US: Debtor Nation (by William Greider, The Nation)

[IrateCitizen]

This is the feature article in this week's issue of The Nation. It raises some pretty serious concerns with regards to the current state of the US economy in relation to our balooning trade and fiscal deficits. In the end, Greider does express some optimism of a better future emerging on the other end, but it will not be without considerable pain and adjustment. I, OTOH, find it hard to view it with the least bit of optimism.

Please read the whole thing via the link at the bottom and share your thoughts.


Debtor Nation
by WILLIAM GREIDER

(from the May 10, 2004 issue)

The backstory for this election year lacks the urgency of war or of defeating George W. Bush but focuses on a most fateful question: When will this hemorrhaging debtor nation be compelled to pull back from profligate consumption and resign its role as "buyer of last resort" for the global economy? The smart money assumes such a momentous reckoning probably won't occur in time to disrupt Bush's re-election campaign, but it may well become the dominating crisis in the next presidential term, whoever is elected. At that point, the United States will lose its aura of unilateral superiority, and globalization will be forced to undergo wrenching change. The American economy, in other words, is in much deeper trouble than most people realize.

SNIP...

What might be done to avoid the worst? The necessary first step is for American politicians to cast aside the propagandistic claims advanced by multinational business and finance and endorsed by policy elites and orthodox economists. For decades, globalization advocates insisted, for example, that the solution to America's trade deficits was more "free trade." Each new trade agreement has been heralded as a market-opening breakthrough that would boost US exports and thus move toward balanced trade. That is not what happened--not after NAFTA (1993) and the WTO (1994), nor after China normalization (2000). In each case, the trade deficits grew dramatically. (Yes, it's true that since the early 1970s US export volume has grown by more than five times, but import volume has grown by eight times.) Economists have also claimed that ending deficit spending by the federal government would eliminate the trade gap. Yet when the federal government's budget did finally come into balance in 1999, the trade deficits were exploding. This discredited explanation is nonetheless being recycled, now that huge federal deficits have been spectacularly revived by the Bush Administration.

The humbling reality is this: Across three decades, only one economic event has been guaranteed to produce balanced US trade: a recession. When the economy is contracting, people naturally buy less of everything, including imports. Look at the chart: On the four occasions when the line of exports briefly converged with the line of imports, the country was in recession. Each time economic growth was restored, the trade deficits resumed. A more ominous contradiction occurred during the 2001 recession: The trade gap was so enormous it persisted throughout. This suggests that American dependency on foreign producers has advanced to a dangerous new level.

SNIP...

The fundamental solution is to raise wages everywhere in the world, with perhaps fewer millionaires but a more generalized prosperity, especially in developing nations. In short, the global system needs more workers with the incomes to buy what they make. Globalization would have to proceed at a more moderate pace, with less rip-and-run disruption, financial crisis and social disorder. It is most unlikely, I have to add, that America's governing elites will come around to such drastic measures in time to avert an end-of-era reckoning.

If a full-blown crisis does occur, the macroeconomic challenge would be unlike anything the United States has faced in more than half a century. While this would be a time of wrenching, painful change, the new adverse circumstances might also inspire a great shift toward a new, more progressive politics. Given our rapidly deteriorating condition, it is not too soon to begin considering how the nation might dig out, lest popular confusion and bitterness generate reactionary politics instead.

MUCH, MUCH, MUCH MORE...

http://www.thenation.com/docprint.mhtml?i=20040510&s=greider

[cliss]

1. The US today can be summed up in 3 words:

We Are Bankrupt. We owe China $100 billion. China's economy has been growing at around 9% for a long time. THEY are the rising star on the horizon. Our current budget deficit is at $540 billion. That's not including the war in Iraq which is now $160 billion and the meter is running.

Picture a really handsome man driving down the freeway in a beautiful, expensive convertible car. His arm is hanging out the side as he's enjoying the ride. We see an expensive shirt with his monograms embroidered on the cuff. He wears expensive Italian shoes and has a Rolex watch. Really a good looking guy.

But the truth is, he's broke. He owes a fortune on his credit cards and he really doesn't have any assets. He looks good, though.

That's us. Thanks for posting, IrateC.

[Armstead]

2. People ought to listen to him more

It's an interesting premise.

Sometimes I think he's like a doctor. He points out the disease, and says we can take some medicine now or have to take a lot more later.

Unfortunately, the US doesn't pay attention, and resists with a collective case of denial.

[The Zanti Regent]

3. But the Republicans believe Jesus is coming in a week or 2

Yes, Jesus will come back and rapture Republicans to float nude in the air with the Son o'God himself!

They really beleive that bullshit so they just don't care about what they're doing.

I wonder how they will feel if the Raputure comes and EVERY bible thumping Republican goon is LEFT BEHIND???????

[KoKo]

4. It's a good read. Many economists are sounding the alarm bells, but

Greider's article puts much into perspective, and gives some interesting prescriptions on what we need to do about this. His idea about instituting tarriffs to keep jobs from going abroad is particularly interesting. But, I don't think he will get much support in the business community or the Chimp Govt. for that idea.

Krugman has been sounding the alarm, also concerned about our National and Personal Consumer debt.

[Kenneth ken]

5. nice read - thanks

I admire Mr Greider, and have since I first read Who Will Tell The People a dozen years ago.

I think he offers some workable ideas for after the crash, but truthfully, I think our nation is too selfish, greedy and short-sighted on the whole to seize these options, and when the crash comes, will find ways to shift the pain from the elites to the rest of us as much as possible. That is truly the American way of life, at least in my life time.

[IrateCitizen]

6. I think a crash would be both good and bad

Although mostly bad.

Essentially, I think you would have two major schools of action -- one would consist of people who would take the opportunity to arm themselves and just try and take what they need to survive, the other would consist of groups of people that would form largely cooperative communities in which resources are largely pooled in order to ensure common survival.

Undoubtedly, these two types of groups would eventually clash. I just like to hold out hope that cooperation and foresight would eventually win out in the end. In fact, I sometimes think that foresight is the next "evolutionary leap" that is necessary for humanity, otherwise we will simply be an evolutionary dead-end.

[KoKo]

7. I think a "crash" is the only thing that would save us from ourselves.

A friend of mine said awhile back, bluntly, "We need a good cleaning out." The words stuck in my head the way sometimes idle comments can come back to haunt one.

Blunt, but, Yes. I don't want to think of the harm and pain a crash would cause, because people haven't had any way to save their money in the past decade except in their 401-K's and by playing the Market and maybe selling on E-Bay. The Re-Fi's and the McMansions are sort of "ho-hum" and our computers and cell phones and MP-3 Players, SUV's and DVD/Digital Plasmas and all the rest have certainly made some feel wealthier than their parents could imagine.

But, at some point their's a price. And the Credit Cards lulled us all into thinking we could pay the "minimum" forever, and our economists and government have promoted it all. In fact they've cheered it on with hype and easy money.

There will be some kind of crash. It remains to be seen, how long they can hold it off, and whether it will be just us, or all over the world.

But, then I'm more pessimistic than most.