Empires are built through the creation or acquisition of wealth.
The Roman Empire came about through the productivity of its people and its
subsequent acquisition of wealth from those that it invaded. The Spanish Empire
began with productivity and expanded through the use of its large armada of
ships, looting the New World of its gold. The British Empire began through
localized productivity and grew through its creation of colonies worldwide—colonies
that it exploited, bringing the wealth back to England to make it the
wealthiest country in the world.
In the Victorian Age, we Brits were proud to say, “There will
always be an England,” and “The sun never sets on the British Empire.” So, where
did we go wrong? Why are we no longer the world’s foremost empire? Why have we
lost not only the majority of our colonies but also the majority of our wealth?
Well, first, let’s take a peek back at the other aforementioned
empires and see how they fared. Rome was arguably the greatest empire the world
has ever seen. Industrious Romans organized large armies that went to other
parts of the world, subjugating them and seizing the wealth that they had built
up over generations. And as long as there were further conquerable lands just
over the next hill, this approach was very effective. However, once Rome faced
diminishing returns on new lands to conquer, it became evident that those lands
it had conquered had to be maintained and defended, even though there was
little further wealth that could be confiscated.
The conquered lands needed costly militaries and bureaucracies
in place to keep them subjugated but were no longer paying for themselves. The
“colonies” were running at a loss. Meanwhile, Rome itself had become very
spoiled. Its politicians kept promising more in the way of “bread and circuses”
to the voters, in order to maintain their political office. So, the coffers
were being drained by both the colonies and at home. Finally, in a bid to keep
from losing their power, Roman leaders entered into highly expensive wars. This
was the final economic crippler and the empire self-destructed.
Spain was a highly productive nation that attacked its
neighbours successfully and built up its wealth, then became far wealthier when
it sailed west, raiding the Americas of the silver and gold that they had spent
hundreds of years accumulating. The sudden addition of this wealth allowed the
Spanish kings to be lavish to the people and, as in Rome, the Spanish became
very spoiled indeed. But once the gold and silver that was coming out of the
New World was down to a trickle, the funding for maintaining the empire began
to dry up. Worse, old enemies from Europe were knocking at the door, hoping to
even old scores. In a bid to retain the empire, the king entered into extensive
warfare in Europe, rapidly draining the royal purse and, like Rome, the Spanish
Empire self-destructed.
In the Victorian era, the British Empire was unmatched in the
world. It entered the industrial revolution and was highly productive. In
addition, it was pulling wealth from its colonies in the form of mining,
farming and industry. But, like other countries in Europe, it dove into World
War I quickly and, since warfare always diminishes productivity at home whilst
it demands major expense abroad, the British Empire was knocked down to one
knee by the end of the war.
Then, in 1939, the game was afoot again and Britain was drawn
into a second world war. By the end of the war, it could still be said that
there would always be an England, but its wealth had been drained off and, one
by one, its colonies jumped ship. The days of empire were gone.
Into the
breach stepped the US. At the beginning of World War I, the US took no part in
the fighting, but, as it had experienced its own industrial revolution, it
supplied goods, food, and armaments to Britain and her allies. Because the
pound and other European currencies could not be trusted not to inflate,
payment was made in gold and silver. So the US was expanding its productivity
into a guaranteed market, selling at top dollar, using the profits to create larger,
more efficient factories, and getting
paid in gold.
Then, in 1939, it all happened again. Although the US eventually
joined both wars, they did so much later than Britain and her allies. At the
end of World War II, the US had a lively young workforce, as they had lost
fewer men to the war. They also had modern factories, which had been paid for
by other nations, that could now be used to produce peacetime goods for
themselves and the rest of the world more efficiently than anyone else.
And (and
this is a very big “and”) by 1945 they owned or controlled three-quarters of the world’s gold, as they’d drained
it away from the warring nations in the early days of the war. This allowed the
US to invite the post-war leaders to Bretton Woods to explain that, as the
holders of the world’s wealth, they’d dictate what the world’s default currency
would be: the dollar.
But this was all threatened by the fact that, when the
now-poorer nations of the world sold their goods to the US, they, too,
beginning with the French, wished to be paid in gold.
And so, in the subsequent years, the gold in Fort Knox was
beginning to travel back to the east, from whence it had come in previous
years. In 1971, this flow was shut off, as the US, still the foremost empire
had the power to simply remove all intrinsic value from the dollar and turn it
into a fiat currency. Payment in gold ended.
Fast-forward to the post-millennium era and we see that America,
like the previous empires, ended its acquisition of gold after World War II,
yet its people became spoiled by political leaders who promised ever-increasing
bread and circuses. The productivity that led to its initial strength was dying
off, and it was spending more than it was bringing in. Finally, it sought to
maintain its hegemony through warfare, thereby creating a dramatic drain to its
wealth.
Like other empires before it, the US is now on the verge of
relinquishing the crown of empire. If there’s any difference this time around,
it’s that its collapse will very likely be far more spectacular than that of
previous empires. However, just as in previous collapses, those who least
understand that the collapse is around the corner are those who are closest to
its center. Clearly, the majority of Americans are worried about their future
yet cannot conceive of their country as a second-rate power. And those who hold
the reins of that power tend to be the most deluded, delving ever-deeper into
debt at an ever-faster rate, whilst expanding welfare and warfare without any
concept of how it might all be paid for.
It’s understandable, therefore, that those of us who are on the
outside looking in find it easier to observe objectively from afar and see the
coming self-destruction of yet another empire.
As stated
in the first line of this essay, “Empires are built through the creation or
acquisition of wealth.” They tend to end through the
gradual elimination of the free-market system, the metamorphosis to a welfare
state, and, finally, through the destruction of wealth through costly warfare.
Does this indicate the “end of the world”? Not at all. The world
did not end with the fall of Rome, Spain, England, or any one of the many other
empires. The productive people simply moved to a different geographical
location—one that encourages free-market opportunity. The wealth moved with
them, then grew, as the free market allowed productive people to make it grow.
Freedom and opportunity still exist and indeed flourish. All
that’s changing is the locations where they are to be found.