economies around other factors. This is very much at the heart of the Chinese Communist Party’s (CCP’s) “unrestricted warfare” doctrine, which stresses not the strengthening of support for China, necessarily, as much as the undermining of faith in the United States by societies around the world.
That isn’t to say the United States is passive in this conflict in currency values. Washington has encouraged a campaign to weaken the Russian ruble, for example, although this wasn’t as easy as U.S. officials originally thought. The most significant decline in the ruble during the past two years occurred in early April, primarily as a result of fears of capital flight from Russia engendered by war conditions imposed on the Russian economy as a result of the war with Ukraine and the U.S.-led moves to isolate the Russian economy.
It isn’t insignificant, however, that the CCP’s major thrust in its form of total war against the United States is to undermine U.S. prestige while boosting the prestige of the Chinese regime, quite separately from the underlying physical realities that overwhelmingly favor the United States (such as its ability to generate massive food surpluses). One of the key goals, as Beijing’s “unrestricted warfare” doctrine has evolved under CCP leader Xi Jinping, hasn’t been for China to “outgrow” the United States through economic growth, but to destroy the credibility of the U.S. politically and economically and, by default, reduce the United States’ inherent strength advantage.
In all this, and even apart from the U.S.–China competition, we also see a movement back toward the bilateralization of trade, which will reenable moves toward countertrade (barter) and offsets. None of these phenomena went away during the half-century of U.S. dollar dominance, but—particularly with the reduction of globalization since about 2008—they will once again become significant.
The question is to what extent this will affect the United States’ strategic dominance. After all, the brief excursions that Beijing has made into moving its trading partners out of the dollar zone don’t yet give the yuan a chance to become the global reserve currency. Even the CCP doesn’t anticipate this. And arguably, the U.S. economy already dominated the post-World War II global trading system even before the dollar became the global reserve currency. Do we just return to that era, equivalent to, say, the 1960s or early 1970s?
All of this is in the “visible spectrum.” The value and universality of the dollar weren’t questioned because of the prestige of the currency, which engendered absolute trust in it. That era is now coming to an end for a variety of reasons, and that is what becomes strategically important.
Are we waiting merely to see which power will be “the last man standing”? Given its present dynamic, is the United States capable of preempting this by presenting an image of a relatively unified society in which trust can be revived in its economic and currency systems? Most U.S. officials appear to believe that the world will continue to trust the U.S. dollar, regardless of the internal wars in the United States, but it’s clear that this isn’t the case.
Moreover, neither the United States nor its allies have coordinated strategic information dominance capabilities or planned to shape the global argument in a world where mass psychosis can be generated almost instantly. The United States used its strategic information dominance almost unwittingly to recreate a cold war re-polarization built around the Russia–Ukraine war, but that has failed to significantly (if at all) benefit U.S. prestige or trust in the United States.
