It's Still The Economy, And We're Still Stupid
It's Still The Economy, And We're Still Stupid
All the recent wartalk has been offset slightly by the creeping realisation that all is not well in the US or global economy. Speculation has arisen that the USA my not be able to maintain it s role as the motor of globalisation and global economic growth for much longer, an uncertainty exacerbated by the effect on oil prices that regional instability could create if and when the US/UK get their way with the UN, or bypass it, as is equally likely.
Domestically, the Fed and its guru Alan Greenspan have been busy these last few years with a steady outflow of interest rate cuts and reassuring sentiment designed to keep the US economy primed. However, the long boom of the 1990â€™s might well be reaching a turning point, akin to the decline of Japanese economic performance after the 1980â€™s.
Although the internal structure and global profile of the two economies are very different, there is a compelling similarity in the manner in which both sides have sought to kickstart their way out of each respective crisis. The common denominator has been consistent interest rate cuts as a means to overcome sluggishness, investor caution and declining consumer spending. In an economy where the free market is as much an end to live by in itself as it is a means to create wealth and prosperity, never mind a socially-responsible state, these interest rate cuts have become as much a confidence-building mantra as they are effective and vital economic policy.
As such, the US economy is slowly being hoist by its own petard, at least in its current guise. As interest rates are chipped away to approach zero, the question emerges; what then? These cuts allow the same structural problems to go unaddressed in a false reality where the Fed intervenes when the waters get choppy. If the Fed cannot rely on its regular medicine, then the US economy will need a dose of stimulus from another source.
Which brings us nicely back to the comparison with Japan. The crucial overarching difference between the Japanese and the US economies throughout post WW2 history is this: the Japanese have not had a significant defence and military sector to fall back on as a basis for contract allocation, R&D spin-offs, sales to rogue states such as the Iraq fighting the Ayatollah in the 1980â€™s. Of course, Japan has revised this slightly over the last few years. But it remains under the American east Asia defensive umbrella â€“ an area designated as integral to one of the more recent and economically-central military projects desired by Washington: Missile Defence. The expense involved here will outweigh fourfold the cost of running the entire State Department. More importantly, the costs incurred will put in perspective the cutbacks in Medicare and general welfare spending under the current administration, not to mention the rise in the numbers of Americans living under poverty line, something unknown for 8 years. As a devoutly neo-liberal theocracy, the Bush administration is firmly wedded to minimal state intervention in the economy â€“ another mantra in the repertoire of economic confidence tricks. However, this one is a blatant lie, one of the enduring myths of the whole rightwing economic ideological edifice.
The reason that social spending remains low is that the money is reserved for other causes: missile defence, the War on Terror, military and financial aid to Israel, Egypt, Colombia, Indonesia and Pakistan. The other drain on the American coffers is imminent and will be immense. The cost of an attack on Iraq will be dependent on the scope of American ambitions. Should they involve â€œnation-buildingâ€ as well as â€œregime-changeâ€, as they surely must, then any American close to the breadline had better get worried. Or perhaps not, given the paucity of money available to take Afghanistan out of the Stone Age. But that is another story, and one which might not have a happy ending should Karzai have to go cap-in-hand for much longer to real terrorist paymasters in the Gulf. Such is the way when an administration has more pressing expenses to deal with.
This, as the old adage goes, is about the economy, stupid. Although every conspiracy theorist around will tell you that attacking Iraq is about oil and imperialism. Well, it is and it isnâ€™t. Sure, these gains will be healthy bonuses should Saddam fall and the worldâ€™s second largest oil producer be made safe for democracy, and should Bushâ€™s implicit desire to extend the scope of the war, if â€œregional instabilityâ€ looms post-Saddam, come to pass. But there is another and possibly more compelling economic rationale for all this.
Looking at the new and incredibly under-analysed National Security Doctrine, the US is creating for itself the unique role of being justified, in its own eyes, in intervening anywhere in the world it deems fit with pre-emptive strikes on assumed aggressors, irrespective of international law, in particular Chapter VII of the UN Charter. And how is this about the economy, stupid? With Europe and Japan looking like spluttering engines of global growth, the USA needs to fan its own economic fire. What better way for a neo-liberal theocracy to do so than by priming the pump via a limitless war on zealots elsewhere on the planet. The neo-liberals hide the inadequacies of the system by de facto massive state intervention in the economy for ostensibly military purposes. That there now is a political-strategic doctrine underpinning all this means that in there will be a permanent fallback for an ailing US economy should it need one. This fallback will be an injection of deficit spending on a military expedition to thwart some threat to civilisation or axis of evil. That these threats can be contrived is not outlandish. There is no more need to attack Iraq now than there was 2, 5 or 7 years ago. But the rhetoric has created the apparent need. The new National Security Doctrine means to make this an ongoing thing.
After World War Two, the military spending and concomitant industrial revival banished 1929 and the Great Depression forever. Anachronistic as the comparison may be, the same medicine may be prescribed to the current situation. As the old saying goes, war is good for business, and close ties between the incumbent administration and big business now seem all the more significant as US warmongering gathers apace. Japan did not have the option of a huge military-industrial complex to fall back on to reinvigorate the economy. The US does and is using it as such. Yes, we are stupid to think that the economy is not central to all this. after all, the Kyoto Protocol was rebuffed by the USA on the simple grounds that it would hurt Bushâ€™s priority constituency â€“ American business and the US economy. If the ecological future of the planet is of lesser importance than the well-being of the US economy, then these high priests of neo-liberalism can have no problems with going to war after war to keep this same economy on track.