Written by Jan Nederveen Pieterse, Sociology
The question now is not whether the US is declining but what form decline will take and whether it will be mild or severe. Does it refer to the economy, to hegemony or to overall decline? Decline isn’t necessarily negative. It’s a relief for Americans who feel besieged by war prone government and incessant marketing, for two-earner households who work harder without seeing their prospects improve; yet recession spells trouble and won’t stop marketing. Decline offers the United States a chance of becoming a “normal country”. But this will happen only if the upset is big enough to surrender the claim to world hegemony and shrink the defense industries and the military. Upon reflection decline becomes a riddle, a glyph to decipher. Arguably the main scenarios of American decline can be narrowed down to three: a crash landing, the Phoenix, and a new New Deal.
1. Crash landing. According to Clyde Prestowitz, “In many respects it resembles the Titanic, a magnificent machine with serious and largely unrecognized internal flaws heading at full speed for icebergs, armed with knowledge and assumptions significantly at odds with reality” (Three Billion New Capitalists, 2005, 21). The Titanic in this passage refers to the global economy, but according to the gist of the book it mainly applies to the US. This script may be too catastrophist. Yet deflation has been ongoing for some time, financially the US already depends on the “kindness of strangers” and bargain basement America already exists. Significant course corrections are unlikely because ongoing trends mortgage future options and “Permanent Washington” is well entrenched. In financial markets there is no greater reflexivity than in 1929; new credit instruments such as derivatives are out of control, transparency is in question because the rating agencies malfunction.
Yet, endings are also beginnings. As a crash landing unsettles elites and closes paths it opens new ones so Uncle Sam’s journey may take several directions. First, it may simply be decline. This doesn’t mean total breakdown but a climb down from the top—the dollar losing its role as world money, foreigners less keen to hold dollar assets, hence the need to raise interest rates, further slowing the economy. Even then the US remains a substantial economy. If it’s true that the US suffers from spleen deficit, a crash landing may generate requisite spleen—greater thoughtfulness could remedy many American ailments. A trend break might curb Pentagon expansion and Wall Street excesses and restore fiscal sanity. Thus American decline may lead into two possible scripts of decline-as-hope.
2. The Phoenix. Britain carried the day during the turn of the 18th century commercial-maritime cycle (“Britannia rules the waves”) and the 19th century industrial cycle (“workshop of the world”). British hegemony declined and then rose again and the same may happen to the US. The US rose with industrial mass production, underwent deindustrialization during the late 20th century and may climb back in the 21st century riding the wave of new economy technologies.
Pros and cons of this script are that the US economy is large and diverse but import dependent. Its higher education system is enviable but the cost of education is rising. The infrastructure is good but old fashioned and energy inefficient. The US leads in services from software to Hollywood and is attractive to immigrants, but on the downside it has low social solidarity, an aging population, dysfunctional health care, unsustainable consumption patterns, a dysfunctional political system, oversized military, self seeking elites, corporate welfare and is headed for fiscal catastrophe. Prima donna narcissism and laissez-faire don’t help rising from the ashes.
So a Phoenix option is possible, but not in the short run. During the Clinton-Gore years this might have been—a smart way forward on the information superhighway with innovation, research and development, ecological sustainability; though already then innovation also meant deregulating telecoms and energy, opening the way to Wall Street financial engineering and Enron creative accounting alongside triangulation, welfare reform, Nafta and WTO. With the Bush administration the smart option was definitively off the program; the America of neo/conservatives is authoritarian, militarist, brawn over brain, the opposite of the smart way forward—another American century built on war and fear, “Americans are from Mars,” channeling innovation into future weapons systems, Star Wars, Total Information Awareness and surveillance, e-espionage rather than e-clever, a fear economy rather than a smart economy. Merge the propensity to war with the ideology of small government and tax cuts and the outcome is a $1.6 trillion credit card bill. War and tax cuts, deindustrialization and imports, consumption and deficits mortgage American futures and reinforce outsourcing and offshoring, so for years smart America has been leaving America and has not been betting on the dollar. The key American problem, by comparison to Europe and Japan, is underinvestment in productive assets. Instead of innovating American companies have tapped and tweaked old value streams, bilked cheap labor offshore and a sheltered home market—quite different from Nokia, Siemens, BMW, Toyota. Thus the foundation and resilience of a Phoenix are lacking. American deindustrialization doesn’t merely foster industrialization in emerging economies but off shores research and development. American specialization in military power and technology is too slim a basis for resurgence. The attempts to gain control of the world’s major oil and gas reserves involve such massive spending in political and military energies, resources and legitimacy that they endanger rather than enhance American futures. Sovereign wealth funds have started buying up American assets and futures. A future smart America may well hinge on corporations owned or part owned by Chinese, Indian and European enterprises. An American Phoenix is possible down the road but is already mortgaged and sold off to outside interests to pay for the debts of the Titanic as it is heading to its rendezvous.
3. New Deal2. Decline may be a source of hope also if it leads to rebalancing the relations between government, corporations and society so social stakeholders (workers, consumers, communities) play a greater role, in other words if it ushers in a new New Deal and a turn to the social market. This script runs, after crisis (via Hoover), Roosevelt and the New Deal.
Many American economists advocate Keynesian demand-led growth with greater public investments, higher wages, stronger unions, overall regulation, full employment, corporate social responsibility and smart consumerism. Progressive cities adopt measures of economic populism. The laissez-faire consensus among American economists has begun to fray at the edges and economic heterodoxy, though still marginal, has been gaining points.
What are lacking are not alternatives but the mobilization of political will and momentum around alternatives. Deep down the key problems are not policies but politics and institutions—undemocratic, old-fashioned and aged political institutions. But declining empires tend toward the “idolization of institutions” as people seek to restore the conditions that had made their rise possible, so the prospects are dim. The economy slouches from crisis to crisis—savings and loan, LTCM, dotcom crash, Enron, subprime and credit crisis. The reasons why the subprime crisis emerged are no different from the reasons why the new economy bubble popped years earlier: deregulation to the point of anarchy. The years pass and ailments are not fixed but deepen and meltdown draws nearer. “The housing bubble was a reaction from the effort to protect us from the collapse of the tech bubble. What’s the next bubble going to be as a consequence of trying to protect us against this?” (M. Darda, New York Times, January 13 2008). A turn toward labor is now much less likely than it was in the thirties. Corporations are much stronger and dispersed in their operations and headquarters, technology is more advanced, large corporations control the public sphere, trade unions are weaker and less organized, political parties are closed to substantial alternatives, the public is socialized in complacency and the utopian imagination is a faint and distant memory. The very meaning of “American” has become dispersed—American as in Halliburton’s headquarters in Dubai, as in IBM and Intel’s investments in India and China, as in tax havens in Bermuda and the Bahamas? Elites have learned from the Depression and can anticipate and block a social turn. Recession turning into crisis might as well bring deepening authoritarianism, extending the fear economy, deftly mobilizing disaster for yet another round of predatory enrichment—Las Vegas capitalism teaming up with disaster capitalism.
Decline is rich with opportunity and danger, which is ordinary by historical standards. A problem specific to the US is that a savvy national conversation about these dilemmas is not within reach. Which script of decline materializes depends largely on reactions to economic upset and electoral options. Decline follows 35 years of backlash politics and culture as the dominant American mood. What began as backlash against the sixties and defeat in Vietnam has hardened in an all-round angry mood, now bashing globalization, free trade, China, immigrants. A turnaround in corporate media is unlikely. Parties remain closed to alternatives. Riots in the streets are unlikely; barricades in the suburbs don’t make sense and would interfere with shopping. So what is likely is muddling through and deepening decline.
Leadership matters but American culture overestimates leadership and underrates structural trends, so which leadership emerges from elections matters but not nearly as much as most talk and media make it out to be. To address Uncle Sam’s problems of growing inequality and economic decline it takes not just more public investment but also private investment, which has been lagging for decades and doesn’t lend itself to an easy political fix. It requires a fundamental turnaround not just in policies but in philosophies—in short, reregulating Wall Street and cutting the Pentagon. Yet Wall Street and the Pentagon, America’s luxury liners, don’t easily change course. Political and corporate unaccountability are structurally entrenched and public forums to address them barely exist. Consider the constants of American policy—in short, support for Wall Street, the Pentagon, and Israel—and there is barely variation among elites across the political spectrum, regardless of party affiliation. There are policy variations but no change in fundamentals.
So I don’t think significant self correction is in the cards in the foreseeable future. The minimum reforms that Uncle Sam should undertake are not particularly fancy or extraordinary. They are commonsense by international standards and most Americans would probably agree. They include, following Chalmers Johnson, “reversing Bush’s 2001 and 2003 tax cuts for the wealthy, beginning to liquidate our global empire of over 800 military bases, cutting from the defense budget all projects that bear no relationship to national security and ceasing to use the defense budget as a Keynesian jobs program” (Le Monde diplomatique, February 2008). Yet by the standards of American politics these are extreme measures for which a congressional mandate is far off. As long as commonsense changes are unfeasible in American politics, the US cannot self correct. Then Uncle Sam will muddle through and problems will get worse until economic decline will get so bad that elites are unseated and an overhaul finally takes place. In the intervening years correction will come from outside by the actions of external forces that cease to follow the US or invest in the US.
(This is part of a book Is there hope for Uncle Sam? Beyond the American Bubble, London, Zed Books, forthcoming August 2008. See homepage URL http://netfiles.uiuc.edu/jnp/www/)
The question now is not whether the US is declining but what form decline will take and whether it will be mild or severe. Does it refer to the economy, to hegemony or to overall decline? Decline isn’t necessarily negative. It’s a relief for Americans who feel besieged by war prone government and incessant marketing, for two-earner households who work harder without seeing their prospects improve; yet recession spells trouble and won’t stop marketing. Decline offers the United States a chance of becoming a “normal country”. But this will happen only if the upset is big enough to surrender the claim to world hegemony and shrink the defense industries and the military. Upon reflection decline becomes a riddle, a glyph to decipher. Arguably the main scenarios of American decline can be narrowed down to three: a crash landing, the Phoenix, and a new New Deal.
1. Crash landing. According to Clyde Prestowitz, “In many respects it resembles the Titanic, a magnificent machine with serious and largely unrecognized internal flaws heading at full speed for icebergs, armed with knowledge and assumptions significantly at odds with reality” (Three Billion New Capitalists, 2005, 21). The Titanic in this passage refers to the global economy, but according to the gist of the book it mainly applies to the US. This script may be too catastrophist. Yet deflation has been ongoing for some time, financially the US already depends on the “kindness of strangers” and bargain basement America already exists. Significant course corrections are unlikely because ongoing trends mortgage future options and “Permanent Washington” is well entrenched. In financial markets there is no greater reflexivity than in 1929; new credit instruments such as derivatives are out of control, transparency is in question because the rating agencies malfunction.
Yet, endings are also beginnings. As a crash landing unsettles elites and closes paths it opens new ones so Uncle Sam’s journey may take several directions. First, it may simply be decline. This doesn’t mean total breakdown but a climb down from the top—the dollar losing its role as world money, foreigners less keen to hold dollar assets, hence the need to raise interest rates, further slowing the economy. Even then the US remains a substantial economy. If it’s true that the US suffers from spleen deficit, a crash landing may generate requisite spleen—greater thoughtfulness could remedy many American ailments. A trend break might curb Pentagon expansion and Wall Street excesses and restore fiscal sanity. Thus American decline may lead into two possible scripts of decline-as-hope.
2. The Phoenix. Britain carried the day during the turn of the 18th century commercial-maritime cycle (“Britannia rules the waves”) and the 19th century industrial cycle (“workshop of the world”). British hegemony declined and then rose again and the same may happen to the US. The US rose with industrial mass production, underwent deindustrialization during the late 20th century and may climb back in the 21st century riding the wave of new economy technologies.
Pros and cons of this script are that the US economy is large and diverse but import dependent. Its higher education system is enviable but the cost of education is rising. The infrastructure is good but old fashioned and energy inefficient. The US leads in services from software to Hollywood and is attractive to immigrants, but on the downside it has low social solidarity, an aging population, dysfunctional health care, unsustainable consumption patterns, a dysfunctional political system, oversized military, self seeking elites, corporate welfare and is headed for fiscal catastrophe. Prima donna narcissism and laissez-faire don’t help rising from the ashes.
So a Phoenix option is possible, but not in the short run. During the Clinton-Gore years this might have been—a smart way forward on the information superhighway with innovation, research and development, ecological sustainability; though already then innovation also meant deregulating telecoms and energy, opening the way to Wall Street financial engineering and Enron creative accounting alongside triangulation, welfare reform, Nafta and WTO. With the Bush administration the smart option was definitively off the program; the America of neo/conservatives is authoritarian, militarist, brawn over brain, the opposite of the smart way forward—another American century built on war and fear, “Americans are from Mars,” channeling innovation into future weapons systems, Star Wars, Total Information Awareness and surveillance, e-espionage rather than e-clever, a fear economy rather than a smart economy. Merge the propensity to war with the ideology of small government and tax cuts and the outcome is a $1.6 trillion credit card bill. War and tax cuts, deindustrialization and imports, consumption and deficits mortgage American futures and reinforce outsourcing and offshoring, so for years smart America has been leaving America and has not been betting on the dollar. The key American problem, by comparison to Europe and Japan, is underinvestment in productive assets. Instead of innovating American companies have tapped and tweaked old value streams, bilked cheap labor offshore and a sheltered home market—quite different from Nokia, Siemens, BMW, Toyota. Thus the foundation and resilience of a Phoenix are lacking. American deindustrialization doesn’t merely foster industrialization in emerging economies but off shores research and development. American specialization in military power and technology is too slim a basis for resurgence. The attempts to gain control of the world’s major oil and gas reserves involve such massive spending in political and military energies, resources and legitimacy that they endanger rather than enhance American futures. Sovereign wealth funds have started buying up American assets and futures. A future smart America may well hinge on corporations owned or part owned by Chinese, Indian and European enterprises. An American Phoenix is possible down the road but is already mortgaged and sold off to outside interests to pay for the debts of the Titanic as it is heading to its rendezvous.
3. New Deal2. Decline may be a source of hope also if it leads to rebalancing the relations between government, corporations and society so social stakeholders (workers, consumers, communities) play a greater role, in other words if it ushers in a new New Deal and a turn to the social market. This script runs, after crisis (via Hoover), Roosevelt and the New Deal.
Many American economists advocate Keynesian demand-led growth with greater public investments, higher wages, stronger unions, overall regulation, full employment, corporate social responsibility and smart consumerism. Progressive cities adopt measures of economic populism. The laissez-faire consensus among American economists has begun to fray at the edges and economic heterodoxy, though still marginal, has been gaining points.
What are lacking are not alternatives but the mobilization of political will and momentum around alternatives. Deep down the key problems are not policies but politics and institutions—undemocratic, old-fashioned and aged political institutions. But declining empires tend toward the “idolization of institutions” as people seek to restore the conditions that had made their rise possible, so the prospects are dim. The economy slouches from crisis to crisis—savings and loan, LTCM, dotcom crash, Enron, subprime and credit crisis. The reasons why the subprime crisis emerged are no different from the reasons why the new economy bubble popped years earlier: deregulation to the point of anarchy. The years pass and ailments are not fixed but deepen and meltdown draws nearer. “The housing bubble was a reaction from the effort to protect us from the collapse of the tech bubble. What’s the next bubble going to be as a consequence of trying to protect us against this?” (M. Darda, New York Times, January 13 2008). A turn toward labor is now much less likely than it was in the thirties. Corporations are much stronger and dispersed in their operations and headquarters, technology is more advanced, large corporations control the public sphere, trade unions are weaker and less organized, political parties are closed to substantial alternatives, the public is socialized in complacency and the utopian imagination is a faint and distant memory. The very meaning of “American” has become dispersed—American as in Halliburton’s headquarters in Dubai, as in IBM and Intel’s investments in India and China, as in tax havens in Bermuda and the Bahamas? Elites have learned from the Depression and can anticipate and block a social turn. Recession turning into crisis might as well bring deepening authoritarianism, extending the fear economy, deftly mobilizing disaster for yet another round of predatory enrichment—Las Vegas capitalism teaming up with disaster capitalism.
Decline is rich with opportunity and danger, which is ordinary by historical standards. A problem specific to the US is that a savvy national conversation about these dilemmas is not within reach. Which script of decline materializes depends largely on reactions to economic upset and electoral options. Decline follows 35 years of backlash politics and culture as the dominant American mood. What began as backlash against the sixties and defeat in Vietnam has hardened in an all-round angry mood, now bashing globalization, free trade, China, immigrants. A turnaround in corporate media is unlikely. Parties remain closed to alternatives. Riots in the streets are unlikely; barricades in the suburbs don’t make sense and would interfere with shopping. So what is likely is muddling through and deepening decline.
Leadership matters but American culture overestimates leadership and underrates structural trends, so which leadership emerges from elections matters but not nearly as much as most talk and media make it out to be. To address Uncle Sam’s problems of growing inequality and economic decline it takes not just more public investment but also private investment, which has been lagging for decades and doesn’t lend itself to an easy political fix. It requires a fundamental turnaround not just in policies but in philosophies—in short, reregulating Wall Street and cutting the Pentagon. Yet Wall Street and the Pentagon, America’s luxury liners, don’t easily change course. Political and corporate unaccountability are structurally entrenched and public forums to address them barely exist. Consider the constants of American policy—in short, support for Wall Street, the Pentagon, and Israel—and there is barely variation among elites across the political spectrum, regardless of party affiliation. There are policy variations but no change in fundamentals.
So I don’t think significant self correction is in the cards in the foreseeable future. The minimum reforms that Uncle Sam should undertake are not particularly fancy or extraordinary. They are commonsense by international standards and most Americans would probably agree. They include, following Chalmers Johnson, “reversing Bush’s 2001 and 2003 tax cuts for the wealthy, beginning to liquidate our global empire of over 800 military bases, cutting from the defense budget all projects that bear no relationship to national security and ceasing to use the defense budget as a Keynesian jobs program” (Le Monde diplomatique, February 2008). Yet by the standards of American politics these are extreme measures for which a congressional mandate is far off. As long as commonsense changes are unfeasible in American politics, the US cannot self correct. Then Uncle Sam will muddle through and problems will get worse until economic decline will get so bad that elites are unseated and an overhaul finally takes place. In the intervening years correction will come from outside by the actions of external forces that cease to follow the US or invest in the US.
(This is part of a book Is there hope for Uncle Sam? Beyond the American Bubble, London, Zed Books, forthcoming August 2008. See homepage URL http://netfiles.uiuc.edu/jnp/www/)