Events now breaking in the US and global financial markets are indicative of a major shift in world power (1) similar to the shift that occurred at the time of the Great Depression when the UK lost it’s global influence.
This time it’s the US that is sinking and it appears to be happening more quickly than most forecast. The problem appears to be due to multiple factors including US policies that have driven much of their production offshore, a focus on trickle down economics, reluctance to regulate financial and corporate markets, and massive military expenditures that generate very little in the way of useful value.
Militarism is clearly a serious problem for the US (2). Ever since WWII they’ve been allocating ever greater percentages of their budgets to the military, as well as authorising various black (secret) budgets for undercover projects and agencies. Their military expenditures each year now surpass the total of all other countries military expenditures. This martial focus has limited their ability to develop peaceful technologies and methods and has also taken their focus off working with nations in cooperative ways. Instead the US talks about pre-emptive strikes and regime change.
Wars are expensive, with the Iraq effort (after ‘Mission accomplished’) costing around US$500 billion to date with more to come. Add to this the self-induced problem of most of their manufactures being bought from offshore, and their budgets have been taking heavy hits every year as their import bills grow along with their military expenditures. A few years of this have put the US into massive debt which has slashed their flexibility to respond to problems.
The destabilisation of the Middle East by the US (mainly) is also responsible for much of the increase in the price of oil that we’re experiencing. While initially this might be construed as good for the US oil companies, it’s also another hit for the US trade deficit as they have to import significant amounts of oil to keep going, particularly fuelling their gas guzzling military vehicles.
US deregulation of financial markets has led to the development of impossibly complex financial instruments which no-one understands. At the time each instrument was developed, commissions were paid all around to the lucky folks who sold them. We’re now discovering that a lot of that paper is pretty much worthless, based more on fantasy than fact. It is this mess of worthless paper that is now being discovered all over the world by financial institutions who had optimistically reported them as ‘assets’. Result – big write downs, red ink everywhere.
So there are at least 3 colliding issues, too much military expenditure, a massive self-induced trade imbalance, and a whole range of dodgy financial instruments of unknown magnitude, all pushing the US deeper into debt.
Now factor in the Bush administrations swaggering incompetence that has scared off much of the rest of the world.
Instead of the US having lots of friends to help them in troubled times, they’ve created whole new classes of enemy (e.g. the entire Muslim world) and demonstrated to their allies that they are not to be trusted. Their claimed ‘values’ of freedom and democracy seem to have collapsed into domestic spying, torture, arrest without charge, evidence free trials and other gross abuses of human life and freedom.
In fact, some people no longer know what the US stands for at all (3), which effectively destabilises any long term relationship possibilities with other countries who will be equally, if not more, uncertain.
As if that weren’t enough, the Controller of the US (Chief Accountant) is going around warning Americans that the country will be broke in a few years because of the maturation of a whole host of unfunded liabilities (4) like Medicare and Social Security. Cancelling these programs will create millions of sick and broke pensioners, a political nightmare for any government.
Now stir in a healthy mix of climate change, with the US experiencing massive storms that are wreaking havoc on communities (e.g. New Orleans) and the insurance industry and we’ve got a brew that conforms to Mao’s curse of living in interesting times. As the global denier of climate change, the US has not only lost most of its credibility on this matter, it’s also reaping what it has sowed.
The overall effect of these, and other breakdowns has led to the US no longer being able to influence other countries in useful ways. A power vacuum is thus developing into which we might expect China, India, Russia, Iran and others to move.
Such a shift will have massive and long lasting consequences, changing our human world forever, perhaps even changing the lingua franca of the world.
On the financial front, we now see that if the ‘credit crisis’ (i.e. crisis created by gross irresponsibility, corruption and incompetence) continues as forecast then we could be facing major and severe catastrophes this year.
Some US investment sites are now recommending that stock/share investors carefully review their portfolios and get out of anything suspect (e.g. banks, financial, insurance). Our own RBA is intent on stopping Australians spending so much by cranking up interest rates. The result is more pressure on individual and business budgets, less money for new business ventures and consequently fewer new jobs.
More a voice than an observer
Most people find these to be big and important issues, but where are these stories in the news?
Our media is simply not reporting or discussing this material or these possibilities, leaving our citizens blinded and unable to prepare for whatever the new future may hold. People need notice of difficulties to adjust their budgets/living arrangements etc. They won’t get that notice from the hours of pointless blether that dominates our airwaves and the sycophantic and incompetent way that much of the supposed ‘fourth estate’ describes our situation and our governments’ responses to it.
John Howard wasn’t the only person colluding with the fossil fuel industry to hide the potential effects of climate change on us. The media was in there too, busy failing to report the tragedies that might befall us all so that they could still get juicy press releases from the Parliament and favoured interviews with political insiders.
In reality, we do not need to keep hearing from these same people, we need to hear the voices of dissent as well so that we can make up our own minds about these vexing issues. We need real balance in our reporting…not just government sycophancy.
After years of climate change denial, we’re now suddenly confronted with Ross Garnaut’s report telling us that we need to make deep cuts in emissions now. His report has already been described as an ‘input’ by the new federal government, possibly in preparation for a series of explanations why we cannot get our climate change act together.
It’s clear that unless we take effective action to stop the climate shift, many of us could lose everything. Yet there are still self-interested groups telling us that we shouldn’t go any faster than the economy will allow, whatever that is supposed to mean. As if the weather can somehow be throttled back at our economic convenience.
These signals are made all the more troubling by the fact that our media and political systems are either ignoring them or imagining that they’re somehow negotiable. (Saw an interview on TV where the subject was described as a ‘climate negotiatior’!??)
The weather, nature and survival of species cannot be negotiated. They are the results of environmental and ecological balances that we are disrupting. We risk setting in train a series of events that could be calamitous for us all.
Our likely best course is to consider the precautionary principle – first do no harm.
What’s the crisis?
At a fundamental level, we seem to be suffering from a crisis of governance. We have a US government system that appears massively out of balance and apparently unable to stop it’s own slide into ruin.
In Australia we’ve had 11 years of denial about major problems that have left us on the brink of a climate disaster with little manoeuvring room. This denialism has also delivered greater power to those who are actually creating our problems – e.g. the fossil fuel, transport and logging industries, making effective responses more problematical for the Rudd government.
In another triumph of government, after Peter Costello’s assurance that Australia was ‘quarantined’ from the effects of the US financial crisis, his Future Fund has suffered a smirk wiping loss of $700 million so far (5), further revealing the government’s investment credentials. These losses may well have to be reinstated by taxpayers so that we can pay our bureaucrat’s superannuation bills. Government takes our money, loses it on poor investments and so has to take it from us again.
There’s nothing I can say about the Tasmanian government that readers of TT don’t already know.
No private sector organisation could survive if they used the methods employed by our governments. It’s a constant plundering of taxpayers to favour mates, prop up unsustainable industries, disadvantage the poor and weak, spend up big on self promotion while scooping up as many benefits as possible.
The necessary roles of government such as personal safety, resource and life security, personal and social development and personal health are all being eroded to satisfy the fantasies of those in government.
Government is there to serve itself.
Communication links between the citizenry and the governments are disappearing and the political parties, which only contain a small number of people, are devising policies that suit the parties’ own goals regardless of whether they suit the people who are being ‘represented’.
All of these are reasons to get involved in politics and let your politicians know what you want and what you expect of them.
Mike is a complex systems consultant, change facilitator and executive and management coach.
1. Martin Jacques at London School of Economics from Guardian republished in the Age - http://www.theage.com.au/news/opinion/martin-jacques/2008/02/19/1203190818888.html?page=fullpage#contentSwap1
2. Movie about US involvement in war - http://www.informationclearinghouse.info/article19362.htm
3. For example see ex US Treasury Paul Craig Roberts article at http://www.informationclearinghouse.info/article19374.htm
4. 10 min video clip http://www.informationclearinghouse.info/article19381.htm
5. Future fund flounders http://www.news.com.au/heraldsun/story/0,21985,23260967-661,00.html
So there are at least 3 colliding issues, too much military expenditure, a massive self-induced trade imbalance, and a whole range of dodgy financial instruments of unknown magnitude, all pushing the US deeper into debt. Now factor in the Bush administrations swaggering incompetence that has scared off much of the rest of the world. The overall effect of these, and other breakdowns has led to the US no longer being able to influence other countries in useful ways. A power vacuum is thus developing into which we might expect China, India, Russia, Iran and others to move. At a fundamental level, we seem to be suffering from a crisis of governance. We have a US government system that appears massively out of balance and apparently unable to stop it’s own slide into ruin. In Australia we’ve had 11 years of denial about major problems that have left us on the brink of a climate disaster with little manoeuvring room.