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

[Cathexis]

Great article, although I do disagree with one assertion: That "a major tax on imported oil is the only way to stop the greatest wealth transfer in human history."

I can see the overarching logic of such an action, but I have the same problem with this as I have for those advocating higher gasoline taxes: The effects such actions would have on those with little or no discretionary income. For those people, such actions would price gasoline out of their reach, affecting the ability of many to commute to or from work.

Sure, mass transit is an option -- for those places with sufficient population densities to support such options. I live in Raleigh, NC -- we don't have any well-developed alternatives to automobiles. I have a 24-mile commmute (one way). My fault for living so far away? Tell that to the people who successfully got a job, albeit farther away, after getting laid off. You say we should move closer? To our "job o fthe moment?" Every time our insecure employment status changes, we should relocate to accommodate? Aside from being an inherently repugnant suggestion, who is going to buy my house? Population densities aren't that great and I don't live next to a Corporation.

I appreciate what you're trying to achieve, but disagree with the suggestion as to how we get there.

[swift goat pet for truth]

"The effects such actions would have on those with little or no discretionary income. For those people, such actions would price gasoline out of their reach, affecting the ability of many to commute to or from work."

Perhaps car pools would become more popular. As would public transportation.

[Cathexis]

Car pools could be an option, although I see that as more of a temporary measure, for most, unless they are in a suitabel social network.

"Public transportation" would be great ... if that infrastructure existed. Right now, the only viable "public transportation" I have is a cab ... and that isn't really an alternative.

My assertion is that this problem is imminently suited for a centralized (government) response ... and it won't be effectively solved (acros steh country) until that centralized, concerted effort is made.

[Rockyman]

Did nobody "tell us" or were we unwilling to listen? President Carter in what has been characterized as "The Malaise Speech" saw our addiction to foreign oil as a huge threat. His reward was to be shown the door and the election of Reagan. Even John Anderson during the Repub primary in '80 suggested a 50 cent a gal. tax as wise to deter consumption and fund alternatives. Where did that get him? America is "soft" and spoiled and has shown disdain for any leader that requests us to grow up, take some bitter medicine and change our ways. We have had before us some Y's in the road and we have taken the easier short-term path. We are doomed!

[boyd]

"We are doomed!"
Thanks for the encouragement.

[Rockyman]

To be pessimistic about our trends does not mean we give up. It means things are REALLY bad and we have shown little will to this point to proceed responsibly. Our leadership is dismal and we chose them. Doesn't say much about our wisdom!

[WIpatriot]

Everything is peachy-keen, swell, nifty-neato!

Feel better, now? That's why I'm here....

[ForRichardorPoorer]

Very Good article.

[liberalghost]

Yeah, right, not a word about "defense of marriage" or "promoting family values". Cuz when we're dumpster-diving for food, we'll have the satisfaction of knowing we're moral dumpster-divers. That's important to Hagee's god.

[Cooltruth]

There's always the possibility of moving out of the cities so growing your food would be an option instead of having to rely on dumpster-diving for meals. Then there are the stores that install locks on their dumpsters or fence them in after finding people in there scrounging for something to eat. Wouldn't recommend having to depend on dumpsters for food once prices get so bad that theres competition over anything in them worth pulling out to eat. Enough people can turn over dumpster easily as a hungry bear can if things get much worse...