America Is Being Destroyed By Problems That Are
Unaddressed
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 US 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 Amerian machine gun and barbed wire fodder
weakened the German position, and an armistance 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 percent 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 US dollar replaced British sterling as
the world reserve currency and became the foundation of US 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 poweful
countries such as Russia, China, and Iran with economic sanctions and military
actions. Consequently, much of the non-Western world is abandoning the US
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,” US corporate executives brought a halt to rising US
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 US labor costs became corporate
profits, executive renumeration, and shareholder capital gains. One consequence
was the worsening of the US 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 US 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 US 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 full-time jobs. Young
people entering the work force find it increasingly difficult to establish an
independent existance, with 50 percent 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 US Senator,
whom they rewarded with a 7-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 US Treasury and the Federal Reserve serve only the
interests of the mega-banks.
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 “ America
today.
Among the capitalist themselves and their shills among
the libertarian ideologues, who are correct about the abuse of government power
but less concerned with the abuse of private power, the capitalist greed that
is destroying families and the economy is regarded as the road to progress. By
distrusting government regulators of private misbehavior, libertarians provided
the cover for the repeal of the financial regulation that made American
capitalism functional. Today dysfunctional capitalism rules, thanks to greed
and libertarian ideology.
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 ledership means instability, leading to a conflict between the
haves—the one percent—and the dispossessed—the 99 percent.
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 US manufacturers
have harmed US 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 percent 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 counry
serves to protect financial institutions that are “too big to fail” and when
profits reflect the relocation abroad of US GDP as a result of jobs offshoring.
Clearly, American capitalism no longer serves society, and the worsening
distribution of income and wealth prove 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.
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