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Oil, Oil, Debt and Trouble |
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Go to any town in the Midwest and chances are, people are well aware of the damage done to the U.S. economy by the decline in the nation’s manufacturing industry.
But it’s also likely they’re not conscious of the simultaneous rise of the financial sector—which in recent years has become so dominant, one of our primary “products” now is finance.
Why should we care?
According to political author Kevin Phillips, America’s turn toward an economy based on financial services—insurance, banking, investment, credit—was how Great Britain evolved toward the middle of the 20th century.
And then the bottom fell out and the sun set on the British empire.
“The Federal Reserve and the Treasury Department have bailed out every financial industry in trouble. Manufacturing withered as this happened,” said Phillips, speaking at the AFL-CIO in Washington, D.C., last week to promote his new book, American Theocracy: The Peril and Politics of Radical Religion, Oil and Borrowed Money in the 21st Century.
In the past two decades, the federal government has provided bailouts of the nation’s banking industry and life support for ailing national currencies in regions such as Mexico and East Asia. Further, it has deregulated financial services, unleashing predatory credit card vendors and creating other potential disasters—all actions that have historically led to various forms of financial collapse.
Unlike many pundits, Phillips sees a strong manufacturing base as crucial to America’s economy—not as some replaceable dinosaur. Those of us in the union movement know well that manufacturing is a mainstay of state and local economies, providing both jobs and tax revenues for essential public services, the major driver of U.S. productivity growth and essential for maintaining a strong national defense.
As coal was to Britain, so oil is to the United States, says Phillips. So utterly dependent upon a single resource at the turn of the 20th century, Britain lost its footing as a global power when its coal fields were depleted and technology shifted to oil.
Also tellingly, “Britain stuck with free trade too long and went down with it.”
But Phillips sees what he calls the “growth of a debt culture” as a particularly cancerous growth choking our nation’s health. With an unstoppable U.S. current-account deficit marking the “fourth danger zone of indebtedness,” Phillips writes:
The national debt is the first, provided the reasonable additions that put it in the $10 trillion to $15 trillion range. Household debt, deliberately ballooned by Washington policy makers, is the second. Financial-sector indebtedness—the half-speculative nervous system that conjoins risky mortgages, shaky hedge funds, liquid credit derivatives and superbank overreach—is a third.
Phillips’s latest book continues his evolution from Republican strategist and author of the 1969 prophecy-making pub, The Emerging Republican Majority to slayer of modern day Gilded Age barons (Wealth and Democracy) and now firm opponent of Bush’s oil and debt-dependent administration.
With his usual mix of first-person narrative, current politics and secondary historical resources, Phillips highlights the damning similarities between the United States today and countries on the verge of decline, such as 20th century Britain, 17th century Spain and 16th century Holland.
Such an approach is not new. Yale University historian Paul Kennedy caused a firestorm that spread beyond academia with his 1987 landmark, Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000. Although Kennedy’s thoroughly researched history of the military and economic similarities of the United States and the countries Phillips covers offered a goldmine of information, most people bought the book to read the last chapter. That’s where Kennedy predicted that, like Rome, the United States, too, would fall.
But in the go-go “Greed is Good” 1980s, Kennedy’s contrarian stand was heresy, and he kept an entire generation of scholars, most notably Harvard’s Joseph Nye, busily writing in defense of U.S. longevity.
Maybe now it’s time to pay attention?
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