The US media and party election machines have once again transformed the run-up to the US elections into a melodrama. Across the country, party candidates have been swaggering across stages, surrounded by stars and stripes and CNN logos, to spew out the latest piece of propaganda that the spin doctors have managed to conjure up. Blazing fake bleached smiles brighter than any of the media’s camera flashes, the candidates have been telling their respective party audiences exactly what they want to hear: vote for me, and I, like the proverbial all-American hero, will take our party to triumph and resuscitate the American dream.
A melodrama would simply not be a melodrama without villains, and the spin doctors and US media have created plenty of these. The prime villains in this particular saga are those countless turban-wearing terrorists from Iraq and Afghanistan and the cunning communist from across the pond in Venezuela. The respective heroes in this tall tale, Hillary Clinton, Barack Obama, and John McCain, have all promised to address these dangers — by any means possible, ranging from outright force (in the case of McCain) to diplomatic maneuvers (in the case of Obama) — so that America can once again be safe. Obama and Clinton have even promised to solve America’s looming economic crisis — without even fundamentally questioning its root cause, capitalism. If the masters of propaganda who are employed by these candidates are to be believed, their man or woman can achieve just that and ensure that everyone will be able to live happily ever after — much like a soppy ending in one of Hollywood’s latest tawdry films.
Of course, reality is not a movie. The truth is that the chief villain is corporate America — defined by its sheer greed — and its warmongering political allies from both the Democratic and Republican Parties. They have created the potential for an unprecedented economic meltdown not only in America, but in the whole world, that will leave very few people unscathed.
The origins of this potential economic meltdown can be traced back to the global capitalist crisis, caused by an over-accumulation of capital, which initially erupted in the 1970s.1 Ever since this, the US economy and global dominance have been on the decline. In 1950, 60% of all manufactured goods were produced in the US; today just over 20% of manufactured goods derive from the US.2 With this decline in US manufacturing, accompanied by trade liberalization, the US trade deficit has ballooned. In 2007, the US trade deficit was a mammoth $816 billion. The country’s surplus trade in services and offshore income from its multinational firms fell far short of covering this. In fact, imports into the US amounted to over 14% of GDP in 2007; while its manufacturing sector only accounted for 12% of GDP. This means that the US is in deep trouble — it is impossible for a country whose imports exceed its manufacturing production to quickly increase its exports so as to close its trade deficit.3 Coupled to this, since 2002 the US has been paying out more to foreign investors than it has received from its investments abroad. The result: in 2007, the US current account deficit amounted to over $738 billion, which was only marginally down from $811 billion in the previous year.4
Originally, back in the 1980s, the Reagan administration attempted to assist companies to overcome this crisis in the manufacturing sector by deregulating the financial sector, so as to open up new investment opportunities for corporations. Ever since then, companies have been able to speculate on stock markets, bonds, and now currencies on a colossal scale. Many manufacturing firms also entered into the financial sector through lending clients money, at high interest rates, to purchase the goods they produced. With this growing focus on financialization and the finance sector, the value of companies’ stocks became far more important than in the past. It was and is essential for a company to have elevated share prices to attract financial investors, like banks and pension funds. To boost the value of their shares, most of the biggest American companies borrowed money to buy back their own shares. They have also sold corporate bonds to other investors to raise capital to buy out competing companies.5 All of this meant that most of the largest US companies are now heavily in debt. More recently these companies have begun selling this debt, through such mechanisms as structured investment vehicles (SIVs), to other investors. The recent subprime mortgage crisis revealed just how dangerous such practices are — indeed, the crisis is threatening to engulf the entire global financial system. Of course, the US government has selected to bale out the major banks that have been involved in the subprime debacle. In doing so, the US state has added hundreds of billions to the country’s already substantial debt.6
George W. Bush and his right-wing cronies have attempted to boost the ailing economy through military spending. Officially, the approved US Department of Defense’s budget for 2008 is $766.5 billion, which includes the costs of the “war on terror.” However, this does not cover the costs of maintaining nuclear weapons, which falls under the Department of Energy, and foreign military assistance, which falls under the Department of State. When such costs are added to the defense budget, it is estimated that the US military spending for 2008 will be in excess of $1 trillion. This is more than the military spending of all of the rest of the countries in the world combined.7 The US government sells this excessive military spending to the public through stirring up fear. In reality, the US does not need 9,962 nuclear warheads,8 over 6,000 military aircraft, and 1.4 million troops stationed in 150 countries9 to protect the US public from a ragtag group like Al Qaeda (which the US state created in the first place). Added to this, the massive military spending has actually failed to improve the US economy. It has rather added to the US debt burden.
In order to cover the costs of its military spending and its current account deficit, the US government has been forced to borrow at an unprecedented rate. The US government has now racked up a debt of over $9 trillion, of which $6.5 trillion is foreign debt. In fact, countries such as China, India, and Brazil have been financing this debt through buying US Treasury Bonds.10 With the declining dollar and the lowering of the interest rates in the US, it seems unlikely that these countries will continue to do this forever. When this happens, the US economy will implode.
If one adds private debt, chalked by businesses and households, to the US government’s debt, the total debt in America stands at well over $48 trillion.11 This is completely unsustainable. In fact, most of this debt will never be paid off. The reality is that the US is bankrupt. The US Controller General said as much when he reported to Congress that “the federal government did not maintain effective control over financial reporting and compliance with significant laws and regulations as of September 30, 2007.”12 In laymen’s terms, this means that the US government is unable to pass an audit. No amount of wishful thinking and colorful speeches by Clinton, Obama, and McCain will change this reality.
A full-blown economic meltdown is set to occur in the US. It could happen tomorrow, or over the next few years, but it will happen. When it does, the US will face a major choice — abandon neo-liberal capitalism and create an economy that truly serves all the people; or face barbarism. It seems very unlikely that the Democratic or Republican parties, with their incestuous relationship with big business, will choose the first option. This means that the time is fast approaching when large sections of the American people will have to shelve their hopeful thinking that Obama, Clinton, McCain, or any other person of their ilk will be able to solve America’s problems. If an economic system that provides hope and is based on justice and equality is to come about in the US, it will have to be created by working-class and poor Americans themselves.
2 Richard Du Boff, “US Hegemony: Continuing Decline, Enduring Danger,” Monthly Review 55.7, December 2003.
3 Paul Craig Roberts, “Empire on the Brink: Republicans and ‘Free Market’ Zealots Bring Disaster to America,” CounterPunch, 13 March 2008.
4 Peter Morici, “The Damage Worsens Each Month: The Corrosive Consequences of the Trade Deficit,” CounterPunch, 17 March 2008
7 Chalmers Johnson, “Going Bankrupt: Why the Debt Crisis Is Now the Greatest Threat to the American Republic,” TomDispatch.com, 22 January 2008.
9 Beverly Darling, “Why Does the U.S. Have Military Bases in Foreign Countries?” Al Jazeera, 7 February 2007.
10 Johnson, op. cit.
12 Roberts, op. cit.
Shawn Hattingh is a research and education officer at the International Labour Research and Information Group (ILRIG) in Cape Town.