A Scenario for how America Falters

A couple days ago, I dismissed the possibility of America having the same fate as the Roman Empire. But the question of collapse is a common theme of the far-right, and I wish I had a better answer to the collapse question than “It won’t happen.” So after some rumination, I have found a scenario in which America collapses, but by collapse I don’t mean it vanishes but rather it becomes less important and its economy suffers irreparable damage.

So let’s first cover how it does not happen:

1. Rise of far-left social liberalism [which does not necessarily imply far-left economic policy, which is not the same as social liberalism, and explains how free markets can coexist despite the rise of far-left social liberalism]. This is common reason given by the alt-right for America’s supposed inevitable collapse, yet I don’t think it will be the reason, mainly because the empirical evidence shows that America in terms economic, cultural, and militaristic influence is stronger than ever despite America being as socially liberal as ever. The reason for this resilience, imho, has to do with how the private sector is so strong and has a lot of autonomy, particularly for multinationals. The economic contributions of America’s ‘best and brightest’–but also high-IQ foreigners–are enough to offset social decay. Look at Google, for example, which is in such a strong position it could terminate one of its best employees, who wrote a harmless memo, just so it could virtue signal against that memo.

2. Growing entitlement spending and the national debt. This is another common reason, but given how Japan has survived despite a much higher debt to GDP ratio than America (230% vs. 100%), and this is in spite of a weaker economy than America, it seems the national debt, despite its growth and size, is sustainable for the foreseeable future, perhaps indefinitely due to the ability to keep rolling over debt, but also due to America’s reserve currency status an a seemingly insatiable demand for U.S. treasuries. Every time the usual talking heads and blog pundits on Zerohedge and elsewhere proclaim that the debt is unsustainable, the bond market proves them wrong.

How it happens:

Excluding natural disasters, after some contemplation, it occurred to me the only way America suffers significant and possibly irreversible decline in terms of economic strength and influence is if there is a populist uprising, either left-wing or right-wing.

If it’s left-wing economic populism (such as Bernie Sander’s vision of America, in which there is higher taxes, more regulation, and even a possible wealth cap), America will become like Brazil–which after its peak in 2008 during the low-IQ emerging markets boom, has faded into irrelevance–or more optimistically, like Northern Europe, which would still be a downgrade from where America is now. Brazil is a low-IQ country with a lot of social liberalism. Europe has a higher IQ but is weighed by social liberalism and a culture that tends to be more collectivist and anti-capitalist (sorta like the anti-Jordan Peterson), whereas China, by comparison, is individualistic and capitalistic, which explains why their economy has done so well and why Jordan Peterson and even Trump have such a fondness for China, and why rich, high-IQ Chinese love investing in America. America becoming more like Northern or Central Europe would mean lower inflation, slower economic growth, less innovation, and general malaise–think the Carter administration but with lower inflation.

In contrast to left-wing populism, regarding the rise of right-wing economic populism, instead of having only Trump in power, image if nationalists achieved a House majority and a Supreme Court majority, and unlike Trump were from modest means and thus would have little to lose financially if the economy were to sour under such policy, which it certainly would, whereas Trump, on the other hand, is restrained to some degree by the self-preservation of his own wealth and social status. Anti-immigrant sentiment could discourage foreign investment. This would stunt innovation and asset prices, but also cause inflation if there are fewer foreign buyers of treasury bonds. A combination of higher bond yields, slower growth, an a protectionist economic climate hostile to trade, could lead to stagflation, similar to many emerging markets. This would cause America to lose relevance in terms of its global standing, with China likely being the successor to America’s throne.