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Thursday, December 30, 2004

The Outlook for Victory Over Want (VOW) 

I launched Victory Over Want in early 2002 - that's nearly three years ago.
The abdication of economic and social responsibilities by governments and international agencies, at that time, were huge and becoming ever more massive.
In large part, their economic and social policies were by any standard, technically economic or emotionally humanitarian, simply plain wrong.
There was then too a lot of private protest - Seattle, Washington, Genoa, Melbourne and the rest; but it all lacked focus. A lot of noise but without harmony. There was no sign anywhere of anyone conducting any orchestra. The so-called orchestra played every tune at once and no one listened to any but his or her own. It was a cacophony rather than a melody of protest.
Since then, particularly, it seems, after 9/11 and even more especially after the re-election of George W, even that cacophony has been silenced. No one seems to be protesting now, even about the war in Iraq. (One exception: at least the Ukrainians protested - on their own dunghill!)
Is that acceptance of defeat? Have people decided that they'll just accept the destiny that George W and the rest of the Big Leaguers force on them? Will they take their long-term punishment whatever that may turn out to be?
I think they will, until a really decisive crisis occurs.
Do we have a crisis right now?
Yes, we do; but it has been muffled by the bubbling confusions, largely attributable to the redoubtable Alan Greenspan.
The DOW is just about at an all time record. The Nasdaq has recovered greatly from the huge slump from 6000 or thereabouts of a few years ago. Interest rates remain low. The American consumer continues to spend his borrowed money as though saving has forever gone out of fashion. Taxes are low and, if anything, with Bush, might get lower still. The employment situation is pretty grim if you live below the salt but it's not so bad yet that many people - many who count with the big boys, that is! - are screaming. Even the US dollar's slide has been so far just that - a slide - rather than a rout; and many people see advantage in it - as a corrective, not the harbinger of a painful and thoroughgoing collapse. Few people seem worried about a monumental budget deficit, any more than they worry about the monumental trade deficit. The speculators continue to speculate - and will continue right on, profitably, until a significant percentage get to believe that the game is up and begin to get out of stocks, bonds, derivatives and the rest in decisive numbers.
Then we may well have lots of the ex-rich jumping out of skyscraper windows.
But people have been forecasting that for years - sensible, intelligent, experienced people like Kurt Richeb├Ącher, for example.
And, so far, it hasn't happened.
George W says the American economy is strong, just as Harding and Hoover said it was strong before the Great Crash in 1929. People talk of growth in the US as being greater and healthier than that in Europe or almost anywhere else.
So, some sound judges have been crying "Wolf" for so long that no one listens to them any more. George W, Greenspan and their cohorts have put the Jeremiahs to flight.
So, my present judgement is that it is only when we are really well into an unqualified and unmistakeable collapse of the mighty dollar and the share, bond and derivatives markets, and the consumer and housing boom and all the rest, that the penny will begin to drop for the Americans, across the board.
When will it happen? Just as it's impossible to forecast the next tsunami, so we can't forecast any more when the Richeb├Ącher reckoning will overwhelm us.
What of the future of VOW?
The short answer is that it is even more desperately needed than in early 2002.
Governments are still abdicating their responsibilities, neglecting what should be done and persisting in doing what should not be done. There is some more enlightened talking or "chattering", mostly the sort of empty rhetoric to which we've been subjected for years past.
Gordon Brown, the British Chancellor of the Exchequer, has, just in the last week, been talking about a Marshall Plan for Africa and perhaps more than Africa; but we've yet to see the colour of British money or anyone else's.
That leads to another point, which is that a Marshall Plan, if people are sincere, is not a matter of doling out money. That has failed in so many instances that it's not worth repeating the process all over again. Forgiveness of debt too makes a nice headline; but it doesn't solve anything.
A true, practical Marshall-Plan effort must involve fixed-capital public and private investment, embedded in programmes that are carefully, reliably agreed by investor and recipient. That is what happened under the Marshall Plan for Europe after the war. It was successful because it was well managed and well supervised. The Organisation for European Economic Cooperation was set up as an effective central authority and consultancy. It matured into the present OECD which unfortunately has dropped the ball in the last few decades. If it had functioned with the competence and vision of its predecessor, Europe would be in much better shape today - and so would the rest of the world economy.
To get back to the earlier point, while the rhetoric is there, much solid policy-change is not.
Therefore, the need is still urgent for direct democracy to weigh in. I would have liked to see this happening before the ultimate economic crisis hits the fan, perhaps in the next few months, quite probably, at least, in the coming year.
If some of the planning and organisation were in place, we could respond much more quickly.
Now I think we will need the storm-clouds of that ultimate crisis to be very heavily overshadowing the horizon before we get the sort of ACTIVE support that a direct-democratic initiative needs. The early steps of planning, getting people together and the early stages of conferencing don't need much money, but they do need some. There is quite a bit of money around for economic and social research and development, but it's going into such worthy but fundamentally unproductive enterprises as "Open Democracy". By the time the money gets around to the procedures and the really solid productive work of VOW, it will be too late - or too late to avoid a lot of pain for a lot of people, in the big countries like the United States, in the middle states like Australia, in the Tigers of Asia and in the societies at the bottom of the economic developing order, whether in Africa or elsewhere.
The appeal for funds - not great amounts - is real and it is urgent. The need to start the processes is equally real and urgent. If more progress can be made sooner, that will be of enormous value when things really start to fall apart in the near future.
I still have hope.
I still have hope too - although I am worried by the expression of such views as those of PIMCO - that we will, this time, as distinct from 1929 and after, adopt positive policies. By that, I don't mean that the US should fling cartloads of US dollars around at home and abroad without any attention to what they achieve - and what further chaos and calamities they provoke.
Rather, what I should like to see are programs of public and private investment that will lead us to higher levels of production and productivity, in ways that will give us both full and fair employment, a growing equality around the world and attention to such vital matters as the planet's environment, something that we will never achieve while we are hog-tied by the foolish, speculative and essentially negative policies of the past many years.
The programs emerging from the VOW procedures, as approved by a World Conference, would then constitute powerful instruments for GOVERNMENTS to adopt. They would be like the Dumbarton Oaks proposals or the Bretton Woods proposals which were drawn up, admittedly then by government representatives, and submitted to governments for adoption as, in one case, the Charter of the United Nations and, in the other, as the Articles of Agreement of the IMF and the World Bank.
I hope that, by some means or other, we can manage such agreements this time around. If we can do that - and bearing in mind the conflicts and the economic, social, political and strategic issues that ravage the world community - we could be, not just saving ourselves from another depression, but saving our civilisation and ourselves from extinction.


James Cumes
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"Uncle Rupert is beautifully narrated, with a wonderful sense of warmth and detail."Order your copy from - http://www.magellanbooks.com/jamescumes.html orhttp://www.authorsden.com/jameswcumes

Wednesday, December 29, 2004

VOW: A Call to Action 

I see the campaign for Victory Over Want as calling for a direct democratic initiative in which representatives of countries from all continents, all regions, all races and religions will meet to draw up their own charter and program for a Marshall-Plan-type assault on poverty. Such a program would not only moderate and, shortly, eliminate poverty in the poorer countries but would simultaneously eliminate the growing poverty and inequality in the allegedly rich countries too - and bring stability with sustainable growth. We would be able to return to the economic and social vision embodied in Chapter IX of the United Nations Charter almost sixty years earlier. In the economic crisis which is likely to hit us in 2005, we must adopt POSITIVE measures of remedy. We must avoid the restrictive measures adopted by so many countries after the Great Crash of 1929 which only made the Great Depression catastrophically deeper and more long-lasting.The tragic tsunami in the Indian Ocean demonstrates again the need for us to work together to protect and improve the human destiny. Above all, we must not fight, exploit and discriminate against each other in a way that will make the future less favourable for us all.
VOW
A Call to Action
Bringing Activism to Life with Practical, Coordinated Democratic Action
Victory Over Want (VOW) is a vital instrument for peaceful change.Our cooperative effort to rebuild the world economy and to ensure its future strength, will empower and enrich men, women and children everywhere, rich and poor, developing and developed, of all races and all religions on all the continents. It will counter terrorism and violence, and promote political and strategic stability.
What is VOW?Let's Give Peace a Chance
In his famous Four Freedoms speech in 1941, President Roosevelt called for Freedom from Want. Sixty years later, his successor, President Clinton, in his BBC Dimbleby Lecture, reminded us that billions, including many in the richest countries on earth, still live in dire poverty, are homeless or poorly housed, are educated far below their potential, and lack adequate medical care. He told us that one and a half billion people - a quarter of the world's population - never get to drink a glass of clean water. Despite the rhetoric and the promises - despite the efforts of the United Nations and the World Bank - millions more join the armies of the poor each day, each month, each year, all around the world.
Isn't it time we determined - and acted - to remedy this tragic situation, to strive to reach the 60-year-old goal and free the world from want?
If governments won't do it, should not the people, in the exercise of direct democracy, take the matter into their own hands?
That is the essential concept behind "A Democratic Initiative for Victory Over Want (VOW)."
To realise worldwide victory over want is a sufficient challenge in itself. It is a sufficient reason for us to bend all our efforts to achieve it.
However, there are other, compelling reasons why we must accept the challenge.
The wars in Afghanistan and Iraq will not bring an end to terrorism or deliver us the peaceful change we need. Nothing can justify the monstrous acts of September the Eleventh and Bali; but we must be positive in our response. We need to show vision in acknowledging the extent of human poverty and deprivation. We must acknowledge our failure to respect human aspirations and ensure that people are not humiliated nor, in Roosevelt's words, "ill-housed, ill-clad, ill-nourished."
We are right now in the paradoxically "fortunate" position that we can be both hard-headed and humanitarian. We can help ourselves while we help others. For once, we can "globalise" in our own self-interest while we lift up the lives of billions of our fellow human beings.
We can do that especially now because the world's three largest economies - the United States, Japan and Germany - are already either in dubious "recovery" or in a recession that, in the coming months, could deepen and spread. Other major economies in Western Europe are in or at the edge of recession.
Only the elderly now have personal memories of the Great Depression of the 1930s. The entire economic, social and political systems of old, proud and powerful societies seemed then to be crumbling. Many had a quarter or more of their workers idle. From the Okies who trudged to California to the tramps on the dusty roads of the Australian outback, the story was of people who had little left except courage and a will to endure.
We sought desperate remedies. Some valuable and progressive left-wing ideologies gained support and authority; but fascism, nazism and militarism took over in several of the most powerful countries. By the end of the 1930s, countries still crippled by economic distress and insecurity stumbled into the most widespread, destructive and murderous war the world has ever known.
Only the elderly remember; but none of us should ever forget.
Nothing we did to solve the long economic crisis really worked - or not enough. Some expedients - balancing budgets and cutting public expenditures, for example - served only to dig the depression deeper.
However, some policies did lighten the darkness. They were projects of public investment mostly forced on unwilling governments in order to give some relief, however inadequate, to the armies of unemployed.
Britain had its public housing projects. In the United States, the famous Tennessee Valley Authority showed what public enterprise could do to help private enterprise get back on its feet. In Australia, parts of our cities were sewered for the first time by relief workers toiling with pick and shovel for a day or two each week, earning 75 cents a day.
In the last twenty years, public investment has gone out of fashion, but we must be clear that it is not the enemy of private investment and enterprise. On the contrary, and especially when times are tough, public investment is, for the private sector, a close, stalwart and indispensable friend.
So we have a need to re-launch the world economy back to prosperity and a simultaneous long-term, global need to lift the quality of life and meet the aspirations of billions of our fellow human beings.
Those are the imperatives that Victory Over Want is designed to meet. Can we meet them? Do we have the resources?
President Clinton is confident that we do. For the cost of the "cheap war" in Afghanistan, costing $12 billion a year, the United States can meet its share of the cost of abolishing poverty, he said, and still have "money left over." On 30 January 2002, he told an international audience in Dubai that "technology can accelerate by a generation" victory over want everywhere.
Our crime is that we waste our resources. We throw them away. It has been estimated that the rise in unemployment from about four to nearly six per cent cost the American economy about $350 billion. Just consider how that cost compares with the total gross national product of many small and middle-ranking countries. Consider the contribution elimination of this waste could make to the abolition of poverty, homelessness, disease, environmental pollution and the rest, not only in the United States but around the world.
We must bear in mind that the rise in unemployment in the major economies might be far from over. We might be only at the start. The recent tendency for the jobless rate in the United States to level out might be temporary. If the United States rate were to reach 8 or even 10 per cent, the impact would be devastating. In Germany, the workless now number more than 4 million. In Japan, unemployment is at record post-war highs and could go higher still.
If Governments Won't Act, the People Must
If governments won't act to stop this waste and turn our resources into productive channels, then private individuals - exercising their right to direct democracy - must act or force them to act in ways that they, the people, direct. That is what VOW proposes.
VOW envisages a process whereby people of all races, religions and secular beliefs will work together for the common good - to accelerate, as President Clinton suggested, our reaching the goal of freedom from want "by a generation" - and perhaps by even more.
The process involves, first, a gathering of moral support from all around the world. Then Commissions will be convened on a wide range of issues.
We will have Commissions on, for example, Economic Growth and Employment; Wealth, Income and Inequality; Mobilising Financial Resources for the War against Want; Financial and Other Pledges for the War against Want; Priority Destinations for Public Investment; Housing the Homeless; Free, Universal Education; Free, Universal Health Care; Water Resources; Saving the Environment; Transport and Communications; Rights of Economic Migrants and Asylum Seekers and Regulation of Economic, Social and Political Migration; Logistics for the World Conference; and Conference Participation and Issue of Invitations.
People sitting around the tables at these Commissions will be from India and Ireland, China and Peru, Nigeria and Nicaragua. They will be Moslems and Methodists, Brahmins and Buddhists, Catholics and Jews.
Some will be poor, others rich. The disadvantaged will sit alongside the "elites."
Their common quality will be their determination to promote the common "global" good, to reconcile differences, to abolish want and, through it all, to achieve peaceful, continuing change for the betterment of all.
The Commissions will report to a World Conference which will decide on ways to implement agreed measures.
It is crucial that, within this process, voices of dissent be heard and the content of dissent thoroughly debated. They must not be shut out as they have been from intergovernmental gatherings from Seattle to Genoa, Montreal to Melbourne; from the World Economic Forum, in Davos and New York, where agenda and guests were acceptable to the world's 1000 foremost corporations and their smaller governing group; and from the World Trade Organisation.
That exclusion of other voices, other ideas must stop.
Governments and their mainstream advisers have failed. They have failed even to listen. Participants in the VOW process must therefore help us make a fresh start, with fresh ideas and fresh policies. Governments of goodwill and equivalent individuals in the economic, social and political mainstream are welcome but they must not be allowed to dominate the process.
We must have a real globalisation of ideas, not a globalisation of formulae devised to serve the self-interest of particular countries or particular economic, social or other groups.
The process will draw on the expertise of those who know both the immensity of the task and the means by which it can be successfully accomplished. Finance for the VOW process and national and international infrastructure projects will come eventually, we hope, from most or all governments; but especially in the preparatory stages and in stimulating governments to act, funds from private associations, foundations and individuals will be vital. Over many years, far-sighted individuals have made generous contributions to many causes in many countries and regions. We envisage that we must look to private initiative to supply both the vision and initial funding for the VOW process, while governments must necessarily be called upon, at the conclusion of the VOW process, to provide the policies and the public resources necessary to implement the programs for peaceful change which the VOW process has formulated.
VOW opens horizons for peaceful change we have scarcely glimpsed before and, in the new millennium, can lead us forward, not only with hopes high but, above all, with newfound assurance that we know the road we must travel by. It is a road we can and must all travel together - hands clasped, as in the VOW logo - living together, working together, prospering together.
This is not an impossible dream. It is a realistic vision. All we need is to accept the challenge and feel again the fire in our bellies that we knew at great moments in the past. In 1969, Man walked on the Moon. Now is the time to make another "giant leap for mankind" - this time right here on Earth.


Saturday, December 11, 2004

China "cures" Australia's Inflation 

Trade deficit made in China
By David Uren
December 11, 2004
CHINA has overtaken the US as Australia's biggest source of imports, as our appetite for its cut-price clothes, furniture, electrical goods and machinery continues to fuel the growing trade deficit.Imports from China totalled $1.8billion in October, moving ahead of the US for the first time. Our imports from the US totalled $1.6 billion.
Australia's biggest imports from China were clothing, recreation goods and industrial machinery, including computers and telecommunications equipment.
Australia's imports of goods and services were worth $2.2 billion more than its exports in October.
More than a third of the deficit resulted from trade with China. Although China is an expanding market for Australian commodity exports, its sales of manufactured goods to Australia are rising much faster.
China replaced the US as Australia's second-largest export market, behind Japan, in November last year and the margin has continued to grow.
In October, we sold goods worth more than $1billion to China, compared with $846million to the US and $2 billion to Japan. Our biggest exports to China are iron ore, wool and crude oil.
The latest trade figures show that Australia will face a long task in turning its trade performance around.
Prime Minister John Howard acknowledged yesterday that weakness in exports was clouding the outlook for Australia's economic growth.
Australia has been running monthly trade deficits of about $2 billion since April last year.

The Australian

Friday, December 10, 2004

The Multiple Abyss 

The Multiple Abyss

by James Cumes

The Four Themes
(1) The Economic Theme
(2) The Power Theme
(3) The Political-Philosophy Theme
(4) The Multiple-Abyss Theme

The Economic Theme
The thrust of my economic analysis is as follows:
(1) The interwar/Great Depression period produced vigorous debate of economic, social and political issues. Two ideas, in particular, broadly identified with Keynes' "Economic Consequences of the Peace" and "The General Theory of Employment, Interest and Money," distinguished Western "democratic" policies at the end of World War Two.
(2) These essentially Keynesian policies brought a period of high and stable domestic growth, relatively orderly international trade and payments, high or full employment and rising living levels in both developed and developing countries.
(3) This period - a Golden Age relative to the Great Depression decade - lasted from 1945 to 1969.
(4) In July 1969, the United States Federal Reserve Board raised interest rates, in support of Nixon's simultaneous more restrictive fiscal policies, in order to fight what was then a modest inflation. Those fiscal and monetary measures sent industrial and other output sharply down and unemployment sharply up. Inflation increased. Stagflation spread around the world.
(5) Despite the real-world evidence that higher interest rates did not reduce inflation, governments persisted and still persist with such misconceived policies right up to the present day. Mainstream academic economists still take them as gospel.
(6) Stagflation was gradually mitigated, principally during the 1970s and the early 1980s, through increased supplies which met, partially at first and then more completely, the supply shortages that had resulted from restrictive fiscal and monetary measures. To be more precise, the supply shortages in the United States, many West European countries, Canada, Australia and others, were met partly by imports from such countries as Japan and (West) Germany which maintained high levels of investment, productivity and production; and then gradually by some developing countries, especially in East and South-east Asia where the American and other supply shortages stimulated investment and production for export. The Asian Tigers were born and their number and export capacity increased over the next thirty years - right up to the present day. Mainland China became more and more the dominant "Tiger." India was a relatively late starter - and has now become a very important one.
(7) This evolution shifted the impact of domestic inflation from upward movements in consumer prices to external deficits. If we project some recent monthly figures, the United States annual trade deficit is now (December 2004) more than $600 billion. Other countries such as Australia experienced much the same effects, though on a smaller scale and without, for example, the complications of the US dollar's reserve-currency status. Home, mainly manufacturing industry in the United States and such countries as Australia shifted offshore, joblessness grew and became chronic, and inequalities in income and asset-holdings intensified. Off-shoring of employment moved from relatively unskilled, low-paid jobs in the earlier period to include many highly skilled, highly paid jobs, especially after we entered the new century.
(8) Neither governments, central banks nor professional economists recognised the initial cause of heightened inflation nor its shift to external trade and payments.
(9) They therefore persisted with what they thought to have been their successful interest-rate policy. To reinforce the monetary "remedy," they cut government spending and public investment, embraced balanced budgets and small government, and privatised public enterprises. One remarkable feature was the failure of both academics and policymakers to comprehend clearly the difference between the impact of interest-rate rises on asset-price inflation on the one hand and consumer-price inflation on the other. Interest-rate hikes could and would moderate or kill price inflation of real estate, stocks and other financial instruments; but those hikes would, at the same time, so depress fixed-capital investment, productivity and production that consumer-price inflation would be forced up, instead of down. In short, interest-rate movements were too blunt an instrument and were thoughtlessly mismanaged. So blunt an instrument were they that they could be used effectively only as part of an array of policy measures and instruments. That was never done; and is still not being done.
(10) A simplistic supply-side economics - valid in its advocacy of increasing supply to fight inflation but otherwise misconceived - was adopted by the Reagan Administration in the 1980s. The tax cuts which were its essential feature, succeeded mainly in creating large budget deficits which in turn prompted tight budget policies to restore balance or surplus. The EU, especially through Maastricht, adopted similar, even more rigid budget measures and restrictive monetary policies. At the same time, the tax cuts in the United States maintained or further stimulated consumption and borrowing for consumption and increased the trade deficit deriving from consumer imports. Further tax cuts in 2001 and 2002-3 are having the same result - and, indeed, the evidence is so far that new records will continue to be set in the size of trade and payments deficits. Consumption in the United States, as distinct from investment, has taken what is probably an unprecedented share of recent economic growth of around 90%.
(11) The decline in private fixed-capital investment was accompanied by a dramatic decline in public fixed-capital investment. Indeed, not only was there a decline but, especially through the widespread adoption of policies of "privatisation", there was huge disinvestment by governments and public authorities. The more transparent disinvestment by privatisation was accompanied by less obvious and often large-scale neglect of public infrastructure, including transport and communications, education, health and, often to a devastating extent, the environment. The consequent public disinvestment cut productivity and production, increased costs, and intensified inflationary pressures which were then translated into further shifts into negative external trade and payments balances.
(12) As the above almost necessarily entailed, the shift of industry offshore was accompanied by movement away from investment in tangible assets. Investment instead came to be concentrated in financial assets and transactions. Tangible assets as a percentage of non-financial businesses in the United States fell from 78% in 1955 to around 72% in the early 1980s and then steeply to 53% today.
(13) Reagan's economic policies were accompanied by defence spending which the Soviet Union could not match and which was an element in the Soviet Union's demise. The Soviet Union collapsed largely because its economic and social base could not sustain its strategic design. At the same time, defence spending and the military-industrial complex in the United States expanded while its own economic and social base was being swiftly eroded.
(14) These trends accelerated in the 1990s. Despite the end of the Cold War, United States defence spending remained high and the military-industrial complex grew in size and influence while the non-defence tangible-asset base of the economy continued to be eroded. Between 1996 and 2001, tangible corporate assets rose by less than half of their financial assets.
(15) The obsession with financial assets created a casino-like economy in the United States and, though in lesser measure, elsewhere. The "greatest asset bubble of the twentieth century" began to burst as the 20th century closed, growth slowed, unemployment rose and a United States budget surplus of $1273 billion in 2001 turned into a budget deficit of $159 billion in 2002, a deficit that was dwarfed in 2003 and now again in 2004.
(16) Overhanging all is the threat of a major collapse of the United States dollar. Such a collapse seems already to have begun and is likely to gather momentum as capital flows into the United States, which grew from $200 billion in the 1980s to approaching $9000 billion in the next decade, are converted into capital outflows. The impact on exports and the economic stability of Asian countries dependent on the American market could range from severe to catastrophic.
(17) We cannot be certain, but, for China, the impact will probably be less severe. The economy has been more strictly managed, domestic demand has grown and a comprehensive program of public investment, especially in transport and other infrastructure might sustain overall growth. Having benefitted from the self-destructive policies of the United States, China might therefore be able to immunise itself - at least to a significant extent - from the effects of the collapse of the economy and currency of its - involuntary! - benefactor.
(18) Confronted with economic collapse on the scale of the Great Depression - or worse - the question is whether the United States will undertake fundamental changes in economic - and social - policies or whether it will embark on, for example, more militaristic and imperialistic adventures to escape from its economic and social dilemmas. The latter is not impossible in the light of the record of the first George W Bush Administration.
(19) If the latter, the United States might find itself even more disastrously on much the same self-destructive course as that which ultimately demolished the Soviet Union.
(20) If the former, there would be a return essentially to the policies before 1969 when real capital investment in plant and equipment and business profits were high, and government policies favoured rapid real economic growth. The great virtue of the American economy that it had unrivalled capacity to produce then had relatively full expression. Domestic strength imparted by a more balanced economy could be extended internationally to more mutually beneficial arrangements for trade, investment and aid; and we might achieve an amelioration of the irrational scramble by many countries for ever more military power and more deadly weaponry. The environment could receive the attention it so desperately needs.
The Power Theme
(1) A country's power includes and is derived from several elements: economic, socio-cultural, political and strategic. Two main pillars support that power: (i) armed forces and weaponry; and (ii) the economic, socio-cultural and political base.
(2) Shifts in relative power can be as or more crucial than shifts in absolute power and can be brought about by changes in either of the two pillars.
(3) These shifts can stimulate peaceful rivalry or armed conflict. "The great wars of history," Mackinder said, "...are the outcome, direct or indirect, of the unequal growth of nations."
(4) The outcome of this peacetime rivalry or armed conflict will be determined by the policies of the countries concerned. It will depend largely "upon the 'skill and experience' with which they manage to sail on 'the stream of time'."
(5) Put in another way, it will depend on the skill with which a country plays what Machiavelli called the role of the lion and the fox: "one has to be a fox to recognise traps, and a lion to frighten off wolves."
(6) In the Cold War, the United States succeeded in combining armed deterrence with a powerful economic, social and political base. The Soviet Union destroyed itself largely because its economic, socio-cultural and political base could not sustain its military and strategic aspirations.
(7) However, in the last twenty years of the Cold War, although the United States base continued to strengthen in relation to the Soviet Union, shifts were taking place in its own base that threatened United States power in its future relations with other countries, including - as an example of a future superpower rival - China.
(8) Those shifts derived from policies that reduced domestic real capital investment, productivity and production and diminished the great strength of the United States - a strength that has traditionally rested on its unmatched capacity for production of real goods and services.
(9) These shifts were mainly to countries in Asia which undertook the production of those supplies whose production United States policies had made uneconomic or unattractive at home. With accelerated investment, productivity and production, those supplying countries experienced unprecedented economic growth. Relative economic power shifted not only to smaller countries but, for example and increasingly, to a major potential, power rival, China.
(10) At the same time, the United States military-industrial complex achieved such momentum, especially during the Reagan Administration, that, with some hesitation in some respects in the early 1990s, it continued to grow, both in size and influence, after the Soviet Union collapsed. Though the parallel should not be taken too far and cannot be too exact, the United States then risked self-destruction or at least grave damage through building a military structure of unprecedented capacity, that its economic base was less and less able to sustain. The extraordinary, poorly planned adventures of the Bush Presidency since the tragedy of September the Eleventh, have demonstrated both the economic and financial weakness of the United States and the limits to its military power.
(11) If present policies persist, United States power will continue to be undermined and relative power will pass to such countries as China, perhaps to Japan if it can solve its banking/investment problems, or return in some measure perhaps to the older industrial countries of Europe. Though relative shifts might not be so great or so rapid as to enable such a country as, for example, India to "confront" the United States, the shifts might be sufficient to encourage a new level of intransigence towards United States domination by, for example, such countries as Iran. In other words, we seem to be on the edge of a dramatic decline in the authority and influence of the United States, and a consequent decline in American capacity to oversee a well-ordered world of peaceful change of the kind that we envisaged at the end of World War Two and during the quarter-century thereafter.
Commentary on the Power Theme
Much of what has happened in the last thirty years was nothing of the Americans' intention. Nixon and Burns did not intend to provoke stagflation after 1969. Successive Administrations and Fed chairmen did not INTEND to continue to intensify inflation, to convert it into trade deficits and to "offshore" so much of American industry. They did not intend, by their own policies, to hasten the evolution of such a country as China to what could well be highly competitive superpower status in the next decade or two. I think it is also possible that they never consciously set out to become the terrifying, but, in many ways, ineffectual military power they are today. Traditionally, before World War Two, their power rested not so much on their immediate armed capacity as on their formidable productive potential. Above all, it was the latter that enabled the United States to win or help win World War Two for the Allies. Now we have a situation in which - in a rather unconvincing facsimile of "peacetime" - the United States has the most formidable military in human history; but much of its industry has been gutted and its economy and its currency could soon drag the world economy into catastrophic collapse. As one distinguished commentator put it, "the whole US economy and its financial system remain a bubble waiting for the needle that will prick it." Not only did the United States never intend this; very few Americans have any appreciation of it even now, in December 2004, after the re-election of President George W. Bush. They have little sense that it is happening or that worse is likely to happen or why. So my concern is not that many Americans have had and still have super-imperialist ambitions. Some surely do have - still have - such ambitions. My concern is much more to show how the Americans' own policies have frustrated any such ambitions and how, in a curious - and of course, ironic - way, the United States could be on the way to "shipwreck" along lines not entirely dissimilar from those in the Soviet Union a decade ago. Unless dramatic changes of policy are made very quickly, the economic and social base - of which the Americans have traditionally and justifiably been so proud - may not be able to sustain the massive military-industrial complex that has been erected - and continues to be erected - on it.
The Political-Philosophy Theme
(1) The long trend towards social democracy, generally entailing greater governmental intervention in economic affairs, higher taxation and public expenditures directed to creating a more caring, equal-opportunity society persisted through two-thirds of the twentieth century.
(2) The trend persisted until 1969 and indeed for a time afterwards and then lost momentum as it came to be identified as one of the causes or the cause of inflation and the instability that the United States and other developed countries experienced in the post-1970 period. During this period, the influence of trade unions declined and left-wing political movements faded or tended to move towards the centre.
(3) The trend away from social democracy strengthened sharply after the collapse of the Soviet Union and, more generally, after the loss of faith in communist, centrally-controlled economies. Virtually all Western governments reduced or sought to reduce their economic and social role, to reduce expenditure and taxes, to cut public investment and to pursue privatisation of public enterprises.
(4) Generally, governments sought to abdicate their economic and social responsibilities and tended, if anything, to expand their law-and-order and defence functions.
(5) These changes affected, for each individual country, its governmental activity both internally and in respect of international issues. The relative anarchy always implicit in international law tended to expand and intensify as this abdication became entrenched.
The Multiple Abyss Theme
(1) These far-reaching shifts in economic and strategic power have taken and are taking place in a world in which nuclear and environmental threats intensify, along with inequalities in levels of living and socio-religious conflicts, both within and among countries. We could be destroyed not only by nuclear conflict but by catastrophic environmental deterioration and a religious Armageddon.
(2) These potentially catastrophic trends can be reversed only if there are fundamental changes in our economic policies that can provide a base on which political, strategic, nuclear, environmental and socio-religious issues can be tackled more effectively.
(3) The essential technical changes are in creditary policies and in the application of policies which will (i) employ human and material resources more fully and (ii) employ them so that all countries and societies, at whatever stage of development, derive benefit from them, while preserving the potential for long-term safeguarding and development of the planet.
(4) Though now universally neglected, the processes by which these new policies may be formulated and implemented are already known and may, in general terms, be modelled on those processes which gave us our national and international institutions after World War Two and which enabled effective implementation, for example, of the Marshall Plan, the creation of the European Union, the variety of aid programs of the kind of UNCTAD, UNDP and the Colombo Plan, and others.
(5) The record of governments and political leaders suggest that they will not be able to lead us away from the abyss and that direct, democratic, grassroots initiative is necessary to design a new vision and take us on a well-paved path towards it.

Copyright: James Cumes 2004

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