It appears that most of my posts this year deal with Indian topics, not particularly surprising since I've spent the better part of a year here. But I do stay in touch with what's going on "back home", since I must return, and I don't want to be a stranger. What propels me to touch on this topic is, frankly, the disparity I see between perceptions and reality in both countries. Indian perceptions of the United States, or what I've gathered in my interactions here, are different from the American reality and, likewise, American perceptions of India are not altogether on target. In the main, Indian perception seems to be that the United States is in decline, and that China and India will relegate it to third place.
That the US is currently in decline, I agree. That it will be pushed to third place in global economic and/or military power, I strongly disagree. I even more strongly disagree that India has even a remote shot at displacing the USA in this century, being not only dependent on exports and inward remittances, but perennially running a current account deficit. How America's economic strength plays out depends more on Americans and far less on the Chinese or Indians, and that is what this post is about: What is it about the United States, the most powerful and influential nation of the 20th century, that has changed that permits the perception of an irreversible decline?
For most of the 20th century, the US was driven to superpower status by an empowerment of the middle-class, motivated by public policies which advocated for higher standards of living for all who were willing to work hard. Earlier, the very idea of a middle-class blue-collar family was almost laughable, but America showed that it was not only feasible, but actually baked the pudding that proved it. A vital part of this transformation was the policy of putting American interests first, economically, politically and militarily. Corporations(and their major financiers) were allowed to amass wealth, but it had to be done inclusively, with the American people sharing in the prosperity they helped to create. As America prospered, standards were set which were emulated by other developed nations, and were aspired to by developing nations: minimum wages, social safety nets, standards for clean air and water, health care, an educational system that was the envy of the world, and so on.
Somewhere, something began to go wrong. Minimum wages no longer kept up with inflation, social safety nets began to be eroded, clean air and water began to be perceived as an obstruction to "progress", health care and education began to be seen as a privilege, not a right. What changed, and when did it change? It's difficult to place a finger on the exact time, but one can see when substantial change began to occur. From my reading(I don't want to call it "study", because I did not formally study American economics), it began with the LBJ administration and its close links to the military-industrial complex. Yeah, yeah, I know, that's such a "liberal" thing to say! But realistically, that's when the talons really hooked into the American political system, and began implementing a series of changes which got us here.
There is a school of thought- and there is some evidence to back it up- that the changes were at least conceived, if not actually set in motion, as far back as a hundred to a hundred and fifty years ago. But limiting myself to my own experiential observations, I see it as having taken place over the past forty years or so. It began with the insertion into government of graduates of the Friedman school of economic thought. They quickly zeroed in on China as a major instrument for their objectives, and implemented the hitherto unthinkable action of replacing the capitalist pro-western Taiwanese government with the communist Chinese government in the UN Security Council. The next few years largely involved stabilizing the leadership of that government before getting on to the agenda at hand. From 1978 onwards, communist China was aided, advised and cosseted by the US and the TNCs as no other. There were three or four hugely appealing(to the TNCs) advantages to China- a huge low-wage working-class population, a large land mass, a willingness to transfer American smog and land and water pollution, and not least of all, a central government with absolute power.
There was, of course, the dilemma of how to sell products to a people who you essentially were making jobless or reducing to lower income. The answer was to leverage income via consumer credit. Thus the period from the mid-1970s on saw the explosion of consumer credit in the US, paralleling Chinese development, along with the systematic dismantling of financial regulations and consumer protections. During this period, there were at least three major transfers of wealth out of the hands of ordinary people, one in each of the last three decades. The first was when Savings and Loans institutions were permitted to enter the more exotic waters of regular banking, and promptly incurred huge "losses" which had to be covered by the taxpayer. The second was when traditional pension plans were replaced by 401(k) accounts, which encouraged people to try out the casino-style operations of the stock market of the 1990s, ending with the bust of 2000. The third was with the deregulation of regular banking, which allowed banks to enter the even more exotic waters of "financial products" such as hedges, securitization and their own securities and commodities trading arms, after first testing the waters with interstate banking. And they, almost as promptly as the S&Ls before them, incurred even more gigantic "losses", pushing the world to the edge of a full-blown depression. A fourth transfer in this decade is probably being engineered right now, and we will be able to see it in the light of day in a few years. I suspect it will be a mandated social security "investment" account or a "health savings" account, which can be taken as easily as the 401k accounts were.
So now we have this fait accompli of a huge, cheap and relatively modern Chinese manufacturing infrastructure made possible by enormous amounts of western debt(mostly American). In the process, the very, very wealthy have become unimaginably wealthy. But the game cannot end here, because this is no one-off special. It's part of a larger strategy, which we can just guess at. It is a strategy which has weakened the US, and has permitted the perception of an irreversible American decline. However, looking at it from the American point of view, what do you do to make sure that being an American and living in the United States does not become a hardship? I already see changes which I think will halt the erosion, and slowly rebuild the pre-eminence of the US. There is more discourse in the public space about what is really going on. There is finally an understanding that, blue-collar or white-collar, Americans need to stand together. A beginning has been made to penalize corporations for their sham globalization which is doing nothing but perpetuating an unsustainable American trade deficit, while allowing profits from that trade to enable their principals to acquire vast global personal assets while sheltering their money from taxes.
Many people debating the China vs. US issue seem to be blissfully unaware of the essential unfairness of the trade between the two countries. While Chinese goods flow unimpeded into the US, American products are all but barred from China. While this works out very nicely for the Chinese, it's not so for Americans. Also, most goods manufactured in China today have been designed and engineered in the west, many in the USA. The iPhone, for example, could not have been designed and developed in China, but the common perception seems to be that it is a Chinese-engineered product. What the Chinese specialize in is cheap production, by any means. But that production needs to be sold somewhere, and the traditional buyers are suffering from debt stress, which is what has paid for the rise of the "global economy". That will be a sticking point for China, and India, should the United States continue in decline.
But more needs to be done. "America-first" needs to become a principle, as other major economic powers do for themselves. When free trade is not free trade, it needs to be appropriately countered, with the same sort of tariff and non-tariff barriers which China employs to protect its own interests. A decline of American living standards should not be accepted as the price for the enrichment of TNCs and their principals. There are serious calls right now to raise the age for social security benefits to 80, which is one year under the life expectancy of the average American male. In other words, pay for up to 60 years into the SS system, and die within a year of benefits eligibility. These calls are based on the notion that life expectancy will climb, despite the fact that it is currently declining. Another factor that is usually not addressed is the quality of life that exists in the last few years, which is likely not very good. Along with cuts to healthcare in the private sector and cuts to Medicare, life expectancy will likely decline substantially. To even propose that people in their 70s in poor health should still be working is simply inhuman. If they are physically able to, and have the desire to do so, that should be their choice. But what is being thrust upon the American people is the notion that you should "work until you die", a happy collateral being that TNCs will continue to get fatter on the back of your declining lifestyle, health and well-being.
To answer the question I posed at the beginning of this post, it is the hijacking of American national interests by the TNCs, the stateless superclass and their proxies in the US political system which has led to this point. As with any hijacking, you have two choices: co-operate with the hijackers, or defeat them. Co-operation means capitulation- and, in this instance, the price of capitulation is giving up the notion of national independence- and that is clearly unacceptable. The only choice is to retake the country.
I believe in compassionate capitalism. The profit motive should not be the only driver. We are not automatons or egg-laying chickens. We are a society, and ultimately need to thrive inclusively. The "global economy" is not the Darwinian mechanism it is claimed to be, nor is the milieu of political and economic sovereignty(as in the China example) of this "global economy" a natural condition of economic Darwinism. Americans need to wake up, and retake the rudder of the nation from the TNCs who have hijacked it. Otherwise, we face the next logical step in this process: unhindered movement of (cheap) workers globally, effectively relinquishing nationality and governance to the global corporations. One can discern the early implementation of this step in the "blue card" program of the EU and the "guest worker" proposals in the US. Private corporations, operating in a tightly meshed and almost invisible web of proxies, are already in control of many aspects of government, from police forces to prisons to military units to lawmaking to electronic surveillance to schools, in addition to their undeniable control of the allocation and spending of public funds. The boiling frogs story is appropriate in this context. It is time that we frogs realize that the water is about to boil.
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