Expert View: While we dine out, poverty's on the menu in America

In the heart of the Square Mile, the wine waiter at Coq d'Argent tells me he has never sold so many bottles of his £800 claret. The luxury shops in the Royal Exchange fill to bursting point at lunchtime, and the less pc lady bankers are wearing fur this winter. It would appear Christmas feels good for the City this year.

Events in the US that have created this phenomenon. For 2004 was a very American year. The US election put most financial markets on hold for most of the year, while its outcome sent a relief rally ricocheting round the world. It was better to arrive than travel nervously.

Equally, and at the very moment when US economic and military power has reached its zenith, the underlying problems to that US hegemony have come to obsess investors. The twin deficits, of budget and trade, indicate the serious structural imbalances that Americans ignored as they re-elected George Bush, but have now woken up to. In February, I warned of a crisis in the dollar. November and December have seen that become a reality.

At the same time, the economic power of China became really apparent in 2004. All the main market stories - the oil price spike, the bull run in commodities and steel, the question of whether Beijing would continue to buy the dollar - have pointed to a new phenomenon. This year, skill in second-guessing China has become a necessity for successful speculation.

We are at a pivotal moment in economic history. The closest parallel is the end of the 19th century, when the US began to challenge the British imperial economic system, and the dollar fought to take away sterling's crown as the currency of trade. It's a long way off, but the end of US dominance is starting to come into sight. One economist predicted this year that by 2020 China would be the world's largest economy.

We were given some unpleasant examples of the consequences of American dominance this year. In the UK, the bidding war for Marks & Spencer brought home the new power of US shareholders, as the rival boards crossed the pond courting the new owners of this very British icon.

This was also sadly the year when the last UK independent finance house, Cazenove, fell into the clutches of the house of JP Morgan, when new US accounting rules were pushed around the world and when President Bush flexed his muscles in a trade war with Europe over aircraft.

A few weeks ago, I received a bizarre reminder of the more literal sense of that abuse of power, watching volunteers sign up at the recruiting station in Times Square - pledging to export "American values" to the Middle East. Earlier, a stand at the Rockefeller Center during the election carried a headline "The US - birthplace of the world's democracy". This in Olympic year.

One other aspect of the US "system" was also brought into stark focus in 2004: the massive penalties for failure. In the US, the ratio between the top and bottom 20 per cent of society reached five times (compared to 3.5 in Europe). Nearly 36 million Americans live below the poverty line, 45 million live without healthcare.

The US domination replicates this internationally. Over 90 per cent of global output now comes from north of the equator. There has been the appalling return of famine to the African continent in 2004. In the Congo the death toll in the civil war reached nearly five million. And in numerous African countries the penetration of the Aids virus has surpassed 40 per cent of the population.

For those drinking the £800 claret this Christmas, please spare a thought.

christopher.walker@tiscali.co.uk