The Recession: The Decline of America?

I am extremely pessimistic about the state of the U.S. economy. I am really scared right now. I believe this is the greatest economic crisis we have faced since the 1970s. The other day, Bob Herbert claimed that the best way to help out Americans right now is to provide them good jobs with good wages. He's right of course, but we can we do that anymore? Ever since Reagan became president in 1981, the U.S. economy has been run by the rich for the rich. And the rich alone. Of course, big capitalists have always had a lion's share of control over the nation's economy. But the rise of unions after 1935 and the power sharing arrangements that dominated American industry after World War II ensured a seat at the table for workers. But with the help of Reagan, as well as all of his successors, companies were not only allowed, but encouraged, to send manufacturing jobs overseas. And so they did, crippling unions and making a ton of money for themselves.

Although the economic dislocation caused by factories closing caused a great deal of pain, for a little while, free trade seemed to help the majority of Americans consume more. The 1990s and first part of the 2000s were periods mostly marked by rapid economic growth, enormous increases in consumer spending, and an overall obliviousness to the long-term fragility of this economy. It seemed to me that the United States was becoming a national elite class based upon the labor of the world's workers. Commentators discussed the "post-industrial America," but this is of course completely wrong. We are not post-industrial; rather, we've just exported all of the nastiness of industrialization while retaining its benefits. We are as beholden to the Industrial Revolution as ever.

But I think I was wrong about my belief in the US as a nation of elites. Not totally wrong, but the phenomena was short-lived. A small number of Americans were getting insanely rich off the new economy, but millions more were spending like it. The housing market went through the roof. I watched homes in places I wanted to live rise beyond anything that I, as a professor, could ever afford. Consumer debt rose and rose and rose. After 9/11, rather than ask us to sacrifice, George W. Bush simply wanted us to spend more. Got to keep the American economy rolling along, despite the fact that it was being pushed by debt that more and more consumers could not afford to pay. Meanwhile, discussions of fiscal responsibility meant that laws that hurt lower and middle class consumers such as the bankruptcy bill passed while the rich continued to rake in the cash.

This massive debt combined with the Bush administration pursuing policies that strictly helped wealthy Americans, allowed the dollar to fall to record levels. All of a sudden, the U.S. economy became exposed for the chimera it was. Foreign companies and governments are buying up U.S. properties at a record rate. This control foreign governments now have over the U.S. economy is making pundits and politicians freak out, but this is the same activity the U.S. has engaged in around the world for decades. Now instead of being the imperial power, other nations are flexing their muscles in world markets more than we can.

And then there's oil. Our oil-driven economy is why I don't think very much of this can be fixed easily. We are so beholden to oil. And we do nothing about it. We still don't even want to recognize that this is a problem. The price of oil is just going to keep rising. Yet with the consumer choices we have made as a nation, combined with the nation's spatially dispersed infrastructure, we have little choice as individuals but to pay those prices and keep on driving. Real government leadership could help guide us to a new future but that certainly is not coming from this administration. It's not going to come from another Republican and it's really pretty unlikely to come from any Democrat, especially the likely nominee, Hillary Clinton.

Paul Krugman compares the present U.S. economic situation to that the economic crises that plagued Mexico and Argentina in the last couple of decades. I think that's not inaccurate. I wonder though if the U.S. will be able to pull out of it as easily as those nations did. We don't have any manufacturing jobs to fall back on anymore, making us utterly reliant on imports. The richest Americans, those who control the economy, are still making boatloads of money, and they are likely to continue with policies that help them alone so long as it is at all politically feasible. Oil prices will continue to rise. Americans have shown little interest in seriously cutting consumer spending. There is little reason for the dollar to regain much strength. Foreign entities, emboldened by oil wealth and/or industrial growth, will continue to control the American economy at greater rates.

And I am left to wonder, have we seen the best days of the United States pass us by? Am I part of the first generation of Americans to see the country worse off at their death than at their birth? Will we look back at the 1990s as the days when America was really great, when we could travel around the world, buy a home at a good price and expect to see a reasonable rate on our investment, when we oil prices were reasonable and we didn't have to worry about global warming?

I am afraid this may be so.