Oct 28 2008

State of the Wave, Geopolitical & Economic Focus — Monday 10/27/08

A key question is: Given the current financial panic, is it likely the United States will play a leadership role in space colonization and exploration between 2015 and 2025? The question can be split into two more fundamental ones: 1) will the U.S. remain a global superpower in the normal sense of the word, and 2) will the U.S. aggressively pursue large-scale, unprecedented space activities of the type expected during the next Maslow Window?

Is America’s global leadership declining? Click buzzaldrin.jpg.

Doubters abound regarding the U.S.’s future superpower status. For example, Germany’s finance minister, Russia’s prime minister, and Iran’s president have predicted U.S. “hegemony” is ending. And the New York Times, Der Spiegel, and Guardian columnist John Gray, all foresee a diminished America.

In this blog, I’ve featured rational arguments that suggest the U.S.’ superpower status will be uninterrupted, because:
1) The U.S. is not only the weathliest and most powerful country now, but in all of history; see Professor Madden.
2) The U.S. has weathered major challenges for over 200 years and continued to flourish; see Lewis & Clark.
3) The analog between Britain’s decline and the U.S. is very weak; see Zakaria.
4) America’s bright future is enhanced by its world-class universities and robust demographics; see Zakaria.

Bret Stephens, in the Wall Street Journal (10/14/08) asserts that “America will remain the Superpower,” because — referring to America’s opponents and critics — “When the tide laps at Gulliver’s waistline, it usually means the Lilliputians are already 10 feet under.” This is seen in a variety of economic stressors where the U.S. is favored vs. other countries, including inflation, ability to finance a bailout, government debt to GDP ratio, amount of foreign direct investment, and others.

The New York Times (10/12/08, David Leonhardt) anonymously quotes a senior Chinese economist who says that people in his home country do not doubt America’s prospects, “They know its ability to turn around problems is really unmatched, historically.”

Stephens concludes that no matter who wins the upcoming presidential election, “the United States will eventually regain its economic footing and maintain its place” as the Superpower.

In space, will the U.S. be a Gulliver or a Lilliputian? Click iss.jpg?

Assuming the U.S. remains the Superpower, will the financial panic reduce the U.S. — in the space arena — to a Lilliputian or will it remain a Gulliver? Several points are relevant:

1) George Friedman (Stratfor, 10/16/08) notes that the current panic is less like a systemic collapse (i.e., the Great Depression with 50% GDP decline over 3 years) and more like an “inflection point” related to business cycles. For example, in the Savings and Loan crisis of 1989 government bailout was 6.5% of GDP, while currently government intervention is about 5%. Friedman concludes that a recession is coming but it “would not break the framework of the postwar economy.”

2) The timing of the current panic relative to the anticipated opening of the next Maslow Window (2015) is a concern. For example, economists believe the credit crunch could last “well into 2009,” (San Diego Union-Tribune, Dean Calbreath, 10/19/08). Until credit problems are resolved, “the current recession could be much deeper and longer than otherwise.” A worst-case scenario would be the decade-long Great Depression. This suggests the next Maslow Window could start near 2018, about 3 years “late”. On the other hand, two major 19th Century panics began within a decade of their Maslow Windows and did not delay their openings or diminish in the least their spectacular Great Explorations and MEPs. I’ve noted before that two factors — renewed Cold War-like tensions, and strong international interest in Moon bases — suggest the Maslow Window might open earlier than 2015. These geopolitical effects might even counter an unusually long recession, similar to how the war economy of W.W. II ended the Great Depression.

3) There was no financial panic in 1949, one decade before the onset of the Apollo Maslow Window, which featured the Cold War’s race to space and footprints on the Moon in 1969. Does that imply that the current panic (7 years before the 2015 Window) will interfere with realistic prospects for international space spectaculars between 2015 and 2025? It appears that the 1949 NON-panic was due to the post-war boom (for which the Boomer generation is named!) and financial reforms passed during the Great Depression. I concluded earlier that a good analog for our current situation is the Panic of 1893 which lasted through that decade but ultimately gave birth to the most spectacular Maslow Window of the last 200 years (until Apollo).

However, there is still considerable uncertainty about how our current panic will end. Arthur Laffer (Wall Street Journal, 10/27/08) believes that “this administration and Congress will be remembered like Herbert Hoover,” and that “the age of prosperity is over” because even more government bailouts are in our future. And The Economist (10/16/08) concurs: “Even if it staves off disaster, the bail-out will cause huge problems. It creates moral hazard: such a visible safety net encourages risky behavior. it may also politicize lending.”

On the other hand, it’s possible that international events will play a stimulating role. We may unify globally and have a Grand Alliance for Space, or someone might decide that a Sputnik-style surprise conveys irresistible geopolitical advantages. Either way it will get our attention.

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