International Writers Magazine - Our Tenth Year: USA and Obama's rescue
Economic Update - New York
the truth will possibly emerge about how Republican interests, fearing
a presidential run by Hillary Clinton, threw massive resources behind
dark horse candidate Barack Obama, whom they figured didnt
have a chance in hell to win, only to watch in horror as the banking
system collapsed just weeks before the election, and Obama being
swept into power with a massive Democratic majority by a fearful
Obama, whose deep
thinking is way to the left of that of the Clintons, is not pursuing
half-measures. He is doing what he believes is necessary to bring the
U.S. in line with other western democracies, and doing what he can to
salvage what is left of a diseased and desiccated social system before
it dissolves into chaos and eventually disintegrates. Whether he can
marshal the resources necessary to bring about a turnaround is a problematic
hypothesis. I personally give him less than a 10% chance to clean up
this mess. Sales of gold bullion and American Eagle gold coins are mushrooming
because of lack of confidence that the dollar will survive as a currency.
Right-wing media is beating a continual campaign of resistance to what
they are featuring as a communist coup détat in Washington.
The battle lines are being drawn, and they are a lot narrower than the
Democrats current 60% - 40% margin in Congress.
If you dont receive preventive care for a condition and it finally
erupts into a medical catastrophe, the costs for care explode exponentially,
and that is what happened to American society. Even as they apply triage
to an expiring financial system that long ago outlived its usefulness,
it is a harebreaths away from dying and shutting down nourishment in
the form of financing to the various social extremities. This is what
Karl Marx predicted 140 years ago: crises of capitalist credit mechanisms
occur where the ever-lengthening chain of payments, and an
artificial system of settling them, has been fully developed".
This essentially means that the ultimate expression of capitalism invariably
leads to collapse. And Marx was not even contemplating the entrenched
kleptocracy of wholesale looting that was encouraged to flourish here
by a systematic looting by the banks, corruption of the rating agencies
and emasculation of the regulatory organs. The solution advanced by
Obama and Geithner is akin to a blood pumping machine that essentially
replaces the heart and pumps energy to the rest of the body until a
new heart, or banking system, can be constructed and grafted on.
Where he runs afoul of the entrenched interests is that while he is
prepared to set up a mechanism to cleanse the system of the toxic assets
created and propagated by it, he is showing no interest in indemnifying
the banks shareholders. Under a hypothetical Republican administration
confronted with the same circumstances, which is what we would be facing
now if the banks had collapsed one month later, or after the election,
the solution would have been diametrically opposite an indemnification
of the banks equity holders with the rest of us scrambling to
get whatever dregs would percolate down the system. The capitalist class
is now gearing up for the fight of its life, only they wont represent
it as anything so crass as losing their bank shares. They will fight
back on grounds of ideology, reducing it to sound bytes for Bill OReilly
and Ann Coulter to incessantly repeat ad nauseum until huge blocks of
society are set against each other. Whichever side ultimately prevails,
the end result will be the same economic consolidation: of banking;
of the automotive industry; of energy and transportation.
When presented with a similar breakdown in France in the 1950s
President de Gaulle correctly enforced consolidation of the economys
major sectors, producing what is today the worlds fifth largest
economy. More than any other western leader I can think of, de Gaulles
experience in resuscitating a moribund society is the most relevant
to the present situation. That consolidation of industrial sectors as
an ongoing necessity for industrial survival is affirmed by no less
an authority than John D. Rockefeller, who pioneered the modern corporation.
No friend to the concept of social Darwinism or laissez-faire, which
he considered disruptive and chaotic, unleashing instability and volatility
in a marketplace that craves order and stability, Rockefeller wrote:
The struggle for the survival of the fittest, in the sea and
on the land the world over, as well as the law of supply and demand,
were observed in all the ages past until the Standard Oil Company preached
the doctrine of cooperation, and did it so successfully and so fairly
that its most bitter opponents were won over to its views and made to
realize that rational, sane, modern, progressive administration was
necessary to success. This may sound self-serving, but in
todays world the oil company that has just now posted the largest
earnings of any publicly owned corporation in history, Exxon Mobil,
is none other than the modern descendant of Rockefellers Standard
Oil Corporation. This obviously begs the question: if consolidation
of industry is an ongoing economic necessity, and Rockefeller and Marx
are not so far apart in their economic model, which interests or class
of people are best suited to be in charge if such an economic monolith?
The answer is social, with each society determining the qualifying factors
of who should be in charge. This is obviously idiosyncratic, with factors
having nothing to do with economics determining who sets economic policy.
The point to remember is that no one sector is any more entitled than
any other to determine economic policy. It should be for the most capable
and the most qualified to lead, which is rarely the case. In this country
that leadership has heretofore been reserved for a class of white persons
coming from a very narrow band of culture. We are all bearing witness
to the residual effect of that class of persons having lost its dynamism.
We are being beat out of world markets at an alarming rate as the Anglo-Saxon
business model recedes in importance. I essentially believe that it
is becoming more and more urgent for Americans to absorb lessons from
other successful cultures, following the Japanese model for emulating
success. It is instructive to note that while Standard Oil enjoyed a
near-monopoly in America, it was forced to co-exist in world oil markets
with Dutch and Anglo-French consortiums whose descendants also still
exist today. Flexibility and application of marketing techniques to
world markets are the keys to survival.
Right now I give Obama a big edge for his determination to mobilize
the use of new sources of energy to power government installations.
This is a big step up from leaving it up to the haphazard free-market
ideology of letting it grow any which way. That this encouragement of
a new industry by the awarding of government contracts is the correct
course is made obvious by the frenzied Republican opposition to it.
Government contracts for small, innovative artisanal operators could
mean a big breakthrough in expanding that industry, as well as bringing
into play a whole new class of persons (which will naturally result
in consolidation and rationalization of that industry further on down
the line). This is the kind of forward strategic thinking of which even
de Gaulle would approve.
We are now witnessing incremental signs of regenerated world economic
activity. The Baltic Dry Index, which sets freight rates for transport
of primary resources like coal and iron ore, has shot up 50% in the
last week (though it is still down 80% form its peak), spurred by depletion
of raw material inventories in China. This has resulted in some mining
activity in Australia, as well as boosting banking and transport stocks
in Scandinavia. Isolated industries such as German automotive companies
like BMW and the oil sector are performing well. Spains Banco
Santander, Europes largest by market capitalization, is set to
report an €8.8 billion profit on last year. These indicators are
the evidence that we are not living in 1929. As these dots continue
to appear, like isolated electric lights appearing after a blackout,
and get connected, combined with aggressive and innovative activity
from the top (Obama) to ensure that poor, hapless suckers like this
writer dont get flushed down the drain, the totality of it may
yet merge to form the image of an improved world.
© Dean Borok Feb 13th 2009
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