If you're confused about where Europe is headed, join the club. Last week at a seminar a colleague with considerable knowledge of European affairs confidently told me "Don't sell your euros ... the Germans will eventually step in and rescue the whole thing." He may be right, but the head of the Bundesbank isn't stepping up yet and there are significant political obstacles to the level of integration that would be necessary to make the European Central Bank a true "lender of last resort."

My concern is more long-term. It's possible that Germany is bluffing, and that Europe's leaders will find a way to stagger through the current crisis. But as I've noted before, the underlying issue isn't just the rickety structure of the euro itself. In addition, it is whether economies like Greece and especially Italy can generate enough economic growth to make it plausible that they will ultimately repay their debts. An all-European guarantee (funded largely by Germany) might help in the near-term, because holders of Greek and Italian debt are less likely to panic if they think a bailout is available if needed and reduced fears of default will lower spreads on Italian and Greek bonds and thus allow them to continue to finance the debts they already have.

Unfortunately, economic growth in the entire eurozone is sluggish, and troubled economies like Italy aren't likely to see sharp increases in growth, especially if they are being forced to adopt austerity budgets that shrink public sector spending and/or throw more people out of work. Plus, over the longer term most of Europe --including Greece and Italy -- are going to decline in population, while the median age will rise sharply. For example, Italy's population will decline by about 1 million by 2035 and its median age will rise from 43 today to nearly 50. A growing population of retirees and a shrinking number of active workers is not exactly a formula for robust economic growth, even in the best of circumstances.

Even if my friend is right and the Germans eventually go "all-in" to save the euro, isn't there likely to be a point where the more prosperous European countries are no longer willing to finance bailouts in perpetuity? And what if a situation arises where they aren't in such great shape themselves and aren't able to fund a bailout? This is where nationalism will really kick in: it is one thing for wealthy New Yorkers or Californians to subsidize poorer U.S. states more-or-less forever, because the subsidies are mostly hidden from public view and in the end we all think of ourselves as part of the same country. But I don't think the existing sense of common European identity is powerful enough to neutralize stubborn local nationalisms, even when the bond market is pushing in that direction. I continue to hope that Europe's leaders will find a way out, but I've yet to hear a convincing story that tells me how.

Remember the 1990s? Back in those days, the U.S. was recognized as the world's sole superpower. Our economy was booming, we ended the decade with a budget surplus, and there was a widespread sense around the world that the United States really had its act together.  True, we had some pretty bitter partisan politics, misguided polices like "dual containment" were helping pave the way for 9/11, and corrupt financiers were busy sowing the seeds for the 2007 meltdown, but most of the world had the impression -- rightly or wrongly -- that the United States knew what it was doing. People like Tom Friedman extolled America's virtues in books like The Lexus and the Olive Tree, arguing that the rest of the world would have to embrace "DOS.Capitalism 6.0" (in other words, our system), or fall by the wayside. Overall, a powerful aura of competence enhanced U.S. influence and magnified our "hard power." 

Fast forward to right now. We are on the brink of a major self-inflicted wound, driven solely by the deep dysfunction that now seems baked into our political system. Why should Pakistanis, Afghanis, Europeans, Chinese, Thais, Mexicans, Venezuelans, or anybody else take our advice on how to govern, when they watch the sorry set of ignorant clowns who are holding the rest of us hostage? If the worst case happens and the United States ends up defaulting, the economic costs will be significant enough. But it is also likely to do considerable damage to America's reputation for being a reasonably well-governed society, and it will accelerate the tendency for people around the world to look elsewhere for guidance. And while all this time and attention has been wasted on the debt ceiling, other problems are festering and will be there to bite us later.

I wonder if all those "patriots" in the Tea Party and the GOP ever thought about that. And if they did, would they even care?

Juan Cole had a nice piece over the weekend on the paltry Western offers of support for the Arab Spring. Helping the Arab economies recover and securing a moderate and democratic outcome in Egypt and Tunisia (and maybe elsewhere) is arguably one of the more significant priorities in contemporary international affairs, yet pledges of outside help have been pretty meager. 

This isn't surprising, of course, because the United States is in deep fiscal trouble and some of our European allies are in even worse shape. So we're trying to get the Arab oil exporters to pony up a lot of the money, or we're making vague commitments of support that may not even be implemented. 

If you want a comparison that reveals how our recent profligacy has undermined our ability to make bold moves in cases like this, consider that the European Recovery Program (aka the "Marshall Plan") cost about $13 billion in 1948 dollars, which would the equivalent of about $113 billion today. The U.S. economy was only about $270 billion back then, so Marshall Plan aid amounted to roughly 5 percent of U.S. GDP. If Washington were to pledge a similar percentage today, it would be about $700 billion. Of course, Egypt and Tunisia are just two countries, not a whole continent, but even a tenth of that amount would be some $70 billion (which is less than we spend each year fighting in Afghanistan). Yet nobody seems to be thinking in these terms. After all, what did Obama offer Egypt in his speech at the State Department? A couple of billion in loan guarantees and debt relief, and that's all. And I'm not saying he should've have pledged more, because I've no idea where he could find it or how he'd get Congress to authorize it.

Which goes a long way toward explaining why the United States and its allies aren't going to have much influence over how the Arab spring evolves.  

P.S. I'll be appearing at a conference session in Washington today (Tuesday), co-sponsored by the Carnegie Endowment for International Peace and the Kennedy School's Middle East Initiative. Other speakers include Nathan Brown, Marina Ottaway, Tarek Masoud, Nicholas Burns, Marwan Muasher, and Christopher Boucek. I don't know if it will be live-streamed or not, but you can find out more about it here.

This is the time of year when pundits (and party-goers) get asked to offer predictions for the New Year. I'm going to resist the temptation, because as Yogi Berra warned, "prediction is really hard, especially about the future." He was right.

In 1849, for example, Ralph Waldo Emerson wrote that "war is on its last legs, and universal peace is as sure as is the prevalence of civilization over barbarism." In 1911, British scholar G.P. Gooch wrote that "even a successful conflict between states can bring no material gain. We can now look forward with something like confidence to the time when war between civilized nations will be considered as antiquated as the duel, and when the peacemakers shall be called the children of God." And we all know about the famous forecast that humanity had reached the "end of history," or the claim that globalization would eventually force other states to copy America's farsighted combination of markets, financial innovation, and "rule of law" if they wanted to enjoy economic prosperity. Yeah, right. 

But it's not just these optimistic forecasts that turn out to be off-base; fortunately, some pretty pessimistic predictions did not pan out either. In 1950, a smart guy named Albert Einstein warned that "unless we are able, in the near future, to abolish the mutual fear of military aggression, we are doomed." In 1961, physicist and novelist C.P. Snow predicted that "The nuclear arms race is accelerating: within at the most ten years, some of these bombs are going off. I am saying this as responsibly as I can. That is the certainty." The late Herman Kahn, another physicist and self-proclaimed futurologist, offered a similar forecast at about the same time, declaring that "unless we have more serious and sober thought we are not going to reach the year 2000 -- or even 1965 -- without a cataclysm."  

These failed forecasts might lead you to conclude that you simply shouldn't listen to predictions by physicists, but even a good realist like Hans Morgenthau got it badly wrong at times. In 1979, Morgenthau predicted that "the world is moving ineluctably toward a third world war -- a strategic nuclear war. I do not believe that anything can be done to prevent it. The international system is simply too unstable to survive for long." All I can say is that I'm glad he was wrong.

For a longer list of failed predictions about war and peace, check out the appendix to John Mueller's Quiet Cataclysm, which was my source for the quotations offered above. I'm not saying that scholars, pundits, and prognosticators don't get it right from time to time, but trying to offer specific predictions for the next year or so strikes me as a harmless but not very serious exercise. Social scientists can forecast certain broad trends, and our theories can certainly identify recurring tendencies that can help us anticipate broad features of the emerging strategic landscape. But the combination of human imagination, agency, contingency, and unanticipated consequences generally plays havoc with efforts at crystal ball-gazing. 

Case in point: at a New Year's Eve party two years ago, I predicted that at least one country would leave the eurozone within the next year. I was clearly wrong about the specifics, but not about the general problems that the euro would face. Which merely goes to show that you can be broadly right but still be precisely wrong.

In any case, I'm not going to offer any predictions this year (at least not until I've had a glass or two of champagne). Instead, I'm taking the social scientist's normal cop-out and will look in the rearview mirror instead. And instead of just gazing back at 2010, here's my Top Ten Global Events of the past decade, in no particular order of importance:

1. January 2001: The inauguration of President Gore (oops, I mean Bush). The contested U.S. presidential election in 2000 proved even more momentous than we realized at the time, because it brought George W. Bush, Dick Cheney, and a gaggle of neoconservatives to power. I'm not saying Al Gore would have made a great foreign-policy president, but it's hard to imagine anyone doing a worse job than Bush and Co. All in all, a hell of a way to start a decade.

2. 9/11. No surprise here, of course. 9/11 altered the course of U.S. foreign policy as dramatically as Pearl Harbor in 1941, and mostly for the worse, and because the United States is so powerful, its response to 9/11 had far-reaching implications all over the world. As horrific as that day was, the real damage came in the form of self-inflicted wounds (such as the invasion of Iraq) that proved even more costly than al Qaeda's original attack.

3. The Beijing Olympics. I pick this as a symbol of China's emergence as a major player in global politics, which is of course precisely what the Chinese government intended. One could also argue that it marked the end of China's self-effacing strategy of a "peaceful rise," and the beginning of a more self-assertive approach to advancing Chinese national interests. In other words, they're starting to act a lot like the great powers of the past, which implies increased great-power security competition in the decades ahead.

4. The Crash Heard 'Round the World. When the history of the 21st century is written, the financial meltdown that began in 2007 is bound to receive plenty of scrutiny. Unless, the same institutions whose greedy machinations helped produce it -- and who are still largely in place -- manage to generate something even worse in the years to come.

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If the United States reduced its defense budget significantly, how would this affect international affairs? I raise this point because one of the primary justifications for America's disproportionately high level of defense spending is the idea that U.S. military dominance is an essential stabilizing force in contemporary world politics. This argument has been advanced by scholars like William Wohlforth and Michael Mandelbaum, was implicit in Madeleine Albright's infamous characterization of the United States as the "indispensable power," and runs throughout the Clinton, Bush and now Obama versions of the National Security Strategy. It is also one of those well-established verities that are rarely questioned in the American foreign policy establishment.  

Given our current budget situation, however, that assumption really ought to be questioned.  The United States spends more on national security than the rest of the world combined, and a substantially larger fraction of its GDP than other major powers do. According to the 2010 edition of the IISS  Military Balance, in 2008 the US spent about 4.9 percent of GDP on national security, and the defense budget has grown in real terms by about 3 percent per year since 2001.  By contrast, China spent about 1.4 percent of its GDP on defense, Russia 2.4% Great Britain only 2.3 percent , and German and Japan roughly 1.3 percent and 0.9 percent respectively. Lucky them.

Meanwhile, the United States has been piling up impressive amounts of red ink in recent years. The federal deficit reached 10 percent of GDP in FY2009 (the highest level since 1945), and various projections suggest that total U.S debt could reach 80 to 100 percent of GDP by FY2020. (My thanks to Gordon Adams of the Stimson Center and George Washington University, the author of an unpublished paper from which I drew these numbers). This situation led President Obama to form a bipartisan commission to study ways to reduce the federal deficit, and the president and Secretary of Defense Robert Gates have both made it clear that defense spending has to be part of that process.

No doubt defense contractors and congressional hawks will try to insulate DoD from significant cuts, but that position will be politically untenable if other sectors are being slashed.  In fact, if we were really serious about trying to close the deficits mentioned above, we'd be looking at cuts similar to the "peace dividend" that accompanied the end of the Cold War.  Measured in constant dollars, for example, the DoD budget fell 36 percent in constant dollars between 1985 and 1998, accompanied by comparable reductions in the active-duty force and the Pentagon's civilian workforce.

So here's my question: Would similar cuts today produce a dangerous shift in the structure of world politics and invite all sorts of nasty regional instability? I don't think so. If the U.S. cut defense by 20-30 percent (an enormous reduction), it would still be devoting roughly $400 billion per year to keeping Americans safe.  Our national security spending would still be six times larger than China's, ten times larger than Russia's and a whopping forty times larger than Iran's.  And because many militarily consequential powers are U.S. allies, its actual position is even better than those crude comparisons suggest. Thus, even seemingly draconian defense cuts would still leave the United States far stronger than any current rivals, especially if the reductions were done intelligently.

Moreover, if you look region-by-region, it's not obvious that reductions of this magnitude would change things very much. It would have little or no effect on Europe, because a large U.S. presence isn't central to European security any longer. There's little danger of serious conflict in Europe these days (and certainly no potential threat that the European states can't handle), and all that's needed from the United States is a mostly symbolic presence to help hold NATO together and remind Europeans not to let security competition reignite on the continent. And please don't try to tell me that Putin's Russia poses a resurgent threat to the rest of Europe.  NATO Europe spends roughly $300 billion on defense each year compared to Russia's $40 billion; if our European allies can't handle Russia's not-very-impressive military, then they don't deserve U.S. help.

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