Tourism after the Fall of the American Empire: Globalization, Protectionism, and Resource Depletion

Craig Webster University of Nicosia Nicosia, Cyprus webster.c@unic.ac.cy Stanislav Ivanov International University College Dobrich, Bulgaria stanislav.ivanov@vumk.eu James Leigh University of Nicosia Nicosia, Cyprus leigh.j@unic.ac.cy Abstract In this paper, the authors write about what the future of tourism after the fall of the American Empire. The authors describe the forces at work undermining the American empire and explain its likely trajectory. Then, the authors turn to the implications of this political event for tourism globally. The implications for tourism suggest the evolution of a new regime for international tourism, with China and other states playing a more central role in setting up the rules for international travel and tourism. In addition, the paper looks at the issue of resource depletion and allocation, since the USA will no longer have the ability to maintain low-cost petroleum nor protect the worlds sea-gate chokepoints, the world arteries for the shipping petroleum. Key words: tourism, future of tourism, USA, resource depletion, globalisation Introduction Tourism is a major industry worldwide. However, it remains an industry that must be able to respond to elasticity in demand for tourist services. These demands will remain influenced by the world economy and the worlds economic and political stability. In this paper, we investigate the impact that the collapse of the American Empire will have upon the tourism industry. To begin the investigation, we highlight the position of the USA in the world and its shrinking capability to act as a hegemon. We explore the reasons to believe that the USA and the system of liberal capitalism that it has championed since the end of World War Two is in decline. We also explore the counterarguments, to tease out the possible reasons that the US Empire can continue for the next 20-50 years. Following that discussion, we look into the geopolitical, economic, and political implications of the collapse of the US Empire. These implications will deal with globalization/protectionism, the flow of petroleum and other fossil fuels, and the regulation of travel. We conclude with a discussion of the impact that the change in global power will have

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Electronic copy available at: http://ssrn.com/abstract=1941210

upon the tourism industry globally and make suggestions for how policy-makers, the tourism industry, and citizens should respond. The American Empire: Rise and Demise Since the collapse of the Soviet Union in 1991, the notion that the United States is an empire has been more explicit. In academic and non-academic circles, the reference to the USA as an empire has been more pronounced, perhaps because its military and economic presence persisted even after the extinction of its nemesis the Soviet Union. The discussion of the US as an empire deals with the military, political, and economic aspects of the maintenance of the empire. Perkins (2005, 2008) describes the empire as a system that is dealt with and maintained through a combination of economic hit men, jackals, and others to create and sustain US dominance. Although the US hegemonic power is neither entirely economic nor military, a mixture of political, diplomatic, economic, and military methods are used to create and sustain US dominance, as Perkins describes it. In terms of its military reach, the USA has the greatest ability to inflict violence globally. Certainly, as has been pointed out, the USA is not shy about using its military power abroad (Hobsbawm 2008; Parenti 2011). The vast holding of military bases around the world which the Pentagon claims is over 700 (Johnson 2007a) and this suggests that US military power is present in much of the globe. For example, Okinawa hosts a number of facilities for the US military, including five air bases and a multitude of other facilities including recreational and training facilities. In Europe, there are still many US military bases, most notably in Germany and Great Britain. In the Indian Ocean, Diego Garcia is a noteworthy military base for the US, a place whose inhabitants were removed from the island so that the UK could hand over the administration of the unpopulated island to the USA in 1971. US military forces are in almost any corner of the globe and their capability to attack by air is ensured by many of these bases. The hundreds of proclaimed facilities abroad may underestimate the scope of US military reach, since there may be undeclared bases or bases that are used in conjunction with NATO allies, giving the US greater worldwide reach militarily, along with global intelligence capabilities than the declared facilities would suggest. The US military has the capability to deliver violence in almost every corner of the globe due to a large international network of military bases, a network of allies, and a sophisticated air force and intelligence gathering capability. This military capability has enabled the US to create a world in its own image in the past decades and there has been discussion of the American Century. However, there seems to be change in the international hierarchy. The most frequently used data to illustrate the power of countries is the Correlates of Wars Composite Index of National Capability. The Correlates of War is one of the most established and continuous social science projects that has been gathering data on countries to learn about war and change in the international system since the early 1960s. The data for some selected countries to illustrate national capabilities is shown in Figure One below.

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Electronic copy available at: http://ssrn.com/abstract=1941210

Figure One: The Composite Index of National Capability for Selected Countries
0.4 0.35 0.3 0.25 0.2 0.15 e r o c S N I C 0.1 0.05 0
Data Source: Correlates of War

USA China India Russia

The Composite Index of National Capabilities (hereafter CINC) is the standard measure of the power of countries, as International Relations specialists view it. It measures the amount of power that any one country in the system has, as a percentage of all the power that is available in the system. The data in Figure One illustrates that for the past few years that China is now the most powerful country in the world. This composite index, the most commonly used one in Political Science, shows that there has been a significant change and that in the most recent year the data show (2007), that the USA has about 14% of the power in the international system while China has about 20%. The figure illustrates an important change, in that according to this one measurement, a nonWestern country holds the plurality of power in the international system. What this suggests is that the power transition that was postulated to happen (Organski and Kugler 1981), has happened, and that China is now the most powerful country in the world. However, it could be merely that one of the dimensions upon which the index is based is biased and therefore distorts the reality. So, a bit of an explanation into the method behind the CINC is critical. The index is composed of economic, military, and demographic variables. The economic variables are the percentage of energy consumed by a country and the percentage of iron and steel produced by a country. These economic variables suggest that those countries that consume more energy and produce more iron and steel will have more of a capability to wage war, since they will be more economically advanced and have the ability to make metals to wage modern wars. The military variables are the amount of money a country spends on its military as a percentage of global military expenditures and the percentage a country has of the worlds men and women in uniform. These military variables tap into the notion that short-term

6 8 1 4 2 8 1 2 3 8 1 0 4 8 1 4 8 1 6 5 8 1 4 6 8 1 2 7 8 1 0 8 1 8 1 6 9 8 1 4 0 9 1 2 9 1 0 2 9 1 8 2 9 1 6 3 9 1 4 9 1 2 5 9 1 0 6 9 1 8 6 9 1 6 7 9 1 4 8 9 1 2 9 1 0 2 3

military capabilities are a function of the amount of money invested into the military establishment as well as the number of men and women who are in the military forces. The demographic variables are the percentage a country has of the global population and the percentage of the worlds urbanized population that a country has. These demographic variables are designed to tap the ability to create a large military, if need be, and the ability to have a population that is not employed in farming, and thus with the flexibility to make war. In terms of assessing the index and what it reveals about China and the USA, there are many things to be said. To begin with, China has an advantage in terms of the population size, since one of the key indicators of power is population size. In addition, much of modern industrial production of iron and steel has moved to Asia, meaning that Chinas manufacturing capability does enable its score to be higher than it otherwise would be. What inflates the USA figure, though, is military spending. US military spending is in a league of its own, so much so that it is economically debilitating and suggests the imperial overstretch that Paul Kennedy (1989) warned of many years ago. Alone, the CINC score of the USA does not necessarily denote that it is no longer a major power. However, paired with other data and trends, it is suggestive that the USA, as a hegemon is in a rapid state of decline. Most importantly, the USA is financially bankrupt and there are a good number of people who write about this bankruptcy and its link with militarism (Bacevich 2006, Bellow 2006, Johnson 2004a, Johnson 2004b, Johnson 2007a, Johnson 20011, Pape 2009). Financially, it can not afford to maintain a global system of military bases, intelligence facilities, and secret prisons. Johnson (2007b) shows the extent to which the influence of the military has upon the US government, describing the system as military Keynesianism, a system of military spending that sustains the economy based upon constant high levels of military spending. Indeed, the USA has had a wartime economy since 1941, with extraordinarily high levels of military spending sustaining the economy. These levels (using current market exchange rates of 2009 US dollars) are not sustainable, as Table One below illustrates (SIPRI 2010).

Table One: Military Spending for Top 7 Spenders 2010 Nation USA China UK France Russia Japan Germany 2010 Spending Share of World Share % $ billions 2010 GDP % 698 119 59.6 59.3 58.7 54.5 45.2 4.8 2.1 2.7 2.3 4 1 1.3 42.8 7.3 3.7 3.6 3.6 3.3 2.8

Source: Stockholm International Peace Research Institute (SIPRI)

The data show that the US is not only a leader in terms of investment in military spending but is in a league of its own in terms of spending. The US, with nearly 5 percent of the global population spends disproportionate amounts of money on military spending. The economic and political implications are great, both for the world as well as the population in the US. Can the Empire Strike Back? However, it could be that US dominance is more sustainable than some would argue for several reasons. The first reason is the influence of American soft power, something Nye (2005) stresses is the real power of America. Indeed, there is some attraction to the American way of life and culture that makes the US attractive to other peoples and such an attraction may make it easier to communicate and convince (rather than physically or financially coerce people outside of the USA). The second reason is a vision of the US as exceptional, and therefore is somehow exempt from the normal ups and downs of empires. This notion of American exceptionalism is a long-term culturally held belief in the USA and political leaders in Washington seem to believe that the US is true. A third reason is that the American way of making war is exceptionally effective and violent, meaning that it is hard to imagine another state being able to defeat now or in the near future. For example, the American way of making war is highly capital-intensive, so a small army relative to the population size can inflict a substantial amount of deadly violence. The common use of weapons of mass destruction by the US (including cluster bombs and munitions with depleted uranium) inflict massive amounts of damage and the impact of these weapons will be experienced for decades following a conflict. In addition, the delivery systems of the US military, including indiscriminate bombings of civilian populations from long distances via cruise missiles and drones or other delivery methods (such as high-altitude carpet bombings) are very deadly and will continue to be used, as long as there are funds to allow this to happen. A fourth reason is that the US has explored many paths for military and intelligence that are very futuristic and perhaps a bit far out for most people to contemplate or understand. The intelligence and military establishments in the US have worked on weapons and methods that range from the astounding to the outright weird. For example, Ronson (2009) outlines a number of projects that had been considered in the US military, including psychic intelligence 5

gathering (referred to as remote viewing), mind reading, soldiers walking through walls, and using the mind as a weapon to implode a goats heart, among many other things. The willingness to explore such methods may indicate the desperation of the US military to explore any possible advantage no matter how bizarre, but at the same time, the success of any of these offbeat methods adds considerable advantage to the US and its military and intelligence capabilities. There are other weapons and programs that the US military and intelligence communities have embraced in recent years including HAARP (a weapon system that allegedly has the ability to change the weather, cause earthquakes, and has mind control applications, as well) and geo-engineering (the ability to control weather patterns). In addition, the US military lately has been open about its successful testing of laser weapons to shoot down a drone (Greenemeier 2010). The open use of laser weapons suggests that another generation of weapons is well on its way in terms of development, so we can expect some sort of particle/plasma weapons are beyond the test phase of development. These advanced weapons are especially disturbing, in that if the US has such complete control over the planet, the US may find itself exempt from the usual cycle of rise and fall of empires. Indeed, the US may merely have to set the gauges on a HAARP facility and destroy a competitor, such as China, by inflicting terrible earthquakes, drought, and tsunamis on it. Few would even know that the war was underway, and the US would be victorious without firing one conventional shot. Despite these mitigating factors, it seems that the American Empire is in decline mostly because the US is bankrupt (Kotlikoff 2010). Unless there is some sort of futuristic weapon that the US can deploy to wipe out its debt, it seems that the US will have a hard time sustaining its empire over the next few years. So we should investigate major issues that will likely impact upon tourism in a world without the US as the worlds dominant political, economic, and military force.. The Brave New World: post-American Empire A major theme that is a current interest and will continue to be important is the control of petroleum and its distribution. At present, the US controls much of this and treaty obligations mean that oil is purchased in US dollars. Petroleum is important since alternative forms of energy are not an effective replacement for petroleum (Leigh 2008) and petroleum has importance beyond being an energy source. For example, food production in the developed world and much of the developing world is made possible by a mixture of machinery (petroleum-fuelled), pesticides (petroleum-derived), and fertilizers (sometimes petroleumderived). The removal of access to cheap petroleum will mean that agricultural surpluses that many countries experience in the developed world will be under threat. This will result in food security issues for much of the worlds population. Some argue that the peak production of oil is already behind us, historically (see, Deffeyes 2006, Goodstein 2004, Heinberg 2003, Leggett 2006, Leigh and Vukovic 2011, Roberts 2004). In Figure Two the dramatic build up to the plateau of conventional crude oil production is shown, and a min-max line shows that crude oil production has declined from 2005 to 2009 by almost 2% (EIA 2010), and this decline trend is expected to continue and even accelerate on into the future (Leigh 2012). Figure 2: World Conventional Oil Production

World Conventional Oil Production

73.7 72.5

Production mbpd

74 68.5 67.2 70 68 66 64 62 1999 2000 2001 2002 2003 68.1 72 65.9 69.4

2005

2006

2007

Years

The loss of a policing state, the USA, to ensure the free flow of petroleum and other fossil fuels, mainly through sea-gate chokepoints, to more developed countries will mean that some states have to act in an aggressive way to secure access to dwindling supplies of fossil fuels. This suggests that energy-deficient countries, many being more developed countries of Europe and Asia, will have to find alternative ways of ensuring access to petroleum and other fossil fuels, since the US will not have a military capacity to enforce low-cost deliveries of fossil fuels. In addition, the loss of the US as a state acting in a global policing function will mean that the sea-gate chokepoints for trade will become increasingly vulnerable and more palpably important. Details of these major chokepoints, the Strait of Hormuz, the Strait of Malacca, the Suez Canal and the Bab el Mandab are shown in Table Two (EIA 208): Table Two: Oil Chokepoints and Flows from the Persian Gulf

With 20% of total world oil production passing through the Strait of Hormuz, the worlds prime oil chokepoint, this geographically speaking is the quintessential oil sea gate. However, it must also be noted that the down-line shipment of oil through the Strait of Hormuz is dependent upon the three other sea gate chokepoints, the Strait of Malacca, the Suez and the 7

2009

2004

2008

72.3

73

76

73.4

73.7

Bab el Mandab. Both Europe and Asia are deeply dependant on oil imports from the Persian Gulf and thus vulnerable to any interruptions along these routes which are in one of the most geopolitically unstable and hostile-to-the-West regions in the world. Also the dangerously precarious environs along these sea lanes, as shown in Table Two, could produce circumstances and events that would seriously block oil supply leading to debilitating consequences for large swathes of humanity (Leigh and Vukovic 2012). A failure of these chokepoints by natural hazard, piracy or geopolitical conflict would create major world oil shortfall problems. For example, a whopping 40% of all the worlds internationally traed oil (through imports and exports) passes through the Strait of Hormuz. The following countries (along with their percentage of oil coming through this chokepoint) would be crippled, just with the failure of this Hormuz chokepoint: Japan (83%), India (70%), China (50%), the EU (40%) and USA (14%). The loss of 14% of petroleum for the USA would be a serious wound, but for the other countries with the loss of 40% or more of their petroleum supplies, the scenario would be catastrophic (Leigh 2009, Leigh and Vukovic 2011). There will be other major resources that will continue to be in demand and this will cause considerable political and economic concerns. For example, coltan, an important and precious component in most cell phones is mined mostly from the Congo. The precious metal is important for cell phones but not found throughout the world, thus, those few countries that control its mining, will have a great deal of power. The issue of depletion of various metals has already been investigated (Meadows et al 1993, Meadows et al 2004), although the political ramifications of the depletion (rather than the economic ramifications) are probably the most deadly and interesting. Thus, the breakdown of the current system of globalization that the US has championed since the end of World War Two will be under threat. It will be under threat because resources are not evenly spread geographically around the world, the enforced system of open markets to ensure access of raw materials into the economy will no longer be fully functional, and some populations will be under a great deal of pressure due to lack of access to the raw materials. In addition, the lack of a flexible and cheap energy sources may make trade more expensive and difficult, if petroleum either runs out, or the US or some other powerful state can not enforce cheap petroleum prices. The rise of China, with an expansionist bent, is also a possibility. China, with a large demand for petroleum, may use military force to either ensure its access to petroleum. Or, it may choose to fill in the vacancy left by the US and create a network of economic, political, and military control to ensure that the global markets retain access to cheap petroleum. The implication is that the opposite of globalization may occurnational or regional protectionism. It may not be that the entire world will revert to autarky within states. However, without a state to actively police for the global economy low-cost petroleum, it would seem that states or blocs will reassert themselves and take political control over their countrys physical resources. Prices for petroleum may be put into a free market mechanism, with states demanding payment in some way that is meaningful, such as gold, or some other resource that they deem important for their economy (perhaps lumber or metals such as copper). At present, such a free market does not exist, since political forces from the US strongly influence the market price of petroleum.

There are other major global implications as well. For example, global financial systems will likely experience major shocks and changes, due to the collapse of the fiat currency system currently based largely upon US dollars. Regional blocs will likely rise to become major powers on different continents. The likely new regional powers will be linked with strong political unions with a common currency. There is also the possibility of a new global currency unit and a shift to a world government of sorts, organized from such financial and banking organizations as the IMF and World Bank.

Implications for Tourism The implications for the end of the US Empire are enormous for the tourism industry. The major implication is that petroleum will cease to be cheap and accessible in most of those places that are petroleum-deficient. What this suggests, without some sort of extraordinary technological innovation taking place, is that travel will become expensive, since fossil fuels will not be able to be obtained at a low price. In addition, food costs for most of the global population will increase a great deal, meaning that those citizens who live in petroleumdeficient countries will likely have a moderate to severe shock to their standard of living. The increase in the price of petroleum paired with the increased cost of travel will mean that the global middle class (something that will shrink in proportion to what it now is) will have less money available to travel, especially for long-distance travel. Despite the probable collapse of the US Empire, the GINI coefficients in most countries are suggestive of more bifurcated populations with a growing number of poor people, and a small ultra-wealthy social class. With the end of cheap oil (even if it is caused by simple depletion of the resource versus the collapse of the system that ensures its distribution), many of those who now have the means to engage in international travel will have less disposable income and will use their resources to buy or grow food. So, what we can expect is that in most countries, a shrinking class of people who travel will have to be catered to. Indeed, with the end of cheap oil, the mountains of butter and lakes of wine that EU petroleum-based agriculture produces will be much reduced. Another noteworthy event is the continued rise of China and, perhaps, also India. With the rise of China, one could expect some changes in the regulation of international tourism, and perhaps a shift to the use of Chinese as the lingua franca for travelers. What Do We Prepare For? The first thing that will need to be catered for are two classes. The first class of people will be those for which there will be a great deal of luxury travel despite increases in petroleum prices, the ultra-wealthy. Sadly, most of humanity will not have the wealth that and the global elites their families will likely retain. Indeed, much of the European aristocracy, with their vast land-based wealth, international investments, and receipts of subsidies from public sources has flourished following liberal revolutions, democratization, and social democratic regimes. The worlds non-aristocratic wealthy retained and enhanced their wealth in recent centuries, as well, despite democracy, welfare states, and social democratic governments and policies. There is no reason to believe that these classes of people will suffer noteworthy

losses in the changeover following the end of US hegemony. For the small collection of the global ultra-wealthy elite, the good life will continue as it now does, unless an egalitarian revolt of unprecedented proportions occurs. For the majority, life will have to be simplified and people will have to work harder. For example, while disposable incomes for most will shrink and the cost of food will increase, many citizens will have to think of ways to grow, hunt, fish, or exchange goods and services for foodstuffs. Those in the more developed countries will likely be the luckier ones, since the famines and food shortages will hit first and hardest in the less developed countries. A reduction in population globally is possible and likely, with the more powerless in Asia, Africa, and Latin America being the first victims of hunger. In terms of leisure, a sizable middle class may remain in more developed countries that may have some disposable income. However, these middle classes will spend less. For the most part, the expectation is that long-distance travel via airplanes will be out of the picture for most travelers, since transportation costs will be too high for most of those who have the ability to travel. Most likely, such travelers will seek pleasant vacations nearer to home. To arrive at the places where vacations will take place, buses and trains will likely play a larger role. There may even be a revival of train travel. For example, European travelers may gravitate to buses and trains to get to beachside vacations on the Mediterranean, since air travel will likely be out of the question for most of them, and as trains and buses can also be fueled effectively by means other than fossil fuels they will remain viable transport. Another expectation is that the collapse of a fiat currency system may mean that whatever currency replaces the current fiat system, there will be a return to protectionist and mercantilist policies, meaning that tourists will be encouraged to holiday within the confines of their countries or economic blocs. Apart from the return to protectionism and frugality, there will be some other interesting developments. If China and India continue to develop, despite the changes we are now experiencing and expect to experience, there will be a growing number of wealthy Asians who will experience some leisure outside the confines of their countries. They will have to be catered for in terms of their tastes and preferences. All-in-all, the tourist industry should be prepared for a bumpy ride ahead. Despite technological innovation and fancy marketing strategies, the reality that the industry faces in the not-so-distant future is a widening gap between the haves and have-nots, food scarcity, protectionism, and rising petroleum prices. The industry can respond in two different strategic ways. One way is to begin to cater more closely to the small number of ultrawealthy global travelers for whom money will be no object. The other way is to go downmarket and cater for the many with less disposable income. Catering for the poorer segment of the market means looking at low-cost opportunities nearer to where the bulk of the future tourists will be. These opportunities should offer recreation and leisure that is low-cost, does not use much petroleum, and can utilize trains and buses to access the opportunities. Conclusion After the fall of the American Empire, we will face a radically different world, with some similarities to the world faced by the collapse of the Roman Empire. What follows the collapse of the Pax Americana will have parallels with what followed the collapse of the Pax

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Romana. We expect that the end of US hegemony will have grave and important meaning for just about every region, nation, and industry on the planet. The tourism industry, as a service industry based upon populations with disposable income, should take notice and prepare. Tourism will persist, as long as there are people with disposable income and a predisposition to travel. However, as the economic and political circumstances of the world change, so will the tendencies of tourists globally.

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