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There are two main ways to destroy a country. Either conquer it
from outside, steal all the assets, and prevent the people of the
country from rebuilding; or conquer it from the inside, steal all
the assets, and prevent the people of the country from rebuilding.
Call the first strategy external imperialism and the second strategy
internal imperialism. . . By diverting human capital and other
resources, the military is creating a situation in which the U.S.
will have great trouble rebuilding. All Bush, Cheney, and Rumsfeld
have to do is let the powers that be continue to siphon off the
assets of the United States, and they will have done their job, as
far as the power elite are concerned.
There are two main ways to destroy a country: either conquer it
from outside, steal all the assets, and prevent the people of the
country from rebuilding; or conquer it from the inside, steal all
the assets, and prevent the people of the country from
rebuilding. Call the first strategy external imperialism
and the second strategy internal imperialism. The British used
the first type of imperialism to subdue India and other countries;
George W. Bush, and the elites he represents, are in a position to
achieve the second one in the United States. Indeed, they are
very far along in their efforts, but conquering from within is
generally much easier than conquering from without. The most
important job of a would-be set of internal imperialists is to
destroy the capability of the state to counter and overturn the
actions of those same parasitic elites. Once the state is
powerless to stop those who already have from becoming those who
have even more, the going gets pretty easy. Your
run-of-the-mill “deciders” can kick back at a phony ranch in
Crawford, get drunk and hunt for quail, or hatch plots to conquer
vulnerable oil states; Bush, Cheney and Rumsfeld need only take
advantage of the power that they already control
The sweet smell of success
A popularly-based state is essential because societies are
like ecosystems that are in constant danger of
self-destructing. The positive feedback loops of power that
exist within all societies have the capacity to rip the system
apart.
Positive feedback occurs when the increase in
something – power, temperature, disease, machinery – increases the
probability that there will be a further increase in that
thing. The most familiar physical example is an
explosion. A chemical process, or a nuclear process in the
case of a nuclear bomb, sets off a chain reaction which explodes the
pertinent material at a faster and faster rate, until everything is
used up. Positive feedback may also mean that a system becomes
“stuck”, or “locked in” at either a maximum or a minimum. For
instance, the phenomenon of the “vicious cycle of poverty” was
explored by the first recipient of the Nobel Prize for Economics
(and one of the few who deserved it), Gunnar Myrdal . [1]
This process “locks in” poor people because education and
other assets are needed to escape poverty, but poverty leads to a
lack of these assets, and so it becomes difficult to “unlock” from a
position on the economic “floor”.
Global warming, as we are
seeing, contains many positive feedback processes. For
instance, when the polar ice caps lose snow, the underlying oceans
and earth absorb more heat, which increases warming, which melts
more snow, and so on .
Empires are created by positive
feedback. A country conquers a smaller neighbor, steals its
assets, and thus has more resources with which to conquer other
countries. Left to operate unimpeded, many countries
throughout history should have been able to create a planetary
empire. However, as explained by international relations
theorists, a balance of power forms, which counters a would-be
global empire . World War II was a good example. The
U.S. and the Soviet Union, at each others’ throats both before and
after, became close allies in their bid to thwart the global
ambitions of Hitler.
The balance of power is an example of
a negative feedback process. Social scientists, and in
particular economists, have made a fetish of stability and negative
feedback processes, and by so doing, have ignored the positive
feedback yin that complements the negative feedback yang.
Without understanding both processes, it becomes very difficult to
correctly analyze complex global social systems.
The decline of
Great Powers such as the U.S. occur because of the positive feedback
processes at work within a wealthy country. The production of
goods and services, particularly within the manufacturing sector,
gives rise to great wealth. Those who are better at
controlling things than producing things take advantage of this
cornucopia to control large concentrations of wealth. In
particular, financial sectors and governments tend to deplete the
manufacturing sector for their own internal and external imperial
reasons, and eventually kill the goose that lays the golden
eggs.
In a dictatorship, this process is well-nigh
impossible to stop, because there is no countervailing power.
Revolutions occur when the process of decline has advanced so far
that the state itself is crumbling. In a democracy, the
possibility (but certainly not the inevitability) of reversal
exists, in so far as the population can rouse itself to challenge
the power elite.
Several authors have noted these
internal processes of power. In the 1960s the economist John
Kenneth Galbraith proposed that the government can be a
“countervailing” power to the rising power of corporations. C.
Wright Mills coined the idea of a “power elite”, composed of
corporate, governmental, and military elites, although he did not
discuss how they might be challenged. Seymour Melman detailed
how the state joins with corporations to form a “state capitalism”
that centers on the production of military equipment, the operation
of the state sucking dry the production system. Recently,
Kevin Phillips has written of the destructive effects of a rapidly
rising financial sector.
Perhaps the broadest effort to
discuss positive feedback, over the long-term, was undertaken by
Karl Polanyi in his book, “The Great Transformation”. Writing
in 1945, the lessons of the previous century were clear: left
unregulated, global capitalism would destroy itself. In
a similar vein, Keynes’ identified the phenomenon of the “liquidity
trap”, another form of positive feedback “lock in”, in which the
lack of investment leads to a low level of economic activity which
leads to a lack of investment, and so on .
The phenomenon
described by the phrase, “the rich get richer and the poor get
poorer”, is really two “lock ins”, one at the top of the economic
system and the other at the bottom. As Linda Minor has so ably
demonstrated in her articles on this website, the rich are able to
maintain their power, and even to enhance it, because they are rich
and powerful. As David Cay Johnston explains, the rich are
becoming richer partly because of changes in the tax code, and the
richer they are the easier it is to become even richer, partly
because they increase their ability to avoid taxes .
Like an
external empire, families and friends in the elite can continuously
gobble up smaller centers of power within a country, until they
eventually control most of the country’s wealth. Power leads
to more power. Manufacturing firms are ensnared in this net
and are sucked dry, left to rot with everything else in the
ecosystem known as the national economy. Instead of putting
surpluses back into the manufacturing system from whence the
surpluses came, those resources are used as weapons to control
economic (and political) entities, world-wide.
The unions used to
serve as a “countervailing” power to the corporations, but the
destruction of the unions has been a long-term goal of the power
elite of the United States. Outsourcing manufacturing had two
goals: first, increase profits by decreasing labor costs, but
second, decrease the power of unions and the middle and working
classes in general. As David Kay Johnston argues, “We are the
only country in the world that is in the pursuit of lowering wages”
. Lower labor costs alone would not in themselves serve as a
reason to outsource; the larger goal is to take power away from the
middle and working classes. Even in the service industries,
which are poorly organized, keeping uppity computer programmers
scared by outsourcing to India even when the gains are dubious can
make sense to power-hungry CEOs who want to keep the “business
climate” in the U.S. “attractive”. Such short-sighted agendas
prevent the people of the U.S. from rebuilding, because eventually
they will have neither the power nor the skills to do so.
Keeping prying eyes off of the prize
The
state, as militarized, corrupt, and greedy as it is, is the only
force strong enough to keep this system from exploding. To do
so would require a population that is sophisticated enough to know
how the political economy really works and therefore how it should
be managed. The current mainstream economic ideology --
neoclassical economics -- serves to prevent people from
understanding what is going on in two critical ways. First,
neoclassical economics, at its core, teaches that the government can
only be a negative force in the economy because it defiles the
perfection of the market; and second, the profession teaches that
the most transcendent expression of market perfection is the theory
of comparative advantage.
The main problem with all neoclassical
economic theories is that they cease to apply in the long-run;
Keynes famous remark that “in the long run we are all dead” really
means that “in the long run neoclassical economics is dead”.
The state, ideally, exists as a social contract, and thus must be
concerned with the long-term survival of its inhabitants, stretching
into the distant future. The main problem to be investigated
here is the following: in the short-term, markets can reward those
who destroy assets, which are necessary for the well-being or even
survival of the economy in the long run. Without the state,
the market will destroy itself, for a number of
reasons.
First, there are certain classes of essential
assets that would not be created without the intervention of the
state, and are happily destroyed if the state is made
impotent. As I explained in “Say
Dubai to the American Economy” , a market cannot function
without a sophisticated infrastructure. Similarly, the human
capital created by an educational and training system have almost
always been provided by the state, as well as crucial research and
development activities.
Second, the ecosystem that
underlies all production is a critical asset that is merrily
destroyed for short-term gain. As we are now seeing in the
case of global warming, there can be no market if the market is
under water. There can be no market if the climate is so
erratic that production becomes impossible. There can be no
market for fish if all of the fish are taken out of the oceans , and
there can be no market for wood if all the forests are gone.
There can be no agriculture, or not much else for that matter, if
there is no fresh water .
In general, the market can not make
rational decisions about using up nonrenewable resources, whether
those resources exist underground or as an entire ecosystem.
The actions of the individual parts in a market are supposed to
maximize the wealth of the market as a whole. But if some
actors in the system increase their wealth in the short-run, while
at the same time decreasing the wealth-generating capacity of the
planet in the long-run, then the market will be making the wrong
decisions. The effect is similar to “milking” a company for
profit before it collapses. Profits rise, but assets
fall.
Third, there can be no market if there is no
manufacturing. Just as a market cannot exist if there is
no infrastructure to bring the products to it, there can be no
market if there is nothing to sell. If, as in the United
States, “market forces” are creating a manufacturing-free zone, then
it is the market that is wrong, not the concept of the necessity of
manufacturing .
As in the case of environmental
destruction, a set of actors – multinational corporations – are
profiting in the short run by transferring manufacturing capacity
out of the U.S., while the economic system of the whole – the U.S.
economy – is losing its wealth-generating capacity. Long-term
assets are destroyed for short-term profits. This is part of
the process of internal imperialism, not economic
growth.
Fourth, there would be no market if the market was
left to its own devices, because markets will always be
monopolized if left alone long enough. If there is one group
of people who hate the market, it is the people who run
companies. They may lie, steal, and cheat– they will even make
weapons for the military – if by doing so they can destroy a free
market and control it instead. The state determines the
structure of the market insofar as the state prevents such
monopolization. Only massive public uproar could have led to
the break-up of the trusts of the late nineteenth century, and
whatever is emerging at the beginning of the 21st will only be
brought to heel as the result of another round of public
intervention.
We are told that 21st century competition
requires corporations large enough to compete with other countries’
behemoths. We must destroy competition in this country
in order to save it. In order for these corporations to
compete abroad, we must establish a free-trade regime world-wide,
for if we keep out other countries’ tyrannosaurus rexxons then ours
will only grow to velociraptor size. The train of logic runs
out at this point, because if we were protecting our economy from
such large beasts in the first place, we wouldn’t need big ones
ourselves. Out trots trade theory, and in particular, the
theory that Robert Samuelson called “the most beautiful theory” of
economics, the theory of comparative advantage.
The comparative advantage of power
The theory of comparative advantage does not hold that countries
should concentrate on what they are best at, in an absolute
sense. The theory is more insidious than that. The
theory posits that even if a country is better than its neighbors in
everything, the top country should remove resources from everything
but what it is best at, relative to its neighbors. In fact,
every country should concentrate on just one industry, and eliminate
– destroy might be a better term – all of its other
industries. The theory is in reality a justification for
internal imperialism, the destruction of a country’s assets and
capability to regenerate itself.
In the medium-term, where
technological change is not important, Ricardo correctly showed that
all countries would maximize their income by pursuing this
strategy. The problem is that in the long run this policy
would be a complete and total disaster.
If the economy is like an
ecosystem that needs all of its various parts in order to function
properly, then destroying vast sections of the economy would lead to
collapse in the long-term, not growth. The different sectors
need each other, and in particular, the industries that produce
final goods and services need the industries that provide them with
machinery. In turn, the industries that make the production
machinery need the industries that produce what I termed
“Reproduction machinery”, that is, the core industrial technologies
such as machine tools, steel-making equipment,
electricity-generating steam turbines, and semiconductor-making
equipment. These technologies collectively reproduce
themselves and are used to make production machinery. In order
for this industrial ensemble to work together and produce
technological progress, they need to be in some close proximity so
that the engineers, scientists, and skilled production workers that
make up the human capital of this system can interact with each
other and the machines .
As I argued in “The rise and
decline of the great American corporation” , the American automobile
companies are a prime example of the problems of
specialization. They will not survive if they are the only
extant components of the manufacturing economy.
Ricardo used his
theory to make a prediction. Let’s see how he did, looking
back almost 200 years later:
Under a system of perfectly free
commerce, each country naturally devotes its capital and labour to
such employments as are most beneficial to each. This pursuit of
individual advantage is admirably connected with the universal good
of the whole. By stimulating industry, by regarding ingenuity, and
by using most efficaciously the peculiar powers bestowed by nature,
it distributes labour most effectively and most economically: while,
by increasing the general mass of productions, it diffuses general
benefit, and binds together by one common tie of interest and
intercourse, the universal society of nations throughout the
civilized world. It is this principle which determines that wine
shall be made in France and Portugal, that corn shall be grown in
America and Poland, and that hardware and other goods shall be
manufactured in England.
Oops.
It all sounded so good until he got to the part about England
being the master of the global economy forever and ever. One
might excuse Ricardo for ignoring the idea of technological
progress, except that he was a witness to the Industrial
Revolution. How the economics profession has managed to ignore
technology deserves an separate essay.
Following in their footsteps
Poor countries are the only ones, up until now, who have been
unfortunate enough to actually follow the theory of comparative
advantage. Their elite specialize in the theft of their
resources for the comfort of themselves and other countries’
elites. Of course, this sort of behavior warms the cockles of
the hearts of the IMF and the World Bank, who try to impose an
economic theory on their unfortunate charges that no rich country
would even think of implementing – until now. When a country
is exporting coffee or petroleum or precious metals or timber, and
preventing its people from doing anything else, it is being
destroyed by both its own elites and by international elites.
The government has all but disappeared as a conscious planning
agency whose function is to keep the market from destroying the
country. The global market in these countries long ago
destroyed them.
And now, it is the United States that is
entering down the road traveled by the poor countries. In the
U.S., the centers of economic power have a willing partner in the
theft of the country’s assets, the military. The military helps tie
together the internal and external imperialism of the United States
via the military-industrial complex and a worldwide network of bases
and military proconsuls. A global elite, not anchored to any
particular country , is being created, and the U.S. military is
doing its part.
By diverting human capital and
other resources, the military is creating a situation in which the
U.S. will have great trouble rebuilding. All Bush, Cheney, and
Rumsfeld have to do is let the powers that be continue to siphon off
the assets of the United States, and they will have done their job,
as far as the power elite are concerned. Only the people of
the United States can stop them.
The next installment of “Taking the Long View” will explore the
role of the U.S. military in the destruction of the U.S.
economy.
You can contact Jon Rynn directly on his jonrynn.blogspot.com .
You can also find old blog entries and longer articles at
economicreconstruction.com. Please feel free to reach him at
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[1] Gunnar Myrdal, The American
Dilemma, 1944
“The Tipping Point”, Time Magazine, April 3,
2006
For example, Kenneth Waltz, A Theory of International
Relations, 1979
See John Kenneth Galbraith, The New
Industrial State, 1967; C. Wright Mills, The Power Elite, 1959;
Seymour Melman, After Capitalism,2001; Kevin Phillips, American
Theocracy, 2006; Karl Polanyi, The Great Transformation,
1945
http://www.buzzflash.com/interviews/04/03/int04017.html
http://www.buzzflash.com/interviews/04/03/int04016.html
Say
Dubay to American Economy
Julia Whitty, March/April Mother Jones,
“The
Fate of the Ocean ”,
Lester R. Brown, “Plan B 2.0”,
2006
See “Before
the economy hits the fan ”; see also “Why manufacturing and
infrastructure are central to the economy”, at http://www.economicreconstruction.com/JonRynn/JonRynnIndex.htm
Ibid.
The
Rise and Decline of the Great American Corporation
David Ricardo, On the principles of Political Economy and taxation,
Chapter 7, “On Free Trade”
I would like to thank Chris
Sanders for this insight |
