Polls show a majority of Americans began to feel the country was off on the wrong track, soon after the War in Iraq started, and except for a brief moment of hope soon after Obama's election, Americans have continued in that pessimistic conviction. Personally, I thought the country was off on the wrong track, when a Pittsburgh billionaire bought a 7-year "scandal" culminating in the Impeachment of the President of the United States. I thought the country was off on the wrong track, when the Supreme Court cancelled an election recount, and appointed Alfred E. Newman as President. I thought the country was off on the wrong track, when the appointed President, a self-described fiscal conservative, launched a massive program of tax cuts for the wealthiest Americans. I thought the country was off on the wrong track, when an Administration lied its way into an aggressive war against Iraq, as a "response" to a terror attack perpetrated by a bunch of Saudi Arabians. But, what do I know?
I'm admittedly fascinated by the "cycles" of history, the apparent patterns of rise and fall, of paradigmatic organization, growth and collapse. Political economy -- the somewhat chaotic, somewhat organized mass behavior of polities, societies and economies -- does seem to find stable patterns in which to channel development and growth, and then, having exhausted the possibilities, to dis-organize in moments of crisis.
The Financial Crisis of 2008 looks remarkably like the culmination of a long political and economic program, traceable, at least, to Reagan, and the ultimate exhaustion of an economic paradigm that goes back to FDR, the New Deal and WWII. Reagan began the process of dismantling the New Deal at home, and the international regime abroad. The Reagan economic program of de-regulation, restricted public investments and tax-cuts for the rich would feed off the entropy of the post-WWII prosperity.
Internationally, the U.S. has led the capitalist order, with the U.S. dollar as reserve currency, facilitating trade and investment. This order, too, seems to have reached a culminating moment.
Key to the U.S. role in the international order has been its role as a consumer of last resort, profiting from its role as issuer of the reserve currency, and leading round-after-round of tariff reductions and market-opening measures. For a long time, those policies both benefitted the world and benefitted the U.S., as the dominant economic position of the U.S. gradually eroded. Much of that erosion was inevitable and even desirable, as other countries caught up to the U.S. technologically and in terms of living standards, and increasing competition benefitted U.S. consumers, as European, Japanese, Korean and Chinese products filled American shelves.
In the Clinton years, the advent of the Internet and the Tech Boom, gave American international economic leadership an Indian Summer revival, but in the Bush years, the costs of hegemony mounted, as the U.S. sold off much of the Middle Class' home equity to buy more electronic junk from China, while American manufacturing was devastated.
When the Financial Crisis arrived, nothing should have been more clear than the need to radically change everything in the structure of the American economy and its relation to the world. Al Gore was quoted in Rolling Stone:
"Right now we are borrowing huge amounts of money from China to buy huge amounts of oil from the most unstable region of the world, and to bring it here and burn it in ways that destroy the habitability of the planet. That is nuts! We have to change every aspect of that."
The Financial Crisis, however, invoked a bi-partisan reactionary response, and an effort, not to adapt through structural change, but, rather, to restore the status quo ante. This reactionary effort has brought about the bear market rally of all-time in the Stock Market, and a calm in banking and international finance. But, the determination to push all the losses on to Middle Class home owners and taxpayers, while holding unharmed, the banks and the financial sector, leaves the country weaker and unprepared.
The Crisis happened because the economic structure could not be sustained. Restoring that structure does not change the fact that it is unsustainable.
Because of the short-sighted insistence of U.S. policymakers on restoring the status quo ante, there will be enormous pressure on the U.S. to resume its customary role as consumer market of first and last resort, so that other countries can use export-growth to lead their economies out of difficulty. To the extent that the U.S. goes along, it will be dis-investing and borrowing massively, once again.
There's not enough seed corn left in the bin, for this to go on for long. And, yet, there also doesn't seem to be the kind of vision, which would allow the U.S. to lead the kind of massive re-structuring of the global economy -- to meet the challenges of climate change and peak oil and ecological collapse, among others -- which ought to be obvious and urgent.