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THE UNFULFILLED PROMISE
It’s crucial to appreciate where we are. We may have avoided a repeat of the Great Depression, but we’re still very much living in a world in which the usual rules of economic policy don’t apply. That is, we’re living in a world governed by depression economics – and our understanding of the logic of depression economics… is our only defense against economic disaster – Nobel Prize winning economist Paul Krugman, from the last paragraph of his book, “The Return of Depression Economics – and the Crisis of 2008”.
The last paragraph of Krugman’s book explains the whole purpose of the book. We can get through this economic crisis if it’s handled properly. But if it’s not handled properly we could end up having a repeat of the 1930s. In the last chapter of his book, Krugman describes the main gist of our current economic crisis, how we got there and how we can get out. By way of comparison to the Great Depression of the 1930s, he says: While depression itself has not returned, depression economics – the kinds of problems that characterized much of the world economy in the 1930s but have not been seen since – has staged a stunning comeback. The world economy has turned out to be a much more dangerous place than we imagined. Depression economics Krugman explains that depression economics is the failure of the demand side of the economy, i.e. spending by the private sector has stalled. Without any direct reference to Ronald Reagan or his disciples, Krugman takes a swipe at the ideology that brought us to this point: The specific set of foolish ideas that has laid claim to the name “supply side economics” (Otherwise known as “trickle down” economics) is a crank doctrine that would have had little influence if it did not appeal to the prejudices of editors and wealthy men. But over the past few decades, there has been a steady drift in emphasis in economic thinking away from the demand side to the supply side of the economy. Krugman sums up the crux of our current situation: In the short run the world is lurching from (economic) crisis to crisis, all of them crucially involving the problem of generating sufficient demand… One country after another has experienced a recession that at least temporarily undoes years of economic progress, and finds that the conventional policy responses don’t seem to have any effect. Once again, the question of how to create enough demand to make use of the economy’s capacity has become crucial. Depression economics is back. In the last chapter of the hardback edition of his book, while making comparisons between now and the Great Depression, Krugman makes a point of saying that he doesn’t think this one will be as bad. But in the new paperback edition, he isn’t quite so sure: By the time this epilogue was written (June 2009) the resemblance had become all too close. Over the past year, by a number of measures, the world has experienced a slump every bit as severe as the first year of the Great Depression… This slump has led to mass unemployment… He then shows a graph that plots worldwide industrial production over time, for the Great Depression vs. now, to demonstrate the very similar first year trends. It looks a lot like this one:  How we got here My parents used to tell me that we couldn’t have another Great Depression because the lessons we learned from that tragedy taught us how to prevent similar future occurrences. And that has generally been the consensus of our nation’s economists, ever since we recovered from the Great Depression. But sometimes lessons are forgotten – or they are unlearned when influential elites change the story to further their own selfish interests. Krugman makes that point: How did this second great colossal muddle arise? In the aftermath of the Great Depression, we redesigned the (economic) machine so that we did understand it, well enough at any rate to avoid the big disasters. Banks, the piece of the system that malfunctioned so badly in the 1930s, were placed under tight regulation and supported by a strong safety net. Meanwhile, international movements of capital, which played a disruptive role in the 1930s, were also limited. The financial system became a little boring but much safer. Then things got interesting and dangerous again… The growth of the shadow banking system, without any corresponding extension of regulation, set the stage for latter day bank runs on a massive scale. These runs involved frantic mouse clicks rather than frantic mobs outside locked bank doors, but they were no less devastating. What we’re going to have to do, clearly, is relearn the lessons our grandfathers were taught by the Great Depression… Krugman talks about what he calls the “shadow banking system” (discussed in more detail in this post) – the taking on of investment bank functions by financial entities that are not formally labeled as banks but which actually were banks, in that they functioned as banks. It was all part of the general deregulatory atmosphere that began in the early 1980s with the Reagan Revolution. Krugman states what should have been obvious to all of those who have influenced our nation’s economic policies for the past 30 years: The basic principle should be clear: Anything that has to be rescued during a financial crisis, because it plays an essential role in the financial mechanism, should be regulated when there isn’t a crisis so that it doesn’t take excessive risks. Since the 1930s commercial banks have been required to have adequate capital, hold reserves of liquid assets… and limit the types of investments they make, all in return for federal guarantees when things go wrong. Now that we’ve seen a wide range of non-bank institutions create what amounts to a banking crisis, comparable regulation has to be extended to a much larger part of the system. In other words, to hell with the idea that we should rescue our financial elites with trillions of dollars of taxpayer money when they run into trouble (i.e. socialize their risks), while acceding to their wishes to be free of regulation (i.e. privatizing their benefits) when they do well. On the worthlessness of the bank bailouts Krugman was quite perplexed about the purpose of the bank bailouts, both under the Bush and the Obama administrations. This is what he said about the Bush administration bailout, in his book: At first, after the fall of Lehman Brothers, the Treasury Department proposed buying up $700 billion in troubled assets from banks and other financial institutions. Yet it was never clear how this was supposed to help the situation… It’s not clear whether banks will be willing to lend out the funds, as opposed to sitting on them. My guess is that… there will eventually have to be more assertions of government control – in effect, it will come closer to a full temporary nationalization of a significant part of the financial system… Nothing could be worse than failing to do what’s necessary out of fear that acting to save the financial system is somehow “socialist.” He didn’t have kinder words to say about the Obama administration’s plans to handle the situation. This is what Krugman had to say about Geithner’s bank bailout plan: The Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt… This isn't really about letting markets work. It's just an indirect, disguised way to subsidize purchases of bad assets. In other words, this is a gift from the American taxpayers to the banks – in the form of socialized risks and privatized benefits. How do we get out? Because the underlying problem is quite similar to the cause of the Great Depression of the 1930s, Krugman proposes a similar solution – the one that FDR utilized, and which worked so well then: What the world needs right now is a rescue operation… The obvious solution is to put in more capital… In 1933 the Roosevelt administration used the Reconstruction Finance Corporation to recapitalize banks… He was very critical of the Bush administration’s less than half-hearted efforts in this regard. And though he felt that the Obama administration took more of a step in the right direction, it still fell far short of what was needed: Mr. Obama’s prescription doesn’t live up to his diagnosis. The economic plan he’s offering isn’t as strong as his language about the economic threat. In fact, it falls well short of what’s needed…. A huge gap is opening up between what the American economy can produce and what it’s able to sell. And the Obama plan is nowhere near big enough to fill this “output gap.”… Only about 60 percent of the Obama plan consists of public spending. The rest consists of tax cuts – and many economists are skeptical about how much these tax cuts will actually do to boost spending. The bottom line is that the Obama plan is unlikely to close more than half of the looming output gap, and could easily end up doing less than a third of the job. Where we stand now Krugman is cautiously optimistic about our current situation. At the end of his book he says: At the time of writing (June 2009) things seem to be looking a bit better. Or to be more accurate, the rate at which things are getting worse seems to be slowing. For example, the United States is still losing hundreds of thousands of jobs each month – but it isn’t losing jobs as fast as it was earlier this year. The sense that the world economy was plunging uncontrollably into the abyss has eased. While the risk of total economic collapse seems to be receding, that’s a long way from saying that the crisis is over. Think of the world economy as a patient who was rushed to the hospital and seemed to be at risk of dying. Now the patient is off the critical list but is still very, very ill – with no hint of when a full recovery might happen. Things haven’t changed that much since Krugman wrote those words, as another 85 thousand jobs were lost in our country in the last month of 2009. The intersection of depression economics and politics Paul Krugman’s Nobel Prize in economics speaks for itself. What makes him an especially valuable source of information is that he makes every effort to bring his economic discussions down to the level of people who don’t have a great deal of background in economics. Other books of his that I would strongly recommend include: “The Great Unraveling: Losing our Way in the New Century” – a scalding critique of the George W. Bush administration’s fraudulent economic policies; and “The Conscience of a Liberal” – which dwelt largely with how FDR’s economic policies rescued us from the Great Depression and set the stage for several decades of economic prosperity, until being undone by the Reagan Revolution. Yet there is one very important dimension that Krugman does not cover in “The Return of Depression Economics”: the political dimension. Nothing better illustrates the omission of this crucial dimension than the last paragraph of the first edition of the book: We will not achieve the understanding we need unless we are willing to think clearly about our problems… I believe that the only important structural obstacles to world prosperity are the obsolete doctrines that clutter the minds of men. True enough as far as it goes. But I think we should ask how obsolete doctrines come to “clutter the minds of men” who ought to know better. With the ballooning of income inequality to obscene and unprecedented levels, some very wealthy people have acquired the means to influence national policy as never before. Gabriel Thompson explains how this power is abused, in an article titled “Meet the Wealth Gap”: It’s about the vast political power conferred by wealth, which can be deployed to support institutions pushing policies that magnify the wealth divide. (These institutions) subsidize senior fellows who … see something sinister in a living-wage movement… (They) call the movement a “sneaky way of bringing socialist economics to America’s cities”. In other words, these wealthy elites use their influence to push policies they perceive as benefiting themselves, no matter how destructive they are to the rest of humanity. They disingenuously disclaim the warnings of our best climate scientists, to argue that global warming need not be taken seriously, thus sheltering corporations that continue to pollute our atmosphere and thereby accelerating the warming of our planet, while accumulating immense profits. Naomi Klein explains how this works in “The Shock Doctrine”: Perhaps part of the reason why so many of our elites are so sanguine about climate change is that they are confident they will be able to buy their way out of the worst of it. The Rapture is a parable for what they are building – a system that invites destruction and disaster, then swoops in with private helicopters and airlifts them… to divine safety. Al Gore says it as well as anyone, in his book, “Our Choice – A Plan to Solve the Climate Crisis”. Referring to the denial of our global climate crisis, he says: The decision by powerful ideologues and self-interested corporate advocates to convert “questions of truth into questions of power” has produced lassitude in reaction to genuine, fact-based warnings of an onrushing tragedy with no parallel in all of history. |
The Unfulfilled Promise
The Unfulfilled Promise of the American Dream: The Widening Gap between the Reality of the United States and its Highest Ideals  Time for change  Notwithstanding the lofty sentiments and purpose of the U.S. Declaration of Independence, the reality of the United States of America did not then – and never has – lived up to its ideal. Our nation remains today a long way from fulfilling the promise implied by those ideals. Yet, our Declaration was a great start, and it has long shone as a beacon of hope for people all over the world. Throughout our history, while many have striven to close the gap between our highest ideals and the reality of our nation, others have focused on the accumulation of private wealth and power, at the expense of everyone else. In recent decades the latter have gained much ground, leading to increasing imperialism abroad and deteriorating democracy at home, characterized by routine (and legal) bribery of our public officials, the fusion of government and private corporate interests (corporatocracy), a corrupt election system largely in the hands of private corporations, a corporate controlled communications media, and the widespread acceptance of Executive Branch secrecy, routinely justified with little if any questioning, by the magic words “national security”. All of this is rapidly turning our country from the democracy proclaimed at our founding into a plutocracy (government by the wealthy and for the wealthy). The result is the most obscene wealth gap our country has ever known, the highest imprisonment rate in the world, rampant militarism, routine flaunting of international law, the least efficient health care system in the developed world, a pending environmental catastrophe that threatens to destroy the life sustaining forces of our planet, and myriad other problems that threaten to destroy our nation and tyrannize our people. My new book, The Unfulfilled Promise of the American Dream – The Widening Gap between the Reality of the United States and its Highest Ideals, explores the roots and consequences of the demise of our democracy, and why most Americans have been unable to understand this process or even become aware of it. A good understanding of why and how we have deviated so greatly from the ideals of our nation is the first and necessary step towards getting back on the right track and revitalizing our society. The book is currently being sold in electronic PDF format and can be purchased at http://www.unfulfilledpromise.com/Buy-the-... for $3.99. It will also soon be available in Amazon Kindle format. DU members who cannot afford to buy the book but would like to read it can pm me with your e-mail address, and I will send you a free PDF copy. I’ve previously posted on DU a slightly earlier version of the introduction to the book, which is also posted at my site. Here is the Table of Contents, followed by a brief description of the three parts of the book: TABLE OF CONTENTS Introduction Acknowledgements Prologue – What is Wrong with the United States of America? Part I – Root Causes of the Impending Demise of American Democracy Chapter 1 – Legalized Bribery Chapter 2 – Human Psychological Factors Chapter 3 – Corporatocracy Chapter 4 – Corporate Control of Media Chapter 5 – Corrupt Election System Chapter 6 – Government Secrecy Chapter 7 – American Exceptionalism Part II – A Sampling of Imperialist Actions Chapter 8 – Slavery and its Legacy Chapter 9 – Early U.S. Imperialism Chapter 10 – U.S. Imperialism in Cold War Chapter 11 – Iraq War and Occupation Chapter 12 – Afghanistan War Part III – Consequences Chapter 13 – Election of George W. Bush Chapter 14 – War and Imperialism Chapter 15 – Class Warfare Chapter 16 – Predator Financial Class Chapter 17 – Shock Therapy Chapter 18 – Contempt for Int. Law Chapter 19 – The “War on Drugs” Chapter 20 – Climate Change Chapter 21 – “War on Terror” Chapter 22 – Health Care Chapter 23 – Unaccountable government Chapter 24 – Response to 9/11 Attacks Epilogue PART I – Root Causes of the Impending Demise of American Democracy It is somewhat difficult to separate the causes of our problems from their consequences, since they combine to form a long chain of cause leading to consequence, leading to more consequences, etcetera. Nevertheless, it seems worth while to identify the root causes of our problems, those that occur early in the chain and lead to so many of the tragic consequences we see today. The only chance we have of reversing the demise of our democracy is through addressing and attacking its root causes. At the top of the list is the systematic bribery of public officials by the powerful corporations (Chapter 1) whom our government is charged with regulating in the public interest. Instead of calling it bribery, we call it “campaign contributions”, but what we call it isn’t as important as what it is. It is hard to fathom how democracy can survive when such a practice is legal and condoned. Working in tandem with our system of legalized bribery is the nature of the people who inhabit our country. That is not to say that Americans are inherently substantially different than any other people. Human beings are imperfect, and that is probably a major reason why in a world where civilization began more than five millennia ago, the oldest written national framework of government in the world today – the Constitution of the United States of America – is only a little more than two and a quarter centuries old. Chapter 2 explores the roles of basic human needs, authoritarianism, psychological defense mechanisms used to prevent us from perceiving reality as it is rather than as we’d like it to be, and corrupted ideologies in causing us to passively accept the accumulation of power in the hands of ambitious and ruthless individuals who care about little else than expanding their own wealth and power. When bribery of public officials is tolerated as an inevitable aspect of public life, government inevitably grows close to the wealthy interests that shower it with money in return for legislative and other favors. A malevolent symbiosis grows between the state and corporate power, resulting in rule by an oligarchy that is highly detrimental to the lives of ordinary people (Chapter 3). Using their accumulated wealth and power to manipulate our legislative process, the oligarchy grabs for more and more control of the communications media (Chapter 4) that are used to control the information available to and shape the attitudes of our nation’s people, in pursuit of their own narrow interests. Since the 1980s an orchestrated campaign has been underway to demonize “big government”, thereby paving the way for private corporate control over more and more functions that were previously deemed intrinsic functions of government. Among those functions is the running of public elections (Chapter 5) – the function that symbolizes democracy perhaps more than any other single function. Consequently, the purging of selected registered voters from our computerized voter rolls has become a routine recurring event throughout much of our country, and without a doubt determined the results of the 2000 – and probably 2004 as well – presidential election. Just as bad, more and more of the counting of votes in our public elections have been turned over to private corporations, which count our votes using electronic machines using secret software to produce vote counts that cannot be verified by anyone. Bribery, the fusion of government and private interest, fake and biased news, and corrupt elections are not things that government and its corporate allies want us to know about. Consequently, they construct walls of secrecy (Chapter 6) to keep us from obtaining information that sheds light on their activities. The perfect phrase for facilitating this is “national security”. When our government tells us that the “national security” requires that certain things be kept secret from us, the understanding is that to question such a pronouncement is unpatriotic, and to actually attempt to obtain the “secret” information may be treasonous. But indefinitely maintaining secrets from the American people can be very difficult, because at least some people want to know what their government is up to. So in addition to the formal mechanisms of secrecy, informal mechanisms are constructed (Chapter 7) to keep vital information away from us. One of the primary methods for doing this is to make certain sensitive subjects taboo – that is, to create the widespread belief that discussion of these topics is so outside the bounds of acceptable human discourse that anyone who discusses them should be shunned by society, or worse. The most common issue that falls into this category is any discussion that sheds light on the disparity between American ideals and the reality of life in our country today. PART II – A Sampling of Imperialist Actions in U.S. History Notwithstanding the fact that our founding document says that “all men are created equal” and speaks of the inalienable rights of humankind, the United States has throughout its history partaken of massive exploitation of other peoples. It is estimated that at the time of our birth, 18% of our population was black slaves. In our expansion westwards during the late 18th and 19th centuries, we decimated the original inhabitants of our continent, and often treated them with great cruelty. In 1846 we manufactured an excuse for war with our neighbor Mexico, in which we continued to expand our country westwards and southwards. In 1893 we began our overseas imperialism with the conquest of Hawaii. Our overseas expansion was greatly accelerated in 1898 with our participation in the Spanish-American War, which led to our conquest of Cuba, Puerto Rico, and the Philippines. With our arrival at world superpower status at the end of World War II, we began the Cold War, which led to and served as a rationalization for covert and/or direct military actions against myriad foreign nations over the next 46 years. With the September 11, 2001 attacks on our country, we declared a perpetual “War on Terror”, which served and continues to serve as an excuse to invade and occupy Iraq and Afghanistan, nations that posed no threat to us. We do not know when or if this perpetual war will ever end. We don’t know how many additional imperial conquests it will lead to. Most Americans don’t think much about all this. Many of these actions are done in secrecy, and the American people don’t find out about them until many years later – or we never find out about them at all. Those that we do know about are spun into the most favorable light, to make them seem benign or even noble. But these actions come at great costs: in the lives of our soldiers; in the ruined lives of the peoples of the victim countries; in trillions of dollars cost to our people and their future generations; in our international reputation; in anti-American hatred leading to terrorism; and, to our democracy itself. For how can a nation claim to believe in the inalienable rights of humankind specified in its founding document, while making a mockery of that belief in the way it treats other peoples? For that reason alone it is worth while to take a brief look at our long history of imperialist actions. PART III – Consequences In the Prologue I give a brief account of what I see as some of the worst and tragic consequences of the root causes that I discuss in Part I – to enable the reader to see where this book is heading. When elections of our public officials are for sale to the highest bidder… when our public officials are so addicted to the “campaign contributions” of their wealthiest constituents that they develop a symbiotic relationship with them… when our communications media are owned and controlled by an oligarchy of wealthy elites… when our citizenry lack the ability to differentiate propaganda from reality… when we allow machines provided by private corporations to count our votes using secret electronic software… then we should expect that the consequences will not be pretty or comfortable for the vast majority of our citizens. In Part III, I explore those consequences in much greater detail, in the hope that the reader will agree with me that these are very serious problems, and that they must be successfully addressed if our country is ever to fulfill the promise of its ideals, or even make progress in that direction. When enough Americans recognize our problems as problems, stripped of the gloss and spin put on them by our oligarchy, they will rise up and do something about them. Until then there will be no progress, and we are very likely to head in the direction of all the former empires of our planet, ending in chaos, widespread catastrophe, suffering, and ignominy. Profile Information Time for change
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