One hundred years ago
European civilization, as it had been known, was ending its life in the
Great War, later renamed World War I. Millions of soldiers ordered by
mindless generals into the hostile arms of barbed wire and machine gun
fire had left the armies stalemated in trenches. A reasonable peace
could have been reached, but US President Woodrow Wilson kept the
carnage going by sending fresh American soldiers to try to turn the tide
against Germany in favor of the English and French.
The fresh Amerian machine gun
and barbed wire fodder weakened the German position, and an armistance
was agreed. The Germans were promised no territorial losses and no
reparations if they laid down their arms, which they did only to be
betrayed at Versailles. The injustice and stupidity of the Versailles
Treaty produced the German hyperinflation, the collapse of the Weimar
Republic, and the rise of Hitler.
Hitler’s demands that Germany
be put back together from the pieces handed out to France, Belgium,
Denmark, Lithuania, Czechoslovakia, and Poland, comprising 13 percent of
Germany’s European territory and one-tenth of her population, and a
repeat of French and British stupidity that had sired the Great War
finished off the remnants of European civilization in World War II.
The United States benefitted
greatly from this death. The economy of the United States was left
untouched by both world wars, but economies elsewhere were destroyed.
This left Washington and the New York banks the arbiters of the world
economy. The US dollar replaced British sterling as the world reserve
currency and became the foundation of US domination in the second half
of the 20th century, a domination limited in its reach only by the
The Soviet collapse in 1991
removed this constraint from Washington. The result was a burst of
American arrogance and hubris that wiped away in over-reach the
leadership power that had been handed to the United States. Since the
Clinton regime, Washington’s wars have eroded American leadership and
replaced stability in the Middle East and North Africa with chaos.
Washington moved in the wrong direction both in the economic and
political arenas. In place of diplomacy, Washington used threats and
coercion. “Do as you are told or we will bomb you into the stone age,”
as Deputy Secretary of State Richard Armitage told President Musharraf
of Pakistan. Not content to bully weak countries, Washington threatens
poweful countries such as Russia, China, and Iran with economic
sanctions and military actions. Consequently, much of the non-Western
world is abandoning the US dollar as world currency, and a number of
countries are organizing a payments system, World Bank, and IMF of their
own. Some NATO members are rethinking their membership in an
organization that Washington is herding into conflict with Russia.
China’s unexpectedly rapid rise to power owes much to the greed of
American capitalism. Pushed by Wall Street and the lure of “performance
bonuses,” US corporate executives brought a halt to rising US living
standards by sending high productivity, high value-added jobs abroad
where comparable work is paid less. With the jobs went the technology
and business knowhow. American capability was given to China. Apple
Computer, for example, has not only offshored the jobs but also
outsourced its production. Apple does not own the Chinese factories that
produce its products.
The savings in US labor costs became corporate profits, executive
renumeration, and shareholder capital gains. One consequence was the
worsening of the US income distribution and the concentration of income
and wealth in few hands. A middle class democracy was transformed into
an oligarchy. As former President Jimmy Carter recently said, the US is
no longer a democracy; it is an oligarchy.
In exchange for short-term profits and in order to avoid Wall Street
threats of takeovers, capitalists gave away the American economy. As
manufacturing and tradeable professional skill jobs flowed out of
America, real family incomes ceased to grow and declined. The US labor
force participation rate fell even as economic recovery was proclaimed.
Job gains were limited to lowly paid domestic services, such as retail
clerks, waitresses, and bartenders, and part-time jobs replaced
full-time jobs. Young people entering the work force find it
increasingly difficult to establish an independent existance, with 50
percent of 25-year old Americans living at home with parents.
In an economy driven by consumer and investment spending, the absence
of growth in real consumer income means an economy without economic
growth. Led by Alan Greenspan, the Federal Reserve in the first years of
the 21st century substituted a growth in consumer debt for the missing
growth in consumer income in order to keep the economy moving. This
could only be a short-term palliative, because the growth of consumer
debt is limited by the growth of consumer income.
Another serious mistake was the repeal of financial regulation that
had made capitalism functional. The New York Banks were behind this
egregious error, and they used their bought-and-paid-for Texas US
Senator, whom they rewarded with a 7-figure salary and bank vice
chairmanship to open the floodgates to amazing debt leverage and
financial fraud with the repeal of Glass-Steagall.
The repeal of Glass-Steagall destroyed the separation of commercial
from investment banking. One result was the concentration of banking.
Five mega-banks now dominate the American financial scene. Another
result was the power that the mega-banks gained over the government of
the United States. Today the US Treasury and the Federal Reserve serve
only the interests of the mega-banks.
In the United States savers have had no interest on their savings in
eight years. Those who saved for their retirement in order to make
paltry Social Security benefits liveable have had to draw down their
capital, leaving less inheritance for hard-pressed sons, grandsons,
daughters and granddaughters.
Washington’s financial policy is forcing families to gradually
extinguish themselves. This is “freedom and democracy “ America today.
Among the capitalist themselves
and their shills among the libertarian ideologues, who are correct
about the abuse of government power but less concerned with the abuse of
private power, the capitalist greed that is destroying families and the
economy is regarded as the road to progress. By distrusting government
regulators of private misbehavior, libertarians provided the cover for
the repeal of the financial regulation that made American capitalism
functional. Today dysfunctional capitalism rules, thanks to greed and
With the demise of the American
middle class, which becomes more obvious each day as another ladder of
upward mobility is dismantled, the United States becomes a bipolar
country consisting of the rich and the poor. The most obvious conclusion
is that the failure of American political ledership means instability,
leading to a conflict between the haves—the one percent—and the
dispossessed—the 99 percent.
The failure of leadership in the United States is not limited to the
political arena but is across the board. The time horizon operating in
American institutions is very short term. Just as US manufacturers have
harmed US demand for their products by moving abroad American jobs and
the consumer income associated with the jobs, university administrations
are destroying universities. As much as 75 percent of university
budgets is devoted to administration. There is a proliferation of
provosts, assistant provosts, deans, assistant deans, and czars for
every designated infraction of political correctness.
Tenure-track jobs, the bedrock of academic freedom, are disappearing
as university administrators turn to adjuncts to teach courses for a few
thousand dollars. The decline in tenure-track jobs heralds a decline in
enrollments in Ph.D. programs. University enrollments overall are
likely to decline. The university experience is eroding at the same time
that the financial return to a university education is eroding.
Increasingly students graduate into an employment environment that does
not produce sufficient income to service their student loans or to form
Increasingly university research is funded by the Defense Department
and by commercial interests and serves those interests. Universities are
losing their role as sources of societal critics and reformers. Truth
itself is becoming commercialized.
The banking system, which formerly financed business, is increasingly
focused on converting as much of the economy as possible into leveraged
debt instruments. Even consumer spending is reduced with high credit
card interest rate charges. Indebtedness is rising faster than the real
production in the economy.
Historically, capitalism was
justified on the grounds that it guaranteed the efficient use of
society’s resources. Profits were a sign that resources were being used
to maximize social welfare, and losses were a sign of inefficient
resource use, which was corrected by the firm going out of business.
This is no longer the case when the economic policy of a counry serves
to protect financial institutions that are “too big to fail” and when
profits reflect the relocation abroad of US GDP as a result of jobs
offshoring. Clearly, American capitalism no longer serves society, and
the worsening distribution of income and wealth prove it.
None of these serious problems
will be addressed by the presidential candidates, and no party’s
platform will consist of a rescue plan for America. Unbridled greed,
short-term in nature, will continue to drive America into the ground.
Disclaimer: The contents of this article are of sole
responsibility of the author(s). The Centre for Research on
Globalization will not be responsible for any inaccurate or incorrect
statement in this article.
ROLAND SAN JUAN was a researcher, management consultant, inventor, a part time radio broadcaster and a publishing director. He died last November 25, 2008 after suffering a stroke. His staff will continue his unfinished work to inform the world of the untold truths. Please read Erick San Juan's articles at: ericksanjuan.blogspot.com This blog is dedicated to the late Max Soliven, a FILIPINO PATRIOT.
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