Financial Meanderings

Thursday, April 27, 2006

I finished Kevin Phillips' book, "American Theocracy", last night and, again, a lot of the finan-o-speak is unintelligible to me.

But...I was able to understand Mr. Phillip's ideas about the declines of three other western financial empires and how they compared to the predicament the U.S. finds itself in. Those three were 16th century Spanish, 17th century Dutch and early 20th century British.

Spain, upon plundering the "New World", found itself deluged with bullion and the growth of financial institutions and the demise of manufacturing and agriculture bloated the Castillian government, invited extensive foreign investment within Spain, and eventually the lack of ownership in tangible goods brought about the demise of the Spanish empire.

With respect to both the Dutch and the British, the factors were a decline in the specific method of production...in the case of the Dutch, the advent of the industrial revolution brought about the decline in the efficacy and efficiency of water and wind based energy (windmills and water wheels) and, in the case of the British, the advent of the petroleum age and their hesitation in exploiting the Middle East oil fields when they had the early opportunity, brought the demise of coal based energy production.

Both of these case studies had the concommitant features of the unchecked growth of financial institutions and helped to end the hegemony of both of these "empires".

After the British decline, it was the U.S. dollar that came to rule along with early and extensive oil exploration and development. In out situation, unlike the British and the Dutch, we have not been supplanted because of a new energy source that some other nation has developed, but because of the shrinking oil reserves and the increased competition for demand world wide. That, coupled with the radical decline in the U.S. manufacturing base and the rampant and extensive financialization and outsourcing of both manufacturing and technical labor forces in the effort to "maximize profits" for shareholders, has seriously jeopardized U.S. hegemony. It should be noted that those increased profits do NOT trickle down...they stay with that elite, upper crust 10%-15% of established wealth and the net result is that the middle class is left holding an empty bag...no job, no savings, huge credit card debt. the jobs that are available are all service and, for the most part, are minimum wage or close to minimum and that, my friends, puts anyone making those kinds of wages well below the poverty line.

The answers??

Well...obvious, at least to me, is to cut corporate executive salaries, for starters. When we learn that the retiring oil execs get a mutimillion dollar pension, yet neither GM nor IBM can afford to pay pensions for which they are already obligated, when we know our elected officials slide comfortably into well paying lobbying jobs upon either retiring or getting voted out, when we continually and insistently give oil companies huge subsidies and tax credits...well...easy to see why the wealth remains within that 15% slice of the pie.

All in all...it is a class war, yet everyine will be forced to pay the piper, sooner or later, and the laws of karma (climatological, for example) will affect everyone, whether rich or poor.