Economic Collapse: US Economy Broken by Corrupt Political System

As the far-from-finished Dubai World drama makes clear yet again, economics and politics are two sides of the same coin – the rulers of oil-rich sister Emirate Abu Dhabi MAY help their debt-ridden brothers to the north, but if they do, they’re going to extract a stiffer price than they have

As the far-from-finished Dubai World drama makes clear yet again, economics and politics are two sides of the same coin – the rulers of oil-rich sister Emirate Abu Dhabi MAY help their debt-ridden brothers to the north, but if they do, they’re going to extract a stiffer price than they have

As the far-from-finished Dubai World drama makes clear yet again, economics and politics are two sides of the same coin – the rulers of oil-rich sister Emirate Abu Dhabi MAY help their debt-ridden brothers to the north, but if they do, they’re going to extract a stiffer price than they have in the past.[br]

So it’s hardly surprising to conclude, after a nearly two month American sojourn – mostly in the San Francisco Bay Area, but the New York and Washington DC metro areas as well – that the biggest economic problem now confronting the US is its blatantly broken and corrupt political system.

The American people remain generally creative and innovative, constantly seeking new ways to make the best of what – aside from the “hallowed” precincts of Wall Street & K Street, where DC lobbyists swarm – is a disturbingly / increasingly / near-universally grim economic picture.

But at nearly every point, those efforts are stymied by a political system that went acutely off the rails with the imposition of Cheney / Bush by a Republican-dominated Supreme Court in December 2000 – a maneuver made possible by the long-term deterioration of American politics and public discourse since the disastrous year of 1979 and the rise of Ronald Reagan/ism.

In the aftermath of Black September 2008 – when the Cheney / Bush regime made crucial choices about which big banks and insurance companies were “too big to fail”, and which could “safely” collapse … choices Team Obama obediently ratified before even coming into office – it should be crystal clear that government is intimately involved – on a daily basis, at all levels – with the workings of the US economy.[br]

And as the current absurd and frightening debate about health “care” makes clear, that political system is in a state of advanced breakdown:

totally hijacked by corporate interests at the micro-level, where the votes of Senators and Representatives nakedly reflect the desires of their biggest campaign contributors, in a way that would make even Karl Marx at his crudest blush with embarrassment;

and, at the macro-level, completely unconstrained by a public discourse in which the most transparent nonsense is taken seriously, not just by a slavishly compliant and equally corporate-dominated media, but in conversations among ordinary people.

Put bluntly, America today is a place characterized not by dynamism and optimism, but defensive paralysis.

A small number of people at the very top – significantly, if not exclusively, affiliated withgun-toting Goldman Sachs and other too-big-to-fail “winners” on Wall Street and K Street, including insurance & drug companies / the AMA & hospitals, and other members of the health-“care”-industrial-complex – are showering in champagne.

But most people are warily circling the wagons – aghast at the precipitous fall in the value of their homes, the total lack of / radical limits on their health “care”, and what they see every day on their various plasma screens, but feeling powerless do much more than moan about it on Facebook, let alone able to do anything to stop it.

Sadly and predictably, the symbol of this reeling and hope-killing political system is Mr. “Change” himself, Barack Obama, who has delivered anything BUT the shift from Cheney / Bush so clearly wanted by the millions of people who voted for him.

Instead, in every major issue area, Obama has continued the main policies of his ignominious predecessors – and in the process, is destroying any prospect of significant improvement in the American situation, not to mention his chance to go down in history as the FDR of the 21^st century, which, as we all know, is what the US and the entire world so urgently need.

From coddling “too-big-to-fail” banks and insurance companies / through his incomprehensible “double down” in the sinkhole of Afghanistan / to the undignified haste with which even the most weak-ass “public insurance option” was dropped – Obama has mystified and dismayed supporters, while delighting opponents who correctly realize that the more they pummel him, the more willing he is to please them.

Indeed, perhaps the most shocking observation of my time in the US – whose Jeffersonian political / cultural elements remain as legitimate and valid as when first articulated in the late 18^th century – is how fundamentally irrelevant Obama seems in the lives and minds of most Americans.

During the nightmare Cheney / Bush years, it was impossible to escape the stupidly grinning presence of the front man, whether in the media or daily conversation.

Obama, however, barely seems to register in people’s consciousness, whether collective or individual – and this less than a year after his glorious Inauguration.

While this is tragic for both him and my fellow Americans, it is not anything that should make the rest of the world – where, at least for the moment, both his standing and presence remain higher than in the US – particularly happy either.

For as the US economy – which will remain the center of the global economy for the next decade at least, if not longer – continues to stumble, in 1990s-Japan-like style, into either de-flation or, even more worryingly, stag-flation [ a subject to which we will return in future columns ] –

it becomes ever clearer that the key factor in maintaining world economic stability is the “good faith and credit” of ALL governments in general – see Dubai / Abu Dhabi – and America’s in particular.

As my many trader friends in equity / forex and other markets continually remind me, it’s always possible to make money, whether trends are up or down. But they themselves often note how dependent they are on the news cycle – and frequently express concern that everything in the public domain is nothing but a manipulative charade, run by those with the real money and power.

And that’s the economic price of a failing political system – the debased value of not just currency / goods / services, but, even more importantly, the whole network of assumptions and safeguards that make productive market activity possible in the first place.

Without the crucial framework provided by an open & honest, transparent & dynamic, political / governmental system, there is no possibility for long-term economic growth and sustainable prosperity.

So not just Americans, but the entire world, better hope the US polity can somehow change course, and avert its seemingly inevitable rush into the Nietzschean abyss – because the “free-fall” staring back is a frightening one indeed.

David Caploe PhD

Chief Political Economist

EconomyWatch.com