The Demystification of the US
"If the US economy is so `strong', the US would not show the deficit structure of a peripheral country in its trade balance.. Superior armament doesn't ultimately create a superior economy. The demystification of the US is inevitable and has already begun." This article by the theoretician Robert Kurz examines finance bubble capitalism, its causes and consequences. Other articles by Robert Kurz are available on http://www.mbtranslations.com.
The Demystification of the US
Is the Boom Locomotive of the World Out of Steam?
by Robert Kurz
[This article originally published in: Folha 77, 2002 is translated from the German on the World Wide Web, http://www.giga.or.at/others/krisis/r-kurz_entzauberung-der-usa_folh... Other articles by Robert Kurz are available at www.krisis.org, www.Portland.indymedia.org and http://www.mbtranslations.com.]
When the US coughs, it is said, the rest of the world gets pneumonia. The US is the last superpower economically and not only politically and militarily. In the 80s, Japan was regarded as the great rival that could take over the US. After the destruction of the Soviet Union, the "markets in the East" should give birth to a new economic wonder. Later the Asian tiger states became prominent and the "pacific century" was proclaimed. Chile and Argentina, the model pupils of neo-liberalism in Latin America, were celebrated as bearers of hope of a new era of growth. Nothing but a little pile of ashes is left of all these myths of capitalist optimism. In reality, there was only a single economic "wonder" on which all the others depended: the boom of the centuries of the 80s and 90s in the US.
This was only a conventional internal economic boom. The US was not an economic model imitated by all others in their own four walls on account of its success as the official propaganda proclaimed. Rather a self-satisfied US economy by its sheer size developed a suction effect on the whole world economy. The process of globalization was basically identical with an "Americanization" of the global streams of money and goods.
In the past, the boom cycles in the different world regions, above all in the three great centers of Japan, the US and Western Europe, ran asynchronously. A downswing there usually faced an upswing here so a long-term balance could be produced through intensified exports to the upswing regions and the cyclical reversal of this process. In the 80s and 90s, the world economy was synchronously disengaged since globalization was nothing but an increasing global orientation to the US economy. More and more countries sent more and more surplus goods on one-way export highways to the US. An ever larger part of the realized profits promptly flowed back as export of financial capital to the financial investors of the US. More and more direct investments from all over the world went directly to the seemingly inexhaustible US market.
The economic exploitation of the global cost-differential and transnational interconnection are vital elements of this development. The one-sided orientation to the US appears formally as export- and import streams of goods under the different components and in reality as a global dissipation of different components of economic production. A considerable part of the exports between the different world regions, above all from Europe to Asia and conversely within Asia and Europe, is not consumed in the country of origin but involves imports of machines, know-how and prefabricated products, ultimately its own exports. Thus the global suction effect of the US economy is much greater than shown by the direct share of US imports in world trade. To discover its true extent, the part of the world trade determined indirectly by the global export flood to the US must be calculated.
Thus the US economy was the economic locomotive of the world. The wonder is how it became the locomotive. It is no secret any more that this boom was essentially a finance bubble boom. The rapid globalization of this era was essentially a finance bubble globalization. Industrial capitalism has reached the inner limit of its development. the new technology of microelectronics does not create any additional jobs or any new basis for an expanded real accumulation of capital but rather makes more and more work superfluous and more and more production capacities unprofitable. Therefore for the first time in modern history, the speculative bubble resulting from the creation of an old ("fordist") industry did not end prematurely with a bang through the social installation of a new (microelectronic) base technology leading to a new era of real accumulation but rather was inflated again and again. Worldwide trust in the wondrous power of the last superpower made this improbable "New economy" appear credible. The central bubble could only arise in the US while secondary bubbles formed in the rest of the world.
The fictional speculative value creation of the stock markets was not new in this development but its systemic and extensive feedback on the real economy. Growth, investments, employment and ;consumption paid out of fictional money multiplication and not real economic profits and wages, occurred all over the world. The lion's share fell naturally on the US, the center of the whole mechanism. The logic of this pseudo-growth is simple, real selling without anything real being sold. The money is taken out of the air, so to speak, without labor, without machines and without produced goods, entirely "immaterially" from the increases prices on the stock exchange. Material labor, machines and goods were then purchased with this money that grew "immaterially". The starting point was unreal like building a skyscraper without a foundation.
The enormous military apparatus of the last superpower (and not only consumption and investments) was largely financed from this global circulation of "fictional capital" in which the US was always the starting point and final point. The result was a constant increase of dollars and a constantly growing trade- and balance of payments deficit of the US.
The free enterprise world that became dependent on "fictional capital" knows all the old resentment against the US. This is also true for the post-modern culture that represents finance bubble capitalism theoretically and artificially and therefore finds its true home in the US although originally a French creation. The post-modern cult of ambivalence, virtuality and "immaterial labor" began to fall in love with US imperialism. After the Islamic terror attacks of September 11, 2001, former radical leftists discovered their heart for the stars-and-stripes and the "western values" represented by the US although these were long as morally empty as finance bubble capital is economic. In a seemingly oppositional variant, the virtualized consciousness resembles hectic consumers of goods in that its own subject form stands and falls with the pseudo-economy of the US.
A series of secondary bubbles have burst in different countries. Japan was the first followed by the southeast Asian tiger states, Mexico, Turkey and Argentina. In any case, there were grave breakdowns of domestic economies. Japan is still not on its feet. The great economic catastrophe did not occur because the central bubble in the US and the second-largest secondary bubble in Europe expanded. This expansion has been over since the early summer 2000. The stock markets of the USA and the EU (European Union) were seized by the greatest bear market of post-war history. In the meantime the US technology index (Nasdaq) lost over 80 percent. The key global Dow Jones index has declined around 30 percent. The long-feared core meltdown of the US financial markets could be realized. Bookkeeping scandals and mega-bankruptcies pile up from Enron to the insolvency of Worldcom, the largest bankruptcy in all economic history. Enormous fictional assets are destroyed. The influx of global monetary capital in the US slackens and the dollar falls. The financing of the rising trade- and balance of payments deficits of the US is endangered.
The decisive question is to what extent the crisis of the financial market will strike back on the real economy and the US capacity to absorb the "surplus" streams of goods of the world expires or dies away. Apologetic economists and politicians claim this setback or relapse will not happen because the US economy is so "strong". This argument is paradoxical. If it were true, the US would not show the deficit structure of a peripheral country in its foreign trade balance. This is a real economy with parallels to the crisis regions of the periphery, not a superior economic structure.
The infrastructure is largely antiquated and gone to seed as in Great Britain, street networks are defective and privatized means of transportation ailing. Even the privatized energy supply is heavily indebted and works unreliably. In California, the electricity was periodically switched off. The education system is only first-rate in several expensive elite universities and is mostly as miserable as in Great Britain. The Anglo-Saxon countries have by far the highest rate of secondary illiteracy in the developed world. The much-praised productivity wonder of the US rests mainly on vast low-wage sectors in all areas while the share of microelectronic robotization in industry is less than in Japan and the EU. The US is only leading in a few top areas like the software industry (Microsoft) and in high tech armaments. The industrial system is largely antiquated. Many products are no longer even produced in the US. The share of the service sector is higher than in all other industrial countries only on account of the industrial weakness. As in the Third World, there are a host of "misery entrepreneurs" and all kinds of untrained domestic servants.
The last superpower is marked by the monstrous disproportion of an oversized bloated bureau7cracy, of high-tech military machinery and armament industry on an underdeveloped economic body that must be artificially supported through the permanent external influx of financial capital and streams of goods. The superior armament does not ultimately create a superior economy, only a capitalistically unproductive cost-factor. The demystification of the US is inevitable and has already begun.
The fall is temporally controlled by several factors which altogether are not sustainable. Thus the Bush administration repeatedly anticipates arms sales particularly in the motor vehicles sector. The statistics of the auto-industry, the high discounts and the free customer credits with which the large US manufacturers increased their sales despite crisis at the end of the 80s are sobering. However unlike the situation at that time, the upper limit of private indebtedness is reached today. Subsidizing sales at the expense of profits cannot be maintained any longer. The armament boom of "Reaganomics" is not repeatable. After a brief phase during the extreme finance bubble expansion up to 1999, the US state deficit returned to a high level. A further expansion of state indebtedness would strike much faster on the pain threshold than in the 80s.
A shift in finance capitalism delays the fall more than the remnants of the arms- and discount boom. Opposite the crash of the stock markets, a speculation bubble of real estate values has formed in the US. The loss of assets on the stock market cannot be compensated. The real estate bubble will also burst. The 25 to 40 year old start-up bohemians suffering in the complete loss of reality are presently consuming again as though nothing happened. However the "bankrupt generation" will soon absolutely exhaust its credit lines and land roughly on the hard ground of facts.
If the US boom locomotive stops, the whole world economy comes to a standstill. The demystification or disenchantment of the US doesn't shift the economic and military power center to another place but plunges the world market into a dimension of crisis, accelerates the global social disintegration and makes the historical obsolescence of the modern goods producing system manifest.
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