The Race for Last Place

The Race for Last Place

            One of the biggest issues in the Western World today is economics, and it looks like no easy solution is in sight. America, the world’s leading power, owes trillions of dollars in debt, and is dragging down its trading partners along with it. The Eurozone, as well, is facing bankruptcy, due to several countries not being able to generate enough economic growth to sustain themselves (About.com). In the midst of this crisis, several countries outside of the Western World are gaining economic power. Most notable of these is China, which several people believe could be the next major power.  But is this the case? Is it really so clear who’s the next major power? Is the Western World really in that much trouble?

            Let’s look at the facts. USA, a major power in the world, is on a decline. Large amounts of debt, political deadlock, human rights, and loads of other issues currently plague the States, but today we will only be focusing on the economic side of things. As of Jan. 23, 2012, the United States owes roughly 16.4 trillion dollars in debt, and has been trying everything in their power to get rid of it (Washington Post). Inflation, the recent Fiscal Cliff, and several other attempts have been made to pay off the debt, but with no easy solution in sight, an economic collapse seems well within the realm of possibility. If America does go bankrupt, it will, with no doubt, drag other countries along with it, such as what happened during the 2008-2009 recession (Wikipedia). This especially affects Canada, for while we’re a leading exporter of raw materials, most of our trade is done with USA; in 2009, 70-75% of our exports and 51-62% of our imports were done with the States (Economy Watch, Canada Foreign Affairs). If the States go dark though, all that will change. In fact, recent talks on the subject of trade have suggested redirecting oil, which Canada is a stable supplier of, from the United States to other countries, such as China (CBC).

"To let it grow unchecked like this is certainly unwise."

As well, countries in Europe face massive amounts of debt. Several, most notably Greece, have faced slow economic growth, which coupled with rising debts have caused them to go, or face, bankruptcy (About.com). But with the European Union, and plenty of trade policies, this has ballooned into an issue that threatens the entire Eurozone.  But talks are slow, and talks about kicking out these countries from the Union have ended with no action taking place. And with no easy solution in sight, it seems that the Eurozone could go dark as well.

How much more can you take?

            So in the midst of all this, the biggest question is: Will the Western World face economic collapse in the near future, and what affect will this have at the world on large? Well, consider the following. America is $16.4 trillion dollars in debt, and that amount continues to grow daily; its annual revenue is well below that number (Washington Post). Meanwhile, the Eurozone’s total debt is on the rise, with it totaling 82.5% of its total GDP (Gross Domestic Product) in 2011, with some areas well over 100% (BBC). But who owns most of this debt? Well, in the case of the United States, one might think China. After all, that’s all what one hears on the news most of the time. It’s this thinking that’s lead some to believe China is the next superpower. With cheap labor, a rising economy with a growth rate of 7.4% as of Oct. 2012 and a strong military, it seems likely they could take control (CNN). All they need to do is tell America it’s time to pay up, and the United States is bankrupt, right?

The cracks have already formed...

            In reality, China contributes to less than 8% of America’s total national debt (Fox News). Make no mistake, this is still a hefty amount, roughly 1 trillion dollars, but it is not America’s primary concern. Realistically, China couldn’t cash in that money either, as, like Canada, America is their largest trading partner; destroying the American economy would make a huge dent in their own (USCBC). China could still be a player for the next major power, but they won’t be the ones to take out the American economy.

Hate to break it to you, but this is not the case.

            It’s true that China is America’s largest foreign debt owner, but the total owed to all foreign investors is 11.2 trillion (as of Sept. 2012) (Daily Beast). But the rest of it, 4.7 trillion, belongs to its own government programs; social security, pensions and Medicare all contribute massive amounts towards the debt, which now falls to the hands of American taxpayers. The very same issues plague the Eurozone, especially Greece; due to over-spending from its government, it borrowed money from other countries to be able to support its people in a time of economic downturn (BBC). The Greek people, however, can’t repay the government, and in turn the government can’t pay back their debt to other countries. It’s a cycle that is affecting the Eurozone as a whole, and is quickly taking a turn towards the worse.

Always the taxpayers, isn't it?

If a country collapses, that’s money other countries can’t get back and in turn makes it harder for them to pay their growing debts. In both areas though, the biggest cause for concern is the people. Due to the massive amounts governments owe, taxes are taking a turn for the worse. This makes it harder for companies to keep running; people may decide to cut their own spending to pay off taxes and debt, which in turn causes it to become harder for companies to get rid of their inventory. This then forces companies to shut down production, or shut down entirely, such as what almost happened to automakers like Chrysler (NYTimes). In a tourist economy like Greece, this hurts a ton, but as seen in America, which has unemployment rate of 7.8% as of Dec. 2012, this hurts everyone everywhere (Trading Economics). In other situations, companies instead look for cheaper workers, instead of the more expensive ones. This is known as the “race to the bottom”, where companies, to compete, seek the cheapest labor they can find (Lexicon). This is the reason why places like China and Brazil, where workers have little rights and work for little pay, are producing so many goods, and why so little production is done in the Western World anymore. This is why when you call a call center; you’re talking to people in places like India. The Western World is being crushed under massive debts, so companies have moved their workforce to elsewhere in the world, and with this, the rich get richer, the poor get poorer, unemployment rates rise and the economy worsens.

"Thank you for calling Microsoft Support Center, my name
is Raj, how can I help you today?"

            With all these factors, what is a country to do? No matter which approach they take, it ends up badly. Cut government programs, and you end up with protest. Cut government spending, such as military, and you’ll lose power in the world (and we all know countries like America don’t want that). Increase taxes, and you’ll end up with protests such as Occupy Wall Street. Borrowing money to pay off debt will get you nowhere, as shown by Greece. Inflation is no answer either. Just ask the Germans or the Zimbabweans, who, due to hyperinflation caused the destruction of their economies (Wikipedia). Increasing the debt ceiling and acts like the Fiscal Cliff only buy time, they don’t solve the issue. Of course, decreasing taxes and increasing spending won’t get you anywhere either.

           Every solution is a dead end, and with America on the verge of collapse, dragging down Canada and China, two somewhat stable economies, and other trading partners with it, and the Eurozone in complete crisis, dragging down their trading partners as well, it seems we’re on the verge of another worldwide recession, or even a depression. Perhaps the dominos are falling into place as I type this. In the end, the Western World’s effect on the global economic climate will be that of an anchor, it’ll just drag it down. Perhaps the rise of the next major power won’t be a matter of economics, but military. After all, that’s what happened after the Great Depression; it’s what got us out of the Great Depression.

It’s a race for last place, and we’re all heading there, one way or another.

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