Sunday, February 3. 2008
Anthony Deutsch: Disgraced and vilified, Suharto dies aged 86. Indonesia's dictator from 1965 to 1998, when his corruption was exposed in the wake of the East Asian currency crisis. He was one of the most murderous rulers of the 20th century, most intensively in the late-1960s when he led an anti-left purge killing at least 500,000, probably a million. He led invasions of Papua New Guinea and East Timor, the latter turning particularly bloody. Throughout his rule he was reliably supported by the US, with the CIA providing him with hit lists of alleged communists in the 1960s. Two American diplomats noted for their work with Indonesia are Paul Wolfowitz and Richard Holbrooke.
Michael Klare: Barreling into Recession. One small point caught my eye here:
This is one of those my-God-what-were-they-thinking? moments. From 2001 through 2004 the US economy was in a prolonged slump, if not a flat-out recession. The number of jobs created was way below population growth, and for much of the time was negative. Real wages lost ground to inflation, and may even have been negative. Working people were besieged from all corners. The nation as a whole was sinking ever deeper in debt. The dollar was collapsing. (Most of those things are still true today.) So there was absolutely no rational basis for consumer confidence that would raise real estate prices, let alone pump them up by 50%. So why did this happen? And why didn't anyone stand up and say this is crazy?
It's pretty clear now that what caused this was the glut of credit that opened up to fight the recession. That credit had to go somewhere, and much of it went into real estate, which looked like a reasonably safe way to sweep it under the carpet. Part of the idea is that real estate always appreciates, which makes it a safe investment. But also business didn't need more plant, especially after productivity gains and shrinking wages in the 1990s. And credit for consumer spending was already damn near maxed out. Still, all we got from force-fed real estate credit was the illusion of appreciation, because in the end it wasn't tied to real growth. It boosted the economy very little, but it did effectively benefit those who could sell high and those who picked up fees in the process. That, of course, was a very Republican thing to do.
But it happened not because the Republicans wanted it, but because Bush needed it. Otherwise, he was presiding over an economy that was tanking, partly from his wars, partly from his policies, including tax cuts, that shifted huge amounts of wealth from working people to the very rich. You'd think that watchdogs would have been alert to these distortions, but for all practical purposes they were in on the scam. One piece of proof that it worked is that Bush managed to win in 2004 -- even with the worst economic record since Herbert Hoover, the phony appreciation of real estate assets gave enough people enough comfort to disregard his lousy economic numbers. Only now is it sinking in how fraudulent the whole scam was.
The other eye-opening tidbit in Klare's piece is:
As Klare notes, this isn't just the US consuming more oil while producing less. It mostly reflects increases in the price of oil, which are largely attributable to Bush invading Iraq and pursuing sanctions against Iran, taking a critical share of oil off the world market. (China gets blamed too: the nerve of some countries taking the dollars accumulated from our vast trade deficits to go out and bid up the price of oil.) I think Klare is wrong when he argues that rising oil prices led to the downturn that popped the real estate bubble. No doubt oil prices add to consumer pain, but they're marginal compared to sinking real estate values, a problem (like so many others) caused mostly by the short-term deceits of the Bush administration and its business allies/clients.
Parag Khanna: Waving Goodbye to Hegemony. The New York Times Magazine ran this excerpt from Khanna's book, The Second World: Empires and Influence in the New Global Order. I would personally be more inclined to emphasize the breakdown of great power prerogatives rather than their mere reordering, but Khanna's map can be read my way as well. A couple of quotes:
America's military power turns out to be worse than worthless. Not only does it represent huge economic costs, it has the effect of isolating us.
Of course, rising oil prices only add to US weakness:
Article ends with a set of recommendations that don't make a lot of sense to me; "Taken together, all these moves could renew American competitiveness in the geopolitical marketplace -- and maybe even prove our exceptionalism."
What is clear is that any American attempts to dominate the other major powers, or for that matter Khanna's "Second World" powers, will be resisted, and almost always successfully, especially in the long run. The obvious conclusion there is that the only workable approach would be to seek common objectives, as opposed to the special advantages that the US is accustomed to pursuing. It seems likely to me that this will be difficult or maybe impossible as long as the US political system is seen as an arena for furthering special interest groups, above all multinational corporations and the defense industries. Changing that will require some serious rethinking, something we don't seem to be very good at.