Coolie: an unskilled Asian laborer.
THE RISE OF CHINA AND THE RETREAT OF THE AMERICAN DREAM
Donald Trump promised to "make America great again." However, Trump's behavior reflects what Marxist historian Eric Hobsbawm in On History (1997) states that as ideology outside and inside history where the people of central and eastern Europe will go on living in countries disappointed in their past, probably largely disappointed with their present, and uncertain about their future. Hobsbawm charges that this is a very dangerous situation. People will look for someone to blame for their failures and insecurities. The movements and ideologies most likely to benefit from this mood are not, at least in this generation, those which want a return to some version of the days before 1989. They are more likely to be movements inspired by xenophobic nationalism and intolerance. The easiest thing is always to blame the strangers.
Scapegoating China--While Forgiving Thatcher-Reagan
John Higgs in Stranger than We Can Imagine: An Alternative History Of The 20th Century (2015) proposes that the retreat of the American Dream, which had promised a future better than the past, is the result of a number of complicated and chaotically linked events from the 1970s.
One of these was the rise of Deng Xiaoping to the position of to the position of Paramount Leader of the Chinese Communist Party in December 1978, in the aftermath of the death of Mao. Deng began the process of introducing a managed form of capitalism into China. The impacts of this would not be felt immediately, but the availability of cheaper Chinese labor for Western corporations would lead to the disappearance of well-paid Western manufacturing jobs, as well as destabilizing trade imbalances. This process of globalization also led to the disappearance of corporate taxes from government balance sheets. Corporations increasingly embraced globalization and re-imagined themselves as stateless entities in no way beholden to the nations that formed them.
"Easternization," by Gideon Rachman. (Robin Lubbock/WBUR)
President Trump will meet this week at his Mar-a-Lago resort in Florida with Chinese President Xi Jinping. The meeting between two world powers will be closely watched. But not long ago, China was nowhere near the powerhouse it is today.
According to author Gideon Rachman, Asian nations' growing wealth is a trend that will only continue, challenging the Western power and influence that has dominated globally since the fall of the Berlin Wall in 1989.
Here & Now's Jeremy Hobson talks about the rise of the East and the resultant tensions with Rachman (@gideonrachman), chief foreign affairs commentator for the Financial Times and author of "Easternization: Asia's Rise and America's Decline From Obama to Tru...."
This segment aired on April 4, 2017.
BRETTON WOODS MONETARY AGREEMENT
A second factor was the collapse of the Bretton Woods Agreement in August 1971. This was a framework for international monetary management that had been agreed in the small New Hampshire town of Bretton Woods towards the end of the Second World War. The pre-war, every-man-for-himself approach to currency valuation had been responsible for some of the instability that led to war, so Bretton Woods was an attempt to create a more stable environment for international finance. It tied the value of international currencies to the US dollar, which was in turn tied to the value of gold reserves.
The link between the dollar and gold was important. When the bank of England had first issued banknotes in the currency of "pounds sterling" in the eighteenth century, this meant that the note itself was a convenient stand-in for a certain weight of sterling silver. The paper itself, therefore, was really worth something. For this reason, currencies have historically been backed by something that was both physical and in limited supply, such as gold or silver.
This link between money supply and actual physical wealth crated confidence in a currency, but it was a constant frustration for those who dreamt of perpetual, continuous economic growth. The gold standard, as the link between paper money and precious metals was known, tended to produce periods of growth interspersed with periods of deflation and even depression. This may have been a natural and sustainable system, but it was not the sort of thing that democratic societies voted for. President Nixon's response to a period of economic pain was to end the gold standard, cut the link between the dollar and physical wealth, and ultimately bring Bretton Woods to an end. The value of the dollar could then float free, worth whatever the markets said it was worth.
Thanks to this neat trick of divorcing money from physical reality, the perpetual-growth economy continued in what would otherwise have been a period of recession. It also transpired that the ever-increasing amount of consumption needed for perpetual growth could be financed by creative bookkeeping, and the creation of debt. Debt mountains began to grow when that approach ran into difficulty, in the early twenty-first century, taxpayer-funded bailouts kept the dream of perpetual growth alive.
Financial traders were able to create wealth out of thin air using wild and psychedelic financial instruments such as those traded on the derivatives market. This involved the trading not of actual things, but of changes to how the market would value things over time. It is not oversimplification to describe the derivatives markets pretty much incomprehensible, which is a problem for those who wish to regulate it. It was recently estimated to have a notional value of $700 trillion, or about ten times that of the entire global economy. In the opinion of the billionaire philanthropist Warren Buffett, "derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."
The fact that markets such as these created wealth on paper, while not actually doing anything of value or creating anything tangible, did not unduly trouble those who profited from them. But when Adam Smith defined wealth in his 1776 book The Wealth of Nations, he said it was "the annual produce of the land and labor of the society." Economics was supposed to be a mathematical model of what happened in the real world.
Another factor in the emergence of post-1970s, or what Higgs calls the Great Divergence, when the American Dream died, was the peak in US conventional oil production at the start of the 1970s, and the rise in the price of a barrel of oil from roughly $4 in 1970 to a price north of $100 in 2008. The price of oil has a proven impact upon national GDP, so even allowing for inflation, this was a significant extra cost which became a drag on economic growth.
This meant that corporations had to work harder to maintain the same rates of growth as before. As energy costs increased, so other costs needed to be reduced, and payroll and taxes were the most likely candidates. This in turn encouraged the move away from the virtuous circle that existed during the period of postwar economic growth. What was good for corporations, increasingly, was not what was a good for countries.
TRUMP'S BIG AGENDA
Higgs declares that it is Neoliberalism that should be blamed for America's fall from greatness. Neoliberalism was a school of economic thought that dated back to the 1930s, but it only became the orthodox belief system for politicians and corporations following the election of Margaret Thatcher as the British prime minister in 1979 and the arrival of the economist Paul Volcker as chairman of the US Federal Reserve in 1979, [and the election of Ronald Reagan as President of the United States in 1980]. Neoliberalism, at its heart, argued that the state was just too dumb to be left in charge of people's well-being. It just didn't understand the nature of people in the way that the markets understood them. It had only a fraction of the information needed to make good decisions, and it was too slow, inept and politically motivated to put even that knowledge to good use.
By the end of the twentieth century neoliberalism had become orthodoxy. As corporate power grew, it influence over politicians and media companies increased, in no small part because of their need for corporate money. Protests about corporate power occurred only outside of the political and cultural mainstream. The idea that a Western democratic politician from a mainstream political party could gain office with a platform that aimed to reduce corporate power, or increase corporate responsibility, became increasingly implausible. This is despite how popular a policy of, for example making corporate executives legally responsible for their decisions would be with the electorate. There may have been widespread concern that a profit-led society was fundamentally inhuman, as well as depressing and unimaginative, but there was no way to express that opinion at the ballot box, [without the permission of the corporation itself].
PLUTOCRACY AS A BIPARTISAN CAUSE
David C. Korten in The Great Turning: From Empire to Earth Community (2006) parallels Higgs. He calls the forerunner to the Tea Party, the New Right. Korten posits that the New right's first major political triumph was the election of Ronald Reagan to the presidency in 1980. The Reagan administration (1981-89) took the lead in implementing the neoliberal economic agenda in the United States, as the administration of Margaret Thatcher advanced the cause in the United Kingdom. In addition to the measures noted above: the middle-class struggle to make ends meet and maintain some semblance of the consumer lifestyle, middle-and-lower-income went deeper into debt--thus obligating themselves to turn over an every growing share of their hard-earned income as interest payments to bankers. Those who had previously enjoyed a comparatively relaxed middle-class life were forced to work harder to support a declining standard of living, even as those at the top enjoyed gourmet restaurants, exotic vacations, private jets, and ever larger and more numerous homes. Military expenditures were increased, and the abandonment of antitrust enforcement allowed for ever larger corporate mergers. Europe, Canada, and Japan were pressured to similarly "modernize" their economies.
The third-world debt crisis of 1982 created the necessary pretext for the IMF and World Bank--operating under the direction of the U.S. Treasury Department--to impose the neoliberal agenda on indebted low-income countries. Through their structural-adjustment programs, the IMF and World Bank stripped governments, some democratically elected, of their ability to set and enforce social, environmental, and workplace standards or even to give preference to firms that hired locally or employed union workers.
After the Republican Ronald Reagan, the presidency passed to the Republican George H.W. Bush (1989-93) and then to the Democrat Bill Clinton (1993-2001). Each administration differed in style and priorities, but American's plutocracy remained fully in charge and its pro-corporate agenda moved seamlessly forward, irrespective of which party in power.
END OF PART ONE