HISTORY may not repeat itself, but some historic dates do. One such date is 6th August. On that day in 1945, the Americans made history by dropping an atomic bomb on Hiroshima, the first such bomb in history, terminating at one drop Japan’s dreams of political and economic supremacy in Asia. Exactly on the same date 66 years later – on 6th August, 2011 – America lost its sovereign debt rating which it had maintained since 1917, the year it entered World War One, and, with the downgrading, lost its century-old supremacy over the world.
Americans are aghast at this sudden blow to their prestige, and of course, to the prestige of their powerful dollar, which had ruled the world for a hundred years. Now the dollar itself is under attack. The countries, including India and China, which hold some of their reserves in US dollars are not sure how long they should do so. The same rating agency has warned that if things do not improve, it may go in for another downgrading in six months time.
America, so sure of itself and its currency, never expected such a big blow, and that too from a private agency without much of a clout except in purely financial matters, and only a few months before the next presidential election. But it is not only the United States that is in trouble. The entire West is in trouble, including Europe, which seems to stagger from crisis to crisis, making both ends meet with handouts from international bodies. Country after country has had to be rescued with injections of cash from the more solvent countries, though these countries themselves are in a jam. It was Greece to begin with, followed by Ireland and Portugal. Now it is the turn of Spain and maybe Italy. But nobody expected the mighty dollar to succumb and follow the same road to near-bankruptcy. Apparently the entire Western world is in some sort of deep trouble, economic as well as political. With nothing in sight to halt its decline.
Let us not get unnecessarily excited by what is happening in the US and also in Europe. Nations rise and fall, like families, and are replaced by other nations, and other families. It is not the end of the world, for these countries will be replaced by others, just as ancient Greece and Rome were replaced by Europe, and later by the US.
The British, a tiny little country off the coast of Europe, made the 18th century their own, with the help of British inventiveness and industry, and, of course, the British empire. The empire dates from 1818, the year they defeated the Marathas, and took over the whole of India.
After that, there was no looking back for them until exactly a hundred years later in 1918, when the World War One finished them and they yielded place to the Americans. It was around 1918 that the dollar replaced pound sterling as global currency and the American age began. It was also the year the US dollar got its first sovereign rating. The mighty dollar reflected the mighty US economy, and not only survived World War Two but established its hegemony for a hundred years, just as the British had done before them.
But hundred years is a long time in history and the US economy as well as the US dollar are showing their age. America is now a tired country, just like Britain before World War Two. It has lived beyond its means for a number of years, acquiring huge debts in the process. It is also clear that the Americans themselves are tired of all this, and have no stomach for world leadership. They went cheerfully into Second World War and fought for three years in Europe and elsewhere, sacrificing hundreds of thousands of their young men in the process.
But their growing fatigue with global leadership and all it entails is clear from the way they reacted to war in Iraq and Afghanistan, and even more clearly, from their reluctance to be drawn into yet another war in Libya and elsewhere in the Arab world. The Americans are slowly withdrawing from the world, in order to devote more time to problems at home.
We should not therefore get too excited about the downgrading, though it might cause some problems initially. The downgrading is a symptom, not the cause, and quite a few more downgradings are on the cards. This is true not only of the US but whole of Europe. Such historic changes – replacement of the West by another new power or set of powers – are always accompanied by financial and other upheavals. You can’t expect a powerful currency like the dollar, which has ruled the world for a century, to lose its power, and expect things to go on as usual. There was chaos in the world after the Roman empire went down, and there will be chaos after the US and Europe go down, as they are bound to go down. The current financial chaos in Europe and the so-called tussle between the Republicans and the Democrats in the US are only a reflection of this coming upheaval.
We should now look at the future, rather than the chaotic present. The downgrading of the dollar is only a start. As I said at the beginning, it is going to be followed by several more downgradings, until we in the East reach some kind of parity with the dollar. But even more important than that is what is going to replace this dollar, and the West, including the US. Who or what is going to rule the world and take the place of the West, which has now ruled the world for nearly two hundred years?
As I have said a number of times, the next century is going to be Asian century, or to be precise, Hindu century. There is, of course, China, which cannot be ignored. But Hindus cannot be ignored either, if we play our cards prudently. In fact, it could be Sino-Hindu century, in which the Chinese and the Hindus work together to lay the foundations of the Asian Century. On the other hand, the Confucians and the Hindus could clash, and others take advantage of the clash to further their claims. The stakes are very high, and we should be very careful what we do. What we do in the next ten or twenty years will decide the world’s fate for a hundred years.