The economics of empire are fairly well understood. Persia for example, conquered the surrounding people, because it meant those people paid tribute to Persia. The cost of conquest was covered by the initial booty, at least in theory. Tribute was calculated on the ability to pay and the cost of defending the new land. While ego certainly played a major role in empire building, the economics were also a factor. In agrarian society, land was the store of wealth, so acquiring new lands was how a people got rich.
This is the reason empires preferred to negotiate with potential new vassals, rather than just invade. It made the math predictable. The initial conquests were all about the warrior spirit or maybe old grudges, but as an empire matured, it was about economics. If a city-state on the Aegean, for example, was willing to submit to Persia without a fight, the cost of conquest was easy to calculate. Not only that, it lowered the cost of maintaining the relationship, as the new vassal would be cooperative.
This has been the rule of empire since the first empire. The Romans conquered the Italian peninsula because of age old conflicts with the neighboring people. They conquered the Mediterranean because it made them rich. The British Empire was a purely financial empire, as were all of the colonial empires. There were rivalries between the European powers, for sure, but their main motivation was economic. Conquering the New World and Africa was all about enriching the conquerors.
There has always been another element to the economics of empire and that is the nature of rule. Empires have always been defined by personal rule. A ruling family or maybe a ruling tribe, sat atop the system. They owned lands themselves and treated their conquests as personal property, even if they were not defined so legally. When new lands were acquired, the emperor or king got his cut first. Then the rest was distributed to his lieutenants and supporters down to the soldiers themselves.
Personal rule means personal responsibility. Darius, the Persian emperor, had a personal stake in the welfare of his vassals. To simply loot them would be like a shepherd skinning his flock, rather than shearing them. The economics of empire have always been the same as the economics of monarchy. The people at the top must treat their vassal states as they would treat their own property, which means they have a stake in their prosperity and therefore a motivation to preserve the value of the conquest.
America is the first democratic empire. The British Empire had democratic elements, like a parliament and limited suffrage, but it was a long way from liberal democracy, as we currently define it. By the time liberal democracy swept the West in the first half of the last century, the British Empire was in steep decline. That process was the result of America rising to dominate the West and eventually become the global hegemon. America elected to conquer the world in order to spread democracy.
Democracy, of course, turns the ruling class of a country into renters. Unlike an owner, a monarch for example, the office holders in a democracy are in it for short term profit. The next election could find them back in the dreaded private sector. In order to hedge against that eventuality, they must convert as much private property into public property, in order to distribute it to friends of government. Democracy is just a formalized version of tragedy of the commons, that always ends in it murdering itself.
The question then is how a democratic empire can survive, when the ruling elite of that empire are motivated to loot the empire. In the Cold War, this was not a consideration, because the other side was a similar empire build around communism, which is just the material implementation of democracy. The natural inclination of both systems to loot themselves was checked by the very real threat of nuclear annihilation. The commies invested in territorial integrity, while the West invested in their economies.
The collapse of the Soviet Empire is something that gets little attention, as it is just assume to have been inevitable. Communism, however, shares something with liberal democracy. The people at the top have no incentive to invest in society. The Soviets did not develop their social and human capital. Instead, it ruthlessly exploited it, along with the natural resources of the territory. The Soviet system was like a renter using the furniture for firewood. When the energy markets collapsed, the Soviets collapsed.
Liberal democratic empire, rather than strip mine natural resources from the land, monetizes social capital through cost shifting. For example, business brings in foreign workers to suppress wages, but then dumps those workers into the surrounding community. Their cost of support consumes the social capital of that community through corruption of local institutions, increases in crime and social alienation. In other words, the cost of cheap goods is the loss of community and local control.
Another aspect of the exploitative economics of liberal democratic empire is how America strip mines foreign lands of their human capital. Silicon Valley, for example, is majority non-white. The best minds from around the world are recruited to the economic centers of the empire. Spend time around the Imperial Capital and it is not only a foreign country, it is an alien country. It is nothing like the rest of the empire. That’s because it is a collection point for foreign elites serving the empire.
What collapsed the Soviet system was the same as with any economic enterprise. The cost of maintaining it exceeded the benefits of maintaining it. The Soviets ran out of cash to pay their bills and went bankrupt. The Soviets had to subsidize the vassal states in order for the local elites to remain in power. They also had to spend on security forces to keep those local elites from getting any ideas. The cost of doing those things eventually exceeded the proceeds of natural resource extraction.
In the American empire, a different crisis is brewing. The destruction of social capital has reached a point where the middle class is collapsing. Inequality has never been higher, but it promises to soar as the Baby Boom generation ages off and their assets are consumed by the state. The proliferation of private debt to provide the illusion of prosperity and mask the loss of social capital, has beggared the young. The next generation is guaranteed to have a lower standard of living than their parents.
The collapse of social capital is surely one cause of the decline in entrepreneurship. To start a business is to take a risk. Having social support not only mitigates the cost of failure, it encourages risk taking. As capital, social and human, has been collected into the control of an increasingly narrow elite, entrepreneurship has declined while overall leverage has grown. The rentier system of liberal democracy, has turned the ruling elites into renters, using up resources without replacing them.
The Russian implementation of democratic communism in an empire became unstable when the proceeds from energy sales could not cover the cost of empire. Like a business with a negative cash flow, it simply ran out of money and collapsed. It’s tempting to think something similar happens in America. After all, government debt at all levels is staggering and is accelerating. That’s a mistake, however, as the state is no longer in control of the empire. Control now rests in private hands.
Proof of that is the inability of the empire to control the borders. Across the West, the voters want to sharply reduce legal immigration and end all illegal migration. Yet, supposedly sovereign governments are unable to do it. In America, the President is stymied at every turn by a system largely controlled by forces that exist outside the government. The reason there can be no border wall is the managerial elite that benefits from and is in charge of the empire, will never permit it.
The more likely source of instability will come from the cannibalization of social capital that has been the fuel of the “new economy” for decades. The loss of social capital has reduced social trust, which in turn has resulted in a decline in trust of national civic institutions. Why would people put faith in their institutions when it is clear that their office holders are powerless? That is a lesson rocketing around Europe. It explains the “yellow vest” protests and the rise of right-wing populism.
In America, only a fool believes the ruling class. People are becoming increasingly alarmed by what’s happening in the administrative state and its private partners in the technology and financial class. This loss in trust will inevitably lead people to look for alternative sources of legitimacy, authority and collective security. Identity politics is just a preview. As America becomes majority-minority, politics becomes a winner take all proposition, which will foster a rise of tribal politics.
The traditional empire always stagnated when it stopped expanding. What followed was a long period of decline. In a democratic empire, the economics that naturally flow from democracy hollow out the empire, by converting its social capital into power and status of a detached ruling elite. The global rulers of today see themselves as detached from those over whom they rule. Their subjects are just resources to be utilized and discarded.
The question to be answered is what happens to the American empire when the social capital is gone? Is it possible for a tiny alien elite to maintain control of a continent-wide population entirely dependent on the system for order and stability? Can the culture of the penitentiary scale up in such a way that the inmates still believe they are in charge of the institution? No one knows, because there has never been a democratic empire, but that is the task facing the ruling class of the American empire.