“History shows that the United States has benefited politically and economically
from wars in Europe. The huge outflow of capital from Europe following
the First and Second World Wars, transformed the U.S. into a superpower…
Today, faced with economic decline, the US is trying to precipitate
another European war to achieve the same objective.”…
Sergey Glazyev, Russian politician and economist.
All of the problems we’re facing with debt are manmade… we created them.
It’s called fantasy economics which only works in a fantasy world.
It doesn’t work in reality…
Michelle Bachmann, former Republican Congresswoman from Minnesota.
That by Sergey Glazyev was from an article “My Money is on Putin” by Mike Whitney in August of 2014, when the US was trying to get Europe entangled in the Ukrainian crisis. The Europeans saw through the American scheme of snaring Europe into America’s war against Russia. Instead of getting involved in a war they decided to slap sanctions on Russia to appease their NATO ally. The sanctions have not worked out well either. Neither has the Syrian fiasco after the Russian involvement nor the logistical support to Saudi Arabia and its allies in the Yemen conflict. Everything is backfiring including the economic problems at home following the great recession of 2008.
Perhaps I can best explain the state of the American economy with reference to books on history and economics I’ve read. One was titled “Are We Rome? The Decline of an Empire and the Fate of America” in which the author Cullen Murphy drew political, social, economic and geopolitical parallels between the two empires. Students of history who’ve have read the voluminous works of Edward Gibbon “The History of the Decline and Fall of the Roman Empire” might recollect that according to Gibbon, the Roman Empire succumbed to barbarian invasions in large part due to the gradual loss of civic virtue among its citizens. There was also the underlying economic malaise rampant as the gap between the rich and the poor widened-Wall Street vs Main Street.
One cannot discount the problems of Rome attributed to occupation of distant lands and the logistics and cost of supporting its administration and armies. Today the US is in the same predicament.
Going on to the Great Recession of 2008, several economists and authors have been sounding alarms that the American economy has not recovered since but is in fact in a decline due to the hijacking of the economy by Wall Street financiers with backing by the US Federal Reserve. The Prussian political economist Karl Marx wrote “Finance is the final stage of capitalism”. Joseph Stiglitz is an eminent economist whose works focus on pitfalls of globalization, skewed income distribution and corporate governance. In an article co-authored with Hamid Rashid in The Guardian of 8 February 2016 titled “What’s Holding back the World Economy” Stiglitz stated that QE (quantitative easing) and low interest rates have disproportionately created wealth in the financial sector and inflated asset bubbles. It has done little for the real economy. The rules of the market need to be rewritten. Stiglitz and Rashid have correctly analyzed the ills of US Federal Reserve policies that favor Wall Street and resulting damage to Main Street (the people).
The French economist Thomas Piketty whose thesis in his book “Capital in the 21st Century” is that when the rate of return on capital is greater than the rate of economic growth over the long term, the result is concentration of wealth, and this unequal distribution of wealth causes social and economic instability. His works are the basis of a feature film in 2016 by New Zealand filmmaker Justin Pemberton. In reality this cannot be further from the truth and mirrors the works of Stiglitz. Thus far no economist has come forward challenging the works except the US Federal Reserve, Wall Street financiers, bankers and the ultra-rich who benefit from skewed policies that have damaged the foundations of American economic and social dynamics which had favored the US in the past. Majority of the Americans are burdened by debt advanced by the US Federal Reserve policies. Recently I came across an article in the Canadian CBC News “It’s not working: Why the old economic rules don’t add up anymore” by Peter Armstrong in which he quotes Benjamin Tal, Chief Economist with CIBC World Markets as saying that the economy today is much more confusing than it used to be.
There are many other works pointing to alarms about the state of the American economy and its resultant policies that are causing global problems. Probably the latest work that I’ve nearly finished reading is “Makers and Takers: The Rise of Finance and the Fall of American Business” by Rana Foroohar (Time economic columnist and CNN global economic analyst). Foroohar has brilliantly captured the key lessons of the subprime crisis of 2008. Then there is the economist Raguram Rajan (ex-Governor of the Reserve Bank of India). In 2005 as he warned about the financial fractures at the annual Federal Reserve Jackson Hole meeting, he was criticized by then US Treasury Secretary Larry Summers. Rajan was one of those economists along with Stiglitz, Nouriel Rubini (known as Dr. Doom) and Robert Shiller who warned of the 2008 crisis. Rajan in his 2010 book “Fault Lines: How Hidden Fractures Still Threaten the World Economy” warns that a potentially more devastating crisis awaits us if they aren’t fixed. The Wall Street Financiers, regulators, bankers, big business, US government and the US Federal Reserve continue to stick their heads deep in the shifting sands ignoring the problems that continue to build up.
As the two world wars catapulted the US as a superpower, the US Senate, Congress and White House may finally pull their heads out of the shifting sands to realize that a catastrophic war in the Middle East (where else?) may be the only remaining solution out of a pending economic crisis even if it means setting the Middle East region on a fire.
We learn from Cullen Murphy and Edward Gibbon that the decline of the Roman empire was caused by two underlying problems – economic and social decay, both caused by failure of the Roman emperors and governors to heed warnings. Several centuries later we find that there is an uncanny similarity between Rome and America. The economic problems have been lucidly stated by several economists. The social problems are far more visible, most deeply in rising debt, alcoholism, drugs, family violence, infanticide, homicide and law officers killing blacks- one that may eventually lead to an August 1965 type Watts riots that killed over 30 LA residents and caused extensive property damage, looting and arson.
Donald Trump whom I’ve termed the circus clown in my article “The Grand Global Circus: 2016 US Presidential Elections” has by now probably caused a deep wound among immigrants from Mexico and among blacks and Muslims. Trump entry in the presidential race is no mistake; it’s an establishment design to test the depth of issues facing America. Can these issues be fixed by some economic miracle or will it be an event along the lines that knitted America closer on 11 September 2001 or a war in the Middle East? No algorithm exists to predict either event except the distant beat of drums that the ear has to strain to hear.
Gulam Asgar Mitha is a retired Technical Safety Engineer. He has worked with several N. American and International oil and gas companies. He has worked in Libya, Qatar, Pakistan, France, Yemen and UAE. Currently Gulam lives in Calgary, Canada and enjoys reading and keeping in tune with current global political issues.