• Who can put America back on a path to greatness?
By Paul Craig Roberts —
One hundred years ago European civilization, as it had been
known, was ending its life in the Great War, later renamed World War
I. Millions of soldiers ordered by mindless generals into the hostile arms
of barbed wire and machine gun fire had left the armies
stalemated in trenches. A reasonable peace could have been reached,
but President Woodrow Wilson kept the carnage going by sending fresh
American soldiers to try to turn the tide against Germany in favor of
the English and French.
The fresh American machine gun and
barbed wire fodder weakened the German position, and an armistice was
agreed. The Germans were promised no
territorial losses and no reparations if they laid down their arms, which
they did—only to be betrayed at Versailles. The injustice
and stupidity of the Versailles Treaty produced the German
hyperinflation, the collapse of the Weimar Republic, and the rise of Hitler.
Hitler’s demands that Germany be put
back together from the pieces handed out to France, Belgium, Denmark,
Lithuania, Czechoslovakia, and Poland, comprising 13% of
Germany’s European territory and one-tenth of her population, and
a repeat of French and British stupidity that had sired the Great War
finished off the remnants of European civilization in World War II.
The United States benefitted greatly from this death.
The economy of the United States was left untouched by both world wars,
but economies elsewhere were destroyed. This left Washington and the New
York banks the arbiters of the world economy.
The U.S. dollar replaced British sterling as the world reserve currency
and became the foundation of U.S. domination in the second half of
the 20th century, a domination limited in its reach only by the Soviet
Union.
The Soviet collapse in 1991 removed this constraint from
Washington. The result was a burst of American arrogance and hubris that
wiped away in over-reach the leadership power that had been handed to
the United States. Since the Clinton regime,
Washington’s wars have eroded American leadership and replaced stability
in the Middle East and North Africa with chaos.
Washington moved in the wrong direction both in
the economic and political arenas. In place of diplomacy, Washington used
threats and coercion. “Do as you are told or we will bomb you into the Stone Age,”
as Deputy Secretary of State Richard Armitage told President Musharraf of
Pakistan.
Not content to bully weak countries, Washington threatens
powerful countries such as Russia, China, and Iran with economic sanctions
and military actions. Consequently, much of the non-Western world is
abandoning the U.S. dollar as world currency,
and a number of countries are organizing a payments system, World Bank,
and IMF of their own. Some NATO members are rethinking their membership in an
organization that Washington is herding into conflict with Russia.
China’s unexpectedly rapid rise to power owes much
to the greed of American capitalism. Pushed by Wall Street and the lure of
“performance bonuses,” U.S. corporate executives brought a halt to rising
U.S. living standards by sending high productivity, high
value-added jobs abroad where comparable work is paid less. With the jobs
went the technology and business knowhow. American capability
was given to China. Apple Computer, for example, has not only offshored
the jobs but also outsourced its production. Apple does not own the Chinese
factories that produce its products.
The savings in U.S. labor costs became corporate profits,
executive remuneration, and shareholder capital gains. One consequence was
the worsening of the U.S. income distribution and the concentration
of income and wealth in few hands. A
middle-class democracy was transformed into an oligarchy. As former
President Jimmy Carter recently said, the U.S. is no longer a democracy;
it is an oligarchy.
In exchange for short-term profits and in order to avoid Wall
Street threats of takeovers, capitalists gave away the American economy.
As manufacturing and tradeable professional skill jobs flowed out of America,
real family incomes ceased to grow and declined. The U.S.
labor force participation rate fell even as economic recovery was proclaimed.
Job gains were limited to lowly paid domestic
services, such as retail clerks, waitresses, and bartenders, and part-time
jobs replaced fulltime jobs. Young people entering the work force find it
increasingly difficult to establish an independent existence,
with 50% of 25-year-old Americans living at home with parents.
In an economy driven by consumer and
investment spending, the absence of growth in real consumer income means
an economy without economic growth. Led by Alan Greenspan,
the Federal Reserve in the first years of the 21st century
substituted a growth in consumer debt for the missing growth in consumer income in
order to keep the economy moving. This could only be
a short-term palliative, because the growth of consumer debt is limited by the
growth of consumer income.
Another serious mistake was the repeal of
financial regulation that had made capitalism functional. The New York
banks were behind this egregious error,
and they used their bought-and-paid-for Texas U.S. senator, Phil Gramm,
whom they rewarded with a seven-figure salary and bank vice chairmanship to open the
floodgates to amazing debt leverage and financial fraud with the repeal of Glass-Steagall.
The repeal of Glass-Steagall destroyed the separation of
commercial from investment banking. One result was the concentration of
banking. Five mega-banks now dominate the American financial scene. Another
result was the power that the mega-banks gained over the
government of the United States. Today the U.S. Treasury and the Federal Reserve
serve only the interests of the megabanks.
In the United States savers have had no interest on
their savings in eight years. Those who saved for their retirement in
order to make paltry Social Security benefits liveable have
had to draw down their capital, leaving less inheritance for hard-pressed sons,
grandsons, daughters, and granddaughters.
Washington’s financial policy is forcing families to
gradually extinguish themselves. This is “freedom and democracy” in
America today.
With the demise of the American middle class, which
becomes more obvious each day as another ladder of upward mobility is
dismantled, the United States becomes a bipolar country consisting of the
rich and the poor. The most obvious conclusion is that the failure of
American political leadership means instability, leading to a conflict between
the haves—the 1%—and the dispossessed—the 99%.
The failure of leadership in the United States is not limited
to the political arena but is across the board. The time horizon operating
in American institutions is very short term. Just as U.S. manufacturers have harmed
U.S. demand for their products by moving abroad American jobs
and the consumer income associated with the jobs, university administrations
are destroying universities. As much as 75% of university
budgets is devoted to administration. There is a proliferation of
provosts, assistant provosts, deans, assistant deans, and czars for
every designated infraction of political correctness.
Tenure-track jobs, the bedrock
of academic freedom, are disappearing as university administrators turn
to adjuncts to teach courses for a few thousand dollars.
The decline in tenure-track jobs heralds a decline in enrollments in Ph.D.
programs. University enrollments overall are likely to decline. The
university experience is eroding at the same time that the financial
return to a university education is
eroding. Increasingly students graduate into an employment environment
that does not produce sufficient income to service their student loans or
to form independent households.
Increasingly university research is funded by the Defense
Department and by commercial interests and serves those interests.
Universities are losing their role as sources of societal critics and reformers. Truth
itself is becoming commercialized.
The banking system, which formerly financed business,
is increasingly focused on converting as much of the economy as possible
into leveraged debt instruments. Even consumer spending is reduced with high
credit card interest rate charges. Indebtedness
is rising faster than the real production in the economy.
Historically, capitalism was justified on the grounds that it guaranteed the efficient use of society’s resources. Profits were a sign that resources were being used to maximize social welfare, and losses were a sign of inefficient resource use, which was corrected by the firm going out of business. This is no longer the case when the economic policy of a country serves to protect financial institutions that are “too big to fail” and when profits reflect the relocation abroad of U.S. GDP as a result of jobs offshoring. Clearly, American capitalism no longer serves society, and the worsening distribution of income and wealth proves it.
None of these serious problems will be addressed by
the presidential candidates, and no party’s platform will consist of a
rescue plan for America. Unbridled greed, short term in nature, will continue
to drive America into the ground.
Paul Craig Roberts was assistant secretary of the Treasury for
Economic Policy and associate editor of The Wall Street Journal. He
was columnist for BusinessWeek, Scripps Howard News Service, and
Creators Syndicate. He has had many university appointments. His internet
columns have attracted a worldwide following. Roberts’ latest books are How
AMERICA Was LOST: From 9/11 to the Police/Warfare State and The
NEOCONSERVATIVE THREAT to WORLD ORDER: Washington’s Perilous War for Hegemony.
No comments:
Post a Comment