Is America Growing… or Declining Like Rome?

41BC, after the assassination of Julius Caesar, the Roman empire went through explosive growth. Why?

Caesar’s hand-picked successor was his nephew, Octavian. As most school children learn, Octavian attacked the renegade general Marc Antony, main squeeze of Cleopatra, took control of northern Africa and expanded his empire. But why was Egypt so important?

Octavian was named Augustus in 37BC,

but in that year, Rome had already sent 100 ships to the Red Sea. The Red Sea lanes gave the Romans a shortcut to the Arabian sea, Indian ocean and the Silk Road.

Silk wasn’t the only thing Rome imported from Asia,

though it was probably the most important. They also imported chemicals, (fragrances, embalming fluids, etc.) spices, ivory but most critical to Rome’s armies, steel.

For something to be important as an import, it must be either not available or expensive in the importer’s country, and this was especially true of silk and steel. To be sure, the Romans had silk, but to the Chinese, silk was the basis of much of their economy. After 2,000 years of minute advancements, they had refined the manufacturing process to the point where hundreds of thousands, perhaps millions of Chinese laborers were cranking out thousands of tons per year of extremely high-quality fabric that no one else in the world could replicate.

In steel, the process was even more acute. 

Roman steel was largely wrought iron, which is a low carbon form, molded into shape by heating and beating. Its low carbon content made it weak, heavy and brittle. Chinese steel could be cast into forms that were flexible, lighter and did not as easily break.

For the Romans, though, what was most important was not steel or silk, but something hardly mentioned in the texts. Branch banking.

To an empire, what you want is not important; what’s important is what you can buy. Rome could never have conquered China and taken its silk and steel. They had to buy it and to do that; they had to not only have money but move it.

Regardless of how powerful a country is, shipping gold across the seas is dangerous and expensive. The Romans, like the Greeks and Jews, solved this by using their temples as banks. Banks took in deposits and issued notes, promises written on paper in lieu of gold. If a person wanted or needed gold, they could have it, just as one who needs cash can get it from a bank, but if they don’t need it, it stays in the bank in their account. This meant the Romans did not need to continually ship gold to finance trade or construction, two things that require large amounts of money.

The Romans protected their temples with armies,

which was why locals kept their money there, but the real beauty of the steel and silk trade was Rome’s ability to tax it. The import taxes on steel and silk were as high as 25%, and the cost of these in the empire was staggering. It’s been estimated that a single bolt of Chinese silk may have cost the equivalent of 8 years of Roman wages. This gave the Romans the ability to create something that didn’t exist in 37BC. A standing army financed by wages and not plunder. Plunder may be a cheap way to finance a war, but you must keep finding new plunder.

In many ways, Bill Clinton, unwittingly, became the Octavian of his time…

though Octavian was a general and Clinton a draft dodger. Clinton’s claim to fame, (or infamy, as it may turn out) was to set the banks free. By eliminating Glass-Steagall and changing banking regulations, he set in motion a chain of events that led us to where we are today. A nation with a mammoth military financed through taxing and borrowing against trade.

Is this good or bad for America?

Like the weather, this is impossible to predict. On the one hand, the US has borrowed rivers of money. On the other, that river has bought us quite a lot. Aside from too many houses too many bars and too many malls, America has something else no one seems to notice. A gargantuan university system.
In Roman times, all roads led to Rome. The same is true here. 9 of the top 10 universities in the world and 35 of the top 50 are in the USA. Of course, you can get an education from a book, but that’s hardly the point.

A few years back, I lived inside the triangle engulfed by three universities, Harvard, MIT, and Tufts.

If you think of these institutions as places you get an education, you’re missing half the story. Harvard college is small, but its graduate school is enormous. The same is true of MIT and Tufts. The level of research going on in this triangle is staggering, and if you think it’s because of “American exceptionalism,” think again. The top students in these universities, as well as many of the professors, are from nearly every country on earth. As my daughter aptly put it when I asked her how many of her classmates in chemistry class at Wellesley were American, she said, “Just me and Eileen.”
To put this in its true perspective, America has 1,400 colleges and universities. The amount of money flowing through is probably higher than the GDP of 80% of the world’s nations. The amount of research being produced is hard to fathom, much less control.

Our Universities may be on the cusp of replacing what for 20,000 years has defined nations. Resources.

They are close to making oil obsolete. The effect on the USA is hard to fathom. Even though the price of computing has fallen by a factor of 3,000 in the last 20 years, the prices of oil and coal, on inflation-adjusted terms, have barely budged in the last 80 years. As Bill Gates once said, if the cost of transportation fell as fast as the cost of computing, you’d be able to buy a jet for what it used to cost for a neck-tie.

This has led to a one to one relationship between energy use and GDP growth. Imagine if this ratio changed by a factor of not 3,000, but just two. Imagine going from using 100 million barrels per day of oil to 50 million? It’s almost impossible to fathom. An electric car uses one-fifth the fossil fuel a gas or diesel powered auto uses. The US has 250 million vehicles!

The same is true of farmland, copper, and steel. We may be within a couple of decades of a family being able to produce almost everything they need to eat in their basements using as much energy as is created by a couple of hours on an exercise bike. In just the last two years, seed technology has raised some crop yields by 20% using the same soil and less fertilizer. Vegetables can already be grown in warehouses and can compete on a price basis with those shipped in from Mexico and sold in Walmart.

We’re close to being able to diagnose illnesses with a cell phone and where you can make love with your spouse that is 3,000 miles away in a hotel bed. We’re a decade away from being able to sit in a room and have a conversation with Einstein and your long-deceased grandmother.

Why is this important? For all of our history, the world has been ruled by empires, from the Romans to the Ottomans, the Han to the Ming, the British Empire to the USA. Imagine a world where everything you need is at your fingertips. Imagine a world where Empires no longer matter.

Is the USA declining, or, as in the case of Dinosaurs, are we becoming smaller and more sustainable?