How Empires Fall

The imperial tree falls not because the challenges are too great but because the core of the tree has been weakened by the gradual loss of surplus, purpose, institutional effectiveness, intellectual vigor and productive investment.

Comparing the American Empire with the Roman Empire in its terminal decline is a popular intellectual parlor game. The comparison is inexact on a number of fronts, starting with the nature of empire: Rome ruled a territorial empire, while the U.S. is a hegemony that doesn't need to hold territory (other than key overseas military bases); its dominance is based on the global projection of hard and soft power, diplomacy, finance and the monetary regime of the reserve currency.

Despite the apparent difference, the two empires share the key characteristic of all enduring empires: they extract the cost of maintaining the empire from client states and/or allies.

The mechanisms differ, but the results are the same: the empire's cost is distributed to those who benefit from its secure trade routes.

Two of the key characteristics of an empire in terminal decline are complacency and intellectual sclerosis, what I have termed a failure of imagination.

Michael Grant described these causes of decline in his excellent account The Fall of the Roman Empire, a short book I have been recommending since 2009:

There was no room at all, in these ways of thinking, for the novel, apocalyptic situation which had now arisen, a situation which needed solutions as radical as itself. (The Status Quo) attitude is a complacent acceptance of things as they are, without a single new idea.This acceptance was accompanied by greatly excessive optimism about the present and future. Even when the end was only sixty years away, and the Empire was already crumbling fast, Rutilius continued to address the spirit of Rome with the same supreme assurance.
This blind adherence to the ideas of the past ranks high among the principal causes of the downfall of Rome. If you were sufficiently lulled by these traditional fictions, there was no call to take any practical first-aid measures at all.

In other words, if our idea of intellectual rigor and honesty is Paul Krugman dancing around the Neo-Keynesian Cargo Cult campfire waving dead chickens and mumbling nonsensical claims of grand success, we are well and truly doomed.

The chapter titles of the book give a precis of the other causes Grant identifies:

The Gulfs Between the Classes

The Credibility Gap

The Partnerships That Failed

The Groups That Opted Out

The Undermining of Effort

I recently read a lengthier book by Adrian Goldsworthy titled How Rome Fell: Death of a Superpower.

In Goldsworthy's view, a key driver of decline was the constant political struggle for power drained resources away from protecting the Imperial borders from barbarian incursions and addressing the long-term problems facing the Empire.

Such conflicts for the Imperial throne often led to outright civil war, with factions of the Roman army meeting on the field of battle.

In other words, Rome didn't fall so much as erode away, its many strengths squandered on in-fighting, mismanagement and personal aggrandizement/corruption.

More telling for the present is Goldsworthy's identification of expansive, sclerotic bureaucracies that lost sight of their purpose. The top leadership abandoned the pursuit of the common good for personal gain, wealth and power. This rot at the top soon spread down the chain of command to infect and corrupt the entire institutional culture.

As the empire shrank and lost tax revenues, the Imperial bureaucracies continued growing, much as parasites attach themselves to a weakened host.

Individual contributions and institutional success are both difficult to measure in large bureaucracies, and it is tempting to define success by easily achieved metrics that reflect positively on individual contributions and the institutional management.

As the organization loses focus on its original purpose, the core purpose of the institution is given lip service but is replaced with facsimiles of managerial effectiveness, bureaucratic infighting over resources and the targeting of easily gamed metrics as substitutes for actual success.

People who have no skin in the game behave quite differently from those who face consequences. This disconnection of risk from consequence is called moral hazard.

Bureaucracies tend to institutionalize moral hazard: those managing the institution’s departments rarely suffer any personal consequence when the institution fails to perform its function. Funds are placed at risk, but the individuals making the bets with the institution’s money suffer no losses should their policies result in failure.

By breaking the institutional purpose into small pieces whose success is measured by easily gamed targets, the institution can be failing its primary function even as every department reports continued success in meeting its goals. Repeated failure and loss of focus erode the institution even as those in charge advance up the administrative ladder.

In the final years of the Empire, in the 5th century A.D., this institutional failure led to the absurdity of detailed descriptions of army units being distributed within the Imperial bureaucracy, while the actual units themselves--the troops, the officers and the equipment--had ceased to exist. In some cases, it appears bureaucrats and officers collected pay for supplying and commanding completely phantom legions.

The disconnect between the failure to fulfill the institution’s original function and the leadership’s rise feeds cynicism in the institution’s employees and erodes their purpose and initiative. Soon the institutional culture is one of self-aggrandizement, gaming of departmental targets, protection of budgets and a collapse of the work ethic to the minimum level needed to avoid dismissal. Personal responsibility for institutional failure is lost.

Does this describe the vast state fiefdoms and state-protected cartels of America's military-industrial complex, sickcare and the education industry? I think the answer is self-evident: yes. While there are still hard-working, competent people within these sprawling empires of moral hazard, these few are not enough to wring long-term success from negligence, friction and incompetence. All they can do is stave off implosion for a time.

There are many other causes for Rome's decline, including epidemics of plague, military over-reach, chronic deficits, debasement of the currency, a parasitic Elite that was immune to what was left of the rule of law, weak leadership, and rising dependence on the Central State for bread and circuses.

America is not Rome, just as the immensely successful Tang Empire in China (700-900 A.D.) was neither Rome nor America. These dissimilarities should not blind us to the underlying dynamics in the decline and fall of all great powers, which can be summarized as the slow erosion of shared purpose, surplus and the productive investment of that surplus.

When a storm arises--a conflict with neighboring powers, an outbreak of plague, a disastrous drought--the imperial tree falls, not because the challenge was too great but because the core of the tree had been weakened by the gradual loss of surplus, purpose, institutional effectiveness, intellectual vigor and productive investment.

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Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

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