Economic Suicide

The other day I was playing with my time machine and came across an essay by a highly respected historian, written in 2020, in which she summarized the economic developments in the United States in the final years of the preceding decade (that is, between 2006 and 2010). By allowing the price of oil to skyrocket and doing extremely little to curb its import--by paying through the nose for millions of barrels of foreign oil--the United States transferred huge amounts of its wealth to its adversaries. Among the top beneficiaries were Iran, Russia, Venezuela and an assortment of authoritarian countries from Saudi Arabia to Kazakhstan.

As of the end of 2008, the historian noted, payment for oil was no longer accepted in U.S. dollars (because of its sharply declining value) but mainly in gold bars. The amounts of gold the US had to pay foreigners were so huge that several ports were clogged as ship after ship lined up to pick up the payments. These ships competed for loading space with other ships that loaded American goods, which had become so cheap (for those overseas paid with their rising currencies) that buyers from overseas emptied American stores.

Americans initially saw a lot of good in the rising demand for their goods, as it created jobs. Only later they noted that because American goods fetched ever less, workers wages and benefits had to be cut time and again. Americans, they found, had to work ever more--for ever less.

Americans also were fooled by the stock market, which instead of collapsing, held on. Only later did they note that it managed to do so mainly because foreigners used some of the trillions of dollars Americans were paying them for oil and other raw materials to buy American stocks; that is, they began to own American companies. Americans, the historian noted, were concerned a bit about the security implications of foreigners owning ever more American companies, but paid next to no mind to the economic implications. Increasing foreign ownership meant that an ever larger share of the profits the American companies did generate was paid to the foreigners who now owned the companies. Foreign owners collected the dividends; they clipped the coupons on American shares. As long as foreigners continued to ship to the United States their precious oil, it seemed that no one noted that, in effect, Americans were paying them to buy an ever growing share of American assets.

The historian speculated on what caused the American blindness to their rapidly deteriorating condition. She found that many factors were at work, each reinforcing the other. Capitalist ideology claimed that any interference with trade across international borders is a grave sin. Americans had a hard time breaking their romance with their cars. None of their elected officials dared tell them that a major tax on imported oil was the only way to stop the greatest wealth transfer in human history, from the United States to a score of other nations. Foreigners financed American deficits for so long--allowing Americans to maintain a standard of living much higher than they were able to pay for by their labor--that Americans were conditioned to assume that they will never have to pay the piper. Hence, they faced a particularly rude and contentious awaking toward the end of decade, when the dollar turned into a junk currency, and Americans had to work overtime just to pay for the trip home from work. Their main outcry was: Why didn't someone tell us?

Amitai Etzioni is Professor of International Relations at The George Washington University and author of Security First (Yale, 2007) www.securityfirstbook.com
He can be contacted at [e-mail].

Comments

[seawolf77]

Order has a price. Control has a price. GE is always listed as the most admired company. Why? Because it is run like the Mafia. Chain of command. Everyone alpha humanoids. Pitted aginst each other. Destroy the "weak". Sink or swim. It's the GE way. The 27 Yankees. They will tell you that is the way to run a bakery, even thought most of them can't bake a cake. But I can tell you this and it is the reason why America is being flushed down the toilet. If General Electric were run like Apple Computer, we'd all be riding in flying saucers. Instead we're all tilting at GE windmills, the zenith of GE techological achievements lately.

[NoPCZone]

Old Hippie Saying:
Live simply, so that others may simply live.

Old saying attributed to Benjamin Franklin:
We should all hang together or we will surely all hang separately.

2 related old sayings from the Bible:
What you sow, so will you reap.
If you sow the wind you will reap a whirlwind.

Old anonymous saying:
Insanity is doing the same thing repeatedly and expecting different results.

Is it a me society or a we society?
Will we stand together or will it be each person for themselves?
Will we learn from mistakes or profit from the knowledge gained the hard way?
Will we light a candle or curse the darkness?
Will we set aside our differences and concentrate on our common humanity and needs?

Let's not get caught rearranging deck chair on the Titanic.
Peace

[WIpatriot]

Warnings do no good. People need to feel the pain in order to take action.

[Sundialsvc4]

Dr. Etzioni, your article is well-written and compelling, but are not "oil prices" but a candle in this forest fire? Any country that is not self-sufficient and that has literally sold-away and dismantled its ability to provide for itself cannot be strong. Any country that abides by "all taking and no giving" as an ersatz "national policy" cannot even survive. It will not even retain its national identity and its territory.

Yes, we have been foolhardy with our oil and with our adoration of the word "multi-national." But have we not become ... my mind gropes for analogies, ahh yes ... "Jabba the Hut," that pathetic slug from Star Wars? Is it not so that the real long-term solution to our quite self-inflicted predicament is to very fundamentally change ourselves? Back... to what we, yes, within our own lifetimes, once were?

"Rosie the Riveter, Line One. Uncle Sam, you're needed in the gym."

[GreedyOldPsychopaths]

Yes Sundial, oil is but a symptom. Consumption w/o equivalent production leads to debt. It is not wealth that is generated by FED printing presses, but rather devaluation. Debt and devaluation driven by greed, the root causes of our economic malady.

[avraamjack]

.
If the 2000 election were held again, Al "kill the internal combustion engine" Gore would win in a landslide.
.
When wisdom fails, experience comes at a dear price.
.
Policy is no longer an abstract concept to the electorate.
.

[seawolf77]

Don't count on it. Remember the chimp won in 2004 even after we had gotten a good look at him.

[BlackbirdHighway]

Take a look at all the electric vehicles at the rally outside the CARB meeting in Sacremento, CA.

http://www.youtube.com/watch?v=3_X1LeNoJ-w

Later, a woman got up to speak and talked about how she has driven her electric RAV4-EV for the last 6 years. She has driven 60,000 miles over 6 years, and in all that time, has not bought one single drop of gasoline,

People, demand that the car companies start making these again. Tell Toyota, Honda, GM, Ford, and all the rest that you won't buy another car unless it runs on electricity, not gasoline.

[PacificGatePost]

In the drive to deal with the cost of living, buyers are moving wholesale to small cars is a major shift for the American consumer, with more shifts to come¦.

SMALL CARS, A PARADIGM SHIFT FOR AMERICA

N.A."s big three weren"t ready.

[FreedomCorpse]

History should tell the truth. That Milton Freidman was greatest fraud ever to be visited on economic theory

[fisharefreinds]

I have been saying the same thing for 8 years and so has everyone I know. It is the greatest transfer of wealth in history and we have Greenspan, Bush/Cheny, the Saudis and a whole host of "friends" to thank for this.
Now why isn't Obama--the great hope--or Clinton--the great mope--calling for price controls and a stop to this momentous tragedy? Who do they owe?

[castlerider]

I don't believe it's because they owe anyone. It seems that this administration simply has it all so sown up SO airtight...
This has been the most secretive, obsessed with control administration in the history of our government. Largely due to Cheney, who has there working for W's dad and probably stayed up nights thinking about just how to do it- he has obviously known just what to do in taking complete and absolute control for him and his mini-me chimp.

New directives are liable to be extremely hard to circumvent for the next administration. Especially if it is a Dem administration. The powerful are going to be very upset to lose control if it happens. We can anticipate some cataclysmic incidents going down because they will want to not only pull their strategies to maintain control, but also will need to cover their tracks for all the illegal practices and deliberations that will likely go all the way to the top.
I will absolutely love it if Jim Webb or John Edwards are made the new Attorney General.

[WIpatriot]

Russ Feingold for AG!

[worldtraveller]

maybe because price controls have never nor will they ever work. Americans partied hard now it's time to pay... ying -yang... makes sense to me

[fisharefreinds]

Who told you that price controls don't work? Ask Nixon in 71/72, They do! and trying to break the oil cartel is crucial! we did not "ask" for this, we were screwed by a power greater, our president!

[swift goat pet for truth]

Warren Buffett has been saying the same things in the article for about 5 years now.

But what does he know?

[FreedomCorpse]

Buffett said recently the worst is behind us...now he's lying. But yes he was warning for some time as was Lyndon LaRouche but nobody listens to him because he's a 'nut'.

[MilwaukeeDan]

FC, several days ago, I read Buffett and his group are predicting a recovery in the housing market in the second half of THIS year, almost died laughing. The only think growing in this area is the number of For Sale signs. Pat Buchanan(not a liberal) for years has been warning Americans about the dire situation we face brought on by job outsourcing and empire building(NATO, wars in the middle east), but he's been labeled a rascist and no one listens.

[Stevelagain]

Economic Doomsday scenarios that lead to the destruction of the US are legion, they abound, thy grow like weeks and you can hear them by the dozens. This has been true all of my long life. So far though, they turned out to be just so much more nonsense.

Focusing on hate and propaganda is not helpful. But here at HP you have a crowd hyped up on hate. The age old formula for "reformists". Hype them up on hate an propaganda then send them forward to give one political power or create the change desired".

As if defending traditional values has anything to do with the economic problems of the day. Straw men hate attacks.

Take cars for instance. Every single day 2,000 new cars hit the roads in China. Every 1 to 2 weeks a new coal plant goes on line in China. The entire world is not a "part of the problem". So lets stop pretending it's all up to the US and that we must destroy our economy to save the world. If it weren't for idiots on the far left we could be getting nearly all out power now from carbon free nuclear plants and using that global warming free power to charge batter powered cars. But no, you see the "bad guy" as people who defend traditional, moral, values.

[swift goat pet for truth]

"Economic Doomsday scenarios that lead to the destruction of the US are legion, they abound, thy grow like weeks and you can hear them by the dozens. This has been true all of my long life. So far though, they turned out to be just so much more nonsense."

There was a guy who jumped off of a tall building. As he passed each floor, people heard him say, "So far, so good."

So far, so good.

[WIpatriot]

Exactly, swifty.

[swift goat pet for truth]

Do you think this behavior is infinitely sustainable?

What is not infinitely sustainable will end.

[loudspeaker]

Thinking of Iran, Russia, Kazakhstan, Venezuela, etc., as adversaries exposes a twisted world-outlook. Is that what you teach your students? Those countries (and all countries) should be made into our allies. It is better to regard and treat other countries as friends than adversaries.

Now, what American goods are we able to sell these days or in the future? You, as a professor, should know about the trade deficit we have had for several years now. We are shutting down our factories (like the automobile industry) and we are using an increasing amount of agricultural products to make low-level biofuels (thanks to Al Gore and his ilk) causing starvation even within our borders.

There are no companies left in America worth owning. We only have bankrupt hedge funds, bankrupt non-banks (like Bear Stearns), killing HMOs, looting private equity funds, and other useless businesses.

[Herrington]

Our next "Moon Shot" should be to reorganize our transit systems to minimize the effects of a hundred years of sprawl. The "Green Jobs" will not be in technology, at least not in high tech, but in the low tech of getting people from A to B without 1) breaking the nation or wothout 2) polluting the planet so that food wars are the order of most urgent business.

[sixthskinjob]

...or the even lower tech option of not moving from A to B at all.

[Cooltruth]

Instead of 'reorganizing our transit systems', wouldn't it just be cheaper to get bicycles for people who didn't already own one? Pedalling a clean, handy bicycle vs waiting on a nasty, crowded bus to come for you... Which would you prefer? The cost of the bicycles would be cheaper than the cost of buying & maintaining numerous busses, not to mention paying for drivers & fuel for the busses which could cause mass transit costs to be greater than rider's fares would cover. Scooters or mopeds would work for those whose legs are incapable of bicycling & still be cheaper than mass transit cost would be.

[BlueSkye]

Which would I prefer? I was going to my office job, I'd prefer not arriving at work all sweaty and smelly, as I would if I rode a bike.

[Cathexis]

Depends on the population density and logistics, Cooltruth.

If the majority of trips are within 5 miles or so, but the population density is not high, then yes ... your suggestion may well be more cost effective. But if the population density is high enough and/or the distances prohibitive, then the economies of scale from a more rigorous Transit System could be more efficient.

[Cathexis]

Excellent point, Herrington! This is a problem that was MADE for a concerted, national effort!

[KillTheMessenger]

"The historian speculated on what caused the American blindness to their rapidly deteriorating condition."

The words "poor education" come to mind.

[Stevelagain]

Letting liberals take over the education system was a huge mistake.

[swift goat pet for truth]

The conservatives said it providing for education was not a job for government.

[pokethis]

Steve - instead of just spewing won't you tell me how liberals are the problem? Perhaps we are part of the problem but it was precisley these kinds of people (corpratists dressed up as politicians) that caused the Great Depression. Did you hear about it? It was pretty bad. Perhaps you could read some history or watch a good documentary about it.

And tell me how "if it weren't for the far left" we'd be living on clean energy???? Perhaps you are suffering from alzhiemers in your old age.

[johnmorgan]

Yeah, the recession we're in has nothing to do with Bush's radical right-wing ideology. Blame the public schools. I guess the schools should teach children to be as ignorant as you are, and then you'd be happy, and magically our economy would be all right again.

[djthedj]

Why did that happen? Oh yeah, because only dedicated, intelligent caring people will teach for the pitence they are paid. That leaves about all of the dispicable greedy scum that pass for conservatives these days.

[WIpatriot]

Allowing stupid people to procreate is still a problem.

[fisharefreinds]

What does this comment have to do with Oil? Are you listening to the clap trap from Greenspan?
"Mr. Greenspan, the way you continually lowered interest rates in the 90's and during Bush's administraion have no regard to the realities of that time, what is your thoghts on the matter?"
his answer,"Public education in this country is going down the tubes and your question is blind, I was the best, now education...."
Mr. Kill do you work for the Oil Companies? OPEC? Is that why you think $15.00 a gallon for oil is hust fine?

[JBS]

Best way to tax oil is to tax oil COMPANY profits. Ain't gonna' happen.

[castlerider]

The same way this country, its media, and its politicians used the oil embargo to characterize Jimmy Carter as a failed president , (when actually it only lasted a short time, correcting itself within months)
Will be the same way we will all remember Bush. Only he obviously really is a failed leader because of his blind arrogance, obstinance and corrupt leadership which has actually caused the death of thousands, the compromising of our laws and regulations, and destruction of our economy..

Opec has stated that after 2008, oil prices will begin to ease. Can anyone else read between the lines? We are being punished for electing this idiot. So hard to accept, in so many ways. Makes one want to kick their ass, but what will that do, except drive prices higher.
Like having a neighbor who had their yard run over and the windows all busted, and now you have to pay for it. All because of an irresponsible drunk little brother... Or a stupid chimp.

[writeaway]

The oil embargo actually began under Nixon (a Republican for the uneducated) who was pre-occupied with Watergate where he attempted to use federal agencies to squelch investigations. Sound familiar?