The West’s Brief Twentieth Century Golden Age
I will be using Hobsbawm’s assessment – laid out in his book, Age of Extremes: The Short Twentieth Century – of the period between 1945 and (approximately) the mid 1970’s as being one of the most prosperous, revolutionary, and egalitarian periods in the history of Western civilization.
In addition, as of much of the wealth and power of the West still resides in one nation – the United States of America – it will be the focus of this essay, as it is typically – but certainly not always – the economic barometer for this region. An old saying goes, ‘when America gets a cold, the rest of the world catches pneumonia’, and certainly the last few years will attest that this relationship – at least when considering what is geopolitically known as ‘the West’ – has not changed very much.
“The world at the end of the Short Twentieth Century is in a state of social breakdown rather than revolutionary crisis.” (Hobsbawm, pg.459)
Life is short and history is long. Our memories are extremely selective, while history attempts to build an as conclusive portrait of the past as possible when piecing together the many moments of cause and effect – along with complete randomness – that make up our long and sinewy path out of the muck.
Within a particular environment, humanity can at first be quite adaptive and then quite complacent, especially if over several millennia these conditions make basic survival skills – food, shelter, clothing – practically an inalienable right. This is perhaps the legacy of only the last century or so. It was through the incredibly transformative nineteenth century that some of the longest and most dominant odious practices – slavery, child labour, heavily class-based society – began to be reconsidered and eliminated, and throughout the twentieth century humanity attempted to improve upon these reforms. The leaps and bounds certain sections of the world were fortunate enough to take part in cannot be understated. While living in abject poverty is a possibility in the most developed and wealthiest countries, starving to death is not. There is enough of a government run social safety net in the form of homeless shelters and outreach programs that can provide free of charge a service that keeps anyone alive who wishes to remain so. This is no small feat.
Pinning down when these changes came to be is not easy, as so many of them were small steps that at first had little basis in explicit government policy. It had to be internalized that the poor deserved all the basic opportunities that the middle and upper classes had, and this extended into a concept of society that was more egalitarian and permissive than any that had come before.
In the decades after the Second World War, those in the first/developed world experienced hitherto unknown rise in living standards, socioeconomic advantages, and privileges across a wide spectrum of classes, cultures, and creeds.
The ‘baby-boomers’ (those born between approximately 1946 and 1962) were the first generation to be raised in this environment, characterized by the rapid expansion of a comfortable suburban life with a domestic nuclear family.
This period begat three decades of unparalleled prosperity. The children – and eventually, grandchildren – of those that lived through the Great Depression and the Second World War saw the periods before their birth as distant and alien. Not knowing much else than stability and security – and for those that remained disenfranchised, the knowledge that it could be only one promotion or judicial ruling away, meant they understood and strived for this level of comfort – the belief arrived that this new environment was, like the rights written in the nation’s constitution, inalienable. That there was always going to be a strong social welfare program, an employment opportunity for every citizen that was tailored to their abilities, and a government that kept the country safe, both from enemies outside thanks to the military, and ignorance and greed from the inside thanks to government reliability, regulation and effectiveness.
Great social changes during the mid-twentieth century (equal rights for minorities, women, homosexuals, increased social programs for the marginalized) were a direct challenge to the current power structure. Suddenly the amount of previously disenfranchised groups that had access to power – the government – increased greatly. The marginalized had a legitimate method to challenge the status quo.
These changes were accepted by the power structure at the time, although the unspoken tradeoff was that slowly the power shifted away from government into the private/corporate sector in the coming decades.
How unprecedented this initial situation was cannot be overstated. Despite the fact that this essentially took place in only the developed world, namely North America, Europe, and handful of other states like Japan and Australia, concentrated wealth remained within these societies – and was distributed among in them in a comparatively egalitarian fashion – for so long that it was easy to forget that any other type of lifestyle was possible. Assisting this perception were simple terms such as the First, Second, and Third Worlds. Which, in order, were developed/capitalist countries, communist countries, and impoverished/developing countries. The First World – the initial focus of this paper – looked at the Second with wariness, and the Third with pity. The power of the First World was such that it was able to conquer the Second simply by outspending it, with enough money left over to attempt to prop up regions of the sagging Third.
If ‘pride comes before fall’, then consider 1945 to 1975 Western capitalism’s proudest moments. Afterward, small recessions and increased government spending – now not in social welfare but military expenditures – by the early nineteen eighties were reasons given to alter the Keynesian model of economic growth. Since that time the changes which at first were gradual and insidious mean that those born in the early nineteen-eighties are only now coming to grips with the fact that most likely the opportunities and benevolent forms of government assistance that had been taken for granted for decades will now not be extended to them, or will be in extremely limited form.
Now obviously government and business has gone hand-in-hand for centuries, but in the earlier decades of the twentieth century it was typically the government pursuing its agenda through corporations (see: United Fruit vs. Latin America), or with corporate support (see: the military industrial complex). As corporate power increased later in the twentieth century, this reversed, and we see corporations pursing their agendas through government bodies.
What has been happening for the past three decades – although Hobsbawm would peg the transformation at nearly four – is a return to economic and political policies that mirror a time that for most in a globalized society seems like ancient history: The pre-World War II society of the over and underclass.
Just as there were many key factors that coalesced at just the right time for the West’s meteoric rise, a plethora of devastating decisions, political crises, and unintended consequences can be pointed as all assisting in its downfall.
In America, class divisions are widening faster than ever before, and in Europe the previously unshakable government programs are being subject to massive cuts, as seen recently in England and France. Germany’s own success at financial austerity has given it the privileged position to ‘advise’ at how other Eurozone countries like Greece and Spain are permitted to deal with their own economic crises.
Taking the West’s place in terms of power and wealth – although not yet on the same egalitarian level where all citizens have a chance to partake in the social improvements – is the East, namely China and India. Their populations – each bigger than Europe, North America, and Japan combined – and the difficulty that comes with supporting all of them prevent the term ‘Golden Age’ to transfer immediately, but the course of the future is clear. Power will shift away from the West for the first time in centuries, and its high-water mark will be looked back upon as a unique, prosperous, and – despite cold overtures of nuclear war – largely harmonious time in the history of civilization.
II. The Pride
“The Great Society is a place where every child can find knowledge to enrich his mind and to enlarge his talents. It is a place where leisure is a welcome chance to build and reflect, not a feared cause of boredom and restlessness. It is a place where the city of man serves not only the needs of the body and the demands of commerce but the desire for beauty and the hunger for community. It is a place where man can renew contact with nature. It is a place which honors creation for its own sake and for what is adds to the understanding of the race. It is a place where men are more concerned with the quality of their goals than the quantity of their goods.” – Lyndon Johnson
As the British Empire began its slow decline in the wake of their victory in World War One, America easily took up the reins. In the first couple years of the 20th century, the Bethlehem Steel Company in Pennsylvania was producing more steel than all of England combined. A mere historical footnote – even then, really – but it was definitely a sign of things to come. Bigger, stronger, faster. Only in America.
Although it took the final defeat of Napoleon to solidify their position, it isn’t too much of a stretch to say that the Brit’s begin their ascent in the late eighteenth century by being the first to feel the birthing pangs of the industrial revolution. This works out to having about 150 years of getting the biggest slice of pie at the table of the world. It looks like America is going to have to settle for half of that.
The transfer of this not-quite-ceremonial role as the ‘world’s policeman’, as America has come to be known, is not typically violent or antagonistic, as there is typically a power vacuum that the new empire is able to enter and fill.
In regards to the last shift, the British and Americans had been allies before the First World War, and as the former’s empire began to crumble due to its colonies demanding autonomy, the latter just watched with an indifferent shrug and continued its meteoric ascent. As far as economics went, America had always been a healthy supplier of resources to Europe and an enthusiastic purchaser of goods from Europe, especially with England in both cases.
The Second World War solidified this congenial relationship even further, although it was the nail in the British Empire’s coffin, as it nearly went bankrupt fighting off the Germans, which certainly would not have succeeded without American intervention.
America’s main concern when they officially took the mantle as empire at the end of The Second World War – first letting no one else have say in how to govern the defeated Japanese – was security, as USSR was the other major victor of the conflict:
“Almost from the start of the Cold War, the USA set out to combat this danger by all means, from economic aid to ideological propaganda through official and unofficial military subversion to major war; preferably in alliance with a friendly or bought local regime, but if need be without local support. This what kept the Third World a zone of war, when the First and Second Worlds settled down to the longest era of peace since the nineteenth century.” (Hobsbawm, pg.434)
Proxy and border wars have insulated empires for decades and centuries. Throughout the twentieth century, mainland America has never felt the sting of a coordinated military attack from an enemy nation (and in 1941, Hawaii was only a colony, not a fully-fledged state). Rather it has frequently expanded its ‘borders’ – which, by the second half of the century, was nothing more than economic policy and political stability that favoured American interests – by assisting various regions in fighting off anti-capitalist influence, both real and perceived.
By keeping these battles far from American shores – while strengthening the role of the military-industrial complex that employed millions of American and Western citizens in a myriad of ways – the country experienced incredible and unimpeded growth, large enough that it was also able to support Western Europe in its rise from the postwar rubble. But while this reliance on a defense/offense program economy fostered its supremacy – with initially honest intentions, as it was built up in order to be a deterrent to the similar Soviet military buildup – it sowed the seeds of the country’s own downfall.
Put simply, the three decades of prosperity that truly began in the years after the end of the Second World War (although in America it began with the advent of the conflict) were an anomaly. Many of the government programs in Europe that were instituted were done so simply because much of the continent lay in ruins and the only way for Europe to return to some level of prominence was to have a centralized bureaucracy calling all the shots. America supported this effort by pushing the need for nations to remain democratic and via the undertaking of the Marshall Plan, which in no small way was an attempt to keep the Europeans from turning to the political ideology of the war’s other victor, the Soviet Union.
Economic policy also played a key role in the West’s overall transformation. The Great Depression of the 1930s was proof enough to even the most ardent capitalist that government intervention and regulation was necessary as rampant speculation obfuscated the market’s true worth and the supply/demand bubbles burst. The near decade economic slump – where unemployment rose to a staggering 25% – was born out banks taking extensive and interdependent risks – which today sounds depressingly familiar – and helped usher in economic reforms that curtailed the power of the financial industry. When asked if he was prepared for the criticisms the banks would levy at him for pushing these changes, President Roosevelt stated, ‘I welcome their hate’. British economist John Maynard Keynes championed this view, also pressing for government stimulus to create new jobs and construction projects to infuse liquid capital in the marketplace.
While the generation given the prefix ‘greatest’ is typically done so in regards to their service in The Second World War, it would be just as appropriate for surviving the Great Depression. These two events brought many different classes and cultures together (the latter helping usher in the massive institutional safety net known as social security, having paid out $615 billion to seniors in 2008), and the leaders of the First World made extremely influential and life-changing decisions for all those living the West. Capitalism would flourish, but under the careful eye of the elected officials.
Throughout the middle of the twentieth-century, business mergers were rare, and governments – who were called to approve or reject the proposal – rarely rubber-stamped them. In fact, this was a period when it was more common for governments to intervene and break up monopolies. While the stock market grew robustly, the corporation was tied to a series of regulations dictating what it could and could not do (limiting its market share and its holdings), and these rules were strictly enforced by states, with financial institutions under the (then) watchful eye of the Securities and Exchanged Commission.
Living standards and life expectancy rose extremely fast. In the United States, between 1950 and 1973, the gross domestic product (GDP) per capita rose from $9,561 to $16,689, a rise of 2.45% annually, higher than any period from 1820 to today. (Steckel) Between 1940 and 1980, the average lifespan increased by more than ten years, from 62.9 to 73.7. (Steckel) Western European countries during this period also had similar growth spurts in GDP-per-capita (Germany: $3,881 to $11,966, France: $5,270 to $13,123) and life expectancy (Germany 67 in 1950 to 77 in 1999; France: 65 to 78). (Steckel)
As far income inequality went, the postwar period has been nicknamed by economists as ‘The Great Compression’, a period when income inequality between the rich and poor was at a record low. Taxes were as high as 90% for the wealthiest bracket in America (although due to obvious deductibles, the highest one would pay was closer to 60 to 70%). The increased revenues from this tax format allowed for the birth of social programs in all parts of the West. But even the United States – which, in the 1960s, introduced the welfare system, medicare and a greatly overhauled social security program – was dwarfed by the reforms made in Western Europe. France soon had what was labeled – first celebrated, then criticized – a ‘cradle to grave’ social net. As Piketty and Saez note in 2006:
“The share of the top decile [the wealthiest] fluctuates around 40 to 45 percent during the interwar period. It declines substantially to just above 30 percent during World War II and stays flat at 31 to 32 percent until the 1970s. Such an abrupt decline cannot easily be reconciled with a Kuznets-type process.” (Piketty & Saez)
For nearly four decades the gap between the rich and the poor in America was smaller than it had ever been, the exact same time while the country grew in size and power quicker than it ever had. Wealth more evenly distributed makes for a healthier economy in part due to a greater circulation of cross-the-board liquidity. It was a period when a greater proportion of Americans could both save and spend their earnings. Materialist consumption has plenty of negative qualities, but at least during the Great Compression one could actually afford the wide variety of goods and services they were purchasing (as opposed to today, where such products purchased on credit has resulted in a credit card debt of several hundred billion).
This increased purchasing power went beyond the nation’s borders, as America and Western Europe traded amongst themselves and the developing world. Along with high tax rates on income, high tax rates on the profits of companies that provided such goods and services meant that the government was not required to borrow money to pay for the programs and regulation it created and maintained.
It was in this atmosphere that the civil rights movement, second-wave feminism, and the easing of social mores came about. Only in periods of great economic prosperity for practically all levels of society could so many sweeping reforms related to how people were permitted to live their lives as they saw fit be instituted, either by government legislation or changing moral views by large segments of the population. It was into this society – ideally Johnson’s ‘great society’ – that the baby boomers were born into. A world of wealth and stability the likes of which the world had never seen, at least below the upper class.
Certainly the hardships and desperate times and measures of what came before paved the way for such reforms. The common bond of suffering through poverty and warfare united previously disparate communities and classes (for Europeans, these supposedly unshakable walls were partially torn down in the trenches of World War I when the upper class officers finally mingled with the lower class privates).
While the women’s movement began at the turn of the century and won the right to vote in the second decade, it was the Second World War that pushed the march to equality to the next level. With the men fighting in Europe or the Pacific, women took the jobs in factories and offices, building everything from airplanes to combat boots. It would take another three decades for the feminist movement to see significant changes in how the Western world operated – and many would rightly argue there is still a dearth of women in highly-paid, powerful positions – but only through the peace and prosperity of the postwar West was this climb to equality possible.
And certainly this was not the only push for equal rights. The Civil Rights movements of the 1950s and 1960s in the United States was a mobilization of disenfranchised minorities that had been building steam for many decades but was only realized in a period where economic prosperity allowed larger segments of the population to look beyond their personal future and become concerned about deeply ethical matters. The widespread acceptance of homosexuality also followed this pattern, and despite setbacks due to the panic surrounding the AIDS epidemic of the 1980s, same-sex couples are now granted the same rights and privileges as their heterosexual brethren in almost all Western nations.
Higher-level education became accessible to middle and lower class families to the point where it was now the exception that you didn’t go to a university or college after graduating from high school.
Healthier, educated, globally aware, multicultural citizens were the result of this seemingly innate process. It seemed to confirm the belief that human progress remained unimpeded despite the setbacks of the first half of the century. While there were still problems, it was as if a generation of people were being groomed to address them, with much improved technological and social tools available to assist.
Why did this happen? Why was this expansion of social programs and government regulation instituted?
Certainly the reform measures ushered in during the Great Depression – in America, both changes to the financial industry and the New Deal programs of Roosevelt – played a large role, but these changes remained in place and in some cases continued to expand long after the improvement of the global economy.
The main reason was the Cold War.
The end of the Second World War came as a relief but also a strong sense of uncertainty. The decisive victors fought common enemies but rarely shared the battlefield. The United States and Russia had opposing political and economic systems, and each side viewed the other with great suspicion throughout the war. At its end, with America intentionally using the atomic bomb to both avoid a land invasion of Japan and to keep Russia from invading the country, tempers flared in meetings between the victorious nations as how to divvy up the spoils of war (Churchill thought it was necessary to consider marching on Russia in the spring of 1945, but – taking into consideration the fact that the Soviets had a three-to-one troop superiority – settled for an ideological battle instead, coining the phrase ‘the Iron Curtain’).
America and (eventually) Western Europe could afford to spend its money on large-scale defense programs and on their citizens, in what could be described as an extensive P.R. campaign extolling the benefits of capitalism as opposed to communism. With military power concentrated in the West and Soviet states, the rest of the world became subject to influence or even invasion of these two larger spheres. Countries with natural resources – whether agricultural or energy – became vassal states, with American or Russia buying the favours of governments, or replacing those that refused to play ball.
Sometimes this resulted in proxy wars between the superpowers, but save for the Cuban Missile crisis, the Cold War never became Hot. Within seven years of the end of the Second World War nuclear weapons were already five hundred times more powerful than the bombs dropped on Hiroshima and Nagasaki. Over one hundred thousand people perished within days of the explosion on the former city. A single hydrogen bomb could take out Moscow or New York.
It wasn’t so much an elephant in the room but a grim reaper with a scythe and hourglass. Ironically, life improved for a great number of people at a time when life for one and all became more tenuous and uncertain than ever.
America was powerful enough that the twelve-year quagmire which was the Vietnam War did not stop but only slowed its growth. In fact, for the ever-burgeoning military industrial complex, it was a welcome infuse of business. And while during this Golden Age political commentators certainly could find many problems both international and domestic as to how America handled its business, what was never questioned was that America certainly had to power to handle it in any way it saw fit.
Yet even with the end of the Cold War in 1990, it was a period not without its problems – many of which we are sill addressing today – but it should be pointed out that the many challenges that did arise during this period – many of which were discovered or propagated among the nation’s youth thanks to an improved educational system – were attempted to be solved in a rapid and straightforward manner. America’s most dramatic steps to tackle climate change and pollution took place in the early 1970s, when President Nixon created the EPA, and introduced the Clean Water and Marine Mammal Protection Acts. The necessity to integrate minorities into the broader American workplace resulted in the passage of affirmative action laws not long after the 1964 Civil Rights Act (similar bills passed in Canada and the United Kingdom). When Johnson introduced Medicare in 1965, many parts of the program was up and running within a year. It’s hard to imagine, but it was also a time when the military industrial complex also helped create practical non-militaristic inventions, such as the study of astrophysics geodesy – which helped lead to the extensive commercial satellite system – and prototype versions of digital computing and the internet.
It was a happy merging of innovation, goodwill, fortune, and communities being built and supported by the larger social safety net provided by governments. Not perfect by any means, but the advantages of living in such a society outweighed the disadvantages to a mindboggling extent. For the average citizen, life, liberty, and security (in terms of both defense and economic stability and prosperity) were practically birthrights, and greater heights of success were limited only by one’s talent and hard work. A nostalgic view to some degree, but at least there were statistics to back it up.
So that was the Golden Age. And it’s been gone for over three decades at this point, with barely any signs that we could be returning to it any time soon.
III. The Fall
“As we take for granted the air we breathe, and which makes possible all our activities, so capitalism took for granted the atmosphere in which it operated, and which it had inherited from the past. It only discovered how essential it had been when the air became thin. In other words, capitalism had succeeded because it was not just capitalism.” (Hobsbawm, pg.343)
America gave us Yogi Berra, who gave us the adage, “it ain’t over ‘til it’s over”, and writing off such a complicated superstructure like a nation or geopolitical region (‘the West’) that still has the world’s largest everything risks blowing up in this writer’s face, but there are plenty of damning signs and statistics that suggest America’s strengths – both domestic and foreign –are on the wane.
The (post)modern American monster was born through the ignorance of Reagan, raised by the corporate-friendly parenting of Bush, Clinton, and the Second Bush, and is currently evading the ‘tough love’ of Obama. The influence of corporate lobbying – occasionally euphemistically termed as ‘special interests’ – continues unabated, despite attempts to ban earmarks or increase government transparency. Often these representatives of their respective industries – whether they be energy, insurance, or financial – are the ones that end up writing the bills that are meant to govern them. And the members of congress or parliament vote for these altered or watered down bills since the same lobbyists pay for their election campaigns.
While I will certainly concede that there is no ‘natural order of things’ when it comes to human civilization, basic power relation hierarchies have ruled over developed and developing societies for millennia in extremely familiar forms (put simply, the few ruling the many), and in the 1980’s, the world began to return to a system that hadn’t been seen since in the early decades of the twentieth century.
Whereas states and empires were run by political leaders well into the twentieth century – whether still in the form of monarchy, or a government meant to represent the electorate’s will – in the waning decades of that hundred-year period, it was corporations, whose assets and investments cared not a whit for borders, citizens or trade restrictions, which took on that role.
In the West, the 1970s was when the prosperity and success began to weaken. Small periods of recession were amplified in importance thanks to many global events, namely the ultimately unsuccessful Vietnam War and the OPEC crisis, which was practically instrumental in pushing the price of oil from $2.53 per barrel in 1970 to $41 per barrel in 1980 (Hobsbawm, pg.474). Watergate and ensuing political inefficiency saw America go through three presidents in six years.
Ronald Reagan entered the White House in 1980 promising change, but rather than attempt to fix and adapt the policies that served the country so well three decades previous, a very different economic ideology was instituted. A conservative mindset was in bloom – citizens in the UK and Canada voted in similar governments at this time – and with it came deep slashes in government programs save for defense, tax cuts (nicknamed ‘Reaganomics’, focusing on the trickle-down economic theory), and a much more liberal view of the free market.
During ‘The Golden Age’, corporations and financial institutions were severely constrained in performing what was considered risky or socially harmful activities.
It was in the 1970s when this shift began to change, but the affects still took about a decade to appear in the passage of laws that benefited first and foremost corporations and those that owned. This was done thanks in part to the increased influence of lobbyists in Washington, an effect that can be measured quite easily. Slate Magazine’s Timothy Noah quotes Hacker and Pierson regarding this:
“The number of corporations with public affairs offices in Washington grew from 100 in 1968 to over 500 in 1978. In 1971, only 175 firms had registered lobbyists in Washington, but by 1982, 2,500 did. The number of corporate [political action committees] increased from under 300 in 1976 to over 1,200 by the middle of 1980. […] The Chamber [of Commerce] doubled in membership between 1974 and 1980. Its budget tripled. The National Federation of Independent Business (NFIB) doubled its membership between 1970 and 1979.” (Noah)
Prior to the 1980s corporate mergers occurred, but were rare and done under strict governmental supervision. For much of the twentieth century, it was in fact the government’s role to prevent similar industries from coming together and forming a monopoly over a particular product or service, and break up single corporations that happened to get too large and autocratic. Standard Oil and Bell Telephone are classic examples of institutions broken up by ‘the people’ because their power had grown to be what was considered ‘unwieldy’. It goes without saying that in the history of world economics, in regards to the idea of the corporate merger, an ideological turnaround of epic proportions occurred in the 1980s under President Reagan.
With restrictions loosened – under the guise that it would make companies stronger nd more competitive – the decade was a time of fourth wave mergers, characterized by hostile takeovers, corporate raiding, and congeneric mergers (Lipton). This wave, “ended in 1989-90 with the $25 billion RJR Nabisco LBO and the collapse of the junk bond market, along with the collapse of the savings and loan banks and the serious loan portfolio and capital problems of the commercial banks.” (Lipton) But rather than scale back the deregulation in the wake of the early-nineties recession, this trend of increased risk and wild speculation – it was the beginning of the internet bubble – went into overdrive. Under both Clinton and Bush II, the people charged with overseeing the financial laws of the country – and by extension, setting the tone for much of the West – through the Securities and Exchanged Commission and the Treasury Department had many ties to the very banks and investment firms they were expected to be investigating (Taibbi (ii)).
The decisions – or lack thereof – from these bodies meant that a new approach to business as a whole was encouraged, “in which companies often find that they must be big to compete, and a relatively restrained antitrust environment led to once-unthinkable combinations, such as the mergers of Citibank and Travelers, Chrysler and Daimler Benz, Exxon and Mobil, Boeing and McDonnell Douglas, AOL and Time Warner, and Vodafone and Mannesmann. From a modest $342 billion of deals in 1992, the worldwide volume of mergers marched steadily upward to $3.3 trillion worldwide in 2000. Nine of the ten largest deals in history all took place in the three-year period 1998-2000, with the tenth in 2006.” (Lipton)
Mergers for the most part benefited the few at the top at the expense of the many below. Stocks would skyrocket, heavy bonuses and fees would be handed out the board of directors and financial institutions that orchestrated the merger, and cuts and layoffs would be passed down to thousands of employees in the years following the triumphant amalgamation.
What becomes abundantly clear is how quickly these institutions acted in wholly undemocratic fashion as soon as certain regulations against them were loosened. In a push to repeal laws instituted in the wake of Great Depression that prohibited banks from speculation and the conjoining of investment and commercial banks, Clinton Treasury Secretary Robert Rubin, “was downright hostile to the core concepts of Glass-Steagall, which he considered a cost-and-efficiency roadblock to bank profits. He declared that the act could ‘conceivably impede safety and soundness by limiting revenue diversification’.” (Prins, pg.141)
Suddenly what was protecting the good of the nation could somehow harm it, or more specifically, the money that financial institutions could conceivably make. With the 1999 repeal of the Glass-Steagall Act, banks could act in the shadows, make key decisions without fear of government oversight, deal in risky investments like credit default swaps, and alter or misrepresent numbers without investigation.
All of which is completely antithetical to the notion of the democratic principles of a nation being governed by its citizens as a whole. Corporations of all sorts were no longer beholden to the people who collectively created its legal existence. Through the last thirty years or so, the corporation and its thirst for profit has strengthened and the expense of the nation as a whole: “In a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.” (Taibbi (i), pg.210)
That private institutions were given more power as to the fate of their own destinies is certainly the most polite way to say that the government began to defang itself and no longer have the ability to properly punish these companies when they broke the law.
The Environmental Protection Agency and the Food and drug Administration are now issuing only a fraction of the fines and carrying out only a percentage of the inspections they did in the 1970s. This is true not only for government inspectors in such industries as food and energy, but in the financial world as well.
Banks were given permission to act like loan sharks and bookies, with Credit Default Swaps becoming a tradable commodity on Wall Street with absolutely no form of tracking or cataloguing to understand just how big this emerging and high-risk market truly was (echoing some of circumstances that led to the Great Depression). Hedge funds would invest in these insurance policies of sorts, hoping that the loan (typically CDOs) would fail, thereby resulting in a high payout (not unlike hoping a house you just bought insurance on burns down, or betting against a football team whose quarterback who you alone know is nursing an injury).
The ramifications, however, of these complex changes to the nature of American (and therefore Western and international) business were simple and straightforward: An astonishing amount of capital suddenly being concentrated to a very small group of people.
Granted, many of these corporations and banks were public companies with stock tradable on global exchanges, but a vast majority of these shares were held by a similarly small concentration of extremely wealthy people. 1% of the US population owns almost 50% of all the available stock of the country. The bottom 80% owns 4%.
Assisting this cabal of new rich and old rich becoming extremely rich yet again after a lean four decades’ was the change of tone many governments had towards the wealthy. A series of tax cuts, gradually introduced over many decades cut the tax rate for the rich from the approximate 70% - when Reagan assumed office – down to 28% - when Bush II left. This was not so much the ushering in of a new era of diminished government capacity – quite simply there is less it can do when there is less to spend – but a return to a bygone one. As Piketty and Saez conclude in the same paper quoted in the previous section, “after decades of stability in the postwar period, the top decile share has increased dramatically over the last 25 years is now at a level close to the pre-war level.” (Piketty & Saez)
What is important to understand is that these changes to the tax code – like changes to the laws regarding economic reform – took place over decades of pressure and lobbying from special interest groups (namely, those that who benefit from such changes). It takes a considerable amount of time to not only have such bills presented in congress or parliament, but to slowly install enough politicians that support such ideas, many of which obfuscate the underlying reality that it is not for the public good (or that ‘the trickle down theory’ – giving tax breaks to the wealthy would result in them spending more, giving more money to the middle and lower classes who provided such goods and services – was a legitimate one).
Politics, then, had to change in order to support this new position on economic affairs. Slate Magazine’s Noah quotes Paul Krugman in his article on Income Inequality:
“[T]he great reduction of inequality that created middle-class America between 1935 and 1945 was driven by political change; I believe that politics has also played an important role in rising inequality since the 1970s. It's important to know that no other advanced economy has seen a comparable surge in inequality.” (Noah)
Additionally, corporate taxes were also slashed. The explanation was that corporate taxes harmed the small business owner and strangled the hopes of the entrepreneur. As such, multibillion-dollar companies began to pay their respective federal governments only a fraction of what they used to. ‘Tax Holidays’ – a startlingly literal concept – meant domestic corporations could keep profits in oversees investments or banks, and bring them back into the country at certain times without having to pay the already lowered tax rate upon them.
The result of which was the slow and steady destruction of the power and relevance of the government. Services deemed essential were paid for in the form of rapidly increasing debt. Programs that provided basic services for the lower and middle classes were cut or eradicated completely.
Other services were sold off to private corporations, who now operated such programs with the aim of turning a profit, and one of the best ways to do that was to cut operating expenses – namely, firing employees – resulting in a lowering the quality of the services being provided. Despite being run by a private company, the fact that the service still appears to be a government one means that its inefficiency will have people believing that the government cannot adequately provide such services, so the public pressure to chip away at government institutions continues in a vicious circle. Writing in The Globe and Mail on the eve of the 10th anniversary of 9/11, Michael Ignatieff notes that, “it is always good to be skeptical about what governments tell us. But we are beyond skepticism now, into a deep and enduring cynicism. There will come a day when they are not crying wolf and we will not believe them. Then we will be in trouble. Some trust in government is a condition of democracy and security alike. That trust has been weakened and can't be rebuilt until sovereigns say what they mean, mean what they say and do what they promise.” (Ignatieff)
While much of these instances are focused on America, its downward trajectory is not an isolated one. The governments of other states across the world – many of which became independent politically but more economically dependent on the West in the last three decades – are hardly in better shape. In Europe austerity reforms – to curtail rampant and unfeasible government spending, a hallmark of the continent’s social safety net – have brought crises to the nations of Greece, Ireland, Spain, and Italy. Massive protests in England welcomed Prime Minister David Cameron’s plan to cut billions out of education and social welfare spending.
While the emancipation of several African and Asian European colonies in the wake of the Second World War could be considered to hold the promise of a similar golden age in their respective regions, years of instability – both political and financial – characterized much of the post-1970s period. As Hobsbawm acknowledges, “in Africa, in Western Asia, and in Latin America the growth of GDP per capita deceased…nobody seriously doubted that for these parts of the world the 1980s were an era of severe depression.” (Hobsbawm, pg.405)
In the last two decades, these same regions continue to struggle – some doing better than others – but the World Economic Crisis – with rumblings beginning in 2007 before it exploded in the fall of 2008 – has wreaked havoc across the globe, certainly playing a decisive role in the many countries in the Middle East that have experienced revolutions and protests that have been labelled ‘The Arab Spring’. These great changes, despite the always good news of deposed dictators, are occurring at the worst possible time, as the cash-strapped West can only offer meager forms of social and economic assistance to help prop up these nations that are desperate for basic levels of infrastructure. A Second Marshall Plan does not look likely.
In a world that is globalized in the most basic ways – people in the West, whether they work in front of a computer or on an assembly line, are competing for the exact same jobs with people in the developing world – America and European nations are having to turn inward and deal with exploding domestic debt crises (not unlike the financial calamities that affected the developing world in the 1980s and 1990s), as they are finding it nearly impossible to rein in spending, despite cuts. But then, this has been a challenge throughout the slide away from the Golden Age:
“In spite of substantial efforts, hardly any national governments in the rich – and mainly democratic – countries, and certainly not those most hostile to public social welfare, managed to reduced the vast proportion of their expenditures for these purposes, or even keep them in check.” (Hobsbawm, pg.408)
The extensive rewriting of Western financial policy in the 1980s made the economic earthquakes of 2008 and their still-continuing aftershocks inevitable, and the policies of the Western governments in that thirty-odd year interim – whether liberal or conservative – only exacerbated the problems. While the 1990s was time a growth – with much credit given to President Bill Clinton ‘business friendly’ liberalism – Japanese stagnation and the internet bubble were missed signs that rampant speculation – a hallmark of free market capitalism – would have devastating consequences.
If an economy being driven into a ditch (a phrase Obama has used in the past to describe the actions of the Republicans, even though his attempts to pull out said vehicle have been feeble) wasn’t enough, the growth of the military industrial complex continued unabated during the decline out of the Golden Age, even after its spending helped bankrupt its enemy, the Soviet Union. While small skirmishes in the 1980s and 1990s proved that American and NATO power was uncontestable on the battlefield, the effort of keeping the peace – the Balkans being the prime example – remained a difficult one. The incidents during this period pale in comparison to American retaliation for the terrorist attacks of September.11.2011. While the militant fundamentalist group Al Qaeda was responsible, declaring war on a small group of terrorists hiding in various countries across the Middle East – although centered in Afghanistan and Pakistan – made for difficult planning. Entire nations were to be held responsible, not simply a handful of criminals residing in them. Consequently, America invaded Afghanistan and unseated the Taliban – who permitted Al Qaeda to use their country as a base of operations – and then invaded Iraq and unseated Saddam Hussein (who, despite being a ruthless dictator, did not have any involvement of the 9/11 attacks or was developing weapons of mass destruction, as the Bush administration claimed). The poor handling of both these invasions has extensive ramifications for America, both at home and abroad.
The cynical adage ‘never get involved in a land war in Asia’ had conquered Napoleon, Hitler, and the Soviet Union, and is now doing the same with the United States.
The cost of the 9/11 attacks to the nation – including both “expenditures of necessity and expenditures of choice” – is estimated at $3.3 trillion dollars (Sanger). This includes both Iraq and Afghanistan, the former costing over $800 billion, the latter, under $400 billion. And while America has been able to excise almost all of its military presence from Iraq – although its presence from a political and economic standpoint will remain for many years to come – in Afghanistan, America finds itself in a, ‘damned if you do, damned if you don’t’ scenario. By putting its faith in feuding warlords instead of a strong central government, America has allowed a Taliban resurgence, meaning it’s once again fighting the adversaries it toppled in six weeks in late 2001. Even if a negotiated peace with the Taliban is enacted, there is no guarantee that a secure state will result. With America propping the country up financially, the people running Afghanistan have little interest in seeing a stable country. It would mean that their influx of easy American taxpayer (and therefore borrowed Chinese) money would evaporate.
The only advantage seems to be that at least Afghanistan doesn’t have nuclear weapons. Sadly, it’s not very stable neighbour Pakistan does. While only sending a fraction of financial aid that it gives to Afghanistan – mostly in the form of military assistance (Rashid, pg.160) – Pakistan is truly the front lines in the ‘war against terror’, as its army and clandestine intelligence agency (the ISI) not-so-secretly support Islamic fundamentalists that seek to attack both America and nearby India. The fact that Osama bin Laden was found living there in a suburban home certainly suggests its commitment and ability to be an American ally should be questioned. But letting Pakistan fail is also not an option, as its nuclear weapons makes such an situation an immediate global military crisis, which is a scenario that the nations of the world cannot afford at this time, in any sense of the word.
So, while not losing or teetering on the brink of chaos in the same sense as these previous states have, America is going bankrupt (or beyond bankrupt, as the country’s gross debt as of September 2011 is 14.71 trillion dollars) by funding the wars and rebuilding efforts in Iraq and Afghanistan.
The estimated budget for defense related expenditures for 2012 is between one trillion and 1.4 trillion dollars, approximately a third of the nation’s entire budget. This is a figure that is nearly untouchable when it comes to debates within the two party system. Current Defense Secretary Gates – who acknowledges from a bureaucratic standpoint that such a large system is unwieldy and inefficient – wants to make deep cuts into the Pentagon’s budget, but realizes he must do so gingerly.
Spending money on weapons catalogues it never uses in its entirety is only the tip of America’s monetary woes.
Government inefficiency – coupled with all-pervasive influence of corporate influence on how laws and regulations are shaped – has become the norm, and with that, the social programs that were born out of the New Deal and developed after the Second World War became extremely expensive with diminishing returns as the seventies and eighties approached. Severe cuts to programs such as welfare, student loan programs, and public infrastructure projects were enacted as cost saving measures, but increased military spending during this time canceled out any gains.
Social security will be strained as millions of baby-boomers retire and not enough young people are working to support them, as they are now competing in a global job market. Globalization has become both a dirty word and dismissed outright as nothing more than corporate exploitation. Why have a factory or call centre in America or Germany when you can build and staff one in Malaysia or India for a fraction of the cost?
Unions – meant to curtail the power and greed of early corporations and help employees – have become corrupt themselves; not only in regards to an early connection to organized crime, but simply complacency and unrealistic demands, whether it has to do with extremely high pensions or a weak interdisciplinary force. With the increased powers of the corporation beginning in the 1980s, instead of being fixed, unions were slowly weakened and dismantled completely, leaving millions of workers unrepresented as their companies cut jobs and benefits en masse.
Consequently, the gap between the rich and poor is America widening at exponential rates: “During the crisis decades inequality unquestionably increased in the ‘developed market economies’, and all the more so since the almost automatic rise in real incomes to which the working class had gotten used to in the Golden Age had now come to an end.” (Hobsbawm, pg.407)
Writing this twenty years ago, Hobsbawm, comes off practically sage-like, as the trends he laments have only increased:
“C.E.O.’s of the largest American companies earned an average of 42 times as much as the average worker in 1980, but 531 times as much in 2001. Perhaps the most astounding statistic is this: From 1980 to 2005, more than four-fifths of the total increase in American incomes went to the richest 1 percent.” (Kristof)
What is shocking is the speed at which this transfer of wealth has occurred, not only at the expense of the financial power of the average citizen, but of the Western nations themselves. An inability to pay bills big and small is a sign that America – and the rest of the West – has been living beyond its means, and this is seen in both the meager savings and massive debts that the average citizen has incurred over the last three decades and the similar faults in government spending in the same time frame. While private corporations and the wealthy few that own them have done spectacularly well, there is clearly as massive disconnect in understanding that in the end their own success is irrevocably attached to the success of their comparatively poorer and less powerful fellow citizens.
This gap – which has been unfairly characterized as class warfare, and whose internal divisions have been set upon and manipulated by those who wish to not see any reforms made towards it – is by far the biggest challenge facing the West in the early years of the second decade of the twenty-first century.
IV. The Future
“What does it mean to say that a system enters into systemic crisis? It means that the secular trends are reaching asymptotes that they cannot cross. It means that the mechanisms that have been used up to that point to return the system to relative equilibria no longer can function because they require moving the system too near the asymptote. It means, in Hegelian language, that the contradictions of the system can no longer be contained. It means, in the language of the sciences of complexity, that the system has moved so far from equilibrium, that it is entering into a period of chaos, that its vectors well bifurcate, and eventually a new system or systems will be created. It means that the ‘noise’ in the system, far from being an element that can be ignored, will come to the forefront. It means that the outcome is intrinsically uncertain, and is creative.” (Wallerstein, pg.230)
While the past never duplicates itself completely, it does repeat in a standard fashion.
The Roman Empire’s borders were much more physical than America and the West’s currently are. Centurions were literally holding the line against barbarians from the northern Germanic tribes, but beyond this physicality there certainly was a doctrinal aspect of their rule that was being rejected in these outer regions of the empire. The wealthy in Rome were aware of the empire’s many deficiencies but were insulated from the brunt of its effects. Not surprisingly, it was the extensive lower classes that were forced to deal with the consequences of corruption and opulence of those on high.
Chalmers Johnson saw echoes of both Roman and British empires in America’s current decline, and makes a rather damning conclusion: “Rome and Britain are archetypes of the dilemma of combining democracy as home with an empire abroad. In the Roman case, they decided to hang on to the empire and lost their democracy. In the British case, they chose the opposite; in order to remain democratic they dumped their empire and military apparatus after World War II. For us, the choice is between the Roman and British precedents.” (Johnson, pg.89)
The comparison to the crumbling of the Roman Empire and the stumbling into the dark ages is the worst-case scenario (although tellingly it did mean that the East would be the beacon of progress for centuries to come). More dramatic perhaps, but hopefully overblown and unlikely.
A more plausible development is the return of a system that resembles that of the nation prior to World War One. ‘Returning’ to a system that became practically obsolete roughly a century ago is not meant in terms of social, cultural, or technological. Advances in these sectors of human endeavours in democratic nations will most likely only move forward, albeit slower. Even certain contemporary debates concerning immigration, homosexuality, and religious freedom – which many see as taking a step backwards – would not even be possible one hundred years ago.
The connection to this specific past – a period that Hobsbawm called ‘The Age of Empires’ – is meant in purely political and economical terms. As the income inequality gap widens, the middle class will sink and join the lower classes to create a underclass.
Elizabeth Warren has done extensive research on how the last three decades have affected an average household in America, and she gets right to the heart of the matter by titling her findings, ‘The Coming Collapse of the Middle Class’. It is a shocking document that shows that housing prices, insurance costs (whether it be health, auto, or other), and an unstable employment market (where jobs are less available, more temporary, and with fewer benefits) are forcing more American families into bankruptcy than ever before (Warren).
A shrinking middle class is the loudest alarm bell that exists for the health of a developed nation. As wages stagnate and prices for essentials – food, energy, health – rise, this pool of citizens will watch their disposable income dry up and with it fall into the ever widening maw of the new underclass.
The future of America and other Western nations does not look promising. The size of its bureaucracy is massive, so much so that in many respects it is inefficient, slow to react to change, and ridiculously expensive. While many conservatives decry the ‘European-style socialism’ that President Obama has supposedly introduced when it comes to health care reform, and use the threat of higher taxes as a reason why the masses should object to it, they would be better suited to point out that these similar programs in European countries are for states with populations ranging from five to eight million people. Trying to install such complex programs – even if it could be done without health insurers driving up the costs – in a country with 312 million citizens is an undertaking that has not been seen in the course of human civilization. ‘Too big to fail’ has entered the cultural lexicon, and so should ‘too big to be efficient’.
The alternatives to government-run programs are no better, however, with private corporations bleeding both the citizens and the government dry (and therefore, the citizen twice). As noted, the deregulation of risky corporate ventures and novel financial instrument brought the nation and much of the world to its knees. The United States is in an unfortunate and paradoxical situation where the federal government is too big to efficiently address the problems it faces – in fact, Obama’s health care reforms will not be instituted fully until 2013 – but the problems it faces cannot be handled by any organization except the federal government.
And this does not even begin to address the problem of debt, which is a combined problem of both the citizens of America and the government.
A massive stimulus that would dwarf the $787 billion that was issued in February 2009 – as the American Recovery and reinvestment Act – would be required to properly jump start the economy, and it would have to be paid for by not only increasing taxes on income – mostly on the wealthy – but taxing capital gains and investments at much higher rates as well - also, mostly on the wealthy. With the debate over tax cuts being so heated, it is almost guaranteed that the above recommendation is politically (read: the whims of the corporations/wealthiest 1%) unfeasible. As Boggs explains in detail in Imperial Delusions:
“From an ideological standpoint, the U.S. Empire will have some difficulty sustaining itself within a matrix of market relations, instrumental rationality, consumerism, and the rampant local disorder that infuses the whole panorama of global corporate colonization. The inevitable loss of community, social infrastructure, ecological balance, and democratic practices is bound to nourish conditions of social polarization, violent conflict, upheaval, and blowback – consequences fruitful to the growth of popular movements but also to a virulent superpower response, as we have already seen. Efforts to resolve these contradictions by military force, as the United States is regularly poised to do, only generate further, perhaps more explosive, contradictions on a world scale.” (Boggs, pg.7)
Conclusions and assessments become more opaque when we stop assessing the West exclusively and consider the rest of the globe. The post World War II years in the Communist countries and what is known as the Third World were extremely difficult periods, filled with violence, famine, and highly questionable interaction with the West and East respectively.
The rise of global population today is found almost exclusively in the third world. While at first it could be said that Western families were having less children because more were surviving (the shrinking of the infant and child mortality rate from the mid eighteenth century to mid nineteenth is a triumph), by the end of the twentieth century it could be argued that they weren’t having more than two – the average, but shrinking still – because they could no longer afford to deliver the Western lifestyle to any more than that.
While we currently remain in a horrendous recession – with highly confusing economic data that suggests it ended in late 2009 and that this is in fact a second one – and the issue of jobs remain the most pressing in the run up to the next presidential election, the kinds of jobs the West can offer its youth are rapidly changing. Many high-tech occupations that do not require face-to-face interaction are being fought over by citizens in any country with a reliable internet connection.
But what of these challenges? If it is destined to get worse, how worse and for how long? ‘The End of History’ is a savvy bit of marketing hyperbole, having made the switch from an early nineteenth century claim by an egotistical German philosopher (Hegel) to a legitimate political position in the final decade of the twentieth. It was the title of Francis Fukuyama’s supposedly earth shattering essay published in the wake of Communism’s fall, but the last twenty years has seen a host of other pressing and more complex issues that are radically shifting power across the globe.
When hype becomes consecrated with fact, however, legitimate concerns from the intellectual community can and should arise. This community is subject to seismic shifts in mood and opinion, just like any other group that are linked – however weakly – by ideology or practice. The truth is, ‘a change in history’ is simply not as eye-catching. Or interesting a topic. But that doesn’t mean it is wrong.
When the ideology you ascribe to begin to falter or morph into an unrecognizable shape, it is tempting to cling to such eschatological terms like ‘end’. Perhaps simply ‘end of an era’ would have been more apropos. After all, those are much more common. And so with that, we can safely return to Hobsbawm, where the language is less alarmist, even if the conclusions rightfully are:
“The first generation of humanity to take rapid and cheap global air travel and telecommunications for granted, the students of the late 1960s had no difficulty in recognizing what happened at the Sorbonne, in Berkeley, in Prague, as part of the same event in the same global village in which, according to the Canadian guru Marshall McLuhan (another fashionable name of the 1960s), we all lived.” (Hobsbawm, pg.447)
But Hobsbawm goes on to note that this was a paper-thin call for revolution, with limited support and almost no real plans to institute a new, more equitable form of global governance. (447) Indeed, for all the temporary success of the 1960s, the young generation that protested for even more liberal reforms turned away from such policies in droves when they finally found themselves in the halls of power two decades later.
Considering the rise and fall of all sorts of complex forms – whether living things or the states existing between living things – it is as if the situation the West currently finds itself in was an inevitable one. With such a spectacular and rapid rise, should we really be surprised that the fall is equally spectacular and rapid?
But nature and its close relative power abhor a vacuum. Next up is China. And just like when the British Empire warily relinquished the crown to America in the first couple decades of the 20th century, the currently fading rulers are keeping their eyes on their ever-expanding competition, mixed with wariness and resignation.
Just like the Bethlehem Steel statistics that gave an example of how much bigger America was becoming when compared to England and Europe, certain superlatives are being repeated concerning China (example: the poverty rate fell from 53% in 1981 to 2.5% in 2005).
Despite pressing and legitimate concerns regarding China’s success as a state that does not offer the typical freedoms that are expected in twenty-first century society (freedom of the press, free speech, elections, etc.), in terms of the type of power that defines a nation, it comes down to sheer numbers in the end. There are over one billion people in China. When it comes to resources – both created and consumed by this amount – little else matters (in 2010, China became the largest manufacturer in the world, displacing the United States for the first time in 110 years (AFP)). It can and does throw its weight around, much like every empire or superpower before it did.
Under Mao Tse-tung, China became a communist state in 1949, and two decades of horrendous mismanagement and brutality killed approximately one hundred million people. During this time, China made claims of greatness and power but had little to back it up. Mao’s ideals – “the revolution, communism itself, could only be saved from degeneration into stasis by a constantly renewed struggle. Revolution could never end.” (Hobsbawm, pg.469) – were poorly matched with the results of actual government polices such as ‘The Great Leap Forward’ (famine) and ‘The Cultural Revolution’ (dissolution of the intellectual class). But when the country opened up to the West, its massive population became one long factory line, and with this influx of revenue its dominating, repressive government turned it into a superpower. It wasn’t long before the switch went from basic products like clothes and children’s toys to electronic equipment and car parts. And, in perhaps the most blatant sign of China’s political and economic power, they now have the largest financial stake in the United States than anyone else, thanks to its purchase of 20% of the available foreign-owned Treasury Bonds.
The U.S.-China relationship is an incredibly complicated one. For starters, on the surface it matches two political ideologies that are so adverse to each other that for over four decades there was a constant threat of nuclear war between them (although it was communist Russia against capitalist America). Yet even this supposed gap is distorted, as America has plenty of socialist qualities in its governance and the corporation-friendly communism China practices would likely be abhorrent to Marx and Engels (Hobsbawm, pg.467). Of its one time Soviet brethren, it was clear that, “organization, rather than doctrine, was the chief contribution of Lenin’s Bolshevism to changing the world.” (Hobsbawm, pg.465)
More importantly, economics trumped political ideology when Nixon met with Mao Tse-Tung in 1972, and China spurned any sort of direction from the Soviet Union to become a sensible choice for both American and European companies. But while an easy choice for an economist or business owner, the effects it had for the average citizen who used to work in American factories creating these items were far reaching.
Soon it wasn’t enough that the Chinese were manufacturing an incredible amount of goods for the rest of the world. As they became extremely rich doing so – admittedly, much of this wealth was initially concentrated to the handful of government officials and factory owners who oversaw these foreign business deals – China began to invest overseas, including billions of dollars in the only country larger and more powerful than itself (with echoes of the Lend-Lease loan program the United States offered to the United Kingdom in the early years of the Second World War). America now finds itself in the unenviable position of being usurped by a country it owes hundreds of billions of dollars to, that initially got so rich by manufacturing trinkets for America.
And while many of Chinese less democratic qualities were downplayed in the early decades of its rise, events such as the Tiananmen Square massacre and continuation of jailing political dissidents (including Liu Xiaobo the winner of the Nobel Peace Prize and artist Ai Weiwei) are constant reminders that China is not a free nation by any means. But its powerful influence over much of the business world means politicians are wary to denounce it. For the first time in several centuries, the most powerful state in the world will not be one with any roots in democratic practices and freedoms, and while there is hope that China will ease up on its attacks of political opponents, this is a matter that should be looked at with some concern in the West. When nations become desperate, one of the first straws they grasp at are the features of the more successful ones.
While China has appeared to be reluctant to display much military might to the rest of the world – another example of how finance has become the main battleground between superpowers – it has been nation building – with all the positives and negatives that accompany such a term – within its own nation. Far-reaching western regions like Tibet and Xinjiang – home of the Uighur culture – have been under close military control, with many lower class Chinese workers being transported there to create a population more sympathetic to the government’s policies on assimilation.
But the above are not the qualities of quasi-communist nation alone. The modern playbook for how to manage regions or states that are hostile to your interests were written by the British Empire (and used on China to great effect) and perfected by America (and used in practically every middle eastern country with oil, slabs of Southeast Asia, and much of Latin America). In other words, China is already acting like the empire it is destined to become.
Behind China is India, the only other country with a population over one billion. While it can lay claim to being the world’s largest democracy, it’s far behind China as an industrial and military power. In terms of going up against its neighbour in terms of flexing it’s economic muscle it will almost certainly lose.
Just as America’s global power is on the wane due to overextension, Europe’s economic troubles are due largely in part into its overeager embrace of getting as many countries in the region into the European Union, regardless of whether the economies of the nations now floundering could compete with Germany and France (Goldman Sachs has been accused, at least in Greece, of misleading EU economists as to the strength of Greek finances).
A globalized economy breaks down national borders, and instead erects tariffs and restrictions to differing economic modes. Nuances in economic policy between powerful regions have superseded strong notions of nationalism in particular countries. For a period Europe was the global centre of finance, then it moved to America, and it is currently taking root China. Each of these regions have differing approaches to monetary and financial policy, and discussions concerning currency, regulation and trade are going to determine the loci of power across the globe in the future.
Despite this, the cultural influence that Europe and America has had on the world in its colonial and post-colonial periods of the last two hundred years cannot be overstated. Even today, as China and India rise, Western culture shapes and shifts the cultures of these nations by those who either embrace it wholly or reject it, which in turn create culture that is decidedly anti-Western (yet still needing the West to have reference points to know what not to do).
But it’s not simply a power shift across the Pacific. It’s an unstable handoff of the keys to a planet that in serious need of not just a tune up but a complete overhaul. When the new empire has to shut down 140 power plants six months before the Olympics so the athletes aren’t running in heavy smog, it’s clear that the many circumstances beyond any single nation or region’s control – environmental instability, a depletion of natural and processed resources – are going to be dealt with in stark and hostile ways.
If relations between the West (namely America) and China become tenser, are we returning to Fukuyama’s view of what history was/should be? Between two superpowers, even if the ideological differences – while there – are not as opposite as they were in the past? Because of the complicated economic relationship, is it going to become something completely unrecognizable, a hybrid of mixed economic theories and mixed freedoms?
What’s surprising is how long these concerns have been enmeshed in Western politics. Writing about a nineteenth century philosopher, Preparata notes in Ideology of Tyranny that: “Veblen, too, had understood that nationhood was finished. He saw clearly that ‘national frontiers no longer [divided] anything but national groups of special interests.’ And that these ‘national frontiers [were clearly] useful to these special interests,’ which proceed with ‘feverish urgency’ to ‘foment national animosity’ with a view to extending their reach by means of forthcoming clashes.” (Preparata, pg.183)
These special interests were reined in during the middle of the twentieth century in the Western democratic regions of the world, and as consequence, the nations taking part grew in leaps and bounds as a vast majority of its citizens benefitted collectively. In the last thirty years, the special interests have reclaimed the power they held previously, and with it, the Golden Age of the 20th Century slipped away into yesteryear.
Like the Roman Empire that grew too unwieldy at its far-reaching borders and whose senate became corrupt and inefficient, America’s fighting of two wars in failed states (Iraq and Afghanistan) they have essentially bought because it helped break them has shown the limits of an economy invested so heavily in the military industrial complex. As for the inner-workings of American politics, one doesn’t have to look much further than the neutering of the 2010 financial reform bill and debt ceiling crisis to see the influence corporate and upper 1% lobbying has on legislative decisions in Washington DC.
The Golden Age of the 21st century is crossing the Atlantic and the Urals, heading for Asia. Much of China’s success can be attributed to the West’s own failure, as given enough rope, you have a half decent chance of hanging yourself. But if you hand the rope to those you had exploited for decades, they won’t have a problem tying the noose and placing it around your neck.
Of course, hindsight is twenty-twenty, and there were few signs in the early eighties that such reversals of fortune were possible (certainly few that would suggest it would happen so quickly). One of the problems of becoming accustomed to a Golden Age is not remembering what life was like before it. Inevitably China will see this period of rapid economic growth and rising wealth for the individual (even if much of it is going to a similarly small 1%) as an idyllic, overly prosperous and exciting time.
This always-slightly-different vicious circle reveals both the strengths and weakness of our humanity. A great capacity to work together and build communities – real and abstract – across the globe, while at the same time the ability to act in short term, narrow minded and selfish ways, from the leaders to the average citizens.
Assessing the twentieth century as the lights of the West’s Golden Age were beginning to dim, Hobsbawm lamentably concludes:
“The world of the third millennium will therefore almost certainly continue to be one of violent politics and violent political change. The only thing uncertain about them is where they will lead.” (Hobsbawm, pg.460)
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Those who came before me
Lived through their vocations
From the past until completion
They'll turn away no more
And I still find it so hard
To say what I need to say
But I'm quite sure that you'll tell me
Just how I should feel today