Global memory is declining at an alarming rate, which does not augur well for the long-term survival of civilisation or even the human species. Why will we not learn from history, especially very recent history?

There are still many people around who lived through the man-made horrors of the Great Depression, a calamity wrought by greed and powerful private interests whose reach and influence far exceeded that of government. (Government regulation of economic activity did not happen without good reason.)

The world was sufficiently destabilised and distracted by these events not to pay sufficient attention to new and lethal threats and, as a result, another World War and horrendous loss of life ensued before mechanisms were developed and put into place to try to avert both Keynesian economics and the United Nations.

The former was all but abandoned as the world slipped back into laissez-faire economics thinly disguised as deregulation; the latter wallows all but powerless because of opposition and constant undermining from the world's only superpower. The two are not unrelated.

Not quite four decades ago the long post-war boom began to show signs of slowing, largely brought about by inflation. It has become commonplace to blame government spending and the welfare state, but the greatest contributor to inflation in the late 1960s and early 1970s was US spending on the Vietnam War, which had created an unsustainable burden not just for the US economy but for the world. The US effectively printed money to bankroll the war; it was excessive money growth by the Federal Reserve that ignited the fires of inflation.

That was one aspect of the economic crisis of the 1970s. The other was the quadrupling of oil prices by most major oil exporters. Why did they do this? It was in protest at US policy in the Middle East. Egypt attacked Israel unexpectedly in 1973 to which US president Richard Nixon responded by providing a $US2.5billion ($A2.8billion) arms package to Israel. Saudi Arabia, ostensibly a US ally, reacted with an embargo on oil exports to the US, and most other Arab oil exporters quickly followed.

Although the embargo was lifted in 1974, the price of oil did not fall back to its earlier level, but remained at around twice its pre-1973 levels.

It was called an "energy shock" and an "energy crisis" and the world was told the good times were over. What the US did was to remake the world, and in its own image.

In 1975, a powerful organisation called the Trilateral Commission set up by US banking interests, comprising representatives of big business and government from the US, western Europe and Japan, published a report commissioned by three eminent political scientists called The Crisis of Democracy. Its key theme was democracies had become ungovernable and governments were suffering from an overload of decision-making and expectation.

In short, there was too much democracy, there was too much regulation, there was too much welfare. Government had to give way to business.

This was the thinking, helped along by radical economists such as Friedrich Hayek and Milton Friedman, that was seized on by Ronald Reagan and Margaret Thatcher and used to dismantle much of the post-war Keynesian safety net. (John Howard was a later, though no less ardent, disciple.) The object of the exercise was to create a global market, a US global market which we now call globalisation.

The role of Vietnam in this massive social engineering project is seldom mentioned, but it does highlight the US genius for turning adversity into profit.

But we forget Vietnam at our peril. The lumbering and rapacious giant that we know as the US economy is starting to stagger and stumble; the Fed, while not exactly panicking, is madly twiddling the knobs to try to resuscitate growth; inflation is again a threat. The whole world watches and waits with trepidation.

Of course, the US is being assailed by the seemingly unstoppable double-digit growth in the Chinese economy, but there is another potent factor at work: the increasingly unsustainable cost of the occupation of Iraq and Afghanistan.

In testimony to the Senate Armed Services Committee in Washington, US Defence Secretary and former chief of the CIA Robert Gates said military operations in Iraq and Afghanistan could cost $A187billion in the next fiscal year, over and above the $A568billion Pentagon budget that President George W.Bush had proposed. But Gates warned the figures were rubbery as war was a very uncertain thing to budget for.

As anyone who has seen the film, Charlie Wilson's War, will know, US funding for military adventures is anything but transparent, and it might be reasonably assumed from Gates's testimony that spending is significantly higher. And it must also be remembered that these figures, rubbery or not, do not include that spent by other US agencies, including the CIA whose costly covert activities appear on no official budget paper.

Just as in the 1970s, US military action is impacting on the world economy. It remains to be seen just what this will bring in its wake as much of the world is still trying to come to terms with an imposed globalisation that appeared out of the last US-induced slowdown.

Norman Abjorensen teaches politics in the Australian National University's School of Social Sciences.