06/12/2008 07:23 pm ET | Updated May 25, 2011

A New World or No World? (Part 1)

Societies never act in totally predictable ways. In response to the global economic crisis of the mid-Seventies, induced by OPEC tripling the price of oil overnight, every country was put to the test. Energy policies proposed by Jimmy Carter, which rested on the notion of consumer restraint (e.g., turning the thermostat down in the White House to 68 degrees), were unpopular, demoralizing, and ultimately a flop. But England, France, the Soviet Union and others adopted widely differing energy policies that were equally a flop.

Today OPEC is enormously stronger than thirty years ago. Thomas Friedman of the NY Times calls the Arab oil producers "petro-dictators." With unrestrained speculation driving oil prices skyward, Saudi Arabia alone possesses more wealth in its oil reserves than all the stock and bond markets in the world combined -- and that was calculated with oil at $100 a barrel. In addition, by silent collusion the Saudis and the American oil companies started keeping more of their income as pure profits while no longer planning adequately for new oil fields. As a result, even if OPEC decided to undertake new drilling today, the first drop wouldn't enter the pipeline for a decade.

This looks like the making of a global crisis lasting for the foreseeable future, intensified by the sudden and dramatic demand for oil from India and China. No extra production and ever- growing demand means that $200 a barrel oil will arrive soon and stay there (absent unexpected changes like switching to ethanol on a massive scale, as Brazil has done, or radically new car engines that get 60 miles to the gallon). The shock to the American economy has been swift and highly threatening, but the psychological impact is equally severe. Americans are used to being rich and stable. We accept without question that this country deserves to bestride the world as the British did before 1900.

So far, during the disastrous years of the Bush administration, no energy policy has existed, and all the toughest problems were kicked down the road willy-nilly. Denial has lulled the public into thinking that global warming, overpopulation, pandemic disease, and the end of cheap energy would somehow solve themselves. This attitude, based on the right-wing worship of the free market, made the country's recent economic woes more shocking psychologically. Now the consensus among global analysts is as follows:

1. Severe swings in the economic outlook for America cannot be avoided.
2. Continuing to do nothing would be disastrous on all fronts. Yet no general agreement on what to do has been found. Divisive politics still trumps intelligent reform.
3. Arab oil producers are absorbing undreamt of profits so fast that its effects cannot be dealt with either by them or their customers.
4. The political will barely exists to cope with emerging problems, much less the radical policies that would solve those problems.
5. Escalating oil prices threaten the world with food shortages and widespread outrage against OPEC, creating the conditions for global rebellion and, at worst, an attack on the Middle East to seize their oil fields.
6. Worldwide inflation has begun and could spiral out of control.
7. As China and India rise, the U.S. will slowly but surely become less relevant as a dominant economy. We are already highly dependent on foreign lenders and hugely in debt.

What, then, the future?

We find ourselves at a fork in the road. One way leads to a new world, one being born with frightening convulsions but eventually benefiting every economy. This is the way of globalization. The other way is the road to protectionism, tariffs, anti-immigration, and the shutdown of alliances. This is the way of nationalism. One way is optimistic and evolutionary, the other is pessimistic and reactionary. One way looks outward to the world at large, the other looks outward and puts national security ahead of every other interest. To date, the general U.S. response has tended toward the latter. Nationalism, including toxic xenophobia, is the province of the right wing, which blocks all things progressive and stigmatizes anyone who opposes them.

Until two or three years ago, hesitating at the crossroads was excusable. Suddenly the dam broke with the collapse of the U.S. housing market and the irrational rise in oil speculation. Decisions must be made in a matter of months, not years (the only historical parallel is the first hundred days of the New Deal in 1933 and the immediate postwar era when Stalin invaded Eastern Europe). Therefore, one needs to look carefully at the forces that will drive us to choose one road or the other. In particular, how can we gain enough confidence, will, and optimism to create a new world instead of collapsing into no world that we would ever recognize today?

(To be cont.)