Boom or bust in Washington

Max Fraad-Wolff and Richard Wolff argue that America's model of unilateral militarism and hopelessly lopsided budgets is utterly unsustainable
November 2004

The last quarter of the 20th century yielded extraordinary capitalist prosperity in the US. Major multinational and multi-product firms and the richest 15 per cent of individuals reaped soaring wealth and social status. Five interconnected social changes produced these results. First, labour productivity rose exceptionally with the global installation of better computer and telecommunication systems. Second, developing economies sold their raw materials and low-value-added industrial commodities for less than had previously been the case, lowering labour and input costs. Third, right-wing politics lowered taxes on profits, deregulated private enterprise, enhanced corporate subsidies and weakened labour unions and left movements. (Today unions represent less than 8 per cent of private sector workers in the US.)

Fourth, real wages slipped downward, with few, small and short-lived exceptions. Together with rising labour productivity, this trend culminated in 2004 with company profits amounting to nearly 10 per cent of US national income: a multi-decade high. In contrast, workers responded to falling real wages by sending more family members to work for more hours and taking on debt without historical parallel.

Fifth, massive globe-straddling corporations consolidated media empires and connections, enabling the prevention or control of public understanding of and debate on expanding wealth and power. With almost religiously fundamentalist fervour, a media blizzard celebrated a magical 'new economy' of perpetual growth in which efficiency gains would pour endlessly from deregulated private enterprise and markets. Left-wing oppositional movements were demonised as anachronistic, wrong-headed and sometimes part of an evil empire. The collapse of the Soviet Union and other similar economic systems 'proved' the non-viability of alternatives to private capitalism.

Over much of the last 25 years, US stock markets reflected these conditions by enabling a hysterical, historically unprecedented accumulation, concentration and centralisation of wealth. The state accelerated the eradication of costly social programmes and mass public services forced on private capitalism by the Great Depression and the Soviet alternative. Public services were denounced as costly wastes of resources that should be diverted to profitable use. The state enlarged its already pre-eminent global military: the US defence budget for 2004-05 was worth $500 billion (four years previously it had been worth $300 billion). And today the US presents itself globally as absolutely supreme, a totally invincible economic and military juggernaut.

Yet myriad internal contradictions and costs of global empire reveal weaknesses that are boiling just below the surface and increasingly erupting to the shock and awe of a watchful world. The stock market bubble burst early in 2000. The promise of endlessly expanding prosperity collapsed. Unemployment and hardship rose as recession returned. Deepening social wounds, opened by rising inequalities of wealth, income and power among and within nations, burst out. European social democracy became more assertive in its competition with US-UK neo-liberalism. Celebrations of capitalist globalisation became increasingly unsure of themselves and decreasingly effective with world audiences. A crowd of diverse critics struggled successfully to obtain public hearing, contesting the 'historical inevitability' of global prosperity and charging the new global market instead with mass immiseration. As chief booster and leader of that model of capitalist globalisation, the US became the focus of critique, rage and resistance.

Instead of multilateral economic agreements, regional blocs increasingly reflect mounting conflict. Political movements and national governments, fearing the fallout from a faltering globalisation project, explore new alliances and strategies. US supremacy faces diverse economic and political challenges. Limits on the export of economic problems to the developing world are emerging. China, India, Brazil and the EU, among others, are rivals for local hegemony.

Domestically, equally serious problems loom. As real wages fall, and people respond by working and borrowing ever more, insupportable emotional and physical burdens begin to overwhelm family life. Countless national surveys demonstrate epidemics of divorce, family violence, parental-child alienation, drug-dependency and personal bankruptcy in the US. These difficulties were tolerated so long as Americans believed that the celebrated prosperity of the new economy would trickle down: they hoped for salvation from inflation in homes, stocks, bonds, mutual funds and pension accounts. Those hopes now threaten not to materialise. Delusions of a speculative reprieve slid with the stock market as the new economy melted away. Only the current, and unsustainable, housing price bubble has postponed serious middle-class crisis in the US.

Amid deteriorating foreign and domestic circumstances, the Bush presidency faced two major problems from the beginning of the administration. First, how could it restart and reinvigorate US-led capitalism given the mounting resistance abroad and criticism at home? Second, how could it manage the growing economic problems of the mass of workers frightened and angered by economic and personal crises? The attacks of 9/11 offered a timely opportunity to 'solve' these problems.

The regime turned disaster to advantage. It deflected blame for intelligence and military failures by a surge in militarism focused on 'foreign enemies' and by the construction of a massive 'homeland security' apparatus. Militarised US hegemony emerged as the plan for revitalising global capitalism. Thus Bush denounces capitalist globalisation's previous alliances with 'old Europe': only militarised unilateralism can crush the evil forces ('terrorism') that threaten the US, liberty and wealth. Wars on Afghanistan and Iraq were 'punishments' for evil deeds and a warning to all other evil-doers. In an important mutation, the new order features more and bolder unilateral invasions, controlled puppet regimes and sustained occupations. Hastily purchased UN endorsements or caricature 'coalitions of the willing' provide the fig leaf. Consequently, we see emerging blocs of almost overtly clashing interests rising throughout an increasingly troubled world.

Afghanistan and Iraq represent more than weapons of mass distraction from the failure to prevent 9/11: they are means to deflect mounting dissatisfaction at home by dramatically redefining the 'enemies' of hopes and dreams of prosperity (or at least of escape from indebtedness and collapsing families). The enemy is not an out-of-control bubble-prone capitalism; it is not corrupt, right-wing, big-business-controlled government. Fear and hate are to be directed instead against classic 'others' defined by their alternative ideologies and policy priorities, alien religions, strange ethnicities, poverty and 'lunatic' opposition to the prosperity and democracy that US supremacy bestows on all who submit. Against the enemy of terrorism pre-emptive wars and tough 'homeland security' are reasonable, urgent obligations for all good and godly people; opponents of this approach, including Muslims, Continental Europeans, civil libertarians, critical media and US 'liberals', all merge into increasingly undifferentiated lesser foes; because they are not 'with us', they 'are against us'.

Unilateral military globalisation entails massive costs. The surveys of global attitudes carried out by the Washington-based Pew Research Center reveal rising hatred for US policy on every continent. Diplomatic reverses and military losses grow. Coping with them in the short run (the outlays for invasions and occupations of Iraq and Afghanistan) is very costly. In the longer run, military unilateralism opens a vista of vast future spending. The costs of this new empire will require further reduced expenditure on social programmes, tax increases, even larger government deficits, or some mix of all three. Any combination risks serious instability. The risks and dangers built into the Bush programme are only aggravated by the fact that the US now needs to borrow $2 billion per day from foreign lenders. Deficits and debt have swelled to a size beyond manageability and without historical precedent.

The Republican leadership comprises those who propose a militarised US unilateralism as the next phase of capitalist globalisation, a continued reduction of what little remains of the US welfare state, and a return to the kind of private capitalism that existed in the US before 1929. The Republican mass base is religiously fundamentalist, celebrating US unilateralism as a Christian 'crusade' and recruiting its legions from a mass of exhausted, indebted and increasingly frustrated workers. The Republican strategy is simple: facilitate and subsidise the Christian fundamentalists to recruit those made desperate by falling wages, the costs of war and the relentless reduction of state services. The Democratic strategy is not only to gather all those frightened by unilateralism and Christian fundamentalism but also to appeal to workers by suggesting that less war and less unilateralism might make possible a slower reduction of the welfare state. The Democrats hope that enough workers will see that as a better bet than fundamentalism for providing them with at least some relief from the staggering blood and financial costs of empire.

But whoever the victor is in the US presidential election, the basic problems will be the same, and neither party's strategy offers any solution. The old question returns to confront everyone: how long will workers accept the decline in their life circumstances produced by the contradictions of a US-led global capitalism?


 

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