Class War in America

The super-rich have launched a class war against the people of the U.S., a war that, for most of our politically naive population, was revealed only with the Financial Crisis of 2008, yet the super-rich continue to gain ground. An extraordinarily clear statement describing how this class war against America is being fought was given in testimony before Congress on July 10, 2012 by Dennis Kelleher, President and CEO of Better Markets, Inc. His statement is invaluable in outlining concisely what occurred and forecasting in detail the likely consequences of a continued failure of Washington to start representing the interests of, not corporations and the super-rich, but the American people. Every word is worth reading. What follows is just the outline.

Customers, credit and credit markets, job creators, businesses, investors and
consumers – all of Main Street and much of America, for that matter – have been devastated by a terrible economy that is a direct the result of the financial collapse and economic crisis that began in 2007, reached a peak in 2008-2009 and continues to this day.  Indeed, it was the worst financial collapse since the Stock Market Crash of 1929 and it is the worst economy since the Great Depression of the 1930s.

While many played a role in the recent collapse and crisis, Wall Street is at the top of the list of those responsible because it caused that collapse and crisis by the reckless and irresponsible creation and distribution of toxic and often worthless securities, among their many other actions.

Unfortunately, Wall Street, many of the major financial industry participants, and their trade groups and other allies deny or minimize their role in the financial collapse and the economic crisis.  Moreover, they are trying to obscure and conceal the cost of the collapse and crisis.  Perhaps most importantly, they are also engaged in a comprehensive misinformation campaign that attempts to refocus the public debate away from the crisis and Wall Street’s role in creating it to the new financial reform law and the rules being put in place to prevent
another crisis and protect the American people, taxpayers, Treasury and economy.

Thus, before the “impact” of the Dodd-Frank financial reform law–more properly
understood as the Wall Street re-regulation law – on customers, credit and job creators can be properly considered, a thorough discussion of the Wall Street-created financial collapse and economic crisis that gave rise to that law must come first.  After all, it would be impossible to evaluate the impact of a law without the context and an understanding of why the law exists, what the law was intended to do and how it was designed to do it.

Wall Street was able to cause the collapse and crisis largely because it used its
economic power to gain political, academic, media and other power that enabled it to tear down the many laws, rules and regulations put in place during the Great Depression of the 1930s to protect the American people from Wall Street’s recklessness and greed.
 It must be remembered that, after those laws, rules and regulations were put in place, our country did not have a financial or economic crisis on that scale for more than 70 years.

It must also be remembered that, even with all those many laws, rules and regulations– a truly unprecedented degree of government regulation of Wall Street and the U.S. capital markets – our country prospered; we built the largest and most broad-based middle class in the history of the world; and Wall Street, our financial industry, our nonfinancial businesses and our economy all thrived.
By 2000, virtually all of those protections were torn down and Wall Street was not just de-regulated, but almost entirely un-regulated.  The results are clear: after 70 years of regulation that protected the American people, our financial system and our economy, it took just 7 years for Wall Street’s unregulated investment, trading and other activities to cause what almost became a second Great Depression.
Those actions by Wall Street required the U.S. government to spend, lend, guarantee, pledge, assume, or otherwise use trillions of dollars to save Wall Street from itself and to prevent the crisis from becoming even worse.  While they may deny it, every single major bank and all of the other too big to fail financial institutions would have collapsed into bankruptcy but for the actions of the U.S. government and the taxpayer dollars used to bail them out and put them back on the road to profitability. Thus, JPMorgan Chase, Goldman Sachs, Morgan Stanley, Merrill Lynch, Bank of America, AIG, Citigroup and the others are only
in business today because they were all bailed out by the U.S. government and the American taxpayer.

But, those bailouts were only part of the costs of that crisis.  The economic wreckage caused by Wall Street’s actions has touched every corner of our country:  high and persistent unemployment and under-employment, historically high foreclosures and underwater homeowners, slow-to-no economic growth, business failures, untold wealth destruction, widespread and growing poverty, and so many other costs continue to mount, including, increasingly, a loss of belief in the American Dream.

Just one measure of these costs reveals how deep and overwhelming the crisis has been and continues to be on our country:  the Federal Reserve Board recently released a study that shows that the net worth of the median family declined 38.8% in just three years, from 2007-2010, wiping out more than $7 trillion in wealth – almost two decades of  crisis. [Dennis Kelleher in testimony before Congress.]

That is what class war in America looks like.


The American Dream…for the 1%

When the rich get richer while the rest all get poorer and the rich campaign to increase their privileges, it amounts to class war.

(Click to View)

Democracy Now [6/6/12] pointedly describes the current state of the American Dream:

Several months before Occupy Wall Street, the Nobel Prize-winning economist Joseph Stiglitz wrote “Of the 1%, by the 1%, for the 1%,” an article for Vanity Fair. He returns to the subject in his new book looking at how inequality is now greater in the United States than any other industrialized nation. He notes that the six heirs of the Wal-Mart fortune command wealth equivalent to the entire bottom 30 percent of American society. “It’s a comment both on how well off the top are and how poor the bottom are,” Stiglitz says. “It’s really emblematic of the divide that has gotten much worse in our society.” On Tuesday, Bloomberg News reported that pay for the top CEOs on Wall Street increased by more than 20 percent last year. Meanwhile, census data shows nearly one in two Americans, or 150 million people, have fallen into poverty or could be classified as low-income. “United States is the country in the world with the highest level of inequality [of the advanced industrial countries], and it’s getting worse,” Stiglitz says. “What’s even more disturbing is we’ve [also] become the country with the least equality of opportunity.”

The “rich enriching themselves by stealing from the poor” is not just a slogan; this is what it looks like. When the U.S. has the highest level of inequality among industrial countries and the least equality of opportunity, and the elite of the business world protected by top politicians in both major parties continue to demand more government welfare (e.g., low capital gains taxes) and less regulation, that adds up to class war.

Voting for the National Interest…and Yours

Unless you happen to be a multi-millionaire living only for today and with your money carefully hidden off-shore, understanding the “national” interest is easy; it is the same as yours.

Workers are disillusioned and giving up, while the stock market is booming, and income disparity was at historic heights even back in 2007 when the anti-regulatory Republicans were mumbling nonsense about the tide that “lifts all boats.” Over the last five years we have all seen what has happened to the boats of virtually everyone. The socio-economic foundation of American democracy is cracked and crumbling.
The story of the post-Reagan era up to 2007 is given in the astounding chart to the right (made by Mother Jones but using Congressional Budget Office data) showing how the “Reagan Revolution” totally ignored the bottom 80% (!) of Americans and passed a few crumbs to the next 19% in order to enrich the top 1%. As for the story of what has happened since 2007 (with the Democrats now fully engaged in running the bipartisan financial system by the rich, of the rich, and for the rich):

At 63.6%, the portion of the working-age population participating in the job market is now at its lowest level since 1981. [CNN 5/4/12.]

A choice does exist, though few Americans being impoverished by this bipartisan government of, by, and for the rich, seem awake enough to consider how their votes relate to their financial tribulations.

The Choice
The choice is to recognize the control of the super-rich over the two-party system and walk away by voting for independent parties. Consider, for example, the specificity of this comment by Jill Stein, candidate for Green Party nomination:

The Green New Deal will end unemployment in America. Of course, such a thing as ending unemployment would never occur to Washington politicians because their corporate backers depend on the threat of unemployment to keep wages down. But ending unemployment, and more, is front and center on the minds of Greens.
As Greens we are committed to im­proving the conditions of working people by an immediate halt to home foreclosures and evictions, and guarantying health care for everyone as a human right through Medicare for All.

Could Jill Stein, if elected President, achieve these goals? Hard to say, but at least the goals she sets are clear (e.g., health care as a right, a halt to foreclosures) and are in the national (not elite) interest.

Want to Do More Than Just Vote?

Participate in the Take Back the American Dream Conference

Do Not Mention the Israeli Threat

After the mess created globally and domestically by the U.S. campaign against Islamic independence, Washington may find the idea of a nice, clean little surgical strike too good to resist.

Americans are protesting in the streets with sufficient vigor to irritate the elite. The brutal response of police combined with the hostility of various mayors makes that pretty clear. And since the elite has, in the three years of recession and unemployment done little to rein in banks or clean up the economic mess, unless something changes, the protests seem likely to get worse.

Internationally, the U.S. is back on its heels in Iraq, which is showing a degree of independence that must be embarrassing to the imperial crowd (though it could of course be considered an achievement by a democracy that wanted to lead by example rather than brute force). Meanwhile, Israel’s diplomatic position in the world is ever so slowly crumbling, the U.S. has seen Somalia slip totally out of its grasp, the Arab Spring made the U.S. look irrelevant (even worse than being hostile), Iran’s influence is spreading, Lebanon is lost, Turkey is disenchanted, and Afghanistan is a slow-motion disaster. China sits grinning in the distance like the Cheshire Cat.

Is it possible that the President facing, simultaneous domestic and international messes that are steadily getting worse, might be tempted to surrender to the vociferous Israeli lobby and sacrifice U.S. national security to A) satisfy the demands of elite extremists ruling Israel for war against Iran to distract Israeli voters from the Palestinian issue and B) to distract U.S. voters from the combined domestic and international messes?

Is it possible that American voters will be tricked once again by the images of pinpoint bombing–this time no doubt accompanied by not-so-pinpoint mushroom clouds–into an emotional outburst of zenophobia and unearned trust in their leaders?

Iran &Israel’s Armageddon Option? [IsraCast 10/30/11.]

IAF chief must save Israel from futile attack on Iran [Haaretz 11/2/11.]

Netanyahu trying to persuade cabinet to support attack on Iran [Haaretz 11/2/11.]

Well, just consider this: in Israel, the idea of nuclear aggression against non-nuclear Iran is being loudly debated by the thinking public. In the U.S.–the country that must give permission, do most of the fighting, and pay the bill for any such insanity that may be implemented–of course no one is saying anything. Mentioning such things in public would, after all, be rude. Israel and the U.S. “share values;” the two are a “team.” So to question publicly an Israeli plan, even if promoted to meet some special agenda like getting reelected or distracting the world from Israel’s war against the Palestinian people, even if the plan may end up crippling U.S. national security, well…if we publicly discussed such a plan, we just would not be “team players.”

Elizabeth Warren Speaks the Truth on the Economy

There is a class war in the U.S., and the financial crisis exposed it to all, but those under attack–the American people–have not yet begun to fight back against the super-rich.

Ben Bernanke had the opportunity recently to tell the truth about the economy and evaded it. Others are doing far worse. So what would an honest person in public office say? Elizabeth Warren, who should at a minimum be our Secretary of the Treasury, just said it:

There is nobody in this country who got rich on his own — nobody.
“You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory — and hire someone to protect against this — because of the work the rest of us did.
“Now look, you built a factory and it turned into something terrific, or a great idea. God bless — keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.” [As reported by Campaign for America’s Future.]

Now that is honesty. Can you tell the difference between that and the drivel you hear from your representative in your state capitol or Washington?

The underlying issue here is of course the hypocritical references to “class warfare” being bandied about by those defending privilege. They are right: it is class warfare, but what Americans need to understand is what those classes are in the U.S. today. The conservative attempt to make an under-the-table allusion to the old Soviet Union merely illustrates their ignorance about world history…or their assumption that you are too ignorant to realize you are being cheated. Class warfare in 1917 Russia grew out of a huge majority in Russian society of poor peasants and poor factory workers. That has little to do with modern America, where the story since WWII and arguably since 1776, has been one of an expanding middle class. 

Two generations ago, Americans congratulated themselves on being in the process of rapidly inventing the world’s first 100% middle class society. Poor existed still, but any poor individual had a real shot at rising into the middle class and permanently keeping his family there. The rich existed too, but they increasingly seemed just like the rest of us except a bit luckier. 

That dream is obviously off the charts today, with the explosive growth of the permanent poor at one extreme (if one can term some 40%!! of the population an “extreme”) and the equally explosive growth of a thin layer of super-rich now almost totally out of control at the other. Don’t relax in the impression that the U.S. is implementing a three-class society, with “you” comfortably in the middle, however. The trends of foreclosures, employment, wage levels, hours worked, availability of jobs for those who want jobs (excluding truck driver in Afghanistan), house values, job security, job benefits, and pensions all suggest that the middle is being sucked into the bottom.

The trends toward 1) a poor majority, 2) a steady weakening of the middle, and 3) a distant, thin layer of the super-rich controlling a steadily rising percentage of total national wealth at the top jointly lay the foundation for the evisceration of democracy and a rude awakening from the American Dream. Now, this brings us to class warfare. The class warfare that exists is a war by the super-rich to exploit everyone else. You don’t have to read socialist analysis to see this, though you owe it to yourselves to get that education; you don’t even have to read the commentary of leading economists (e.g., Robert Reich, Paul Krugman, Joseph Stiglitz, or William Black); just take a look at the executive summary of the recently published U.S. Senate report from the Permanent Subcommittee on Investigations (“Wall Street and the Financial Crisis“) on the fraudulent behavior of the super-rich that brought us the endless recession.

The Senate report lays out in no uncertain terms what it means for the super-rich to be “out-of-control,” detailing such “shoddy lending practices” as “steering” customers to high-risk mortgages [3] and a pattern of “unacceptable lending and securitization practices.” [4] Former U.S. financial regulator William Black pointed out the elephant in the financial room by posing the question:why, this is the greatest financial crime in the history of the world and no one senior, at any of the major places that drove the crisis, has gone to jail?[Interview on]

Ms Warren has cut to the chase: the point of the war of the super-rich is to evade responsibility for building the future.

Military and Financial Adventurism: Two Sides of a Bad Coin

Global war against Muslim political activists and domestic economic crisis both appear here to stay, so it is high time for Americans to recognize that they are connected and to start trying to figure out how global war and domestic economic crisis impact each other.

Two long trends characterize the political environment of the U.S. today: an expensive, forward-leaning foreign policy and a debilitating economic crisis. Neither is being resolved. If fraud is the act of selling something on false pretenses, then both Washington’s policy toward the Islamic world and the joint Washington-Wall St. attitude toward the behavior of Big Finance are fraudulent. Washington is selling its militant stance regarding global political Islam as in the interests of U.S. national security, even though it is actually undermining that security by provoking hostility. Washington is selling its coddling of Big Finance as “reform,” even though it is precisely the lack of thorough reform that is setting us up for a second financial crisis. The situation in each policy realm is in fact so bad that the moderate tone of the above words itself approaches deception. [Those who would like to read a summary of U.S. policy toward the Muslim world that does not try so hard to be polite can turn to the award-winning U.S. foreign policy reporter Nick Turse; those who want the criminal nature of the financial crisis spelled out for them can turn to economist and former Federal financial regulator William Black.]

That the U.S. faces these two adverse trends simultaneously is obvious, but these two trends tend nevertheless to be considered in isolation. Therefore, the incredibly dangerous, non-linear ways in which the two might feed off each other is overlooked, as are the potential solutions that might be obvious were we to think of them together. For example, the obvious solution to the budget crunch is to stop wasting so much money spinning wheels in counterproductive efforts to control an endless series of Muslim cultural, political, psychological, and economic brushfires not amenable to military solutions in the first place.

Before focusing on solutions,  however, we need to understand the context in which we as a society currently find ourselves, and “train wreck” is not the appropriate metaphor; more accurately, the appropriate metaphor is “double train wreck.” The problem is not just that Washington faces two major problems, but that each is making the other worse. The military-political crusade against not just presumed terrorists but a global array of politically active Muslim groups advocating justice for Muslim societies rests on moral grounds and national security grounds concerning which debate is perhaps possible, but one thing is clear: Washington’s approach is expensive.

That drain of resources for military adventures leaves less to combat the weakened economy that has resulted from the financial adventures of gambling bankers, brokers, and mortgage firms. In addition, America’s foreign creditors are increasingly reluctant to loan us the funds to power a military campaign they find distasteful in the first place, while such trade partners as Saudi Arabia are looking for less controversial partners, and allies such as Turkey beginning to view the U.S. as a hopelessly incompetent global leader. The links also work the other way: a gutted economy of unemployed workers combined with a financial system now focused not on investing in the American economy but on manipulating the savings of Americans to enrich the elite can hardly avoid weakening the ability of the U.S. to spend about half the world’s military budget all by itself. So the war undermines our ability to maintain a strong economy, while the weak economy undermines the war. The urgency for Americans to understand that these two trends are interacting is hard to overstate.

Nevertheless, all that is, frankly, obvious. What is not obvious is exactly how the two negative trends of endless military adventure and endless economic crisis will interact. Since the public debate pays little attention to the fact of their interaction in the first place, it is not surprising that little insight about the actual dynamics of how these two trends interact is available. Are the interactions additive or multiplicative (i.e., exponential)? Is there a time delay that will generate nasty instability? Is there a logical approach to resolving the two problems jointly, whereby we need to do X on foreign policy in tandem with or before or after we do Y on the domestic economy?

It is a safe bet, unfortunately, that no one knows. Suffice it to say that since neither adverse trend shows any sign of being resolved, we’d better start trying to figure out how global war and domestic economic crisis impact each other.
Technical Note: I kept technical terms out of the above overview, but the implication is that the nexus of domestic economic trends and foreign policy constitute a complex-adaptive system characterized by exceedingly complex causal dynamics. Therefore, not only is the prediction of any specific event hard because all the parts are evolving, but surprise is easy to predict because the underlying forces work in irregular ways. Recent examples of surprise include 9/11, the bursting of the mortgage bubble, the size of the CDO market, the viciousness of Israel’s invasion of Lebanon in 2006…

Do you want more surprises?

The Appearance of Elite Collusion Against Democracy

Apparent fraud brought us the financial crash of 2008 and resultant, on-going tsunami of (permanent?) unemployment: apparent fraud throughout the whole system of elite rule, which was characterized by government agencies concealing information to prevent open democratic debate, rosy scenarios, conflicts of interest, and failure to hold anyone responsible for his actions. Will those leaders stay under this cloud of apparent guilt for the rest of their lives, staining the name of democracy, or will they have their day in court?
The shocking and sobering expose of corporate-government financial collusion to enrich the rich by stealing from all the rest of us offered by Gretchen Morgenson and Joshua Rosner in Reckless Endangerment concludes with the following assessment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010:
It did not insist that large and unmanageable institutions be cut down to size to alleviate their threats to taxpayers in the future. Nor did it increase the accountability of those running institutions that will need government assistance in the future.
Therefore, despite this presumed reform of the corrupt U.S. financial system, will, they ask, a debacle like the credit crisis of 2008 ever happen again? Their answer: Most certainly, because Congress decided against fixing the problem of too-big-to-fail institutions when it had its chance. [304-305]
Congress failed the American people. That is the outside peel of the infinitely-layered onion of elite corruption.
As for why Congress failed, peeling back the second layer of the onion makes that question is easy to answer: the foxes still guard the henhouse. As the authors make painfully clear, many of the key individuals in charge of bending and breaking the rules, of looking the other way and of carefully planning and implementing fraudthose there at the creation of economic ruin for millions of Americansremain either in power officially or active behind the scenes. No real prospect of bringing these men to justice is visible on the horizon.
Ripping one more layer off this rotten political onion, the problem goes well beyond the handful of corrupt, short-sighted, and arrogant politicians, Wall Street executives, and mortgage company managers named in Reckless Endangerment. As the authors make clear, the real rot was systemic: the collusion not just of individuals but of the institutions at the core of the system, including Wall Street, mortgage companies, rating agencies, the privileged semi-governmental Fannie Mae, Congress, the White House, both the Democratic and Republican branches of the monopolistic/elitist political party that runs the whole show, and most shockingly even the actual regulatory agencies designed to prevent such corrupt and apparently criminal governance.
From all sides, the leaders stood shoulder-to-shoulder bulldozing aside every courageous, far-sighted, and patriotic civil servant who warned of the coming disaster. Whatever other lesson one takes away from the financial collapse of 2008, we should all remember this one: it was no surprise. It resulted from the willful denial of truth and a literally incredible inability on the part of everyone who was profiting to remember the warnings of the very recent past (the original Depression, the S&L scandal of the late 1980s, the Long-Term Capital Management scandal, the 2001 Enron scandal, the 2001 crash of the CDO [collateralized debt obligation] market, the 2002 WorldCom scandal) in the interest of maximizing personal profit. And who can blame the thieves? After all, we let them keep what they stole, and it seems that no one wants to know how many layers of the onion are rotten.
It is hard to imagine how faith in democracy in America can be restored unless those members of the elite under the cloud of a prima facie case of criminal behavior can have their day in court to make the case to the American people that they are in fact not guilty. If they by some miracle do not deserve to be jailed, they have the right to clear their names.
Far more important, the American people deserve closure on what must be one of the most egregious betrayals of the American people by a rapacious gang of the ruling elite in American historyor perhaps not. Perhaps if the Geithners, the Raines, the Greenspans, the Blankfeins, the Bensingers, the Weills, the Lewises, the Paulsons, the Gramms, the Leaches, the Blileyes, the Franks, the Johnsons, the Clintons had their day in court, they would explain how they all had our best interests at heart.

The Appearance of Fraud

Republican member of the House of Representatives Darrell Issa has been trying to protect Goldman Sachs from being investigated while pouring his wealth into Goldman accounts. If he thinks Goldman is a valuable and upright American institution, then why is he afraid of an investigation that could exonerate Goldman and restore its tattered reputation?

American Decline?

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We have reached a level of political irresponsibility over the past 35 years, and specifically over the past decade, where we can now quite realistically see the possible collapse of the U.S.-centric world order as the U.S. is allowed to decay from within.
The core assumption of the above statement, which introduced The Speech Bernanke Should Have Given, is that the U.S. is in decline. Clearly, no military competitor is even on the horizon, despite the grumbling about China’s launching of a two-decade old ex-Soviet aircraft carrier. The U.S. economy also remains enormous, though the total GNP of 1.3 billion Chinese is now approaching the GNP of 300,000,000 Americans and the two countries are dangerously linked by American reliance on Chinese loans. So, is the U.S. truly in decline?
American decline is more subtle. A traditional, WWII-style frontal clash between the U.S. military and that of any conceivable enemy would surely result in a quick U.S. victory, but such a situation is utterly unlikely. Meanwhile, the enemies the U.S. has faced on the battlefield seem always just beyond American reach. The U.S. has not been able to conquer either the insurgents of Afghanistan or Iraq, failures that suggest a significant decline in the ability of the U.S. to wield its weapons effectively. What matters is not the number of guns and the size of bombs but the degree to which one’s weapons enable one to achieve one’s goals. It is difficult to identify a single national security goal that the U.S. has achieved by force in the last decade: the terrorist campaign against Iraqi civilians that did not even exist when the U.S. invaded not only continues but is intensifying; Taliban influence not only continues but is on the rise in Afghanistan; Hamas seems increasingly secure in Gaza, while Palestine as a whole has seized the initiative in its struggle for freedom from Israeli occupation; Hezbollah is the majority party in the Lebanese government; anti-Western Islamic militants are increasingly influential in Somalia. The U.S. today is brilliantly qualified to win WWII; it is dismally unqualified to resolve issues such as the worldwide Muslim grievances about the way they have been treated by the West. Obama’s response to the Arab Spring, albeit far more realistic than Neo-Con militarism, nevertheless continued to demonstrate a lack of comprehension in Washington of Muslim grievances. To say that the U.S. has impressive weapons is irrelevant; the point is the degree to which the U.S. has the appropriate tools for solving the problems it faces. Unfortunately for Americans, the tools being employed by Washington are increasingly irrelevant to the most serious international challenges facing the U.S. The first way in which the U.S. is in decline is in its declining ability to design the appropriate tools for international conflict resolution.
Force is an extreme expedient; most problems are resolved through less expensive methods, and the best method is to be so trusted and admired that others aspire to follow one’s lead. Unfortunately for the U.S., its behavior over the past decade has eroded its reputation as a moral leader. Iran defies the U.S. with impunity, in great measure because its argument that the U.S.-centric world order should be organized more fairly is beyond dispute. Russia and China seem increasingly to be moving in directions that are not so much in defiance of the U.S. as based on the assumption they do not really need to pay attention to the U.S. Russia, ignoring U.S. military noise, calmly signs contracts building up its hydrocarbon empire. China appears to be operating on a completely different time-scale, not resisting U.S. military moves but, like Russia, ignoring them, while it develops its own economy, gets on its feet militarily, and prepares for a future world in which the U.S. will have either collapsed or mired itself in economic dependence on China’s continuing willingness to support American over-consumption. U.S. allies like Brazil and Turkey, rather than kowtowing to Washington, increasingly see Washington’s behavior as part of the problem and unilaterally assert the right to take leadership roles—not to defeat the U.S. but to fill the gap created by Washington’s incompetence. The little antagonists of the U.S. are neither cowed nor defeated; rather, they seem to learn and adapt faster than the U.S., running circles around the giant. Even those who do exactly what Washington calls upon the world to do (e.g., become democratic) do so on their own, more in spite of Washington than at Washington’s command: what do the millions of activists in the Arab Spring owe to a U.S. that followed or opposed but never led or even kept pace with their movement? Moral leadership gets one influence for free. The second way in which the U.S. is declining is in its evaporating moral leadership.
Military might and moral leadership are tools of foreign policy. Both, over the long term, are linked to the domestic circumstances of a society. A society that is obviously happy, self-confident, just, and productive is the foundation for a state’s military might and simultaneously a model for emulation. Ironically, the conditions that enable a state to maintain a powerful military make that powerful military less important. The world will rush to follow a great society. But the endless political buffoonery in Washington, be it presidents landing jets personally on aircraft carriers or Congressmen tying themselves in knots over debt ceilings, raises eyebrows worldwide and brings wide smiles to the faces of America’s enemies. Far more seriously, all can see the signs of collapse in one facet after another of that marvelous jewel of the imagination, the American Dream: the middle class model of the 1950s with a single breadwinner able to finance a nice suburban life style for his family was replaced in the 1980s by the same lifestyle financed through the fulltime work of two parents (who thus could not but ignore their kids, leaving them to be babysat by drugs) and now in 2011 has become a family with at least one breadwinner unemployed and the friendly neighborhood bank foreclosing and putting them on the street. As for the core of any society’s success in the modern world—the educational system, where every decent U.S. high school student in the 1960s studied a foreign language and took four years of history (pathetically superficial though it may have been), today neither standard is observed; meanwhile, if the universities still teach science at all, the classes are composed mostly of foreign students planning to take their new knowledge back to their own countries, where expertise is far more precious than in a U.S. in denial about the most fundamental issues of modern science (e.g., evolution, global warming, environmental pollution). Meanwhile, highway bridges of the world’s greatest highway system collapse, old dams threaten catastrophic flooding, and nuclear power plants are maintained in service for decades past their planned  service life without being properly maintained. The wild scare talk of politicians about a terrorist bomb notwithstanding, the collapse of the U.S. as world leader is more likely to result from the evaporation of a U.S. city as the result of a nuclear meltdown from a rusty pipe in the cooling system. The third pathway to decline in the U.S. is the degradation of the U.S. physical infrastructure.
An even more insidious problem is the declining faith, for good reason, of the American people in their own institutions. Sneering at Big Government is endemic, though no persuasive argument is ever made indicating what institution could be trusted to replace government. In fact, Big Government does deserve a failing grade – but mostly because it is too small. Regulatory agencies responsible for oversight over Wall Street, the food industry, and corporate pollution of the environment have all fallen grossly short of fulfilling their duties in recent decades. And who respects Big Pharma, Big Finance, or Big Oil? The fourth pathway to U.S. decline is the justified popular loss of faith in American institutions.
But the good news for Americans and all who hope for the reemergence of a morally sound, sympathetic, and realistic American leadership of the world lies at the core of this sad story: the problem with U.S. behavior is self-inflicted and fully within the capability of Americans to overcome. It is precisely because of American military superiority that it should virtually never resort to violence any more extreme than peacekeeping or international police work. Once American society succeeds in recognizing this truth, the door will be open for Americans to elect a government capable of identifying the real challenges facing this country and the rest of the world (for the most serious problems today are almost exclusively common ones) and focusing on devising effective long-term problem-resolution strategies. The War on Terror, at its best, was no more than burning down the house to put out a fire in the bedroom: short-term conflict resolution at its most mindless. Such emergency crisis response sacrificing the long term in the interest of short-term survival is in no way called for: the U.S. has the resources and the time to take the long view and do things right. Such a long-term approach would have several aspects, all obvious, none currently being implemented: most fundamentally, the focusing of national energy and resources on domestic housecleaning, in brief:
                                                 “Empire – No; Jobs – Yes.”                     
Specifically, the refocusing of national energies on the state of domestic society would entail:
  • Using the crisis level of unemployment as an opportunity to rebuild U.S. infrastructure, fixing the dams and bridges and sewage systems and rusting nuclear power plants while employing those looking for work;
  • Launching a national campaign to improve the quality of public education at all levels, A) bringing public science and math education up to world standards so the next generation will have some hope of being able to compete with the tens of thousands of scientists and engineers graduating from Chinese, Japanese, and Indian educational systems and B) funding the revolutionary improvement in social studies, world history, and language studies (particularly regarding the Arab world and China) that will be required to produce a generation of Americans capable of understanding the international political challenges of the 21st century and capable of exercising oversight over the their elected officials;
  • Political reforms to facilitate honest elections open to reform candidates, the recall of corrupt politicians, the strengthening of government regulatory agencies, and the minimization of corporate bribery of Congressmen.
The U.S. is in decline for a multitude of reasons, but not because of a declining population or a shortage of resources or an overwhelmingly powerful enemy or bad luck. The U.S. is defeating itself. The decline will end the day Americans join hands and decide they no longer want to decline.
Joseph Stiglitz and Linda Bilmes, The Three Trillion Dollar War;
Gretchen Morgenson and Joshua Rosner, Reckless Endangerment;
Andrew Ross Sorkin, Too Big To Fail.

The Speech Bernanke Should Have Given

We, the American people, can no longer afford to pay the bill for the lifestyle of the rich and powerful.

Federal Reserve Chairman Ben Bernanke missed a critical opportunity to tell the truth with the world listening at the annual Jackson Hole, Wyoming economic conference. Here is the speech he should have given:

We have reached a level of political irresponsibility over the past 35 years, and specifically over the past decade, where we can now quite realistically see the possible collapse of the U.S.-centric world order as the U.S. is allowed to decay from within. If you, the Washington policy-making elite, do not want this to happen, then you must change course in a more fundamental wayin domestic terms–than Washington has done since Lincoln made ending slavery the moral foundation of the Civil War andin international termsthan Washington has done since Roosevelt defeated isolationism and took us into WWII.
Domestically, you must personally sacrifice your class interests as the representatives of the rich and powerful by reorienting U.S. financial and tax policies to put the interests of the low and middle classes first. This will entail policies that will severely punish non-productive investment strategies, that will strictly regulate with harshly applied criminal penalties both the banking and mortgage industries, that will re-create a highly progressive tax structure, that will heavily tax carbon use, that will make the ownership of expensive vacation homes prohibitively costly, and that will transfer excess wealth rapidly into the hands of the poor. Such a revolutionary set of reforms will obviously be feasible only in an environment in which real political power is transferred from the rich to the average voter, and will thus entail such political reforms as public financing of elections and legislative steps to encourage rather than discourage third parties.
Internationally, Washington policy-makers must accept that their primary job is to manage the U.S. on behalf of the whole population, i.e., to ensure quality education, plentiful jobs doing productive work, a healthy civil society, political inclusiveness, civil rights, universal health care. Their primary job cannot be the pursuit of global empire. The empire must go. The U.S. must eliminate most of the U.S. military budget, cutting back from some 40% of total global military expenditures to perhaps 10% of total global military expenditures, a budgetary shift that will have the enormous benefit of forcing the U.S. to emphasize moral leadership, rather than leadership through force. The global U.S. military base structure will disappear, and wars of choice will no longer be launched by the U.S. against the wishes of the majority of mankind.
The bottom line is simple: either you, the rich and powerful, must agree to go on a diet and live life in the U.S. as part of rather than as parasites on American society or America as we know it will disappear. We, the American people, can no longer afford to pay the bill for your lifestyle.
But of course I am dreaming, because Bernanke would have been called a troublemaker and not a team player. Then Bernanke would have been fired.

Can the U.S. Reverse Its Decline?

If an historic shiftthe decline of the unfolding before our eyes, then the double scandal of the invasions of Iraq and Afghanistan followed by the scandal of the recession will be seen as key pieces of evidence. Butjust as those events constituted failures of leadership rather than external accidents, good leadership could avoid the decline they point to.
It is very easy to offer the double military debacle of the U.S. in Iraq and Afghanistan as evidence of the decline of the U.S. Indeed, it is evidence, and strong evidence at that. But that of course does not prove that the U.S. decline is, so far, more than a bad decade that could be overcome by an educated and determined population led by a responsible national leadership aware of the mistakes of its predecessors. Stephen Walt neatly spells out this all-important caveat:
The good news, however, is the defeat in Iraq and Afghanistan — and make no mistake, that is what it is — tells us relatively little about America’s overall power position or its ability to shape events that matter elsewhere in the world. Remember that the United States lost the Vietnam War too, but getting out facilitated the 1970s rapprochement with China and ultimately strengthened our overall position in Asia.  Fourteen years later, the USSR had collapsed and the United States had won the Cold War. Nor should anyone draw dubious lessons about U.S. resolve; to the contrary, both of these wars show that the United States is actually willing to fight for a long time under difficult conditions. Thus, the mere fact that we failed in Iraq and Afghanistan does not by itself herald further U.S. decline, provided we make better decisions going forward.
What lessons should we be learning from the Iraqi and Afghan wars?
  • Dont deify your enemies.
  • If the enemy is a gang, war against states is the wrong strategic response.
  • If the problem is social, a military solution will make things worse.
  • We cant do everything.
  • Even if we can do everything, we cant do everything without sacrifice.
  • Foreign policy and domestic policy are linked, and a strong societyworkers gainfully employed, people living within their meansforms the basis for an effective foreign policy.
  • Breaking our own laws, ignoring our own principles, and undermining our constitution do not strengthen our position.
  • Our ignorance of the rest of the world and of the actual behavior of our government and corporations overseas makes it very easy for enemies to set traps and sucker us into voluntarily stepping into them.
  • The military card is most effective when available but never played.
  • Never trust American leaders: they harm Americans far more than our foreign enemies do.
  • Most enemies of the U.S. are more like hornets after you throw a rock at their nest: their hostility did not come out of the blue.
  • Learn some history.
Evidence that either voters or leaders in the U.S. have learned any of these lessons is, unfortunately, hard to find.

Whitewashing U.S. Behavior
Robert Danin of the Council on Foreign Relations recently called for improving our “message” to Muslims. Focusing on the idea that our problem lies in our message rather than our behavior exemplifies the failure to learn the fundamental lessons of 9/11. Empire-building, supporting Israeli rightwing expansionists, and–yes–taking the oil are what they don’t like.