Ueyama Akira's Notes 4: America as a Game Maker

When talking about America, its characteristics have been unique since its birth in 1774, making it completely different from other countries. When considering America's government system and the spirit of its founding, there are several important points.

A. America: A country that began with the negation of the existing order

First, America was born from a way of thinking that completely rejected the despotic monarchs and monarchies of Europe. It is a well-known story that America was the first to incorporate the European concept of the separation of powers into its actual government. In other words, they believed that concentrating power in one place was wrong. Therefore, the concepts of democracy and the separation of powers have become fundamental parts of America.

However, compared to the religious issues of the Thirty Years' War in Europe, the separation of religion and politics in America is not complete. The background of America's founding included Protestant ideas and the belief that the federal government should not be given too much power.

In fact, until the Civil War, the federal government in America had almost no power, and state governments were central. Therefore, what we call "state government" in America is closest to what we think of as a nation-state. And with every war, the authority of the federal government grew stronger. This trend was particularly evident in World War I and World War II.

When discussing the spirit of America's founding, the issue of guns cannot be avoided. The American people hold the value that they do not ultimately trust the government or the military. Therefore, they believe it is important to own guns to protect themselves.

Furthermore, until World War II, America was centered on state governments, but through the wars, the federal government grew larger. And America originally held the idea of preventing foreign intervention in its own territory. However, that stance changed after World War I.

America was originally a country that did not get very involved in other countries' wars. But through events like the completion of the Transcontinental Railroad in 1867 and the Spanish-American War in 1898, America began to take an interest in the outside world and even showed some colonial-like movements.

If you understand the thinking of the American government and its people based on this historical background, I think the current state of America becomes much clearer.

B. America: A country of liberalism

After World War I, President Wilson did something remarkable. He was the first to incorporate new concepts like "human rights" and "national self-determination" into international agreements. At that time, America valued the new concept of democracy highly and tried to incorporate these new values into the old politics of the time.

Now, there are the terms realism and liberalism. In an era centered on Europe where realism was mainstream, America adopted the new concept of liberalism. The trigger for World War I led to Britain stepping down from the top of the world, and America took its place. What America valued was this liberal way of thinking.

American liberalism gradually spread from around 1845 and is said to have peaked in 2022. Especially between 1990 and 2020, amidst the major trend of globalization, this liberalism had a huge influence. That is why America was able to become the world leader during this period.

The American concept of liberalism has continued since the country was founded. And you see, the religious thinking of Protestantism is rooted in Americans, and they believe it is their mission to spread values like "democracy," "human rights," and "freedom" throughout the world. Therefore, this idea combined well with American leadership, and after 1990, American ideas spread more and more.

A famous scholar named Joseph Nye uses the term "soft power," and this is incredibly important. Strong economic and military power are important, but you cannot be a world leader without soft power. The reason America is as prosperous as it is now is that the ideas of democracy and freedom it has maintained for a long time serve as soft power. I think having this perspective is very important for understanding America.

C. The American economy

The story regarding the American economy is interesting. To start with a bit of European background, the central bank was born in the Netherlands. The Netherlands introduced the central bank in Western Europe, and it was passed on to Britain, where the Bank of England was born. Thanks to this central bank, Britain became a hegemonic power. Why? Because they spread the power of their currency throughout the world through the central bank.

So, how was it for America? Because there was a strong desire to avoid centralization, the system of a central bank was only created temporarily. In the end, the conclusion was that it was better to conduct finance at the state level.

As a result, in America, private capital—such as major financial cliques like Morgan, Rockefeller, and Carnegie—held more power than the government. In 19th-century America, the railroad and steel industries were the main industries, so these capitalists and financial institutions backed them up.

Particularly noteworthy is the market crash of 1907. In America, which had no central bank, the Morgan financial group played a major role. Based on this experience, it was decided that the government should indeed respond, and in 1914, the Federal Reserve Bank (FRB), America's first central bank, was finally established.

What is interesting is that the period during which America had a central bank was actually short. But during that short period, they participated in World War I, and the FRB played a major role. If the FRB had not existed, America's role might have been different.

And the successful experience of American centralization was World War I and World War II. Through this experience, departments like the Treasury, the Pentagon, and the State Department have played a central role in America. Therefore, when thinking about American history, these organizations cannot be left out.

D. The source of American power

Why do you think America reigns as a great power? During the old Cold War era, America made a promise to the Western countries, "Don't worry, we will protect you," and that is how it was able to firmly establish its position. The Cold War is over, but America still has 180 military bases around the world. Because they provide stability, other countries have been able to focus on economic development.

However, recently, countries like China have been gaining power, and this balance seems to be crumbling little by little. But considering that America's military spending is surprisingly large, it cannot be said that America has declined. They are still playing the role of the world's police. However, it is also true that problems are occurring here and there, and their superiority is wavering little by little.

In terms of soft power, that is, culture and image, America has been strong for a long time. Hollywood movies, music, and the latest technology—America has led the world. Values like democracy and freedom were in the background of that. However, recently, many countries and people have pointed out that America's actions and ideals do not match. The biggest example of this is the 2003 invasion of Iraq. America attacked Iraq with a reason, but it was later found that the reason was wrong, and their credibility was lost.

Actually, for America, war is a 'success experience' as a way to demonstrate its strength. That is why it is easy for them to seek war even when there is no enemy. The terrorist attacks on September 11, 2001, became a trigger for America to find a new enemy, and it began to emphasize the war on terror. This resulted in an increase in America's military budget, while at the same time allowing it to continue its role as the world's police. And globalization progressed even further.

In this way, America is still playing the role of a great power, but in this era where that position might change, we need to keep a close eye on those movements.

E. The End of American Soft Power?

Questions and criticisms regarding American influence, especially its soft power, are increasing. Previously, because America's immense economic and military power was in the background, people somehow followed what America said. But now, especially from a global perspective, what America says is also being heavily doubted.

The biggest concern is what will happen if American soft power loses credibility in the countries of the Global South. A new movement called the 'Great Reset' might emerge from there. We must value that perspective.

And the issue of currency cannot be ignored. The American economy accounts for about 25% of the world, but dollar settlements are much larger, at 50%-60%. That is why America uses the dollar as a weapon. However, in recent years, America's actions using the dollar, especially the excessive use of sanctions, have led many countries to begin feeling the risks of depending on the dollar. China, in particular, has a strong desire to move away from the dollar.

Militarily, America is still strong, but if it loses credibility due to soft power and dollar issues, America's influence itself might be shaken. This trend is particularly strong in the countries of the Global South. It is not yet to that extent in developed countries like the G7, though.

What we should think about is that the American-centered world of the past is changing slightly. Now, countries like China are proposing new systems that are different from the American style. Indeed, we are shifting from the unipolar system of the past to an era where multiple great powers take leadership.

And the influence of American media, such as the Washington Journal and Bloomberg, is also waning. Until now, the opinions of those media outlets were the world standard, but that is no longer the case. They are almost ignored, especially in China, Russia, and the Middle East.

Also, America's past actions, especially the influence of the CIA and NGOs, are becoming an issue. The dark sides that were previously unknown are being exposed.

Countries and organizations that hold power always have dark sides and taboos. When power is solid, those dark sides tend to be hidden. But when power weakens, those dark sides are revealed. That is happening in the UK now, and it might happen in America too.

When looking at international affairs from this perspective, the Western-centered era of the past may be ending, and an Eastern-centered era may be coming. The countries of the East have large populations, and it is certain that their influence will increase. This is also an important perspective.

F. How to Unite a Country

The country of America was originally made up of immigrants from various cultures, so it needed universal values to unite the country. Those were 'democracy,' 'freedom,' and 'human rights.' This is an important point for understanding America.

The economic aspect cannot be overlooked either. The 1950s and 60s were the heyday of the American middle class, and it felt like a golden age. But it has been on a downward slope since the Vietnam War, and during the Reagan administration, globalization progressed, and the American economy shifted from manufacturing to financial capitalism. This left the region of the American Midwest, now called the Rust Belt, behind in economic growth.

The middle class was solid in the 1950s and 60s, but due to the influence of globalization over the last 30 years, the middle class has been steadily shrinking, and the gap between rich and poor is widening. This is a problem, but the middle class is a politically moderate force; neither the left nor the right is extreme, and it maintains a state where everyone can exchange opinions. However, when the middle class shrinks, extreme opinions increase, and even discussion becomes difficult.

Until around the Lehman Shock of 2009, the middle class drove American politics, but since then, the middle class has declined, opinions from the far-left and far-right have increased, and American society has become divided. To resolve this division, there is no choice but to strengthen the middle class again.

The Biden administration is also aiming for that, adopting economic policies different from past administrations. In March 2021, there was an $8 trillion infrastructure policy, and in 2022, there were $400 billion in inflation measures and the promotion of chip technology; the American government is acting actively. This is not just to strengthen security and the role of the government, but also to properly redistribute wealth to reconnect American society.

In particular, the swing states in the Midwest, which attract attention in elections, are politically volatile, so the election results change significantly depending on which party they support. To firmly secure these states, strengthening the middle class and redistributing wealth are necessary. The Biden administration is also pursuing active fiscal policy as a big government for that purpose.

Looking at it this way, America has changed quite a bit. The way the government operates is completely different from before. Society is becoming increasingly divided, and the confrontation with China is heating up. America views China as its greatest competitor, and it is thinking about building a supply chain with the G7 as the axis, and if possible, bringing it back domestically. The goal is to boost American manufacturing and reduce social division.

I don't think this trend will change in the 2024 US presidential election either. What America is aiming for is a society centered on the middle class of the 1950s and 1960s. If this vision doesn't work out, there is a risk that wealth redistribution will not progress and society will become even more divided. As Samuel Huntington mentions in his book 'Who Are We? The Challenges to America's National Identity,' if white people become a minority between 2040 and 2045, there is a possibility that divisions will occur at the state level in America.

The American elites known as WASPs will likely become a minority from here on out. Therefore, before that happens, America needs to rebuild itself as a unified country once again. Otherwise, America's position as a hegemon will be in jeopardy. America is truly at a moment where it faces both a crisis and an opportunity.

When you think about AI and digital transformation, American companies are still at the top, but this doesn't necessarily lead to prosperity for the American mainland. Through the power of digital technology, there is a danger that old-school major companies, such as Ford or GM, will be eaten up by new companies like Tesla. Even if America becomes a leader in the EV sector, it is highly likely that people in traditional manufacturing will lose their jobs. The digital age destroys the old to create a new era. In that process, how to support the industries that are being destroyed is a major challenge for America.

Every country, including Japan, must face a reset of security and the economy and play a role in avoiding social division. I think the role of the state is more important than the market. I believe we should look at the current state of America from that perspective.

G. America with visible fraying

America seems to be having a bit of a hard time lately. It's still strong militarily, but its influence, especially in the Middle East, has become subtle, and the dollar currency system feels like it's falling apart.

At the BRICS summit in August 2023, Russia brought up the idea of a new BRICS currency and suggested basing it on gold or resources like lithium. Since the world of renewable energy is expanding, BRICS has the idea of creating a currency based on rare metals and resources. In short, they want to create a currency with real value, not just bills that are printed. If this really moves forward, the power of the dollar could potentially weaken.

America's power is gradually declining, but in typical American fashion, they are trying to rebuild using fiscal policy. However, it is concerning that the current inflation is not coming down easily. Since the government is spending a lot of money to forcibly create demand, I suspect demand isn't falling. Thinking about it that way, I'm not sure if the central bank can easily stop inflation. We might see policies like interest rate hikes continue in the future.

In this day and age, it feels like the role of the state is changing significantly. It's not that power is becoming centralized, but there's an atmosphere where the state, not the market, is creating the game. The state is gaining more and more influence. Therefore, I think it is extremely important to properly understand the rules of this game.

Summary

・America is a unique nation that rejected the centralization of power, such as European absolute monarchy, and adopted the concept of the separation of powers, with state governments playing a strong role. Its involvement with foreign countries was limited, but it began to enter the international stage in the late 19th century.
・After World War I, America spread the new idea of liberalism internationally, and its influence peaked in 2022. America's influence stems not only from its economic and military power but also from its soft power.
・Initially, America avoided a central bank, with major financial conglomerates leading finance. However, after the economic crisis of 1907, the Federal Reserve was established in 1914. America's centralization of power strengthened through the two World Wars.
・During the Cold War, America promised to protect Western nations and still maintains numerous military bases around the world today. Despite the rise of countries like China, America's military spending is enormous, and it continues to act as the world's police. However, the gap between its actions and ideals, as well as past failures, has damaged its credibility.
・America's soft power and the credibility of the dollar are being questioned, and its influence is waning, especially in Global South countries. China and other nations are moving away from the US-centric system and proposing new ones. The credibility of American media and past actions has declined. From the perspective of international affairs, there is a possibility that an era centered on the East is coming.
・America is a multicultural immigrant nation that uses 'democracy,' 'freedom,' and 'human rights' as values to unite it. Since the golden age of the middle class in the 1950s and 60s, globalization has led to a widening gap between rich and poor. The Biden administration is promoting fiscal policy with the goal of strengthening the middle class and redistributing wealth. America is currently in the midst of a challenge to rebuild a middle-class-centered society and avoid social division while adapting to digital transformation.
・America's international influence is on a downward trend. BRICS is considering a new currency based on resources, showing signs of challenging the status of the dollar. In recent years, the state has been strengthening its control over the economy, so understanding those rules is important.