American dream at cross roads
by Krishnarjun on 16 Nov 2015 1 Comment

The campaign for party nominations for the 2016 presidential race is gathering pace in the United States of America. The Republicans with control over both House and Senate are confident and looking for the right candidate to turn dominance in Congress and many states into a win in the race for the White House. For Democrats, after losing majorities in House, Senate and governorships in the majority of states, regaining control of the White House for a third consecutive term has become crucial.


Donald Trump and Ben Carson, both amateurs in American politics, are in close contest for the Republican Party nomination, according to the surveys. Hilary Clinton, former first lady and former US secretary of state, is seeking the Democratic nomination for the second time after losing the race to Barack Obama in 2008. The surveys indicate that she is the leading choice for Democratic Party candidature, followed by Bernie Sanders, a self-declared democratic socialist.


Debates on either side, apart from their respective ideological positions, are replete with rhetoric about income inequality, rising unemployment and diminishing social security. The solutions offered and rhetoric in this election season is similar to the election contests that followed 2008 financial crisis. Even after almost a decade after the Wall Street vs Main Street debate, the main driving force that pushed Obama to presidency, nothing much has structurally changed, the same game is being played by the same players, this time with cash from bailouts.


The Republicans propose their template tax cut, small government and balancing budget as a solution for the economic growth needed to deal with income inequality and unemployment. Donald Trump, a real estate billionaire and television entertainer, is vocal about bringing back offshore jobs to solve unemployment problems and his outrageous comments on immigrants has upset a significant section of people. He puts forward an amusing argument that since Washington follows the agenda of business lobbies, his business record and wealth makes him independent of lobbies and hence the ideal candidate for president.


The Democrats promise more spending on infrastructure, clean energy and Social sector to improve economy and employment. Obama’s track record in office is way off the hope generated and promises made while running for office. His affordable health care act has so far increased health insurance premiums with sky rocketing deductibles, nevertheless he has undertaken some significant steps like promoting clean energy as part of a climate change agenda which has some potential to re-shape the economy and deliver future growth.


Between the entrenched bipartisan political establishment in Washington and the too-big-to-fail corporations on Wall Street, somewhere the American dream with its emphasis on liberty and democracy is being choked. The gridlock in American polity and economy is not something that can be fixed with status quo, yet the status quo cannot be changed without recognition of the failures and some fundamental changes inspired by fresh thinking and ideas.


The 2008 financial crisis has raised some fundamental questions on the structure of the economy, the role of corporations and capitalism. Is Limited Liability Corporation a construct to privatise profits and socialise losses? Should there be a distinction between profit for need and profit for monopoly? Should private interests control banking and monetary policy?


The idea and model of unlimited profit beyond need with limited liability sponsored by an extractive banking system is the primary driving factor for a restless unstable socio-economic situation in the modern world. No doubt the model has transformed human activity and unleashed restless forces to push the frontiers of material knowledge in few centuries, yet the inherent structural and ethical instability is making it dangerous to the long term interests of the human race and life on the planet.


Though the unlimited profit model looks scintillating and invincible, it has glaring holes that proponents have so far managed to cover with the rhetoric of unlimited growth and innovation. The pre-condition for the viability of unlimited profit model is either continuous expansion of economic activity by promoting new horizons of consumption or destruction of existing systems to find opportunities for profit making and monopoly through re-construction.


It’s not possible to ever increase economic activity through consumption because the capacity of human beings for material consumption has limitations. Knowledge that cannot be transformed into mass production of consumer products is useless for this model. The advancement of material science and the ability to convert material knowledge into consumer goods and services rescued the model for a few centuries, but neither the potential of human senses to absorb material consumption is unlimited nor can limited resources on the planet support unlimited consumption.


When the ability to maximise profits through economic expansion plateaued in western economies, accompanied by local natural resource crunch, the giant corporations and elite establishment invented globalisation to exploit natural resources and cheap labor in underdeveloped economies, for profit. This phenomenon has increased unemployment or under-employment in western economies, a consumer credit model was forced on the population to finance the gap between income and consumption, with the net result of increase in indebtedness.


The expansion of state spending necessitated with such unstable model increased the debt of the United States from around $1 trillion before 1980s, the decade when outsourcing began, to $18 trillion in 2015. The consumption in western economies has become the prime engine of global trade with big trade deficits in western economies and trade surpluses in the economies of the east. The consumption in eastern economies has also increased leading to more burden on already stressed global resources.


Money is created in modern economy as debt with an interest charged on it. This imposes an unproductive cost on economic activity. Since institutionalised interest is unproductive, it can only lead to creation of more currency without real value addition, leading to its depreciation. Depreciation of currency over time makes savers and pensioners insecure and forces them to chase for returns on their money. This creates a self-perpetuating cycle of insecurity in the system for returns on idle money among the public, forcing them to play into the hands of the financial elite.


The financial elite exploit this insecurity in the system to create more unsustainable instruments of financial betting and ponzi schemes. What’s appalling in the 2008 financial crisis is the engagement of the banking system that creates broad money through loans, in risky financial bets. This raises fundamental questions about banking and whether it can be considered as any other economic activity that can be left to private profit seekers.


Profit beyond need for economic monopoly and unproductive institutionalized interest sponsored by extractive banking are ideas that heavily destabilize the socio-economic life. When these ideas are supported by limited liability of a corporation the potential of mischief without responsibility is much amplified. There is need for fresh evaluation of these well institutionalised ideas.


The globalisation of the last few decades and economic growth supported by fossil fuels increased the threat of climate change and global warming. The un-sustainability of the whole process coupled with unemployment challenges, global financial crisis has forced some re-thinking in leading western economies. The challenge of climate change, real threat for many and imaginary for some, is also an opportunity for economic re-construction and can also potentially solve unemployment problems.


Skill is the real creator of wealth; neither investment nor profit can create wealth without skill. Even waste can be transformed into wealth with right skills. Unlike in the early phases of industrial revolution in Europe and during the emergence of the United States as an economic giant when individual private inventors led path-breaking innovation, from the latter half of the twentieth century technological breakthroughs emerged mostly from public funding and collective team effort.


The US government emphasis on renewable energy under the Obama administration is a welcome policy change. The current presidential candidate debates from the Democratic Party side are more focused on climate change and potential employment opportunities through renewable energy and investment in infrastructure. The US is relatively late in joining the renewable race but nevertheless as a global leader in innovation and as an economic giant its contribution would be critical for mainstreaming the technologies.


If the fossil fuel technology of the 19th and 20th century centralized economic activity led to the emergence of empowered giant corporations, the emerging renewal energy scenario and the potential emergence of portable technologies could possibly decentralise economic activity with more focus on individual skills to maximize local resource utilisation. This would mean a re-organization of economic activity with structural changes in banking, corporations and land ownership. This is easier said than done with the vicious hold of profiteering vested interests in the political and economic system


The Unites States has good models of local governance but it is powerless and the benefits are over-shadowed by omnipresent giant corporations. The American dream of liberty and opportunity for which founding fathers and presidents like Andrew Jackson and Abraham Lincoln fought the domestic and colonial elitist interests is again under threat from the Corporatocracy.


The experience proves that individual liberty cannot be guaranteed in isolation, it has to be supported by a sustainable economic and political process. The economic process needs fresh ideas and structural changes for achieving sustainability. The self-preserving revolving door politics between corporations and political establishment has emerged as a major threat to liberty and democracy. As Bernie Sanders, who managed to raise substantial funding from small donations said, there is need for grassroots mass political activism to regain political power in United States of America from the elitist consensus in Washington.  

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