One wonders at times what constitutes the wealth of a nation. How can one consider a nation wealthy, or not so? Is gold the yardstick? Precious metals? In truth, the tangible measure of a country’s wealth nowadays is the hard currency reserves of that country, and that information is conveniently published in certain magazines and newspapers, for instance, The Economist. So let’s go over these figures (and mines’ are not the most recent):
The Wealth Of Nations
At the top of the list stands China with more than a trillion dollars worth of hard currencies. Next to china … (yes you guessed correctly) is Japan with more than 800 billion dollars. We see the South East Asian countries dominating the top ten. At about number 11 stands Russia. Now that is interesting! Russia has about 400 billion dollars equivalent of hard currency reserves. Here is a country which a mere decade ago was a basket case with its Ruble worth dime-a-dozen and defaulting on its debt. Last year, Russia, quietly and without much fanfare, paid off all of its Cold War debt completely-debt free and wealthy. Iran is not doing all that bad at all with about 70 billion dollars which it, not too long ago, withdrew from the Western bank lest the sanctions start biting off. So you may ask where is the US standing.? Somewhere in the middle of the list with , I am sorry to say, a puny 40 billion dollars. How the wealthiest country, not too long ago, in the world has fallen so badly on hard times! The picture is grim indeed for the US. China just last year surpassed the US as number one trading partner with both Japan and the EU. Even worse, with more than 10 trillion dollars in debt, the US is no longer a wealthy country. The debt is truly staggering.
The Mighty Debt
With the end of the Cold War, the US was burdened with 3 trillion dollars in debt. The unchecked military spending and Reagan’s objective of a 600 ship navy brought about this sad state to the US. In the past two decades the debt has more than tripled most of it caused by the profligacy of the Bush administration. The warning signs were there but no one cared to sound the alarm. The deficit spending was for the sacred cow of America, namely, the military-industrial. Two decades ago, in the feel-good post Gulf War era, no one took the 10 to 15 billion dollars a month in trade deficit all that seriously. The debt was owed to an ally, Japan, which then held about 250 billion dollars in American debt. Clinton balanced the budget and looked forward to budget surpluses. The skeptics were of course ignored. But the yearly deficit of 160 billion dollars not only did not go away but grew apace. Today , a monthly trade deficit of 50 to 60 billion dollars is the norm. Now to get a sense of this critical situation one might recall that this monthly trade deficit is equivalent to the yearly budget of one or two medium size countries. Both Japan and China hold several trillion dollars in US debt. Japan must be in a bad case of déjà vu -been there, done it. Many of the Japanese investments in the US two decades ago went bust and down the black hole of America’s wheeling-and-dealings. Mighty Japan
If WWII was exceedingly good for America, the Korean war was exceedingly good for Japan. The US military in Korea in the early 1950s was desperately in need of quick massive supplies. The war-ravaged Japan, with its proximity, received American investment to purvey to the US military in Korea. This was a shot in the arm for the needy Japan. As the cold war progressed, both Britain and the US shifted more of their internal investments to the military-industrial sector and hence neglected the consumer goods sector. One reason you do not own a British made car or TV may be ascribed to this economic prioritization, at the height of the cold war, which made sense at the time but was myopic at best, in the long run, for both America and Britain. The opportunity was god-sent to the eager Japanese, however.
The Mighty Dollar
After WWII, the US emerged intact while the rest of the world lay in ruins, the most devastated being where the actual war took place, namely, Russia , Germany, Japan, and China. The truth is that the mainland US was never targeted by any of the belligerents. The US was not the primary target of either Japan or Germany. Britain whose colonial possessions in Asia were to be the spoils of war, and communist Russia which had been exporting Marxist revolution to the colonies and the West were the primary targets. Needles to say, the US positioned itself as the main arbiter of the world economic system. At Bretton Woods, N.H., the dollar backed by gold, was pegged at an exorbitantly high exchange rate. This was the spoils of war for America. The US ally, Britain, was the only country whose currency was more expensive than the mighty dollar. This was more an act of favor towards an obedient ally than anything else. The US was rewarding Britain for being a good lapdog. For both countries the high exchange rate meant huge purchasing power which functioned like a giant vacuum cleaner sucking up vital resources from around the world cheaply and hence the immense prosperity in post WWII years. To understand what this meant for the third world, the former colonies, the price of that indispensable commodity, oil, can be used as an example. After the fall of Mossadegh, the price of a barrel of oil was 65 cents. This cheap fuel guaranteed to every idustrial manger in the West that the cost of fuel would remain minimal, next to nothing. In the mid 1960s, the price of a barrel of oil dropped even further. A barrel of oil dropped to 55 cents. This literally fueled the prosperity in the West. This scheme which was cloaked as the Marshall plan, hides the fact that the transfer of wealth from the former colonies to the former colonizers continued unabated. In the 5 years after the termination of WWII, the Anglo-Iranian oil company netted a profit of 500 million dollars. Iranian government was paid 80 million dollars, the remainders, 420 million dollars, went to the British investors. The British government was making more money taxing the company than the Iranian government’s share. During these five years, Britain was in a sever austerity crisis due to a sever economic contraction. The revenue from the Iranian oil was a lifeline for Britain. So while America’s generosity, with its Marshal Plan is much trumpeted, the Iranian ‘Marshal Plan’ for post WWII Britain is never mentioned.
The Jinni Out Of The Bottle
The pivotal year for the dollar after the Bretton Woods was 1971. American economy was not able to absorb the cost of the Vietnam war any longer. Borrowing was not an option then as it is today. China under Mao was not going to bankroll America’s imperial ambitions. Nixon decoupled the dollar and America’s gold reserves. This demarche removed all fiscal restraints and the US government began printing dollars exorbitantly. The jinni was out of the bottle!
The Class War
The firing of the air traffic controllers by President Reagan was not simply a from of collective punishment for the strikers but an undeclared war against the unions in America. The capitalist ruling class in America is interested in dependency of workers upon the ruling capitalists. Assertions of bargaining powers by the unions and their members violate this golden rule of the capitalist economy which seeks workers’ dependency, not their autonomy. The class war was conducted on three dimensions. First and foremost, the destruction of collective bargaining powers of the workers. Second, the push for cheap labor. Third, the end of government as an advocate of and partner with the working class.
The Armies Of Peons
As the attack against the unions continued , the union membership dropped dramatically. Against their own interests, the American workers bought into the notion that the unions were harmful to the economy. The lessons learned from the struggles to bring about labor reform such as 40-hour work week, overtime pay, child labor, were forgotten or unlearnt. From the depth of Great Depression, the southern Dixiecrats succeeded in keeping the minimum wage exceedingly low. During the first administration of Roosevelt , the Dixiecrats killed bills intended to raise the minimum wage for the impoverished Americans.
As during the slavery era when the slaveholders were in close alliance with Northern tycoons and banks who financed and marketed slave labor products, again such unholy alliance was struck. Over the decades the minimum wage has been barely subsistence wage , and certainly not a living wage, thank to this alliance between the Northern finance and the hidebound Dixiecrats. To complement the erosion of the unions and the lowering of the wages, the government had to be gutted of any social safety net and welfare system. The model being used was that of the imperial British government in the nineteenth century. The British government was a government of colonial management, ruling over the colonies and their native peoples with an iron fist. Its business was to conduct colonial wars and to dictate terms to the defeated nations.
The sacred cow of this type of government is the military-industrial complex. It is often said that the Republicans are against big government and high taxes. This is of course a phraseology meant to hide the real intentions. The Republicans, and the ruling class in general, are determined to make sure that there is no competition vis-à-vis the funds allocated to the military-industrial complex. For that, all forms of social safety nets, and health care fundings must be eliminated. It is ironic that when Reagan lowered the taxes, the IRS simultaneously began systematic auditing of the Americans’ tax returns. There were so many horror stories, back then, of the excesses of the IRS in imposing hefty penalties and fees. As the taxes were purportedly lowered , the heavy hand of the US government made sure the military-industrial monster was well fed. This reversal of the rights and income of the American workers is one of the most astonishing success stories of the far right and their plutocratic masters. The latter’s’ dream of armies of peons,- prostrate, dependent, and with little or no rights at all- at the plutocracy’s beck and call has been finally realized.
Debt Denominated Economy
With the American government not providing funds for education, housing, and healthcare, or minimally so, a de facto dysfunctional government exposed during Katrina, the American workers, and increasingly the middle class, have been forced to turn to borrowing. The age-old virtue of save-and-spend-later and cash denominated economy shifted in astoundingly short time. The banks and their wealthy owners began to float their gains, gained partly by having denied millions of workers of living wages, in the form of loans of all type for housing, healthcare, education, and with the advent of the credit cards, for everyday expenses.
The current credit card debt for the American household is estimated at 17,000 dollars which, with accrued interests, will take a life time to pay back. Borrow and spend became the norm with billions of dollars in profits for the wealthiest in the US. The dependency of the American workers on the capitalist system has become complete. With Wall-Mart and corporate behemoths, destroying the small businesses along with the mom-and-pop stores, and the credit bureaus policing Americans’ financial records, more and more Americans have opted for bankruptcy courts. Over the past decade, on average , about a million and half Americans every year have filed for bankruptcy protection with the American dream but a pipe dream.
The Ruining Of The American Family
With the erosion of stable jobs and income in the borrow-and-spend economy, the ultimate price has been pernicious. About half of marriages in America end in divorce. Single parent household is the norm not the exception. Despondency, drug addiction, crimes of all type , and social isolation have been on steady rise. The military-industrial has found its complement, the prison-industrial complex. A shameful number of Americans, more than 2.3 millions and increasing, are in US prisons. The erosion in moral fabric is noteworthy as it is now acceptable to all of us to see so many of our fellow humans in the harsh gulags of the American prison-industrial complex.
The Capitalist Carousel
Every year the US government allocates 200 billion dollars to service America’s 10 trillion dollar debt. It is said that about 5% of the US population owns about 85% of all stocks and bonds. This 5% of the US population gets the lion share of this huge 200 billion dollars. It is not hard to imagine what this money could be spent for if the piper was not to be paid: new schools and more teachers, new highways and roads, new transportation technologies such as fast trains, new hospitals, caring for the sick and the elderly. Moreover, the US spends about half of the budget on its runaway military fundings. This huge amount finds its way into the military-industrial complex whose stocks are owned by the 5% aforementioned. This guarantees high stock prices for Lockheed, Grumman, Boeing, GE, etc. It also guarantees high dividends for these stocks. So the wealthiest 5% of the US population lends money to the Us government by purchasing US bonds , the American government turns around and spends half of the taxes and borrowed money in the military-industrial complex thereby guaranteeing increased wealth for this 5% in the forms of high dividends from stocks, interests from the bonds, and higher stock prices. Round and round! This capitalist carousel is truly a joy ride for the wealthiest in the US.
With more than 200 billion barrels of crude oil, given a modest 100 dollar a barrel price, Iraq’s oil wealth stands at a minimum 20 trillion dollars. With 10 trillion dollars in debt and an ailing economy, the US possession of the Iraqi oil wealth can solve America’s woes. Tom Brokaw‘s, NBC news anchor‘s, Freudian slip that ‘we now own Iraq’, at the outset of America’s occupation of Iraq, is a window to the neo-con mindset. The Manifest Destiny die-hards and their counterparts in America’s board rooms, (NBC is owned by GE), must have been driveling over the Iraqi oil wealth. With a puppet government in Baghdad, and the largest American embassy in the world, more like a crusader’s fortress than an embassy, a groveling Iraqi government may now place orders for American products, from GE generators and jet engines to Boeing’s jumbo jets.
The sinister scheme and driver for this brutal invasion might be the US Anti-Ballistic Missile system. The ABM is astronomically expensive and an economically strapped America in no position to afford such a cost-prohibitive system; but with Iraqi oil money lubricating America’s military-industrial complex, the sky is the limit. War Against The Minorities The Katrina debacle exposed not just a dysfunctional US government, more busy catering to the Military-Industrial complex than caring for the afflicted Americans, but also other ills of America. New Orleans demographics comprise a large cross-section of minorities. The question whether New Orleans was neglected because it is not a ‘white’ city is valid and intriguing. Furthermore, the sub-prime lending practices and adjustable rate mortgages were targeted at the Latino community in America and at cities with a large minority population such as Detroit. Puzzlingly, Natural hurricanes and man-made hurricanes seem to target the minorities in America.
The Last straw
As the price of oil sky-rocketed, we were told, by the corporate media, repeatedly, that India and China and their fast-clip growths are the culprits. But Chinese and Indian growths were very much alive in the 1990s as well. The price of oil was indeed cheap in that era. The change began with the Bush administration and its double wars of occupation in Afghanistan and Iraq. The war machine is indeed thousands and thousands of gas-guzzling military vehicles needed to continue the war; specifically, the airlift which is the lifeline of the occupations. This massive airlift, unprecedented in history, sustained over seven years, comprises C-5, C-17, C-130 heavy cargo planes and the aerial tankers which fuel millions of military flights. A typical C-17 carries 40,000 gallons of fuel on board, enough to fuel the traffic of a medium size city during the rush hour traffic.
Moreover, this fuel is a very expensive aviation fuel. The refineries prefer to sell more aviation fuel than gasoline since there is more profit to be made. With the heavy demand this massive airlift has placed on aviation fuel over the past few years, the refineries have switched to this more expensive and profitable fuel at the expense of gasoline output used in transportation. These particular supply-and-demand dynamics have thus increased the cost of energy which in turn has affected the price of food. The Indian economist, Amartya Sen, who won the noble-prize, in his book ‘Poverty and Famines’, reminds us that famines are man made. Wars and famines go hand-in-hand together.
The End Game
Last year, the economic crisis could have been averted . Had the US government intervened to help the mortgage borrowers by putting cash into their hands and using its leverage to correct the predatory lending clauses, rather than the 700 billion dollars bailout handout to the very banks which contributed to this economic crisis, then the economic spiral could have been halted. But a dysfunctional government would not be capable of such a bold move. The patriarchal plutocratic American political system, worst than those in the Old Testament, spurns any such move. The people are just like little children, they must always be guided by the big old patriarch-government who knows better,- for the good of the people! Right!
A national economy which is based on millions of small businesses is always better than one buttressed by a few monolithic corporations, like a building which is supported by thousands of slender pillars as opposed to a few monolithic ones. In the latter, if one giant pillar cracks, the whole structure collapses, whereas in the former paradigm the failure of a few slender pillars cause no harm since there are so many more still left intact. A nation owes itself two things first and foremost, free healthcare and free education. A healthy and educated nation has a bright future. An America of a few giant corporations, with more than 40 million Americans without healthcare coverage and millions mired by hefty student loans or saddled with usurious credit card and mortgage loans, is ill prepared for the future.