Friday, December 08, 2006

Blood And Treasure

Joe Stiglitz, a nobel prize winning economist (he wrote Globalization And Its Discontents- excellent book), revises his estimate of the total cost of the Iraq war as being over $2 Trillion. That's right over $2 Trillion.

Chan Akya: A Feral Garfield With Guns

A couple of interesting articles from Chan Akya, a columnist for Asia Times Online. Is the US on the brink of a precipitous decline? Akya makes the case for a major geopolitical power shift with the US having.. I disagree with some of what he says, I suspect he exaggerates his pessimistic outlook for affect, but a fair bit of it is on the mark.

Garfield with guns.

America's backward leap
A wealthy family that got rich on oil co-opts religious extremists to maintain its stranglehold on power. Western readers of that statement would immediately assume that I am referring to the Saudi royal family, while at least some non-Western readers would surmise that my reference is to the Bush White House.

For neutral observers, the comparison is quite compelling. Much as the Saudi royal family signed away its role in society to Wahhabi leaders in return for political patronage, US Republicans have coasted to electoral victory on a combination of support for the rich that is balanced with concern for society's morals, as defined by the religious right. In other words, it is the politics of fear that is used to put harried middle-class voters into submission. This is very similar to the politics of fear that Muslim countries use to keep their populations in line, often engaging in lectures on threats to the religion.

Middle Eastern dictators need Israel as an available excuse so that they can themselves stay in power. Being portrayed as an opponent of Israel in Arab media carries with it a decided advantage, as any political opponent would immediately be labeled as pro-Israeli. In much the same way, US President George W Bush and Vice President Dick Cheney probably need the Middle East to remain the sorry mess that it is for their own selfish reasons. This week, Defense Secretary Donald Rumsfeld indulged in name-calling of Americans opposed to the Iraq war, likening them to Nazi-era sympathizers. In doing this, he has pulled a page straight out of the "Arab Despot Book of Governance".

As I wrote earlier, demographic calculations vary wildly once you remove immigration from the calculations. The question that Americans need to ask is whether ongoing trends allow their country to remain a magnet for immigrants. Assuming that the rightward shift in policies and practices is fully executed, will anyone from Asia want to live in America?

The Cold War kept the United States honest, by providing a tangible enemy. The resulting focus on innovation and technological leadership, combined with a free market for entrepreneurs...The end of the Cold War removed a key element in this balance, namely the omnipresent external threat. True to form, that provided lopsided behavior as Americans focused more on guaranteeing their standards of living, while resisting the influx of new ideas.

the United States is aging at the same rate as Old Europe. The relatively free system I talked about above did not include payments for retirement or medical insurance, leaving an ever-increasing hole in the ability of the nation to sustain its living standards. Initially, this was handled by increasing welfare payments that were offset by rising tax revenues - but once the latter fell, America's structural deficit became visible to everyone.

Americans recognize that the main attraction for foreigners to own their financial assets is their country's status as a solitary superpower. Any threat to that status would logically cause investors to diversify their holdings, at an obvious financial cost. This is what the financial implication of a multipolar world is. A terrorist attack produces an overreaction from the US precisely because the country cannot economically handle these consequences. It needs to be the solitary superpower to keep its girth intact, in other words. Hence "Garfield, with guns".

For their part, Islamic tyrants have long used external threats to justify their continuity, which is why they will relish and prolong the current standoff with the US.

This situation explains why neither the US-led West nor Islamic tyrants have any reason to control an escalation of the current situation. The result will be tragic, leading to World War III, although it will benefit any country that stays out. China and India should keep that in mind.

Feral cats, beware

With the US government firmly on the back foot in Iraq and President George W Bush rendered a lame duck by a Democratic Congress, the end of the American century is approaching rather faster than previously expected. [1] My characterization of the United States as Garfield may have been too gentle in the context of what is likely to happen going forward, when the cat becomes feral. The death of any superpower usually carries with it a combination of military and economic defeats and, as with the Soviet Union's demise in the 1990s, America's decline will prove equally cruel.

Iraq has descended into a civil war in recent weeks, as a feckless US military attempts to recover lost ground with the same failed tactics of the past few years. Albert Einstein defined insanity as doing the same thing over and over again but expecting a different result...As with the end of the Vietnam conflict, it might take 10 years or more for any resurgence in national optimism in the US. The difference is that this time around, putative successors are much better positioned to inherit the mantle of superpowers.

The US has lost its competitive edge in manufacturing ... The simple fact is that after the Cold War ended, US innovation stopped dead in its tracks. Evaluate the engineering aspects of any American car, and you are likely to walk away completely unimpressed. A six-liter engine used by US car companies produces the same power as an engine half that size from the Germans, and one-third of the size by the Japanese (tuned, admittedly). Leave out engineering, and simple design dynamics don't work either - Detroit has not produced a single desirable car in the past decade.

The United States came to the forefront of righting human-rights wrongs such as racism, but only when its economic prosperity was threatened by the status quo. Now, America's lost competitiveness in manufacturing comes alongside its declining demographics (when keeping immigrants out of calculations), and rising threats from the likes of India and China in all areas of the global economy that it currently dominates. In this high-pressure economic environment, rising geopolitical risks argue for an unwelcome acceleration of the country's transition. Much like a worker who becomes a wife-beater when threatened with losing his job, the US lashes out, with its anger directed toward garnering any resource advantage that it can to lengthen its reign at the top.

the US is unlikely to go quietly into the night. It will attempt to lash out at the rest of the world, particularly at its potential successors - the Eurozone, Russia and China.[3]...I have already written about the latter in the aforementioned article, concluding that China would make necessary accommodations to its currency and economic policy to avoid confrontation with the US.