THE MOST INTERESTING LESSON OF 2005

Fascinating assessment of America's position in the world.

The unravelling of the Bush administration, which started immediately after the President's re-election, came as no surprise to those of us who found Mr Bush an absurdly implausible leader and were expecting open warfare to break out within the Republican Party's strange coalition of economic liberals, social conservatives and trigger-happy militarists. This early infighting in Washington is not necessarily bad news for the American Right or good news for the Democrats.

The various Republican factions have plenty of time to let off steam and settle on a plausible candidate by 2008. But the rapid decay of the Bush presidency could inspire a profound reassessment of America's global hegemony and role in the world.

After 9/11, and especially after the easy invasions of Afghanistan and Iraq, America has been widely believed to dominate the world because of its unchallengeable military power. But this year's events in Iraq and Washington have shown this assessment to be simply wrong.

America's military power, at least in the hands of Mr Bush and Defence Secretary Donald Rumsfeld, has turned out to be, as in Vietnam, a paper tiger. Yet America is more globally dominant than ever before. The explanation lies in America's economic performance, which has been as successful and as skilfully managed this year as the military operations have been bungled.

The US has again had the fastest-growing advanced economy in the world. And this 20-year winning streak is bound to continue as long as Europe entrusts its economic management to institutions even more incompetent than the Pentagon under Mr Rumsfeld. In other words, the saying that "the business of America is business" has never been more true.

More than ever it is economic success and the associated strength of its higher education system that assures America's cultural dominance.

America owes its global hegemony to the "soft power" that European politicians boast about but are unable to harness, mainly because of Europe's incompetent economic management. Meanwhile, the "hard" military power beloved of braggart neoconservatives turns out to be largely an illusion -- and one that America cannot sustain on its own. This paradox is, to me, the most interesting lesson of 2005.

Tags: Bush, U.S. economy, U.S. military power