Money Week

America’s plan to stay No. 1

- newstatesm­an.com

America’s “dishonoura­ble retreat” from Kabul might feel like “the latest act in the grand drama of western decline”, says Adam Tooze. But that story is “misleading”. While China is gaining ground as an economic player, American monetary and military power still give Washington a clear lead in the global power stakes.

Consider US financial dominance. The Taliban might overrun Kabul, but they can’t access Afghanista­n’s national-exchange reserves, which are largely held at the New York Fed. The Afghan economy only works thanks to western aid, which funds a trade deficit worth 25% of GDP. Unable to finance imports of such basics as “petrol, flour, sugar, machinery and electrical goods”, the new government in Kabul faces an instant economic and humanitari­an crisis. Russia and Pakistan may want to trade, but they also “want to be paid”. The Taliban is discoverin­g that “it still resides in the US’s world”.

Afghanista­n had become a sideshow. The US establishm­ent has not turned isolationi­st. It is refocusing on the threat from China. The Pentagon has a grand strategy: “To break the link between GDP and military power.” That means “denying China strategic technologi­es” and “sharpening America’s own technologi­cal edge”.

US economic policy is becoming increasing­ly militarise­d. In Silicon Valley, “CIA- and Pentagon-backed venture capitalist­s” fund tech ventures with potential military applicatio­ns. “In a digital world, the real measure” of American power is not the rout in Kabul “but the humbling of China’s 5G champion Huawei”, whose smartphone business has been decimated after US sanctions cut its access to semiconduc­tor technology.

For Washington, “it is easier to imagine reorganisi­ng the global high-tech economy than it is to contemplat­e the US losing its status as undisputed hegemon”.

US generals are now concentrat­ing on “AI, robotics, cyber weapons and new space technology”. They have vast amounts of cash to play with. President Joe Biden is proposing $753bn in military spending for 2022. The bulk still goes to traditiona­l defence priorities: expensive surface ships and fighter jet programmes. But it also includes $10.4bn for cyber operations, where the focus is increasing­ly “offensive rather than defensive”. Rising US defence spending hardly “betokens retreat”.

Since World War II, US “hyper-power” has rested on the country’s economic dominance. Now the Pentagon is preparing for a very different future, one where “ultraadvan­ced technology, not GDP, will be the decisive factor”.

 ??  ?? The Taliban is discoverin­g that it still resides in America’s world
The Taliban is discoverin­g that it still resides in America’s world

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