This is a reprint of my June 30, 2010 post. Obviously, it’s just as relevant today as it was then. It’s fair to say that nothing has improved since I wrote it, and many situations—there are now 41.8 million food stamp recipients—have gotten worse. The Housing Market continues to deteriorate. Unemployment according to the “official” statistics has not budged. The nation is heavily in debt (>100% of GDP) but has few prospects for economic growth, especially in light of the jobs and housing situtations. Since the financial blow-up, the bailed-out banking system has re-consolidated its power and ability to game the system.
Although no one can not predict the future, it appears that many apparently separate crises are interacting to create a Perfect Storm. Although we can’t know precisely what form this next Big Crisis will take, it is becoming more and more likely we will see another tragic blow up within the next 3 years.
As DOTE readership grows, I occasionally feel the need to return to first principles. Is America an Empire? Is this Empire in Decline? Why is this view of our situation illuminating?
I have never directly addressed the question of whether the United States is an Empire, and I never will. I simply assume it, for this proposition seems self-evident to me and explains so much. It is worth noting that America is not a territorial Empire, as with historical examples like Persia, Rome or Britain. The United States exercises its power through its enormous military presence all over the world, and through the sheer size of its economy, which makes up about 25% of world GDP. These factors alone have allowed America to dominate global politics and thus trample over other sovereign states.
If we assume that Empires rise & fall, and history tells us they always do, the question becomes where do we stand? Again, it is crystal clear that our power is waning, to wit—
- The Imperial Capital (aka. Washington, D.C) is now mostly out of touch with the citizenry, and thus no longer serves their interests.
- Corruption is rife in the Capital, with corporate special interests, especially in Finance, dominating any actions taken there. This makes a mockery of our so-called “Democracy.”
- The things that made us great are falling apart. For example, our Middle Class is disappearing at an alarming rate. Wealth & income disparity in the United States is greater than at any time since the late 1920s before the 1929 crash and the subsequent Great Depression. These developments are related to the outsourcing of our manufacturing base, which began in earnest in the early 1990s during the Age of Globalization.
- The United States is effectively broke, or soon will be. The private sector no longer functions. Our failed domestic sectors are bankrupting us (e.g. Banking or Housing—see Citigroup, or Fannie & Freddie). The public sector grows overly large. We can no longer afford our Imperial Adventures, and must borrow money from rising powers like China to carry them out (e.g. Iraq, Afghanistan).
- The United States is heavily dependent on resources (chiefly oil) that it does not produce domestically. Thus America must defend far-flung supply chains to secure these resources, but its ability to do so, or coerce others to sell us what we need, becomes weaker & weaker over time.
- Corruption itself, aside from plain vanilla bribery, is a symptom of a lack of Vitality and a tendency toward Paralysis & Complexity which always arises when an Empire goes downhill. It happened in Britain, it happened in Rome, and it is happening here. I have written that our get up and go has got up and went. In other words, we are stuck on The Wheel of Suffering.
By my reckoning, the Empire’s Decline began in the early 1980s. I date it then because a wide array of disturbing economic data points to that period. For example, it is no accident that the so-called “credit bubble” got started during that time, and later grew to disastrous proportions during the Lost Decade 2000-2009.
Increasingly, people did not earn a living wage and spend their money based on savings & income. They spent money they didn’t have because of easy credit. They speculated in stocks & houses, among other things. As Bill Bonner once pointed out, Easy Credit Is Stimulus. You can see why I find it a complete joke that we must now stimulate an economy that has been over-stimulated for nearly 30 years.
All of the above is incomplete, but I write about these issues every day here at DOTE. Let’s turn to the third question: Why is this view of our situation illuminating? I will turn to what might look at first glance like a trivial example. Consider the text below from economist Mark Thoma. I ran across this item today—
Financial reform legislation fails to remove an important advantage that large banks have over small banks:
If financial reform legislation passes in its present form, it will have positive features. It creates a relatively strong and independent consumer financial products protection agency, it forces most derivatives to be exchange traded or passed through clearinghouses — though important exceptions remain — and it provides regulators with resolution authority for large institutions in the shadow banking system. But overall, as with health care reform, the legislation is unsatisfactory in many ways—it leaves much of the job yet to be done — and it’s not clear that Congress will have the will to follow through.
In both health care and financial regulatory reform, much of the job is yet to be done. About the lack of effective action, the real question becomes are these two failures merely a coincidence? Or are they related to each other through a systematic inability to respond to our problems? Clearly, the answer to the first question is NO, and answer to the second question is YES—these failures are related, not coincidental. That’s what experience has told us for many, many years now.
And will Congress have the will to follow through? No way! Does anybody, including Mark Thoma, really expect they will?
These failures are merely symptoms of a faltering Empire. America is no longer able to respond to and fix its problems. Problems get worse, social inertia becomes more entrenched. We do not build high-speed rail systems. Instead, we think about (study) building high-speed rail systems. The oil spill in the Gulf of Mexico reminds us of our perilous oil dependency, but we can not, and will not, create a coherent, effective energy policy. And so on.
I don’t expect DOTE to become wildly popular because many Americans, especially the powerful, influential ones, are vested in the Failed System I have described here. Thus they argue back & forth about this policy or that policy, or they argue that we need to do this or we need to do that. Some policies are better than others, and some actions are more effective than others, but it hardly matters if nothing significant is going to happen in any case. Inside the Beltway, they argue about things like the war in Afghanistan, another failed policy which is completely irrelevant to the ordinary concerns of most Americans.
People who are vested in a Failed System do not acknowledge the failed nature of that system because if they do, the game is over. This is especially true if playing this absurd game benefits them somehow (e.g. they have a good job, some influence, some money, a book publisher, a nice home, etc.). I’m pretty much outside of things, and poor, so it’s easy for me to tell you the Awful Truth. My fall from grace happened years ago.
In the coming weeks & months, I will continue to document the Empire’s Decline. I believe it’s better than not to set your expectations about the future correctly, I believe it’s better than not to be prepared for what’s coming rather than let it take you by surprise. I’m not happy about any of this, but these are the Times We Live In.