America heading for two class society 20% rich 80% poor

Here is a lecture by Elizabeth Warren from Harvard University presenting the results of her research into American families. It's entitled "The Coming Collapse of the Middle Class."



It's the Latin American model of society, and it is the direct result of the Reagan Revolution and the conservative movement.

American power, wealth was based on oil; That's nearly over

Sara Robinson is a futurist. She studies trends and estimates what they will mean in the future. Last week she reported on a fascinating book about energy as the source of empire. The book, by Thomas Homer-Dixon entitled The Upside of Down postulates that oil has been the source of American world power and the power of the dollar through the twentieth century, and that America's control of oil is running out. What does that mean? Here is an explanation from Sara Robinson:

All empires are built on vast amounts of energy. And no great empire in history has ever come to power without controlling and dominating the market in whatever the current preferred energy resource was at the time. [Snip]

He carefully builds the argument that Rome rose on its ability to harness vast amounts of Mediterranean sunshine, turn it into food, and then reliably move that food around the empire to feed vast numbers of soldiers, builders, and horses and thus consolidate its regime. When that system failed, the empire crumbled.

Likewise, the Dutch built their short-lived empire on the ability to supply oil for Europe's lanterns. They were supplanted by England, which was able to supply better, cheaper fuel out of its vast coal resources. British dominance lasted until a rising America turned out to have unimaginable amounts of coal, which allowed it to undercut the British pound as the world's most stable currency — and outperform the UK economically.

And then came oil, which was soon preferred to coal because it proved to be a far more efficient (hence, cleaner and cheaper) and versatile fuel. You could get far more energy output from a smaller unit (coal's comparative inefficiency made it impractical for small vehicles like cars, for example) and with far less effort; and you could turn it into far more different kinds of products -- not just fuel, but plastics, fertilizers, wonder drugs, and much more.

As the world moved toward oil at the beginning of the last century, the UK — eager not to lose out again — made an early bid for the oil fields of Arabia. But North America counted among its original blessings more oil reserves than any other continent on the planet; and that, argues Homer-Dixon, was decisive. Unable to compete, the British Empire faded, and the American Century began.

Sara then discusses how a second element of developing a full-blown Empire is developing and exporting the infrastructure that allows the rest of the world to build much better lives from that preferred energy source. America leveraged its control of oil resources by developing and exporting oil-fueled cars, power plants, farms and factories. Those exports became the basis of the dollar as the world currency. But that creates a dependence in the dominating nation on both control of the energy source and on world demand for the infrastructure that uses the energy source to create wealth. So Sara continues:

Homer-Dixon also points out another, more sober lesson. It's never happened that an empire that built its wealth on one energy resource also succeeded in dominating the next resource that supplanted it. Human nature being what it is, societies that are deeply invested in the current energy regime tend to fall into denial when that regime comes to its natural end — either because it simply runs out, or because it's superceded by something even more efficient and versatile. People can't believe things won't go on as they always have, or imagine that life could be any different. They shut their eyes to looming trouble, ignore the signs of impending doom, and refuse to make any reasonable plans to navigate the coming changes.

In the meantime, as old system falls apart, someone hungrier and more nimble finds a way to capitalize on a new, more efficient energy resource. And so old empires die, and new ones rise to take their places.

Put it in this perspective, and it becomes obvious that when we talk about running out of oil, we're not just talking about higher prices or low-carbon lifestyles or making an easy transition to something else that America (we like to think) will also dominate. When we fully grasp the foundational role oil played in securing America's wealth and global power, it becomes obvious that when we talk about moving off oil, we're really talking about nothing less than the demise of American power throughout the world, and the end of the American Way of Life as we've known it for generations.

That's serious stuff. But it's the truth that provides the backdrop for everything else that's going on right now. Against this larger process, it's easier to see that the dollar is weakening because our control over the whole oil economy that has supported its value for the past century is in serious trouble — and that we won't be out of financial danger until we can base on the dollar's value on something other than oil. Our political stature is tanking because the world doesn't need to kiss up to us anymore to keep the cars running and the lights on — and it won't rise again until we find something else of equally high value to offer. Our standard of living is falling because it always floated on a sea of oil — and that sea is drying up. Oil prices are high not because of market manipulations and oil company profit-taking (though plenty of oil economists are sure that's part of the story, too); they're high because the whole system is destabilizing, heading for a major tipping point.

The Sara continues by using this view of American world political power as being based on the American oil monopoly. As the oil and our monopoly of it runs out, so does American world political power.

Even before 9/11, the Bush Administration has always had a sense of panicked desperation about it — a desperation we've usually attributed to conservative revolutionary zeal, religious fanaticism, or free-market fundamentalism. But it's also plausible to interpret some of this as the desperation of people who were tasked with protecting the American empire by keeping the oil taps open and under control at any cost — and who know, deep in their guts, that time is running out.

The Project for a New American Century's stated strategy for maintaining the American superpower in the face of a rising China was to invade and dominate the Middle East, and thus control China's access to oil for the next several decades. That was the intended long-term payoff of the Iraq War: control the oil, and thus control the world. In their minds, if we have to bankrupt the country, tear up the Constitution, and piss off every other country in the world along the way, it's worth it — since they know we're not worth a damn economically or politically without the oil anyway. Sure, the means are ugly; but according to their view of the ends, there's simply no alternative — and no other possible future worth discussing. They don't care if we hate them now, because they're convinced we'll thank them in 20 years for having the statesmanlike foresight to do what had to be done.

(Blame it on too much time in the oil patch. That toxic elixer of crude and money so easily goes to one's head....)

This perspective also provides some extra context for why locally-based power generation, like on-site or community wind and solar, are political non-starters for energy execs and their government minions. It's obvious that they hate it because they can't take profit from it; but they also know that America's global hegemony depends on keeping the world dependent on energy supplies they control. Since nobody can capture a monopoly on the wind or the sun, there's no way to build the next global empire on them. And therefore, renewables simply aren't very interesting to people whose first priority is geopolitical dominance and stratospheric profit.

This view of energy and Empire certainly offers a coherent explanation of the twentieth century American world power. It also provides a connection between the period of American Empire, its decline, and the almost panicky reaction of American conservatives to that decline and to the loss of control of world oil.

One thing is very clear, though. Oil as we have known it is gone. Does that mean that American wealth and power is also gone? Remember, no previous empire every outlasted the loss of its control of the dominant energy source. Can America be different? Back to Sara:

From this 10,000-foot view, it's easy to interpret the political spats and economic machinations and deal-making and climate debates and regional wars — the whole parade that dominates the news now — as simply opening acts in a long transition that could end up taking most of this century. Unless a) we discover vast new reserves on a globe that's been already explored from pole to pole (unlikely) and b) we come up with dramatic new evidence proving conclusively that climate change isn't a problem after all (even less likely), then the hard fact is: We will be spending the next several decades moving off oil.

It's going to be the most important work of this century. And Americans can either get out in front of this change and come out of it at the century's end with much of their greatness intact — or continue to fight it, and end up as another of history's has-beens.

Meeting this challenge means we're going to have to get very smart, very fast, about a lot of things.

• First, we need to accept that this change is happening, and start having serious conversations about how we're going to handle it. The Bush Administration's denial has already cost us eight valuable years. It's an understatement to say that the longer we avoid the issue, the worse the transition will be.

• Second, we need to stay mindful of the horrific pitfalls. The unimaginable grimness of the worst-case scenarios alone should be enough motivation to get and keep us talking.

Even the most-likely-case scenarios are disturbingly short on sunshine and roses. Historically, energy transitions (involving, as they do, the collapse of vast economic and political systems) have never happened smoothly. Rome fell so hard that it took a thousand years for anything like it to rise again. The stable world order held together by the British coal empire shattered apart in two vast world wars and another dozen colonial revolutions (some of which still aren't resolved decades later). It's not unreasonable to expect similar disruptions as the American oil empire begins to unravel. It's not going to be pretty.

When complex economic systems fail, they almost always fail catastrophically, leaving vast numbers of displaced, disoriented and righteously angry people in their wake. Bad economic and environmental decisions get made. Critical issues are ignored, or abandoned due to lack of resources. If folks get desperate enough for security, it's entirely likely that they'll reorganize into feudal kingdoms or even warlord-run clans, as has already happened in too many Middle Eastern countries in the wake of war. Restoring these lost democracies can take generations. Much of that risk can be averted — but only if we're aware of the potential for trouble, and start figuring out how to deal with it now.

• Third, an important part of that planning will involve taking stock of the carbon-based resources remaining to us, and figure out how to best invest them to smooth the way to the next era. We can use that remaining margin of oil to rebuild walkable cities, construct next-generation energy infrastructure, and install electric transit. We can leverage it to repave the world with agrichar, restoring millions of acres of arable land, creating a vast new carbon sink, and eliminating the need for petroleum-based fertilizers in the bargain. We will still be able to afford to run oil-fueled bulldozers and trucks and ships for a while yet. Let's use them wisely while we can.

• Fourth, "globalization" may take on a whole new meaning, one that's more about global governance than global trade. Executing transition plans necessarily means empowering planet-wide organizations that have the ability to make and enforce the rules. We've already done this on a limited scale in the CFC treaties, international non-proliferation efforts, and so on. But navigating a transition of this magnitude is going to force us to take the whole idea of global government to the next level. (Can't you hear the far right howling about this already?)

Creating these new powers will raise all kinds of hard questions about national sovereignty and the rights of the global collective. In the end, we may revisit the meaning and purpose of government, and perhaps create entirely new forms of government that better balance local needs against global goals.

I've quoted more than enough of her article. She has an interesting final section entitled "What's Next?" which I suggest that you go read.

Hillary is not the revolutionary leader that Obama is.

There is no doubt that the conservative movement has brought America to a very sad low state. We are ineffectively fighting multiple wars in the Middle East while our economy moves into the tank and the middle class is finding itself losing economic ground for the first time since the Depression. Americans are unhappy with the government we have gotten, and the mid-term elections of 2006 are a down payment on that unhappiness. Something is changing, and most of the politicians are unaware of it. The mass media has no clue. It's time for changes. Big changes. The crowds surrounding Barack Obama suggest that he has tapped into the nature of the times, and the times are going to be revolutionary. So what makes the times so revolutionary?

Sara Robinson reports some very interesting research into the causes of revolutions. Some sociologists have study revolution, and they have established a set of conditions that, when they occur, result in revolution. The seven criteria are

1. Economic conditions for most people soar, then crash


2. The upper classes no longer consider the condition of the lower classes to be important to what happens to them. There ceases to be a general consensus across all the society that everyone is in it together.


3. The career and social expectations of the professional and upper military classes cease to be tied to those of the very wealthy. Instead of the best qualified being able to reach the top jobs through talent and hard work, they find that those top jobs are filled by the well-born and wealthy but less competent - like George Bush.


4. Conservatives who do not believe that government should exist run the government. The result is invariably incompetent government and a great deal of corruption. This is the natural result of putting conservatives in charge of government.


5. The world is changing rapidly, yet the top government leaders do not react and lead.


6. The economy is mismanaged to the point of indebtedness, bankruptcy, and currency collapse. Whether through ineptness or corruption is unimportant, although I can identify a great deal of both in the present situation.


7. The use of force is irrational and unproductive.
   • Domestically criminal punishments are widely seen to be unfair and inappropriate, with clear criminals getting no punishment ("Scooter" Libby) or alternatively, punishments wildly excessive to the crimes are handed out (see the mandatory drug sentencing laws.)
   • Outside the U.S. The military is used in wars that offer no benefit to the nation (Iraq is, of course, a classic example.) "These misadventures not only reduce the country's international prestige and contribute to economic declines; they often create a class of displaced soldiers who return home with both the skills and the motivation to turn political unrest into a full-fledged shooting war." Timothy McVeigh would be a classic example of this latter case.

[If I have not adequately summarized the seven items then the error is mine, not Sara Robinson's.]

I have seen every one of these conditions occur in the last two decades, and have grown more and more upset.

The Vietnam war was a beginning of a lot of it. It was clearly a war we did not need to fight, but our conservatives held every other progressive action the government could take hostage until LBJ was forced to send half-a-million soldiers to that country. His goal was to pass Medicare, the Civil Rights Bill, and the Voting Rights Bill. As bad as the Vietnam War was, LBJ was leading America to the solution of the social problems of lack of health care for the elderly and was resolving the problems of Racism and segregation that have plagued America since European settlers arrived. There has not been an example of national leadership since then, unless you want to count the totally negative attacks on modernity that Ronald Reagan represented. Conservatives don't solve social problems. They shoot the messengers who describe real problems and move into gated communities while siphoning as much money off the middle and lower classes as they can. The predator lending that is represented by payday loans, subprime loans, and increased credit card interest with hidden and surprise fees are just the tip of the iceberg. The bankruptcy bill was another step in the same system of predatory lending. All of that sucks money from the middle and lower classes and hands if over to the wealthy and extremely wealthy, who, unsurprisingly, have been purchasing tax breaks from their Congressmen.

If you want to know why the crowds are surrounding Obama as they are, he is the person who is promising the leadership out of this morass. Hillary, for all her technical skills, simply has not demonstrated the awareness or the leadership to make the changes needed to break up the disaster America has become under the Reagan Revolution and the Bush administration.

The conditions for a real revolution are ripe. Obama has tapped into the feelings the conditions have created, and he is stoking them. Will he be able to provide the real leadership that is going to be required at this time of change?

That is always the question. In Obama we seem to have a man who recognizes the nature of the times and who is offering his leadership to deal with them. The question always remains whether he has the abilities. But one thing is becoming more and more clear - there is no one else on the horizon even willing to try.

The last stages of American world dominance have arrived

If you want to understand what has happened to America, go read the short but very interesting article American Parallels. In it Ian Welsh compares the pattern of the decline of American world dominance to the declines of the Empires of Great Britain, Spain, Rome, and Athens. This is where we are:

American world dominance, as with British, was based on a military dominance that came out of economic dominance. From about 1890 on America had the world’s most powerful economy, out producing Britain industrially, and backed moreover by a continental resource base. At the end of world war II the US was producing about half the world’s goods.

Since then there has been a gradual decline, and the rise of larger powers – China and India, whose population are significantly larger than that of the US. As in the decline of Britain, capital is fleeing the old empire, heading for the rising powers.

• As in the decline of Britain, the new powers flout intellectual property laws, refusing to pay rent to the old power.
• As in the 1890’s – the rising power has now, on a pricing parity scale, an economy equal to the old empire.
• As in the case of Britain military overstretch is straining the dominant power.
• Financialization, the curse of late stage empires, has hit the US as it hit Britain, with rent-seeking the predominant method of making money, and actual production of goods ignored. American capital flows to other countries seeking returns, and builds factories there. American ex-pats teach other nations how to compete, even as Scottish engineers did during the decline of the UK. As with Britain, America, breathless with greed, is teaching others how to defeat it.

[Highlighting and bullet points mine - Ed. WTF-o]

If you have read my earlier posts you may notice that I have repeatedly pointed out the futility of trying to use tax cuts to stimulate the American economy. Tax cuts won't work, because the investors will try to seek the highest return, and like the British investing in mines and railways South American and India in the late 19th century, those returns are much more available in the rest of the world. The utter stupidity of a government policy based on a refusal of the government to interfere in - or even plan for - the American economy has made the American decline inevitable.

Mr. Welsh makes a final statement with which I heartily agree:

America will follow its own unique path. All Republics end, and so do all Empires. There is, in human history, a series of cycles of renewal, decay and renewal. Each one ends in a crisis period, and each crisis must be overcome. It is never inevitable that you’ll fail – but it’s never guaranteed you’ll succeed either. It is this generation’s task to renew the tree of liberty and keep the American experiment going – to remain true to the ideals that made America and have driven it since 1776. It is my profoundest wish, as we come up on the New Year and look both back and forward, that you are successful in doing so, and that America once again becomes the beacon of liberty and hope that its founders wanted it to be.

Go read the rest of Ian Welsh' article.

Our task as Americans is clear. We need to renew the ideals from 1776 that have made America great. The most urgent task at the moment is to destroy the power of the conservative movement who have betrayed those ideals.

Happy New Year.

America on the decline in the world

Steve Clemons just got back from a conference in Germany and posted some thoughts that tend to confirm what I have thought about America in the World recently.

"I've just returned from Berlin and am scribbling a brief note from JFK Airport in New York.

One of the unavoidable impressions I got from Europeans and particularly Germans during this trip is that there is widespread regret that America has slipped off its pedestal as a largely benign superpower that promoted liberty and economic opportunity. The dollar's decline against the euro has only reinforced a widespread view that America can't afford its global pretensions any longer. While America remains important, it is clear to everyone that it is less so. [Snip]

A widespread view among elite Germans and the non-elite normal types I spoke to is that America is in fast decline -- sort of like Britain after World War II. I think that the impressions foreigners have of this decline is "overshooting reality" as there are many substantive realities about America's ability to deploy force and purpose in the world that remain formidable.

I'm a bit surprised to see this written, but it confirms my own impression of the American position in the world currently.

I've written this before. After WW II the U.S. was the only industrial nation in the world which had not had its industrial infrastructure destroyed by the war. Our factories were in great shape and looking for customers world-wide, and we had the shipping available to ship the goods anywhere anyone wanted them. We had the financial centers which could finance such commerce and a government that encouraged it, so that New York surpassed London as the world financial center. The dollar became the world currency and was managed as such out of Washington D.C.

Militarily we were protected because we had the nuclear bomb. It also was a clear talisman that America was "Number One" in the World in a military sense.

American business was managed by a lot of men who had learned a true "can-do" attitude during the War, so that they tended to spend their time building businesses instead of scrapping with labor over how the profits would be shared. The result was a real benefit to the incomes of workers in general as well as to business in general, and led to a recognition that the waste of human resources that Segregation represented had to end. Segregation was both a moral and economic abomination. The amazing body of government funded research that came out of the war created numerous opportunities for whole new industries (particularly aviation) and the government continued to fund the development of computers until they became economically viable and a new industry. The GI Bill provided the necessary educated labor force to make all this work.

The Korean War and the Cold War were the only dark clouds on the horizon. Politically the American right wing had to frighten voters in order to get elected, so they latched on to the then pretty much destroyed Communist threat and played the fear card for all it was worth.

The expansion of the Soviet Union into Eastern Europe was primarily the movement of a numerous, very weak military representing the winning side of WW II into the vacuum of a destroyed Europe. The takeover of China by the Red Army was the success of a well-managed army that enforced honesty in its leaders and offered a previously unknown economic salvation and peace to the Chinese peasantry, in opposition to the corrupt KMT which mainly wanted to reinstitute the old Chinese class system with the KMT members as the new upper class. Neither the USSR nor the Chinese Communists were especially powerful. Each was in the position of having an effective organized force it could use to move into a political vacuum.

It's not clear that the Cold War could have been avoided, but the end result was never really in doubt. Communism offered an inadequate economic ideology that did not offer a viable economic system. This was attached to a pre-industrialism form of government that could not be adapted to the industrial factory manufacturing model effectively. The requirement to enforce the Communist ideology even in the face of its obvious failure forced both the USSR and the Communist China (separately) to adopt totalitarian models of government if they were not to abandon the failed economic policies their ideology demanded. Marxist-Leninism did, however, offer a vehicle for accumulating techniques and tactics for fighting against western right-wing exploitative capitalism, however, and was used as such.

America really did stand astride the world alone in those days. But by the end of the 1950's Germany and Japan had been sufficiently rebuilt so as to begin to provide real economic competition to America, and it was such a new thing to the American business management that they didn't recognize the challenge or deal with it. They'd been on top so long that they assumed that was their rightful place forever. The American financial industry made the same assumption, failing to recognize that the financial economy is no better than the real economy it rests on.

The right-wing, fighting to overcome the FDR democrats who had controlled government, continued to ride the exaggerated threat of Communism. This led the American economy to rely excessively on the Military Industrial Complex for economic growth, and led our government (from Eisenhower through Kennedy to Johnson) into the disaster we call the War in Vietnam. Military spending is inherently destructive of economic growth in the long run. The American inflation that started under Johnson and accelerated under Nixon and Ford was a direct result. Carter inherited both the inflation and the military spending that had caused it as had Ford, and also faced the consolidation of the oil producing states into an effective OPEC (based on the amazingly effective Texas Railroad Commission structure. TRC was the first OPEC.) Carter's solution was to work to find substituted for the American dependence on oil and to install Paul Volcker as the new Federal Reserve Chairman. Volcker sharply increased interest rates, causing the recession of the early 1980's, and removing inflationary expectations from the economy.

The oil companies, however, got together with OPEC and established a price for oil that was too low to encourage private enterprise to research for alternatives, while stopping all government-funded research. The result has kept Oil company profits higher for nearly thirty years, and only now it the real bill for that coming due.

The result of all this is that America has been in financial and economic decline since the early 1960's. There has been too much military spending, with not enough spending on basic research. Shutting down the Super Conducting Super Collider after half its $5 billion budget had already been spent has delayed physics basic research world wide for two decades and sent it to CERN, Switzerland instead of Texas. College tuitions have been increased and are today primarily funded by student loans rather than by grants, so that an MD who graduates from medical school today faces student loan payments for thirty years or so. Most of the rest of the world has instead invested in its educated labor. American bleeds it financially.

The financial position of America in the world today is a legacy of the post WW II period when the dollar was established as the world currency. Today it remains the world currency only because it is to the (short-term) advantage of the Chinese economy. Without the Chinese buying American debt, American would have followed Argentina into bankruptcy sometime in the last decade.

The mismanagement of the Federal budget by the Bush administration assures that the bankruptcy will arrive. When the EURO was established, it was designed to be on par with the dollar, one for one. Today it requires at least $1.30 American to buy one EURO. For a nation that spend the last half century on top of the world in terms of the economy, moral leadership, and military power, the economic aspects of leadership are in the past, Bush has abandoned all pretense at moral leadership, and the insurgents in Iraq have clearly demonstrated that the U.S. cannot effectively fight an insurgency in a distant country.

The decline of America as the unique leading nation in the world is obvious for anyone to see now. It leaves a power vacuum in the world that Europe is not prepared to fill. It appears to me that China is moving to fill some of that vacuum, and that explains why China is building soft-power around the world. This has become obvious in the last year or two, and it is in large part a direct result of the fact that the Bush administration has been so tied down in Iraq and Afghanistan that they took their eye off the ball and have allowed China to make such moves. [This probably is not bad. American - Chinese relations are much better than they would have been if Cheney and Rumsfeld had not decided to defend against terrorists by attacking Iraq.]

With luck the Republicans will have so thoroughly discredited their fear-mongering that they will not be able to prevent America from recognizing its new, less exalted world position and take appropriate actions to invest in our people and our economy. In this the Europeans will, I am certain, be glad to cooperate. It will be to their advantage as well as ours. But right now we need to stop letting the insurgents in Iraq bleed the giant in an unwinnable and unnecessary war. That means getting rid of Bush and Cheney as rapidly as possible. Beyond that, we'll just have to see where it goes. Like an alcoholic, America appears to now recognize that it has hit rock bottom. That is the first step to recovery, and this is still a very great nation, no matter how badly the conservatives mistreat it.