A few nights ago, having read far too much about the alarming drop of share prices on Wall Street, I fell asleep trying to remember those lines from Shelley’s Ozymandias that were drummed into my skull at school long ago: . . . Two vast and trunkless legs of stone Stand in the desert . . . And on the pedestal these words appear: “My name is Ozymandias, king of kings: Look on my works, ye mighty, and despair!” Nothing beside remains. Round the decay Of that colossal wreck, boundless and bare . . . Has it come to this for the American imperium as well? Will George Bush’s vast legs of stone lie in the desert outside Crawford, Texas, like Ozymandias’s crumpled statue at Luxor? Given the number of e-mails that I have received – from Brazil, Korea, China and beyond – this is the burning issue. What is more, most presume that the fundamental answer is “yes”.

Yes, the American “mission impossible” 500 lb gorilla is crumbling into the sands, its pretentious military overstretch now compounded by its loose fiscal stupidities. Don’t you agree with that, Professor Kennedy? Hasn’t your controversial prediction in the closing parts of The Rise and Fall of the Great Powers been realised?

Well, slow down a minute. It is one thing to argue that the United States has been weakened by fiscal extravagance and military overstretch. It is a separate thing to recall that, regardless of regime follies, from century to century economic and military balances do shift gradually from one country or part of the world to another.

Right now both of those developments – American political incompetence and geopolitical shifts – have joined in time to make the world a less easy place for the United States. But one of the “rise and fall” lessons of history is that great powers (the Ottomans, the Hapsburgs, the British) take an awful long time to collapse. They take knocks on the head, they suffer a defeat and humiliation here or there, plus a bankruptcy or two. But they hold on, a trifle diminished although not mortally wounded.

Often they hold on because the rising powers don’t know how to replace them. They hold on, too, because they have massive resources. The Hapsburgs held on because they had an army that could operate in 14 languages. The British held on because of the City of London and a lot of useful naval bases. The short-lived 20th-century empires – Nazi, Japanese, Soviet – had no such back-up systems. They came, they went.

America’s back-up systems are enormous. It is a super-great-power, with about 20% of the world’s product, 50% of its military expenditures and most of its top research universities, massive R&D spending, a highly sophisticated services industry to complement its industrial base, an extremely strong demographic profile and the best agricultural acreage-to-population ratio among all the large nations. This is not an imperium that will tumble into the sand overnight.

Still, one wonders whether Ozymandias – “whose frown and wrinkled lip, and sneer of cold command” – might not deserve a contemporary thought or two. What Shelley was really commenting upon was how a great power is slowly eroded, by arrogance surely, but also by the passage of time. So far as we know, Ozymandias’s enormous sandstone figure at Luxor was not pulled down by marauding Nubians or Arabs. It slowly fell apart, more from within than from without.

Which brings us back to Wall Street. Since 1945 the “free” world has relied upon two linked pillars of US-provided security: first, its enormous capacity to fund and undergird all nations willing to stand up against communism and its many radical-liberationist-socialist variants; and, second, its capacity to project its armed forces as far as 8,000 miles away, ultimately having some 200,000 soldiers and marines fighting in Iraq and Afghanistan while others guard South Korea and further outposts.

If both capacities are in harmony with each other – if economic productivity marches abreast with military and strategic strength – what could possibly prevent the United States from remaining No 1?

Well, as Hamlet said, there’s the rub. What if bits of the imperial edifice are beginning to crack? What if the overseas military deployments are insufficient to fight an entire tide of Muslim resentment against pro-western collaborators? What if the maintenance of American obligations overseas becomes less and less sustainable financially?

The American republic, like the feckless kings of Bourbon France, has not been able to pay its way in the world from its own resources. For years the federal government’s expenditures have far exceeded its revenues. Each month that horrible gap has been covered only by the sale of treasury bonds (five-year, 10-year, 30-year promises to repay), chiefly to foreigners, chiefly nowadays to Asian governments and banks.

What is more, Congress has signed on to the $700 billion financial aid package for Wall Street without any of its members – so far as I can tell – asking how that terrifying sum is to be paid for. Or, rather, who picks up the tab. Well, it is to be paid for, ultimately, by future generations of US taxpayers. But it will be paid for right now by borrowing from foreigners. If, that is, they will pay for such dodgy assets. But will they and for how long?

Just as China, along with India, Russia and Brazil, welcomes the return of a multipolar system for the conduct of great power diplomacy, so also – and almost exactly in step – come the pressures to move away from the unipolar dollar-based global currency system to a more mixed basket of currency holdings. The People’s Daily in Beijing recently allowed Shi Jianxun, the notable Chinese economist, to call for “a diversified currency and financial system and [a] fair and just financial order that is not dependent on the United States”.

This shift will be gradual but unrelenting. Most 18th-century merchants preferred to trade in Austria’s Maria Theresa dollars. One hundred years later their currency of choice was the pound sterling and after another century it was $100 bills. Currencies move on, usually a little ahead of the great powers themselves.

Just look at the shrinking share of US dollars being held as global reserve currencies. How could any sensible investment fund in the Gulf or east Asia want to be bound solely to dollar-denominated instruments, especially when America’s politicians and bankers don’t seem capable of running a whelk stall? Of course a Gulf sovereign fund wouldn’t sell all its dollars overnight, for it would ruin itself in the process. But it is more than likely being advised, right now, to steadily shift more of its savings.

If that happens, further cracks will start to appear in the American imperial edifice. They will be patched up by congressional and presidential plasterwork in a desperate effort to keep this gigantic, alarmingly unbalanced road show on the tracks for a few more years at least. But the inner fissures will be there.

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