The Oil and Glory Interview: Paul Kennedy

Posted by: Steve LeVine on March 30

Economic historian Paul Kennedy is arguably the West’s most influential scholar on the decline of great powers. When you hear or read someone talking about whether or how America is being eclipsed as the world’s pre-eminent power, you are almost always getting a derivation of Kennedy’s seminal 1987 work, The Rise and Fall of Great Powers.

Two narratives are currently going on. One is the global financial turmoil. The second is America’s place in the world now and going forward. To plumb those subjects and others, Oil and Glory caught up with Kennedy by phone at his New Haven, CT., home, where his grandchildren gave him a respite to talk. Here is a related story. And here is the edited interview:

Q – Many experts are comparing the upcoming G20 summit with the 1933 World Economic Conference. Do you agree with the analogy?

A – You know how Truman said he’d give anything for a one-handed economist? You are going to want a one-handed economic historian. Since you already have some historians telling you about the analogies, let me just go through what is different.

This time we are talking of most of the world coming together – North-South, and East-West. Then, there was still a western-oriented discussion. The Soviet Union was in its own, closed environment. Most of the world was in its own tariff regime.

The biggest difference is the absence of anyone seeking to alter the territorial status quo. The Depression allowed extremist countries to exploit a resentful public at home. For those getting too alarmed, by 1933 you already had bad guys who were in power. In Japan you already had a regime that had invaded and controlled Manchuria. Mussolini was in power in Italy, the Nazis were already assuming autocratic power. … [Today] I don’t think anyone is busy with revengeful, pro-war militaristic feelings. Certainly not any in the G20. You don’t have a massive bifurcation between war and peace that a massive Depression can exacerbate. The world is more integrated now than then.

Q – There were 66 countries represented in 1933, and Maxim Litvinov was present from the Soviet Union

A – Don’t get bemused by the number of countries in 1933, or the word of U.S. recognition of the Soviets at the time; Roosevelt wanted to [recognize the Soviets anyway]. And really, you had just the eight or nine important countries. I’m more impressed by the representativeness in this conference than in 1933.

Q – What is your feeling how G20 will shape up?

A - Something will be done in London to satisfy everybody. The sherpas will be pleading with [Nicolas] Sarkozy to keep his mouth shut and don’t go into denouncing the dollar-denominated system. [The rise of another reserve currency] will happen anyway.

I think that this crisis, if sensibly managed, is going to be managed by eight or nine central banks. You are going to see more behind the scenes working together – Japan, China, the United States, Germany, France, Canada, the European Central Bank, India.

Q – You must get this question a lot: How does the current situation, and America’s place, stack up against the themes that you present in Rise and Fall?

A – It surprises the author that the book goes on selling and getting quotes. It is helped by the bad intervention in Iraq. So you have imperial overstretch, that if you are committed too much abroad, you are going to hurt yourself. The second part of the equation – that you need a balance between the capacity to pay on one hand, and obligations to pay on the other – has been the financial crisis. Since it started in the U.S., it is about the U.S. hurting itself with its spending policies. The knock-on effect of this crisis is that it has hurt world trade in a way one didn’t expect a year ago.

One way you can see it is the U.S. being at the fulcrum of world affairs, and likely to be for some time. But you can also see that by the end of this year, the U.S. financial situation is going to be highly overstretched. For me, the jury is out. It is as difficult as puzzling out where China is going. Is America still the vital power, or whether it is declining relatively. The debate has intensified. That fact tells me that the U.S. is not going to go away. There is a competing expectation, whether there is a world order that is more multi-polar, which I think we are moving toward, or a hub and spoke with the U.S. at the center.