Archive for November, 2009
Theodor Adorno of the Frankfurt school of critical theory said that the main goal of education should be to assure that the holocaust is never repeated. Adorno and his colleagues were Jewish academics who were forced to flee Nazi Germany, and were shocked at the way in which their country fell into such barbarism. How could this happen in Germany of all places — the country of the most advanced science, culture, and philosophy?
Andorno recognized that education should not just focus on methods and facts, but also values. An education devoid of value development creates a population of individuals able to skillfully manipulate data and people to achieve their personal ends while rationalizing the human cost and consequences of their choices. Instead of wisdom, we get sophistry.
Universities in general either push a mix of social political correctness (have minority students, use politically correct terms, and show sensitivity to ‘differences’) and practical political conformity (teach established theories, do not rock the boat of corporate sponsors, and buy into the theories that support the country’s elite structure). It’s not like university professors are in a conspiracy to promote the corporate elite. Rather, the way we’ve learned to teach and educate, by dint of the state of the disciplines (especially in social science), works against value education. Rather than really questioning the nature of power and manipulation in the system students seek to become one of the powerful manipulators themselves. Their goals are not malevolent, they simply believe they need to “play the game” in order to achieve the change they desire. To be sure, there are always radicals out on a limb — the Noam Chomskys and various socialists or anarchists. They are easily defined as an academic margin — the ‘fringe left.’
I take Adorno’s call seriously. In my “World Politics” course we look at holocausts that have happened since Auschwitz, and how a world that said “never again” seems to have no problem allowing it again and again. We examine how Communist utopianism led to genocide in Cambodia. We study the Rwandan genocide and the heroic efforts of Canadian General Romeo Dallaire who led the UN mission in Rwanda. The world watched a genocide unfold at a pace of killing faster than the holocaust, with UN observers right there telling the media and the world the gruesome details of what was happening. The world yawned and looked away. Students confront these cases having to think through difficult questions — should we have intervened? But why should we ask a 20 year old American to get mixed up in someone else’s conflict? What was the role of colonialism? It ends up being a much more difficult problem than it originally seemed.
We also look at the world political economy that way, seeing the severe problems of the industrial West alongside the existential threats in the third world. Students often respond with a mix of shock, anger and surprise that things like this go on in the world. They’re not just learning theories about politics, but thinking about core human values.
My first year seminar “Germany Between the Wars,” covers the roaring Weimar mix of parties and crises to the rise of Nazism. Students confront the fact that during the thirties the Nazis appeared successful; they can actually understand how the Germans would support them. Many admit they might have too, knowing only what they might have known by 1936 or 1937. They confront the power of manipulative propaganda, and then compare that with the way talk radio or the advertising industry in the US operates. The realize that the mythic version of WWII told in the schools is only one side of a complex story. They also learn and compare the war time experiences of Sophie Scholl and Traudl Junge, and explore why two women born the same year could think they were doing the right thing, but only one had clarity of vision.
The goal of the whole course is only partially to learn about German history (we explore art, science, music and politics during this era), but also to shake students up to realize that Hitler’s rise was not one of a maniac simply grabbing power, but a sophisticated movement which at one point appeared peaceful, successful and (to Charles Lindbergh and Joe Kennedy) a potential model the US could learn from. To assure no more holocausts we need to learn that the danger from something like Nazism is that one only realizes too late how evil it is unless you have the moral and intellectual tools to see beneath the delusions they create. That requires a willingness to question authority, not take claims by government (whatever party is in power) at face value, and avoid the emotional appeal of opposition movements claiming there are “conspiracies” to try to somehow destroy the country or its core foundational values. It takes work and skill to avoid being manipulated.
In general, every course tries to do something to get at the human dimension of the relevant political issues and get students to empathize as well as intellectually understand a situation. In The Politics of Developing Countries we look at how social science theories and the media ignore the role of gender and the ethical/human dilemmas the experiences of women raise. Why it is that our current theoretical lenses leave these experiences out — what does that say about us and our values? Ethics and values come as much from empathy than intellect; it entails a complexity that defies any clear set of rules.
So I like to think I am teaching in accord with Adorno’s dictum. Yes, students learn political science theory, relevant facts, various authors, and the like. They emerge prepared for law or graduate school, or any of the other professions they may choose after college. But I hope that in some way my teaching tries to promote the development of critical value processing for students of all political, ideological or religious stripes. I am not concerned about those who go through a difficult process of valuation and evaluation, and ultimately choose differently than I do on the issues of the day. I am concerned about those who get manipulated by the media and political leaders into thinking they are doing what is right and just, without the will or capacity to critically reflect on their choices and beliefs.
Luckily my colleagues across the campus seem to share these values, recognizing that education is not just teaching students how to win, but how to make choices they can be proud of. The need to help students “make good choices” is just as relevant in college as in Kindergarten.
Pam over at Notes Along the Path recently asked me if I’d join those reading her blog to pass on what advice we’d give our children if we had one chance to send a message. Here’s my effort:
The most important thing about living in this world is to live with joy. Life is a precious, wonderful adventure, and the world is full of beauty and opportunity. In making choices about what to do in life, who to have as friends and companions, and where to put your energy, make sure it is designed to bring real joy to your life.
Yet, what is joy? Is “living with joy” more important than helping others, or living an ethical life? Does joy come from a 50 inch plasma high definition television, a hike in the woods, or a successful career? How can I make this advice practical, not simply rhetorical? Here are five practical tips:
1. Be adaptable. The unexpected happens all the time. Neither the world nor other people will conform to your expectations and desires. Sometimes people will be petty, they may betray you, they can be mean and incompetent. Sometimes plans you are excited about go bad. If you let these negatives get under your skin, you’ll live a life of irritation and simmering anger. The world is unfair! My life isn’t what it should be! People use me and don’t appreciate me!
You might think learning to deal with those kinds of annoyances is difficult and requires a massive shift in behavior and thinking. In reality, there is a simple way to move away from annoyance to acceptance of reality as it is: adapt. To adapt does not mean to conform to others’ wishes. Rather, accepting the reality principle — the fact that reality does not change because we want it to or think it is unjust or wrong — simply adapt to the circumstances and make new choices based on those circumstances. Lose rigidity, and you’ll lose those things which cause the anger and annoyance when the world or other people let you down. The world works on its own terms, others make choices for their own reasons.
The power in adaptability comes from not losing energy over wanting the world or others to be what they are not. That anger and annoyance is useless, and in fact starts eating away at oneself. And once you adapt make your own choices based on what you believe right given the circumstances and move forward. Adapting to reality gives you more power than you’ll ever get complaining about the fact things aren’t as they ought to be.
2. Take responsibility for your life and choices. People who lack joy often feel that they do not have control over their own lives. They blame themselves or others for their circumstances, regret choices made in the past, or carry a grudge against others. It is important that one take responsibility for who one is, where one is in life, and the choices made. Don’t regret the past, but learn from it. Obviously, we are born in a world with limitations, physical and social. Some people are born in intense poverty, suffer abuse from their parents, grow up in a war zone, or have severe handicaps. It sounds cold to say even those people should take responsibility for their life. But that is the only way to overcome hardship and still find joy in living. It is the only way to find the strength to make changes, and to feel a since of empowerment, whatever the circumstances. And those who live in good conditions — relative wealth and security — should recognize how absurd it is for them to complain about small things and blame others or themselves for problems. Those in good conditions should relish taking responsibility and learning to live, so that if things go bad at some point, they have the skill to persevere.
3. Always keep perspective. In life most people who are angry, upset, or down are reacting to petty things. Whether it is a policy at work, a bad grade, a snide remark, an accidental spill, or a slight injury because of someone else’s carelessness, people get worked up, angry and emotional over things that really aren’t worth it. Everyone makes mistakes and life is full of little disappointments. Yet often it’s hard not to let things get to you, the pain of hot coffee spilled on your arm or your child being careless and spilling grape juice on the carpet after you warned him to be careful creates an emotion that at least for awhile can defy rational control. Keeping perspective is not a magical act that vanquishes such annoyance, it’s a skill that you develop over time.
Put yourself in the place of the other person — think about the accidents you’ve had, the times you’ve been careless, and recognize that most things that annoy us are not malicious. Even malicious acts usually come from people who are reacting to their own fears and frustrations. Practice trying to understand that. Ask yourself if this will really matter five years from now. Most of the time, you’ll realize it won’t even matter to you by the evening! Is it worth ruining your mood and the mood of those around you? Keep in mind all the good life contains. If it helps, remind yourself of the real misery faced in many parts of the world, and how blessed you are to have such petty annoyances as your main problems. Don’t let a few problems or annoyances destroy your joy. It isn’t worth it. People tend to take things — and themselves — far too seriously. Perspective is a skill that is essential for living a life with joy. It is a skill you cultivate over time. Like a child learning to read who suddenly realizes he or she can read signs and books heretofore incomprehensible, you’ll suddenly notice little things aren’t bothering you, and life is better.
4. Connect with others – Love. Humans are social creatures, we need to connect with others on many levels. I believe that we crave variety in life because we really crave connections with other people. Our desire for travel, trying new food, new video games, and all sorts of distractions is simply a re-directed desire to connect with others. In fact, one reason our consumer society finds hyper-materialism so unable to provide lasting joy is it probably is really a sublimated form of desire for others. The quick variety of a new video game can never replace the personal and spiritual satisfaction of a friendship. So play sports, play music, debate politics, share meals, talk about life and experience, and recognize in others the humanity that we experience in ourselves. Another word for this is love. You cannot have joy without love, and you cannot have love without connecting to others. An inability to connect and share intimacy makes a joyful life virtually impossible to achieve. Most importantly, it allows you to love yourself as well as others — the feedback from friends and family will give you a strong sense of your own value, and you can never truly love others and live with joy if you do not also love yourself.
5. Forgive. Life is better if you forgive others, drop grudges, and recognize that all humans have flaws and weaknesses. Nobody is perfect, everyone does stupid things, and everyone is mean or petty sometimes. Let it go. Forgive. Completely. Don’t just forgive on the surface and be nice, holding resentments inside. One might feel virtuous doing that, but true forgiveness is one of the most powerful acts you can undertake. An ability to truly forgive is key to deep happiness. You don’t let others have power over your mood, you feel liberated. Like perspective, forgiveness is something you need to learn how to do. It may start with “I know I should forgive, but I can’t help but holding a grudge.” That’s OK. Just keep trying. You’ll see even partial forgiveness helps, and soon it’ll be easier to truly forgive others, allowing you to claim responsibility for your own life.
Also, you cannot live with joy if you cannot forgive yourself. If you can forgive others you know were being thoughtless and maliciously cruel, you’ll not torture yourself when you sometime are malicious and cruel. And guess what — no one is above giving in to anger and lashing out with cruelty sometimes. If you can’t forgive yourself you’ll fixate on such things and not let yourself feel joy. If you can forgive others for anything, you can forgive yourself for anything. In short, the ability to forgive gives you the power to vanquish the joy-killing emotion of guilt. Those who can’t forgive also are most tormented by guilt, and nothing defeats joy more soundly than a deep sense of guilt over past choices and acts. That is why forgiveness is so powerful — being able to forgive is the only way to really overcome feelings of guilt.
I’m convinced that if people focus on these five “skills” — be adaptable, take responsibility for your life and choices, live with perspective, connect with others (loving them and yourself), and truly forgiving, joy will follow. Moreover, I think living this way will yield an ethical life. This is better than puzzling over ethical dilemmas and quandries, or trying to figure out the “right” set of rules to live by. I think knowing how to love, forgive, have perspective, adapt and be responsible yields ethical choices.
Finally, I’d ask my children to never lose sight of how life is at one level magical. There is a mystery and a sense of spirit that defies reason, science, or the mere material world. Be open to spiritual ideas, a sense of fantasy, synchronicity, or a side of life that brings opportunities and choices that happen to be needed right at that point. In fact, I think if you live with joy and are open to the magic life, good things happen. Never shut off the magic or get lost in trying to figure it all out. That sense of magic reinforces joy, and makes it easier to live a good life.
As we leave behind a 20th century defined more by ideological struggle than nationalism or religious conflict it’s interesting to think about the role of ideology in politics, especially during a time of such turmoil. Ideologies are odd creatures. They are simplifications of reality built around assumptions or beliefs about the world through which people interpret experience. At base ideologies are unfalsifiable and internally coherent, meaning that you can usually interpret reality equally well through different ideological lenses. And, while one can make persuasive arguments that one interpretation is better than another, persistent ideologies defy efforts to disprove them. Ideologies fail not because of logical argument, but because of politics — people veer to some ideologies, and reject others.
Many people engage in “ideological jihad,” treating ideological belief akin to religious faith. This makes politics a “holy war” where one side is convinced it is right, and must therefore defeat the other side. These people are “idealists” in the sense that they compromise little in pursuit of the ideal, or make tactical compromises without losing the long term vision. Others view ideologies as tools to glimpse different aspects of reality. Much like the six blind scholars and the elephant metaphor, ideologies are seen as giving incomplete and biased versions of reality. Just as the scholar who felt the trunk concluded the elephant was like a snake, and the scholar who felt the leg concluded the elephant was like a tree, we interpret reality imprecisely through these ideological lenses.
Those who view ideology this way are “perspectivists,” who tend towards pragmatism because they do not think it possible to find one true coherent ideological story about a complex reality subject to numerous interpretations. They hope that by understanding a variety of perspectives one can make choices that work better in the world. This is pragmatism. Most people are somewhere along a continuum between idealism and pragmatism. Idealists like to have the “right answer,” are themselves willing to judge, and prefer to see reality as objective and clear. Pragmatists are more likely to hold paradoxical beliefs, see reality as subjective and unclear, and are comfortable with ambiguity and lack of certainty. Whether one is an idealist or a pragmatist is probably a result of personality more than academic inquiry.
In the US three dominant ideologies compete for support, with numerous alternatives occupying niche regions. The dominant ideology is a form of liberalism called neo-liberalism. It is made up of Democrats and Republicans, and represents the post-war consensus which has defined the American center. It is distrustful of big government, believes in capitalism and markets as the best form of social organization, generally focuses on individual choice as the driver of reality, and rests on a belief that the best society is one where individuals are able to freely determine their own destiny through their choices.
On the left is an alternative ideology, primarily held by Democrats seen as being “on the left wing” of their party, such as Dennis Kucinich or Ralph Nader. They believe that humans are denied freedom and liberty by the way in which the wealthy elite are able to control the game and structure reality to benefit some at the expense of others. Their main prinicples are equality (not necessarily in terms of material outcomes, but in real opportunity), justice, human rights, and empowerment. Communism and government planning are extreme forms on the left. They see big business and transnational corporations as exploiting the poor, destroying the environment, and condemning millions to lives to poverty and struggle. They share the neo-liberal desire for freedom and individual choice, but believe social structures created by the wealthy and powerful limit that choice. The only solution is through rational governance, via regulation and taxation. They support a public health care system, increased taxes, strict environmental laws, and strong regulation of business and finance. They do not trust markets to provide justice — markets serve those with money, not all humans.
On the right is an alternate ideology that is built on nationalism, tradition, and a fear of difference. While both neo-liberals and leftists share a sense of wanting individual liberation and a belief in enlightenment reason, the right distrusts intellectualism, is driven more by emotion, and finds great comfort in the symbols of the nation or sometimes religion. Fascism is an extreme form of this kind of ideology, as is Islamic jihadism. In the US the shock radio jocks (who openly use emotion to garner listeners) and politicians like Sarah Palin occupy this space. They are not as extreme as fascists, but the roots of their politics comes from the same place. They tend towards xenophobia and militarism, and often believe that the “left” and “neo-liberals” are destroying the country they know and love. They turn their anger as intently on neo-liberal Republicans (so called ‘Rinos,’ or establishment Republicans like John McCain) as they do on the left. Ironically, they share some of the left’s distrust of markets and big money. They can also be anti-war, may distrust the support the US gives Israel, and often internally at odds. Being more emotion-based than reason-based, the right lacks a clear ideological story.
One reason the right is more successful with, say, talk radio is that the left remains very much entangled in an enlightenment mindset that distrusts emotional fervor. This means the left is more comfortable with NPR than Air America, and in fact sees the market success of talk radio as an indication that markets do not serve truth but whim.
Neo-liberals are the majority, and while Democratic neo-liberals share some of the concerns of the left (they both believe in enlightenment thought), the Republican party is more split by ideological difference. Republican neo-liberals (the so-called ‘libertarian’ wing) are not comfortable with the motion stirred up by the “tea party” movement, the support someone as apparently uninformed as Sarah Palin receives, and the pressure to try to purge the party of diverse perspectives. For someone like Olympia Snowe, a committed neo-liberal Republican, the party appears to be taking a very negative path if it follows those who want ideological war.
Neo-liberals on both sides tend towards pragmatism, but on the right and left there are pragmatists who are willing to work within the system to change it. However, a tripartite ideological divide leaves some issues out. Gender is generally ignored, environmental concerns get second fiddle, and concerns on human rights get subsumed in a larger ideological debate. Indeed, race, gender, environment, human rights, and ethics get defined through the ideology, warping those issues in a way. This leaves open space for feminist, green, and human rights movements, though they tend to operate on the political fringe. They can, however, influence the larger groups, especially if they mobilize youth or alter the political discourse. Finally utopian socialism, new age spiritualism/humanism and romanticism represent currently fringe movements on the “left” associated with emotion and rejection of enlightenment logic.
As the country undergoes a severe transition due to economic decline, the ideological battles may well get worse. Lacking a coherent sense that all is well, people will be more willing to put faith in ideological voices that promise that they have the answer. In a sense, people will gravitate to ideology as an ersatz religion, finding meaning in the struggle to change the country in the way they prefer, fighting clear “enemies.” During the Great Depression ideological conflict destroyed democracies in Europe. Only the UK, defined by a strong sense of pragmatism, survived. The US has always had a more pragmatic response to ideological debate — pragmatism is a fundamental American trait.
We can’t operate in the world without beliefs, so at some level we have make ideological assumptions. The key is to try to understand the assumptions others make, respect diverse views, avoid a level of idealism which leads to ‘ideological holy war,’ and recognize that we’re in this together, and we can find ways to compromise, work together and respect each other as we work through this crisis.
UPDATE: In the comments there has been some discussion of emotion. I think I made my point a bit unclearly. I do not think emotion is necessarily wrong; in fact, I’ve been critical of the emphasis on enlightenment inspired ideology to focus solely on rational/material ideas and ignore sentiment and the emotive part of the human psyche. Empathy, for instance, is a trait that is fundamentally important (and I want in all my politicians and Supreme Court justices!). Moreover, the extreme left’s errors of communism have been if anything deadlier because of the way reason makes it seem to proponents that they have the right cause and anything goes to implement it. Finally, left and right will use emotion to inspire support.
Moreover, I neglected the traditional right, those who focus on preserving traditional values and culture, and are critical of neo-liberalism and others on the left and right. Like in Germany between the wars the traditional right often gets seduced by the far right, but fascism is ultimately anti-conservative as well. Simply, the roots of the politics of the so-called “right wing” are generally based on an appeal to emotion (often fear — fear we’re losing our country, welfare cheats are stealing our money, the President has betrayed us to the Chinese, the birthers, those who think Obama has a conspiracy to bring socialism to the US, etc.) rather than a reason-based ideological vision. This is happening increasingly on the Left too, Obama’s appeal was also to emotion. Emotion isn’t bad — I personally prefer hope and empathy to fear and anger, and hope love trumps hate — and neither left nor right has a monopoly on positive or negative emotions. George W. Bush’s “compassionate conservatism” was intriguing, even if it didn’t end up leading anywhere.
In 1930, the first year of the Great Depression, most economists and prognosticators thought that while the crisis was deep, it would run its course in a limited amount of time, and growth would come back to the economy. It didn’t. The crisis continued throughout the decade as economies were stuck in a stagnant mode while governments rejected the idea of using debt to stimulate their economies.
In some ways, the depression seems easy in comparison to the crisis we now face. If our policy makers would go back to 1930, they’d see US debt at about $16 billion, or only about 13% of GDP. As a percentage of GDP that debt would rise to over 40% by the middle of the decade, but in nominal terms would rise only to about $30 billion — the shrinking GDP was causing the debt to GDP ratio to worsen. Only WWII would bring a significant increase in debt (over $220 billion and 120% of GDP by 1946) as the US had to pay for a two front war.
US policy makers in 1930 would have numerous fiscal and monetary tools at their disposal. The low debt to GDP ratio would mean they could inject significant stimulus directly into the economy and jump start growth. They’d have low interest rates, and the capacity to increase connections across borders to fix the economy. I’m absolutely certain that policy makers now, if transported back to the 1930s, could create policies which would have meant economic growth by the mid-thirties, and perhaps an avoidance of WWII. So when people ask whether or not we’re facing another “great depression” my response is “if only it were that good.”
Total US debt reached nearly $400 billion by 1970, while Richard Nixon was President. However, that was only 37% of GDP, and reflected the new willingness to use “Keynesian” policies to maintain economic stability. John Maynard Keynes was the economist who, besides writing in 1924 that the Versailles treaty made another war with Germany likely, figured out the Great Depression and how to get out of it. He realized that the market had no magical or “natural” solution to an economic downturn, and fiscal stimulus was necessary to “prime the pump,” so to speak. Yet he was not in favor of ongoing debt and deficits. He recommended counter-cyclical budgeting — run surpluses when the economy is strong, be willing to run budget deficits if there is a recession.
Though the last Johnson budget (for 1968) was in surplus, the economies of the West ignored one side of Keynes’ advice and instead became very adept at running deficits during economic slow downs, while refusing to cut that spending when things improved. Still, since the debt to GDP ratio was improving, this wasn’t seen as a major problem. The first year of the Reagan Administration, saw debt at 33% of GDP, even though it had reached $1 trillion. Our economy was growing faster than our debt. An analogy: If you have $10,000 credit card debt and an annual income of $35,000, you’re in trouble. If your annual income is $200,000, it’s not that big of a deal.
The eighties, as noted last week, saw the US undertake a series of economic policies that set up the current crisis. The biggest was to stop even attempting to limit debt growth during a boom. In 1983, the last year of a recession, debt was $1.4 trillion, and 40% of GDP. By 1990 it was nearly $3.3 trillion, and almost 60% of the GDP. Yet that period from 1983-90 was defined by a serious spurt of economic growth, a time when Keynes would have said we should save money and cut deficits. Keynes was out, however, as his “demand size” fiscal policies were replaced by “supply side” monetarism. The deficit doesn’t matter as long as inflation is low, and inflation was low.
Now, low inflation over the past generation is in some ways an illusion. The quality of goods has declined to the point that things need to be replaced more frequently, hiding inflation. Anyone who has bought a cheap DVD player probably knows that the cost only seems low until a year or two later it gives out and you have to replace it. Suddenly the Sony seems a better buy. For the US, however, it was a double illusion — the role of the US dollar meant we could export inflation to the rest of the world, meaning that we didn’t suffer the usual currency decline caused by increasing budget deficits (or current account deficits).
In the 90s things stabilized as the US, like the rest of industrialized world, found debt at 60% of GDP something we could live with. By 2000 US government debt was $5.8 trillion, but in a$10 trillion economy that was slightly under 60% of GDP. Despite a booming economy in the first eight years of the 21st century, US wars and government spending started a debt to GDP increase again. By 2008 debt was at nearly $10 trillion, or 70% of GDP. Then the last days of the Bush Administration saw a dramatic increase due to the bailouts, meaning 2009 debt is likely to come in at $12 trillion or 90% of GDP. Spending early in the Obama administration on economic stimuli mean that by 2014 we should be looking at debt and GDP at about $18 trillion. Estimates suggest we could remain at such high debt loads for the next decade.
Herein lies the problem: stimulating the economy by increasing debt becomes counter productive if debt is too high. Given that the private and corporate sectors of the US are also in debt (total national debt is probably about $60 trillion), there is no reserve of money able to be injected. Moreover, the US now pays relatively low interest rates on short term loans to finance much of the debt. This could increase massively in the near future, much like people with subprime mortgages saw their loan payments go up when they couldn’t refinance. In a weird way, the subprime crisis could symbolize the budget crisis faced by the US.
This debt crisis is the reason why the US economy will not simply grow out of this recession like we did in past recessions. From 1980 to now we’ve gradually put ourselves in an unsustainable position, making ourselves vulnerable to a new depression, though one where we lack tools we could have used in 1930. So what our the options?
1. This is like a war. One could look to the massive spending during WWII as a sign that we can go deep into debt and, if it sparks economic growth, slowly work out of it. This seems to be the approach of the Obama administration, and is the most optimistic scenario. The problem is that the world was under producing in 1945, and could rely on European growth and increased trade to fuel a major spurt of economic prosperity which would allow the debt to go down as the economy prospered. For this to happen now the developing world would have to be the engine for growth. If this scenario plays itself out, the US is headed for a “soft fall,” though the world economy will move away from US dominance and Americans will have to get used to a lower standard of living. And again, that is the best case scenario.
2. Dollar devaluation. In this scenario foreign countries will stop investing in US bonds at low interest rates, distrusting the dollar at such high debt levels. The collapse of the dollar in an otherwise deflationary economy will have a devastating effect on the US economy. Previously cheap foreign goods will become expensive, meaning inflation will increase during a time of economic stagnation (stagflation). This would intensify the recession (things would get far worse), bringing structural change to the US economy. Slowly production would increase here (to replace cheap foreign goods), meaning jobs would come back. To deal with the debt, the US would either default or alllow currency devaluations to handle the debt (meaning new debt would not be allowed, as interest rates would be much higher). This all would mean a long term structural adjustment to the US economy which would likely take the next decade to play itself out. If this scenario becomes reality, we’re only at the start, only feeling a pinch of the pain that is in store.
My own guess is that reality will be between the “best” case scenario 1 and the “worst” case scenario 2. Simply: the debt crisis is real, unprecedented (not like past war time debt), and defies any quick solution. Moreover, any external complications — an energy crisis, terrorism, war — only makes things more difficult. The bottom line is that the US is in real economic decline, thanks to our lack of fiscal and monetary discipline over the past three decades.
I’m either none or all of the following: Christian, Muslim, Jew, Hindu, Buddhist, Zoroastrian, Pagan, and all the other religions on the planet. I don’t have much time for religious dogma, though I think the teachings and stories from all faiths contain wisdom and insight. The idea that an omnipotent being would only give paradise to those who happen to believe a particular set of stories seems a bit absurd. In fact, as I noted last year, I think those “exclusivist” religions will overtime learn to accept that it makes no sense to say that the faith which happened to develop in their part of the world is the one and only true one, with all the others wrong.
Yet, I do believe in God. I don’t know for sure what the term means. Is God simply “all there is,” and I’m a segment or a piece of perspective in a pantheistic universe? Is God simply a part of my consciousness that connects it at a deep level to all of reality, linking me to the eternal? Is it something like the “force” in Star Wars? I suspect anthropomorphizing God into a human and giving God gender, human traits and (in the case of Judaism and Christianity) even human vices (God is jealous, God is angry) is way off base. Most likely, God is a human concept that represents an aspect of reality that is beyond our comprehension. We glimpse it and try to make sense of it in our various myths and religions: God is love, God is a universal force, God provides a culture its sense of meaning, etc.
So I believe in God, don’t know what God is, but feel a sense of connection to a spiritual side of the world in which material divisions are somehow irrelevant. Time, distance, space…that doesn’t matter, all is one at that level.
That all may sound nice, but the next question is WHY do I believe in this “God?” Religions at least have their holy books and rituals. You get taught from youth to believe, or you are brought into a community which helps you find meaning for life. My view is very individualized, I’m determining what kind of God I believe in, I’m not buying someone else’s set of beliefs. I am considering many teachings and beliefs to help guide my own personal effort, to be sure. I also know that my belief is my “best guess,” not something I consider to be unquestionably true — and that’s good enough for me.
One reason that I don’t accept a ‘pre-packaged’ faith is that on a question of this import, I’m not going to leave my beliefs up to others to determine. I’m not going to believe something out of fear or going to hell, or because of pre-existing institutions. In fact, the more I study religions, the more clear it is that dogmas develop over time and due to human conflicts, not timeless commands from above. It’s my life, I’ll determine what I believe!
The second reason is fundamental: It works for me. I live life in two ways. Sometimes I’m involved in a hectic pace of preparing for classes, getting tasks done, taking care of the kids, worrying about finances, trying to find time to exercise, reading about politics, engaging ideas in blogs or by grading papers, and having a laugh at the end of the day watching Jon Stewart and Stephen Colbert. Days pile on each other, little things bother me more easily, I get bored, I worry more, and I realize that time is slipping away.
Other times I am, in a sense, “in a state of grace.” I do this by imagining God as a part of me, with me, every step of the way. This “God” is both within me and outside me. It’s like a voice assuring me that things happen for a reason, even the horrible things I can’t understand, and helping me avoid stress, see humor in tiny things, and enjoy each moment without being weighted down by expectations of the future, irritations of the present, or nostalgia for the past. I enjoy life, feel awake, connected to the world at a deeper level, and good things seem to happen. Instead of chance coincidences now and then, synchronicity starts to define my life. I look for reasons why I’ve drawn things to me, lessons I can learn, ways I can enrich my experience of life. I feel a strong sense of joy — I enjoy life.
The social scientist/rational skeptic in me smiles and thinks, “it’s just a psychological thing. I’m engaged in a kind of auto-hypnosis whereby I’m altering my own mood by feeding myself suggestions about how to take things and how to respond. There is no real connection or higher power, just my own mind learning how to deal with the stresses and demands of the modern world. That’s not bad — it’s a good skill to have — but “God?” A “state of grace”? Nah, I’ve just learned to modify my own attitude.
That may be true . Life may feel magical because I’m choosing to look at life through that lens. When I do that I don’t get angry at a car that cuts me off, I laugh when my three year old spills milk on my papers, and shrug when my retirement account loses tens of thousands in a market downturn. When I’m outside that state, I’ll honk at the obnoxious jerk who cut me off, raise my voice to my child for being so careless, and obsess about finances when I have a loss. Since the former experience is more pleasurable than the latter, I’ll go with it even if my thoughts about God and spirituality might be a fantasy.
Yet, I don’t think I’m simply deluding myself. I feel a sense of serenity when I allow myself to be in a state of grace. It becomes easy to forgive others, easier to keep my temper, and can better accept it when things go wrong. There seems to be more understanding and strength, as if I’m tapping into something beyond me — or perhaps a part of myself from which I disconnect when I lose this state. It’s not that I won’t get angry, or write something a bit too provocative, or get irritated. It’s not that only good things happen. Yet inside of me I feel I am more myself, more complete when I’m in this state.
This “state of grace” is a perspective — to feel like I am where I am because somehow I chose to be here for the lessons I can learn, or the people I can help (or be helped by). It’s the belief that I need to make the most of every moment, that each moment has purpose, and is precious. I best maintain this and reinforce/strengthen this perspective through what Christians might call prayer — an ongoing dialogue with my conception of God, a spiritual force which connects me to everything else. At times I imagine responses, at times it’s a monologue. At times I just try to feel the connections. But the more I practice doing this, the easier and more natural it seems, and the more life seems to be a joy rather than a series of burdens or anxious moments.
(Thanks to my POS 336 class discussion on globalization, and the second and third chapters of the book Globalisms by Manfred Steger for inspiring this post).
Neo-Marxian theories about the global political economy have been relegated to a secondary position in academia, and outside the third world tend not to be taken seriously by politicians. Part of it comes simply from the term “Marxian.” That gets associated with Soviet style communism, an approach to politics and economics which failed utterly. But neo-Marxian analyses of the global economy are profoundly different than orthodox Marxism, and do not posit some kind of workers and farmers’ paradise in the future. They often see communism as the major flaw in Marx’s thought — rather than just analyzing how the political economy operates, he tried to imagine some kind of perfectly just system. That goal led to the horrors associated with Marx’s legacy.
Neo-Marxian analysis is an approach to studying the global political economy in a manner informed by Marx’s structural analysis of capitalism. It has evolved far beyond Marx, most notably in that it looks at the global economic system while Marx was concerned with a domestic economy. Perhaps the most famous of these is an approach put forth by Immanuel Wallerstein some time ago called “World Systems Theory” (WST). Wallerstein was an Africanist who, in studying Africa, realized that underdevelopment there could not be explained or cured by the liberal capitalist theories coming from the West. He sought to explain the division of the world between a relatively small wealthy core, and an impoverished and underdeveloped periphery. A small semi-periphery held states that moved beyond poverty and instability, but could not become as wealthy and dominant as core states.
In essence, he posits capitalism as a world system with relations between the core and periphery structured so that the core exploits the periphery for cheap resources and labor, turning those goods into valuable finished products for consumption in the core. Some finished goods are sold back to the periphery, but consumed by governmental elites whose interests are more in line with those of the core than those within their own country. The elites in third world states thus find it in their interest to perpetuate structures that benefit the core (one reason corruption is prevalent throughout third world governments). Because post-colonial states are often fictions with no strong sense of national identity, people go into government more to get rich than out of any idealistic notion of helping their state develop.
For Wallerstein and the numerous “world systems theorists” who followed in his wake, creating a kind of cottage industry of academic neo-Marxism, this world system functions in part through the control of a hegemon who can dominate the system and enforce its rules. First it was the Netherlands, then Great Britain, and finally the US. US hegemony started weakening in the 70s, and the current crisis pretty much collapses it. US military power is seen as less credible after Iraq and Afghanistan, while US economic hegemony has vanished with the current crisis. The US really lost economic clout with the downsizing of its manufacturing sector after the 1980-83 recession, but managed to retain hegemony by dominating financial markets. An illusion of economic health existed with the bubble economy, but now huge deficits, a large debt, and dependence on countries like China and Saudi Arabia for maintaining the ability of the government to function, puts the US in a weakened position. Still an important actor, but not a hegemon.
WST has been effective in predicting the on going division between rich and poor states and the limitations of the semi-periphery (Taiwan, South Korea, Brazil, etc.), but until recently seemed overly pessimistic about the health of global capitalism. Like all Marxian theories, WST claims that capitalism as it operates in the real world contains contradictions which lead to intermittent crises. The most dangerous is the problem of over-production which can lead to a credit crisis that can cause systemic failure. Capitalism runs on credit, you can’t invest without credit, and any threat to the availability of credit is very dangerous.
On September 18, 2008 the world economy nearly collapsed. Credit markets had seized and if capital wasn’t injected into the system right away there would have almost certainly been a global depression. I do not think Americans quite comprehend the danger the world economy faced that day, and why it was that free marketeers held their noses and supported a massive federal bailout of the financial industry. Yet this bailout didn’t solve the problem, it just bought time. The crisis is still very real, and much like the kind of crises predicted by neo-Marxian analysts.
Now, this may sound weird, but neo-Marxism seems to find some common ground with the ideas of someone associated with a pro-US pro-military approach to globalization, Dr. Thomas P. M. Barnett. Barnett, who writes for Esquire, has a Ph.D. from Harvard, and has worked in the defense department, puts forth a grand strategy for how to approach globalization. He defines different types of states: Core states (much like Wallerstein’s core, though including India and China), Gap states (states not integrated into the global economy) and Seam states (those somewhat integrated). This parallels WST’s Core, Semi-periphery and periphery in a manner that seems almost too obvious to be coincidental (given he has a Ph.D. in Political Science from Harvard, he has to know WST).
Like WST, Barnett looks at globalization as a system that should be global. Concerned with terrorism and security, he argues that gap states represent the breeding grounds of terrorism, and seam states are places where terrorists could entire the core from the gap. Globalization thus needs to be protected by both integrating the gap into the global economic system, and fighting anti-globalization forces, particularly jihadist terrorism. In a way this is similar to neo-conservatism, which also views globalization as a force for good, though Barnett is more realistic about the limits of the US to manage the system alone. In fact, his approach seems to recognize that a concerted effort in the core to manage globalization is necessary to keep the project alive and avoid systemic collapse.
Not being a Marxian thinker, Barnett seems convinced that if the globalization project is kept alive, then the gap states can successfully integrate into the system and the power of markets and liberty will spread prosperity. WST would suspect that his approach might only help the global capitalist system overcome current structural weaknesses (especially the collapse of US hegemony) and contradictions (global financial instability and the dollar crisis) to maintain the system. WST would predict that efforts to integrate the gap/periphery into the global economy would fail because of how the system operates and is structured.
I’m not sure if WST is right or not. However, it seems to me that of all theories of the political economy that emerged after WWII, neo-Marxian analysis is surviving the current crises and changes brought about by globalization as good if not better than neo-liberal and neo-realist theories. My own view remains in the constructivist camp for a variety of reasons I won’t get into here. However, at least in explaining the changing nature of the global political economy, neo-Marxian thought may have to be taken much more seriously. Non-Marxists like Barnett may already be doing so.
The decision to try Khalid Sheik Muhammad in New York has generated some controversy by a few on the right who have argued that this is a disastrous decision. They would prefer a military tribunal. The problem is that the legalities around this case point to the necessity of a trial and not towards some kind of military alternative. We’re supposed to follow the law, right?
Not to some on the right, though I suspect for many the outrage is disingenuous. They want to generate irrational fear in order to attack the Obama administration. If you listen to the “outrage,” they posit all sorts of scenarios. Some claim that American courts are somehow ineffective and won’t be able to do justice (they are too “PC” or give groups like the ACLU too much “clout.” ) Those criticisms betray a total distrust of the American legal system. If we can’t trust our legal system to try criminals, we have far greater problems than the venue of one suspect!
Others claim that “terrorists don’t have the same rights we do.” But where in the constitution does that provision stand? And don’t you have to presume guilt before you can make that kind of claim? In other words, if we go down that route, what kind of precedent are we setting? The state can unilaterally deny rights by declaring someone an enemy of the state? Gee, that worked well for the USSR and dictatorships world wide, but do we want to start going down that slippery slope? Others claim we are “at war.” Well, we do have military operations overseas, but Congress has not declared a war, and such rhetoric is more political hyperbole than reality.
The most common claims are blatant fear mongering. It will make New York a target! It will be expensive! It will cause emotional distress for New Yorkers (a claim I think New Yorkers should reject as insulting to their mental stability)! He’ll infiltrate the prisons and create recruits! In short, the effort is to make it sound like we should be afraid of allowing our legal system to function; out of fear, we should abandon principles.
First, terrorism is a real threat, but not something to we have to fear. Even 9-11 did limited damage, and it’s been eight years and they haven’t been able to mount a serious second attack in the US. That could change tomorrow, but the idea that massive attacks could truly damage the country seems remote at best. Second, the idea that having this trial in New York will somehow inspire al qaeda to hit New York again seems odd, especially if the claim is that they have been wanting to attack again but we’ve prevented that. I doubt this adds to their motivation. Finally, the idea he’ll go into the prisons and win scores of recruits is plain silly — he probably won’t have that kind of access and he will be watched. He may even get the death penalty.
The real problem is that back in 2001 we put aside the Geneva Convention and our constitution to create a legally questionable alternate system of incarceration and justice at Guantanamo Bay. If it would have been short term, that may have worked. But can you really keep suspects for years — many who already have been shown to be innocent — without any kind of legal status? This kind of issue comes up because the Bush Administration wanted to make their own rules regarding the so-called ‘war on terror,’ and in so doing veered into unexplored legal territory. The Obama Administration has to untangle that mess. For some captured in Afghanistan, military tribunals may function well, but in a case like this a trial is the only legally viable option. There is no reason to hurl aside our principles and rule of law out of irrational fear.
But things get even more bizarre when one sees that an even smaller group get in a huff that President Obama bowed to the Japanese emperor. Someone forgot to tell the President that bowing is not allowed in Japan when you greet people! But let’s assume that Obama did bow out of courtesy to his position in Japan — the claim made by those who criticize him. So what? How much does that add to the budget? What harm does that do the national interest? What does showing respect for others cost us?
These same people don’t like that we “apologize” for errors of the past. We should never admit a mistake (as has been pointed out by ‘classicliberal’ in comments to the last post, President Bush famously could not recall making any mistakes when asked). In other words, we should fear admitting errors, apologizing, or showing respect for others. We should fear showing any weakness.
What would we think of an individual who acted that way? We would consider such a person an arrogant prick, someone with such low self-esteem that they don’t want to show any weakness, someone so afraid of what others think of them that they put on a show of false bravado. We tell our children it takes strength to apologize, that we should show respect to others, and that it’s OK to make and admit mistakes. But as a country we’re afraid to do so? What exactly do these people think will happen? We’ll lose our claim to be the ultimate superpower above the rules? That’s been lost already.
There is no harm done to the country by any of these things, none whatsoever. The attacks on Obama for “apologizing” or “bowing” are silly. I mean, President Bush has been caught kissing the King of Saudi Arabia — you do things to show respect in other cultures that you might not do here. No big deal. Most people think it’s good when America does not try to act like a pompous jerk on the world stage.
The fears of terrorism are, to be sure, more grounded in reality. But ultimately the last ten years have taught us that it is hard to hit the US with a terror attack, the post 9-11 panic was overblown, and while we cannot be absolutely secure, we have more to fear from car accidents than from terrorists. As Benjamin Franklin noted, anyone who would trade freedom for security deserves neither. We have a lot of problems as a country; irrational fear will only make them worse.
T. Boone Pickens told a Congressional caucus that US oil companies were entitled to contracts to develop Iraqi oil, thanks to the fact that over 5000 Americans died, 65,000 wounded, and $1.5 trillion spent to liberate Iraq from Saddam Hussein. Pickens is criticizing the fact that Iraq’s oil auctions are based on the best offer and not on rewarding the US for all it has spent in Iraq. Instead, contracts have gone to China and BP so far.
And, of course, there is nothing the US can do to make Iraq comply with such a request. President Bush explicitly denied that it was a war for control of oil, and President Obama has already pledged to withdraw the troops. Most Iraqis realize that the American people don’t want a long term major US commitment.
In Afghanistan President Obama is struggling with the decision of whether or not to send more troops there, and if so, what their task will be. While former Vice President Cheney says Obama is “dithering” (Bush and Cheney dithered on Afghanistan from 2003 to 2008, to be sure), the fact is that this is a very consequential decision, and there is no need to hurry. The President is correctly taking the time to examine the options and not simply make an easy political decision of going with McChrystal’s recommendation. His job is to make the policy call, the general’s job is to figure out how to implement the policy effectively.
Striking about each of these “wars” is how early military victory — the US defeated the Taliban within a month, Saddam fell within weeks of the initial attack — turned into lengthy quagmires with no clear exit strategy or no sense of what victory would look like — or if it were even possible.
The US went into these wars guided by the heady ideology of neo-conservatism, a belief that the US was a “unipolar polar,” uniquely capable of creating a new world order which would expand democracy, reinforce market capitalism, and be good for American business. Their argument seemed powerful. The US economy in 2001 had a budget surplus, and the early Bush tax cuts were designed to rekindle another economic boom, negating the impact of the stock price collapse in 2000. The Soviet Union was dead, there was no other major power on the horizon, so the US seemed at its peak — economically vibrant and the only major superpower. The world was ours if we have the will to use our power and shape reality to fit our ideology and interests.
The thing holding the US back, the neo-conservatives argued, was too much concern with what the rest of the world thought about us, timidness in foreign policy, and a lack of will to do what is necessary to reshape the world. Unipolarity doesn’t last along time, the neo-conservatives warned, we should use the power while we have the chance. It was a heady, bombastic, and extremely confident ideology. It mixed idealism (spread democracy and enforce human rights) with raw self-interest (protect US control of oil reserves, promote US corporate interests). It’s audacious confidence attracted hawks, it’s lack of concern for what others (especially “Old Europe”) thought of us attracted nationalists.
9-11 was the pivotal moment for this group. The attacks would give the American people the will to take the aggressive moves necessary to reshape the world. Most did not doubt success was likely. Afghanistan seemed to fall quickly, as few questioned the move to eliminate a regime as hated by the left as by the right. After 9-11, the quick victory over the Taliban seemed to demonstrate US resolve and power — even if Bin Laden himself slipped away. But, as Donald Rumsfeld noted, Afghanistan doesn’t have many targets. The place to really make their move and assert US dominance was Iraq.
The plan was to take Iraq, install a pro-American government, show that democracy can work in the Mideast, and make sure oil is in the control of pro-American forces. These actions would put Iran, Syria and every other nation in the region on alert that the US is willing and able to use its power. That would also allow the US to achieve peace in Israel by weakening those who support the Palestinians, and geopolitically trump Russia, China and the EU in the quest to secure long term oil supplies. The war wasn’t really about WMD in Iraq, even though that was the way it was sold. Nor was it about how repressive Saddam was — others in the world, including our allies in Saudi Arabia, are just as repressive. It was about a grand vision of reshaping politics in the Middle East, and assuring another “American century.”
“Everyone wants freedom,” the President claimed with confidence. The neo-conservatives boldly predicted that the “modern, secular” Iraqis could not only make democracy work (some said it was ‘racist’ to claim otherwise), but even pay the cost of their “liberation” with oil revenues. Instead, Iraq and Afghanistan have become symbolic of America’s decline. When the US leaves, Iraq will not be a true democracy, not be pro-American, and won’t even give the best oil contracts to US companies. It will have tarnished US moral legitimacy in the eyes of much of the planet, made American military threats less credible (not only didn’t we succeed in Iraq, but the public is sour on war and the world knows it), and fed into an economic crisis which continues to threaten the very status of the US as a major super power.
In Afghanistan the situation is even worse. Because of the size and demographics of the country, an Iraq-like “surge” won’t stabilize things. In Iraq security improved when the US chose to make allies of their former Sunni adversaries. Few expect the US to become allies with the Taliban in Afghanistan. If Obama chooses to continue with an unclear, open-ended mission this risks becoming a conflict that could eat his Presidency alive. Yet to end it inconclusively would at the very least be humiliating to the US.
After 9-11 the US suffered numerous delusions, which together created a self-image of a country second to none, economically vibrant, and with the right approach to politics and economics. In my last post, I outlined the delusional thinking which over thirty years set up the current economic crisis. Senator Fullbright once called this kind of attitude “the arrogance of power.” As a country we — especially the political leaders — got so caught up in the belief that we are something special, we are the best, we’ve found the right way to govern the country and run the economy, that we started to embrace delusions as reality. We saw ourselves as superior to others, yet isolated ourselves in an orgy of consumption, with little regard for trying to understand the rest of the world, or even acknowledging that reality of the suffering that takes place over so much of the planet. The cause of our current woes was delusional thinking.
Unfortunately, it continues. The anti-Obama rhetoric from the right tries to deny reality by blaming everything on Obama, with weird claims that he’s trying to impose socialism or somehow destroy our way of life. The left focuses on health care and the politics of the moment. The President has spread himself thin by tackling numerous issues, but has yet to really focus the country on the challenges ahead with a clear and coherent vision about how to move forward.
I will only be optimistic about the future when most Americans become realistic about the present.
Pam at Notesalongthepath asked me when I would post something explaining the current economic crisis. I’ve done so many posts about the economy I assume I had one that explained my view of what is happening, but there really is no one clear post laying it out. So I’ll attempt here to explain just what’s going on, why, and why it’s not likely to get better anytime soon.
In 1980 the US economy entered its worst post-war recession, one that would last until 1983. The pain was real — high unemployment, high interest rates to fight inflation, and major manufacturing sectors going out of business, most notably the steel industry. Nonetheless, the economic fundamentals were not all that bad. The US government had gone from total debt of 120% of GDP at the end of World War II to only 30% of GDP, budget deficits were small, and the US ran a current accounts surplus, meaning that we were a net investor in the world. The US could have responded to that recession by saving the manufacturing sector and investing in national infrastructure. Instead, the Reagan Administration made a series of bad decisions, starting a process that would yield increasingly unsustainable economic imbalances for the next thirty years.
First, the recession was ending in 1983 due to a dramatic drop in oil prices, which stimulated the economy. The oil price drop also eased inflationary pressures, allowing interest rates to go back down. All other things being equal, we were going into a clear recovery. Yet the Reagan administration increased budget deficits radically. Total debt went from 30% of GDP in 1980 to 60% of GDP by 1990. This hyper-stimulated the economy, creating an illusion of economic prosperity — you can think of the country as the equivalent of a family whose costs are declining but yet spending beyond their income through increased credit card debt.
Second, believing in the free market, the Reagan Administration allowed industries like the steel industry and manufacturing jobs to die out, to be replaced by jobs supposedly fitting our comparative advantage. It was thought these would be high tech jobs that would benefit our advanced economy, but it turned out to be mostly service sector jobs, often in the financial industry, which did not produce any goods. We started consuming more than we produced, as our current account went into deficit.
A current account deficit (not to be confused with a budget deficit or debt) means that we take in more from the rest of the world than we put back. For us, this was mostly a trade deficit. You can’t do that unless this is financed by foreigners buying US assets — property, bonds, stocks, currency, etc. In this case China, Japan, and the Arab world were willing to buy US bonds and currency. They trusted the dollar and thought these were good investments. More importantly we were purchasing goods from them, and they knew the money would cycle right back to their economy, bolstering their industrial sector. For China especially this was a win-win situation — they get a stake in the US economy, and we use that money to buy their goods, further stimulating their economy. At this point China has over $1 trillion of US assets, and the US relies on China to help finance the deficit. If China wanted to, it could launch a crippling blow to the US economy. That would hurt China too, but if you ever wonder why the US doesn’t ever really pressure China, this is the reason. In vulgar terms, they have us by the economic balls.
The current account deficit becomes a problem at 3% of GDP. The US hit that by 1990 and it kept growing. We kept consuming more than we produced. Moreover, the country as a whole went into debtor mode. Saving rates dropped, personal debt (credit card and otherwise) increased, to the point that now the country is about $60 trillion in debt if you take all sectors into account. Credit card debt alone is $1 trillion. Savings rates hit zero in 2006. Some economists sounded alarms over this, but the wealth illusion made it seem like savings were unnecessary. Instead of having money in savings, we had it in stock portfolios (in the 90s) and real estate (in the 00’s). That theoretically meant that we could dip into our wealth if we needed funds, and thus low interest savings accounts were irrational.
Yet the wealth illusion was built on bubbles. First was the stock bubble, where people literally believed all they had to do to get rich was buy some stock and watch it grow. We got addicted to the notion of something for nothing. People were borrowing to buy stocks, knowing they’d earn enough to pay back the loan and make money. It was quite literally too easy. And in 2000 (over a year before 9-11-01) the inevitable occurred: it crashed. The tech-heavy Nasdaq collapsed, and stocks started reeling. The current account deficit was up to 5% of GDP, and the only good news is that we briefly had small budget surpluses rather than deficits. But those surplusses were built on the bubble economy, and represented a kind of illusionary sense of economic health.
At this point in time a painful recession like that of 1980-83 might have been enough to correct the imbalances and force us to increase production to bring it in line with consumption (and balance our current account). Yet after 9-11, the US decided that we could not let terrorism bring down the economy. President Bush said the patriotic thing to do was to go shopping, interest rates were kept very low, and thus a new bubble formed, the housing bubble.
Again, a something for nothing mentality took over. Making money on real estate became easy, people could borrow from the equity on their home to buy more property, knowing it would go up in value. Or at times people would borrow against their home just to have a better lifestyle, invest in a company, or pay for college. With housing values rising, it seemed to be easy money. The claim was that though housing values might finally stop rising, real estate values never actually decline, so the investments appeared safe. Again, a wealth illusion spurred greater consumption, and by 2006 the current account deficit reached a whooping 7% of GDP. Budget deficits started to rise again as well, as a mix of tax cuts and war (I still cannot comprehend cutting taxes in a time of war) led to rising debt and deficits.
With the financial markets deregulated, bizarre financial products were put on the market. Mortgages were bundled and sold, and then those bundles were rebundled and resold. These ‘derivatives’ were wholly unregulated, and produced huge gains as people saw them as both safe, and rising in value by 10% or more a year. The perfect investment! On top of that, other financial products were sold that were really insurance policies on those mortgages. They appeared to be safe investments, and many buyers didn’t realize they were obligated to pay if that insurance was needed — meaning they could lose whole principle on those “safe” investments overnight.
When the housing bubble burst, this started a chain reaction. Note: the bad mortgages or subprime sector could not alone bring down the economy. If it wasn’t for how these got bundled up and turned into complex financial products, the housing bubble could have burst with containable damage, easy mortgages alone were not the problem. Rather, these complex and little understood financial products came crashing down, bringing the entire financial industry with them. Bear Stearns felt it first in March 2008, then the biggie came when Lehman brothers had to declare bankruptcy in September 2008.
By September 18, 2008 credit markets had seized completely, the financial system stood at an abyss. Without a dramatic injection of capital the financial sector was about to collapse, and with it the US and likely the world economy. If that had happened, a spiral into depression was all but guaranteed. That’s why free marketeers like Treasury Secretary Hank Paulson were forced to go for a massive government bailout, and why Alan Greenspan admitted he was wrong in trusting the market to “get it right.”
However, that is only the tip of the iceberg. The imbalances in the US economy not only are unsustainable, but it’s clear that China and the rest of the world are no longer willing to continue to finance a completely out of balance US economy. We need to start producing more, or we will be forced to consume much less. Even as we try to stimulate the economy, we do so by increasing debt, now at about 90% of GDP, and likely to rise to over 120% of GDP by 2015.
This has been a long post, but the upshot is this: there is no way we can right our economy without a massive decrease in our standard of living, and some kind of restructuring of our budget, especially as the baby boomers retire. The imbalances are real, and with the US no longer seen as a safe investment, countries will refuse to finance our debt and deficits. That means unemployment will be with us for quite awhile, and the US is in the midst of a severe economic decline/restructuring which will weaken us on the world stage, force a more isolationist foreign policy, and end the days of US global economic and military dominance. I suspect it will be at least a decade before things start to turn around, and even then it will not be like the heady days of 2006.
Or, as I tell my students, “my generation has enjoyed a thirty year party of wild excess, a kind of consumerist orgy. Now we’re leaving you with the bill. Sorry.”
In a panel discussion last week I said that November 9, 1989 may be the second most important day of the 20th century. (I put June 22, 1941 as the most important, since that’s the day I think Germany’s defeat in WWII became inevitable). It is the day that the Berlin Wall became irrelevant, as citizens of East Germany were allowed to cross into the West, and started physically chipping away at the wall. The Cold War was ending.
Communism did not fall because of what happened November 9th. It fell mostly due to internal collapse. Bureaucratic socialism didn’t work, was inflexible, denied personal initiative, and led to a system that from the late sixties onward was in constant decay. By the mid-seventies the Soviet KGB knew that they would face a major economic crisis in the eighties, but the political leaders didn’t believe them. Aging Politburo members were oblivious to reality, caught up in their own world of jargon and superpower ambitions.
By the mid-eighties the crisis was acute. Though the West vastly over-estimated the strength of the Soviet economy and political system, the Soviet government was becoming aware that things were starting to fall apart and they had no way to deal with it. Thus they chose a leader from a new generation, relatively young Mikhail Gorbachev, who argued that the system had to be opened (glasnost) and restructured (perestroika). He hoped to turn Communism from a system of the bureaucrats to one that took the needs of citizens seriously, and gave people the right to speak up and participate openly. It would ultimately fail — the system was incapable of such dramatic reform. Yet his efforts opened the way for real change in Eastern Europe. By 1989 Poland and Hungary were making dramatic changes, with Gorbachev signaling acceptance of even those changes with which he disagreed.
In East Germany, the leader Erich Honecker was from the old guard, aloof and convinced by his own ideology. He ignored or didn’t even understand how weak the East German economy was, and he dismissed dissidents as “immoral” for rejecting the state. Even as East Germans fled to the West through Hungary and Czechoslovakia in September and October of 1989, he thought the problem minor. As protests within East Germany mounted, he decided to end them with the “Chinese solution,” refering to the June 4, 1989 Chinese crackdown on their protesters.
But Gorbachev had convinced Honecker’s subordinates to torpedo such efforts and remove the aging leader from power. Honecker’s orders were ignored, and on October 17th he stepped down. The new government then tried to convince the public it would reform the system, yet protests continued to grow. By November 4th a half a million filled East Berlin’s Alexanderplatz to demand change. Then, on the evening of November 9th, it got surreal.
Gunter Schabowski, a member of the Politburo and East German press spokesman, was giving a press conference. It was to end at 7:00, but at 6:53 an Italian journalist asked about travel between East and West Berlin. Schabowski had papers about travel between East and West Germany (not internal Berlin), which was an issue to be decided at a Politburo meeting later that evening. He thought, however, that the paper was part of what the journalists had been given, and was already in effect. He read that travel would be allowed. When asked when it starts, he looked at his paper and read ‘immediately’ (unverzueglich). The journalists weren’t sure what to make of this, and a slightly confused Schabowski headed towards his next meeting. That Politburo meeting was to determine next steps at winning public support, and they left strict instructions not be disturbed.
West Berlin TV praised Schabowski’s unintended announcement and invited East Germans to come over. East German protest leaders rounded people up to go to the border crossings. Yet, since no decision to allow travel between the two parts of the city had actually been made, the border guards had their usual complement and orders — kill anyone who tries to cross. The crowds grew. East German radio reported Schabowski’s statements. The border guards called to get orders on what to do, but their calls went unreturned — the man who had to make the decision was a member of the Politburo, in a meeting that could not be disturbed. As time passed, frustrated guards decided to go ahead and make the decision to open the gates. East Berliners poured into the West. Soon they stood atop the wall, chipping away at the structure which symbolized communism — a wall was needed to lock people in, people desperate to escape the “workers and farmers paradise.”
When the Politburo meeting ended and they realized what happened, they knew there was no going back. Back in 1961 when the wall was built, President Kennedy came to the wall and gave his historic Ich bin ein Berliner speech (and yes, his phrase was gramatically correct), where he made the wall the symbol of communism: A repressive system that walls their people in, in contrast to the freedom of the West. When that symbol was breached on November 9th, East Europeans realized that the power to change their countries was in their own hands, and within two months Eastern Europe was transformed — mostly in a peaceful manner.
What is also striking about the fall of the wall is how it emphasizes the power of the people, not the governments. It was average East German citizens trying to escape through Hungary who started the crisis, and by October East Germans were willing to endure Stasi beatings, arrests and pressure to keep protesting and demanding change. They left the leaders speechless, they had no idea what to do to fix things. It is especially fitting and a bit ironic that a mistake made by a press secretary would lead to the wall’s demise — it shows how little control the government has when the people are willing to take charge.
Many people down play that day. Perhaps I magnify its importance because of my emotional connection to Germany and Berlin. I had been in Berlin in August of 1989, and visited the East. I recall the vast differences between the two parts of the city, and how sad I felt as I truly understood the meaning of the Cold War division. I talked to Germans who had tragic stories of families and loved ones divided by the wall, sometimes never seeing each other again.
I heard about the news driving in to the University of Minnesota on November 9, 1989. I took the elevator to the Poli-Sci offices on the 12th floor and started telling people what was happening. There was no internet news yet. A number of us went to the Lippincott room which happened to have a television. We tuned in and watched the scenes as people now were atop the wall. I realized I had to go home. The emotion was sweeping me thinking about the drama of the change and how totally unexpected it was. Experts on East Germany from all major political parties and some major research institutes had told me that summer that this kind of scene was impossible. The experts were caught off guard as well as the politicians.
I got home to my basement efficiency apartment on Lyndale, Avenue, and watched the scenes and interviews on my small portable TV with rabbit ears, letting tears roll down my checks as I was amazed at the meaning of these events, so glad I’d taken the chance to see East Berlin a few months earlier, just before things started to unravel. I was there literally in the final days of the “old order,” a week before events in Hungary and protests at home began. Watching history being made I felt a deep and immense sense of joy.
It was truly one of the great stories of the 20th century. The people take control and overthrow a regime that had oppressed them for half a century. A system in economic collapse falls peacefully. And though there would be problems in the transition to something new, and many in the East still believe western style capitalism goes too far the other way, nothing can diminish the meaning and drama of that day.
November 9th is an odd day in German history. On November 9, 1918 Philipp Scheidemann proclaimed that the Kaiser had abdicated and Germany would have a Republic. On November 9, 1923, in the midst of the great inflation, Adolf Hitler failed in his attempted Beer hall Putsch. On November 9, 1938, the Nazis started the wave of violence with the famous Kristallnacht, attacking Jewish shops and buildings. In a way, November 9, 1989 symbolically ends that story. The birth of Democracy in Germany, followed by the rise of Hitler, the violence of the holocaust, and the subsequent division of the country and Europe. That chapter of German (and European) history finally ended twenty years ago today.