A Decade of Illusions

As we near the end of the first decade of the 21st century it may be possible to look back and think about what the last decade of the 20th century, the 1990s, was all about.. I’m increasingly convinced that it will be remembered as the decade of illusions, starting with the apparent victory over Iraq in 1991, and defined by massive budget surpluses, cheap oil, a roaring stock market, and an illusion that American power was such that the country was invulnerable and poised for a century of growth and prosperity.  Don Henley probably captured it best with his 2000 album Inside Job and especially the cut “Workin’ It.”

The scenes we remember from the 90s seem almost trivial. Sure, there is the drama of the first Gulf War, and who can forget the Time magazine cover of the refugees fleeing Kosovo. But much of the 90s seemed to be about fluff. The OJ Simpson case, talk radio, Monica Lewinsky, and Republican attempts to take down Clinton over issues that had little to do with anything of substance. Clinton himself seemed more show than substance, talking a great talk, but unable to intervene in Rwanda or use the decade of cheap oil and balanced budgets to prepare the country for the future.

As oil prices plummeted, we had a chance to invest significant sums of money into research on alternate energy sources, and fund efforts to build more energy efficient cities and towns. Instead we bought SUVs and partied on the highways. Now we are faced with the prospect of permanent energy crises and shortages in coming years, utterly unprepared and apparently unwilling to prepare. According to some energy analysts, it could even mean civilizational collapse.

The victory over Iraq in 1991 seemed so complete and unquestioned that the idea we’d be bogged down against Iraq at some point in the future would have been laughable. Our military was powerful, and could defeat the fourth largest land army in the world with hardly any casualties — and most of the soldiers killed were killed by friendly fire. The debacle in Kosovo should have showed us that this sense of military power was an illusion — defeating armies does not create political and social realities — but Clinton was a master at papering over difficulties, and soon the country was sold on the idea that Kosovo was a victory. The Soviet Union was gone, no country was close to us in military power, we were invulnerable and many started dreaming that the judicious use of our power could reshape the Middle East and perhaps create a world that would follow western and American ideals. It was fashionable to consider us the “new Rome.”

In the 2000 election campaign candidate Bush promised tax cuts because budget surpluses were so large that all the tax cuts would do is cut down future surpluses. Economists were warning that paying down the debt too quickly would be counter productive. Who’d have thought that a few years later our deficits would again be in record territory, and debt would double? As the stock market soared throughout the decade people thought the future would be one where anyone could be rich. On the day Nasdaq hit 5011 TV pundit James Cramer predicted it would soon get to 8000 and then soar higher. Other pundits talked about Dow 60,000 or even Dow 100,000. The new economy was leading us into a world of plenty and prosperity, only those dumb enough not to invest would miss out. March 11, 2000 was the high point for the stock market, it’s collapse started long before 9-11. The Dow is currently hovering around that 2000 level; the Nasdaq remains at less than half what it was. Slowly our illusions are being shattered by reality. Even the housing market bubble, which persevered through 2005, popped in 2007, and has spawned a credit crisis whose scope we do not yet know for sure..

For me the 90’s began on January 16, 1991 with the start of the war against Iraq, and ended on September 11, 2001. I recall on the 4th of July 1991 as I observed fireworks along the Mississippi river in Minneapolis (amusingly when the first pops were heard bats flew out of the trees and scared people there in a very brief scene reminisicient of Hitchcock’s ‘The Birds’), wondering if, in this post-war euphoria of having “kicked Saddam’s ass” we might not have set ourselves up for real long term problems — that we were in a world of false confidence. The illusions of the 90s made me think that those concerns were misplaced — the US seemed to be moving onward and upward. But on September 11, 2001 the first of those illusions — our invulnerability — was shattered. We are now coming face to face with reality.

This decade has been the shattering of those illusion. The stock market boom and new economy now is a distant memory. Cheap energy is gone, probably forever. The property bubble that allowed people to turn their homes into ATM cards and find a cheap way to gain wealth after the stock bubble collapsed, has also fallen. Now we stand face to face with the reality that we are not the emerging unipolar power, but a country with severe economic challenges. We rely on China for consumer goods, and Saudi Arabia for oil. Each control massive amounts of US currency and investment, and could choose to devastate our economy if they wanted. We aren’t impotent, but we have been snapped back to earth by a decade that has served as a cold wake up call, with the Iraq war especially helping lay bare our weaknesses.

The 90s saw us living in a fools’ paradise, partying in the belief that seductive illusions were obvious reality. Those illusions shattered this decade. In the next ten years, we’ll either face these issues seriously and effectively, or we’ll cling to illusions and find ourselves even worse off than before.  We definitely live in interesting times.

  1. #1 by FaxPaupsAccusy on August 2, 2008 - 22:01

    Brilliant!

  1. The Economic Storm « World in Motion

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