Wednesday, November 17, 2010

The Great American Decline (2): The Globalization Factor

In a short but concise and startling letter in The Financial Times, Philip G. Cerny, Emeritus Professor of Politics and Global Affairs at Manchester University wrote:

“In the last analysis the US’s relative decline as the rest of the world develops and catches up is the real cause of the Tea Party

How accurate is this and what is the basis? How can it be that a small nativist movement (some might say cult) predicated on putative fiscal responsibility, should have seen its star rise so dramatically on the political stage?

To understand this, one needs to understand the historical perspective of what’s transpired since after World War Two. Just after the war, the U.S. had seen its manufacturing and production ascend to the top of the global rung because of the need for war materiel production. No other serious rivals existed. Japan, occupied, lay in ruins. Germany was a bombed out backwater of poverty and destitution with millions on the verge of starvation, and Britain – with so much sacrificed- was barely hanging on. The U.S. had the world’s economy almost exclusively to itself, save one outlier player: Switzerland.

Recall Switzerland had remained “neutral” during the war, although its bankers had no qualms about surreptitiously squirreling away Nazi plunder, including monies from Jewish bank accounts, as well as gold and jewels, not to mention art.

Apart from Switzerland and the U.S. no other major economic competitors existed. China, for its part, was a teeming, overpopulated swamp of poverty as was India. One could go to visit any part of the then “Third World” and behold suffering and deprivation on a scale difficult to comprehend. I got some inkling of this in a visit to Guyana, South America in 1978 (still at least a decade before Globalization) where “hack and run” robbers prowled the streets of Georgetown – chasing down anyone wearing expensive jewels or gold earrings, rings and then hacking them off. If any bracelets happened to be on a wrist, they’d use a machete to chop off the wearer’s hand in order to grab the bauble. If lucky, the victim would be able to grab his or her hand (before one of the thousands of stray dogs took it) and make it to a hospital in time to save it.

Such desperation wasn’t merely common to Guyana, but existed throughout the world’s economic backwaters, wherein only desperate measures assured a person or group (not of the elite class) of gaining a piece of the action. “Survival of the fittest” write large, and economically – before the re-distribution of globalization arrived.

So what happened to alter the global landscape? In a nutshell, globalization, coupled with deliberate policies enacted with new regimes in India and China to massively reduce their populations. Both understood that – for any future hint of prosperity – they’d have to cut their numbers to achieve it. As one recent letter writer to The Mensa Bulletin put it:

“Materially poor countries are endemically overpopulated. Population control is the long term solution to this problem”

Understanding this was a first step to India and China’s future prosperity, with China invoking a one child per family rule, and India mounting a program of widespread vasectomies. By implementing these programs, both nations put themselves in a position to strongly compete even as the globalization imperative ramped up.

What we will see then, is that globalization as a process of capital transfer, effectively moved wealth and capital from the once prosperous U.S. to the formerly deprived (and overpopulated) nations of the world. Given a fixed amount of wealth in a zero sum economic game, if one domain of the planet (the formerly destitute) gained, the other had to lose. Thus, the progressive U.S. dollar debasement (the green back is now worth barely one fifth of what it was in 1969) coupled with a decades long loss of quality jobs to outsourcing (first manufacturing then brain jobs) has seen the U.S. economically devolve to more nearly what the other nations were before, while they economically evolve closer to what the U.S. was immediately following WWII. The Tea Party reaction, irrespective of what they claim is really to this economic devolution which also has seen the U.S. become the world’s foremost debtor. (See last blog for more on this dynamic)

So, exactly how did this transpire?

What I call the Global Corporatocracy was germinated, at least in nascent form, at Bretton Woods, New Hampshire- in a conclave of global financiers and politicians in July, 1944. The essence of Bretton Woods, was that there existed the potential for limited financial investment and trade between national entities, creating international bridges as it were.

However, by the early 1970s the government-managed Bretton Woods system collapsed. Multiple inputs probably were responsible, the most notorious being the escalation of worldwide oil-energy prices by the OPEC Cartel, putting many governments into severe debt. It wasn't only Middle-East Oil potentates behind what transpired. Donald Gibson ('Battling Wall Street: The JFK Presidency', 1994), for example, has already noted:

"The complex web of relationships among trading oil companies, banks and insurance companies" (p.113)

and also that :

"financial interests, led by the Rockefeller-Morgan groups, and the top oil companies were, if not one entity, something close to one entity." (ibid.)

Not surprisingly, he goes on to note that it wasn't only the price of oil, but the price of money, which went up dramatically and "delivered a severe blow to the U.S. and world economies."

Further (ibid.)

"The economic damage done to poorer nations by rising energy prices, higher interest rates, and a stagnating global economy was compounded by painful policies, imposed by the banks and the International Monetary Fund."

In this, President John F. Kennedy also played a role, even before Bretton Woods expired. By midway in his 1000-day presidency he'd antagonized many pooh-bahs in the banking and financial domains, by such policies as his "Alliance for Progress" which provided next to zero interest loans for many Latin American nations. His tax proposals were also looked on with venom, and he was roundly called a "statist" by many ensconced in the financial media, including The Wall Street Journal and FORBES. Indeed, Gibson notes that these elite banking and financial interests (ibid.):

"would have little tolerance for a president who interfered with their decisions or made their interests secondary to the needs of nations or of people in general."

So, one could say that by the time of JFK's assassination, the global tableaux had been set for eventual market domination of the world. With no other fearless national leaders to stand in the way (the last ones assassinated) the goal of worldwide subjugation of national interests to speculative capital, trans-national corporate control and personal debt could proceed apace.

The plan was long range to be sure, but the finance and political elites in their pay had always been patient. Now they would exercise that patience and sense of noblesse oblige. Again, the payoff being a world of serfs delivered to them by their own governments. These governments themselves hamstrung by the power of differing accords (i.e. GATT, NAFTA) over which they had little option other than to 'sign on'.

The basic objective again, lest we lose sight: to flatten the global economy so that no major winner nation could emerge, on the basis of a constructed "race to the bottom". The basis was largely global labor costs, or the relative costs vis-a-vis competing nations. The assorted accords (e.g. NAFTA, GATT etc.) thereby designed to permit movement of companies, corporations to other nations with lower labor costs, to maximize profits. Thus, instances like Al "Chainsaw" Dunlap tossing out American workers at Sunbeam - earning $12 an hour plus benefits, to move operations to Mexico ( with labor costs of barely 25 cents an hour and no benefits) would now be rendered endemic.

As the global labor population became hostage to the "race to the bottom" paradigm, securities wold also be dismembered, such as social insurance and health care provisions- again to save money for the elites. In addition, these elites were assigned "scripts" to use in their nations, by which those programs could be cut - under the aegis of "austerity" or "spiking deficits" or whatever- and in this way the assorted nations' own citizens could partake in their own eventual serfdom.

Again, the overall imperative of the global "New World Order" is ultimately to abolish all governmental, national social insurance systems - whether these be Medicare or Social Security in the United States, the National Insurance program in Britain or the analogous systems in Germany or Barbados. In each case, the particular system to be replaced by a privatized entity able to generate debt and further income inequality. As Jay Bookman aptly notes ('The New World Disorder Evident Here, Abroad', in The Baltimore Sun):

"The global economy has been constructed on the premise that government guarantees of security and protection must be avoided at all costs, because they discourage personal initiative. In times of crisis, however, that premise cannot be sustained politically. In times of trouble it is human nature to seek security and protection and to be drawn toward those who promise to provide it. That is how men such as Adolf Hitler, and Vladimir Ilyich Lenin came to power, with disastrous consequences. "

To put this in finer focus: historical mavens may recall that the German Weimar Republic, before the emergence of the Nazis, was experiencing many similar failings to our own political system based on a democratic Republic. People could see their protections eviscerated step by step, much of it tied to repayment of the enormous amounts of money demanded by the Versailles Treaty. Because of the bleed down of these reparation payments (including to the U.S. for loans to repay) German society had to leverage itself and exist on the basis of massive debt. When the whole house of cards collapsed, ca. 1931-32 it provided the opening for Hitler and the Nazi party to achieve power, even though, at no time, did Hitler ever attain a clear majority of votes. (In the April 10, 1932 election, the results were: Oskar Hindenburg: 19,359,983 (53.0%) Adolf Hitler 13,418,547 (36.8%))

Weimar also tasked citizens with constant inter-party feuding and political gridlock, as well as backdoor deal making to get anything done. More and more German citizens, as my sister-in-law Krimhilde has related, were coming to believe any "strong man" would be better than the melange of opposing interests that couldn't seem to get anything constructive done. The rest, as they say, is history.

In the U.S. the imperative to dismantle the social contract is now proceeding full steam, with Social Security cuts soon to be on the legislators' table in some form, and the private disposal of Medicare, Medicaid, soon to follow. (Indeed, the Medicare "Modernization Act" already incepted this process via Medicare Advantage plans and a drug formulary hostage to proviate profits). Much of this divestment is being pushed by ideologues in rabid think tanks such as the "American Heritage Foundation", CATO Institute and its offshoots. But behind that veneer are the multinational corporate interests funding many of them.

Less recognized- but noted by many other authors (cf. Morris Berman, ‘The Twilight of American Culture’) is that stripping "entitlements" is the most effective way to abolish what remains of the Middle Class in the U.S. Once that Middle Class is fully eroded, then their full de-politicization will follow (indeed many would argue it has already) since they’ll have to work in the proletariat (perhaps at two or more low paying jobs) just to make mortgage payments. There’ll be no time for political attention or focus, much less reading papers to inform onself of the issues, or even voting. More to the point, their imminent “peasantry’ will ensue- placing all American workers on the same labor-wage scale (and surplus status) as the Chinese, Indians, or Mexicans. The world will then have one uniform labor pool from which global corporations can pick and choose. No ‘spoilt’ aberrations bearing any “benefits” or disjunctive wages. Or hotshot citizens who actually possess the free time to pursue political insight.

With so little time for acquiring deep understanding, sound bites and political tricks will come to dominate the stage, as they have. One master elitist or two (like the Billionaire Koch brothers) can then easily instigate an entire "movement" at their behest- populist in appearance, but actually forlorn, uninformed puppets acting at the behest of their master puppeteers. Hence, the Tea Party movement. Angry, even furious at the evident erosion of their country's fortunes, but not quite sure how it all occurred.

To be fair, much of the outsourcing of work to other (poorer, lower wage) countries is not under the immediate control of the mega- corporations, as they are rather following the edicts (for de-regulation, globalization etc) issued from the real hidden 'government' - the Central Bank controlling all the other central banks of the World, based at The Bank of International Settlements, in Basel, Switzerland.

For at least 28 years now, the world has moved progressively and inexorably toward 'stateless capital' (money, capital under the control of no single state, or government) under the impetus of the stealthy central bankers - be they in The Federal Reserve, The Bank of France, The Bank of England, or wherever. In each case, powerful imperatives are deployed along with downward wage pressure, including:

a) Negation of any possibility of debt liquidation (such as forgiving the international debt of most poor African nations)

b) Global wage arbitrage: forcing corporate capital to continuously flee to markets with the lowest wages, benefits denominators. The most marginalized, unprotected, unregulated workforces.

c) Redistributing capital to cooperative poor nations, always at the expense of quality jobs in the advanced nations. (Already > 80% of computer and high tech jobs have been farmed out to India, and other countries)

The end result of these combined imperatives is to bestow an ever larger share of returns from production on capital, while extracting it from labor. (Since labor is being continuously downgraded). At each stage, 'cheap' people are preferred in tandem with expensive machines, technology. In terms of the U.S. it means we are looking at a permanent under- or unemployed underclass, with no hope of rescue. So longer as mobile capital prevails over static labor - and the world's population continues to grow making each laborer cheaper- this will not change.

Will the Tea Party grasp or process any of it? Will they ever understand the real reasons for their discontent, as opposed to the spurious one of Barack Obama's "over reach" or "socialism"(sic)? I doubt it. The reason is that for simple minds, Obama conveniently substitutes (as a ready caricature) for the whole alien process and powerful agents that have displaced their lives. Far easier to vent against one man as president, than against the often murky global financial process that brought our nation to its permanent decline!

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