Great Empire or Grand Illusion?

Sohail:

aapki baatain humari samajh say bala haiN:)

is maiN humaray musalmaan honay ka kitna dak`l hay is ka il`m to ooper walay hee ko hay! laikin hum hisab-kitab maiN itnay bhee kamzore nahin...lehaza mundarija zail she`r kay hisab say hum 66.6666666668 % zindagani theek hee guzaar rahay haiN...baqi rahi 33.3333334...tou woh allah janay...ar`z kya hay...


fik`r-e-ma`aash, ishq-e-bootaaN, yaade-e-raft`gaaN
do din ki zindagi maiN bhala kya karay koi


...t

ps: Banjara agar she`r ghalat naq`l kya hay tou ijazat hay:)

I agree wih you that there is a need for slowing down of the consumption rate. But we have to be careful in distinguishing between on the one hand deliberate deprivation of masses and mountainous extravagence of the selected few and on the other the massive wastefulness of the general population.

One needs to honestly look at the achievements of US economic policies. Which country has auto workers who drive the cars they manufacture? Which country welcomes people of all nations and gives immigrants benefits that are not available to even the citizens there? Which country has enough food to experience epidemic of obesity? Which country has advanced in science as America has? Which country has unemployment benefits? Which country has welfare system even for immigrants even illegals? Which country can have Bill Gates?

I think what is needed is to conserve and promote the reuse and a gradual reduction in disposable items of economy. Larger support should be given to those who help in the cleanup of the ecosystem. Greater emphasis is needed on reduction of demands without further impoverishing the poor. The poor should be encouraged to support themselves and the society should reward those that help in others reaching self-improvement and self-sufficiency.

...solow uncle has answers to all these problems...we just need to look carefully...

Bahut achhaa sher hai Temporal saahab!

SR:

Hope you are doing well. An excellent analysis indeed. I have just one question for you. Does the US own any assets that may be considered ``real`` by your metrics? Feel free to include ferderal lands, forests, Mount Rushmore etc. in your estimation.

later
-sac

SR

It was simply great to read this article. Finally somebody has spoken about the charade of the `post-modern` `service-based` economy. Lies perpetuate wealth in the short term but lead to long periods of recession. The USA relies way too much on consumer sentiment to bolster the economy. The bluff is being called, but this sound bite culture is unable to appreciate the argument. The ability to standardize and sell can only go so far. Eventually control of natural resources will once again become the standard and source of wealth, I cannot see that attempts to replace that as a driver of the economy by consumption of man made things will be successful. As for outsourcing, the irony is too cute. After instituting barricades to foreign workers and protective visa restrications, the joke is that businesses just started buying skills from foreign countries and reduced the incomes and jobs of everybody inside north america, while increasing the spending power of people abroad. The foreign spending power does not translate to a rise in US exports however, because USA is too rich to be competitive...

Two values have had a huge impact on the situation today:
1. Profit maximization ( i.e., the price mechanism in a laissez faire economy (buying at the lowest price, selling at the highest) and
2. Choice

The pursuit of both goals seem to have led to a reduction in wealth and also a wider gap between stratas. The post modern economy has focused mostly on these values with a near complete exclusion of other social outcomes--except for small groups of ineffective protest so far. Efficiency is a goal for the individual enterprise but not the entire industry. It is assumed that efficiency for the single firm means efficiency fot the economic system--which is a fallacy. Nights and days can be spent on arguing this--but my purpose is not to say that a welfare or socialist state is a solution, but rather to point out that the situation today is part and parcel of an economy like USA.

What can US economists do?
1. Bite down any arguments about the laissez faire economy or the welfare state, since that will challenge the status quo and the almost religious acceptance of the capitalist system.
2. Persuade people that things will right themselves if other countries change their behaviour and become more like USA
3. Control resource rich countries through diplomacy and other means

Let`s see if 1,2 and 3 will work. I think they might, just because of the precedence. So far, people take everything USA dishes out.

Sohail Rabbani,

A nice insightful article on the economic prosperity and depravity all in the same.

``Today the US economy is beholden to the rest of the world and the country can only maintain it’s living standards through the kindness of strangers.``

IMO it should read ``it can only maintain its living standards through weilding its danda on the weak and kindness of stronger nations.``

A similar article was mass mailed to me by an indianl, on how the asians conserve while americans splurge. The more the Americans splurge, the more we are forced to conserve. Its as if we conserve, so the rulers of the world can splurge.

Well, it was a pleasure reading it.

Adios

In my very very poor and naive opinion on this topic, the biggest threat to US economy would come from demography. The demographic changes of three groups in particular, central Americans, African Americans and Muslim Americans threaten US economy like nothing else. These three groups have irrational unquenchable thirst, which is not backed by logic of necessary societal changes along with highly entropic almost evangelic forms of radicalism and protestation.

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Good to see a fact filled article. However, it is off kilter imho for the following reasons:

a. Manufacturing vs. Services: All economies, not just the US, undergo a shift from manufacturing to services as they progress.

b. Knowledge content: Knowledge constitutes an increasing share of value-added in manufactured goods. And US continues to provide leadership in knowledge generation (witness the distribution of nobel prize in science over the past half century).

c. Innovation: The US remains the innovation capital of the world and has led the world in this throughout the 20th century and into the current century. Throughout the 20th century, predictions of the demise of the US have been made. The commies predicted with scientific precision the destruction of the capitalist system and the emergence of a communist paradise. Didnt happen, and the commies came and went.
You quote from John Kennedy`s book where he predicted the imminent decline of US economic strength. That book was written in 1986. This was just before the US went into the longest period of economic expansion. What is significant is that this expansion followed the classical Schumpeter model of economic growth (i.e. due to innovations, these being in the hi-tech industry) and the current recession fits hand in glove with that model (i.e. adjustment of the economy at a higher plateau, with the results of the high tech firmly embedded in the economy of not just the US but across the world). This technology driven expansion has changed the world and given rise to Globalisation. It now appears that decades of effort are now reaching their culmination as the next wave of changes - in the biotech field - is getting ready to crest over the next decade or so, and this set of changes will probably change not just the world economic structure but the face of mankind itself.

d. Today, the US remains a dynamic nation as it welcomes talent from across the world (i dont share sameerjb`s fear that the ``browning`` of the US will cause its decline). Europe and Japan continue to restrict immigration (no doubt due to unarticulated fears similar to sameerjb) and as a result are digging their own grave. India and China will grow, but whether they will ever develop the underpinnings of greatness of the US - something that may be summarized as the American Character - remains to be seen. Right now they carry too many incubii from their past decadent cultures. Africa and the middle east (oil riches are like lottery winnings - they disappear surprisingly quickly) are not going anywhere anytime soon except in small pockets (gulf states, south africa possibly).

These are the seismic factors that you overlook in your analysis. In this article, you concern yourself with water ripples on the surface, while ignoring the seismic events that give rise to tsunamis.

Very interesting and educational. Some questions, at the end:

The US military budget will soon be higher than the military budget of the rest of the world combined. It is already higher than that of the next 23 countries combined. It usually hovers around $100 billion per year per force. I believe it will touch a total of $400 billion soon. In comparison, Canada with an equivalent border threat and size, has a military budget of around $13 billion, or so. Pakistan with a much larger border threat has a military budget of around $2.8 billion. And India with a larger threat than USA, and four times the population, has a military budget of around $15 billion.

``As retired Gen. Merrill McPeak, former Air Force chief of staff, said at the time of last year’s budget request, “if we can’t defend this country for $300 billion a year we ought to get some new generals.”

So, it is very difficult to understand why the extra $100 billion is needed. Unless.....

The US Navy works on a 600 ship philosophy, while very few countries in the world can afford 600 old fighter aircraft. The size of the air branch of the US Navy is larger than nearly all Air Forces of the world. The reason I bring up the Navy is because a large Navy, with aircraft carriers, is the ultimate sign of offensive weaponry. They are not used to protect the USA. They are used to attack other countries.

If a country is not under threat from its borders, like the USA is not, then it must keep a large military only if it makes economic sense, i.e. it will spend $400 billion on the military, when it needs to only spend $15 billion, because it knows the military will generate more than $400 billion for it in return. This is why all other Western nations, have militaries that are getting smaller and smaller. While the USA`s is getting larger and larger.

How can the US military make money? Defence exports are all under civilian companies like Boeing, Lockheed etc. So the military isn`t exporting much. The biggest military expenses, Navy and Air Force, in that order, cannot be used as manpower to build roads etc. It carries out a lot of scientific research, but that can be carried out in civilian research centers.

The only way I can think of, is by invading other countries, for economic benefits. A kinder gentler form of colonialism, where the locals are not treated as inferiors while their resoruces are taken, mixed with some human rights based invasions (like Bosnia). This is why the USA invades around one country per year or two (don`t have the exact average), in some form or fashion. This is by far a larger amount than any other country in the world. And since domestically, the US treats people well, these people tend to think that the US is very humane when it invades these countries. A closer look will reveal otherwise. The current Iraqi invasion had a budget of around $70 billion or so. That amounts to a lot of expensive weaponry being used. The US massive firepower during battle is a sight to see. Humane is the last word I would use for it.

So, as a counter to your analysis, of the USA not producing anything and just spending,and thus going bust:

Wouldn`t it be possible for the USA to make up for not producing anything, by just invading other countries, subtley or openly, and taking direct or indirect control of their resources (or economic systems)? Why produce something, when you can just take it from others? No other country in the world, except maybe (big maybe) China can think of doing that. And even China can only do it along its borders. It does not have nearly a powerful enough Navy to do it beyond its own neighborhood.

Assuming oil is now at the top, or close to the top of the production food chain (after or before gold), then any country that controls the world`s oil, could just sell it and survive on its, ``services`` industry. It wouldn`t need to produce much else, other than a high tech educated populace. The biggest oil reserves in the world are in Saudi Arabia (26% of the world`s total known reserves). The US has indirect control over those, and the Saudi monarchy would never allow the oil price to go beyond a limit set by the US. The second biggest, at 11% are in Iraq, and those are now directly under the US control (so even Saudi oil is not needed anymore). And the third largest maybe in central Asia, and the US is sitting close to them in Afghanistan.

All of this must total in the trillions. Hence a very nice payback on a $400 billion annual investment in the military.

Based on this, some questions for you:

- Do you think the USA can survive in its current spending sprees if it can regularly invade and control high-demand natural resources of other countries? If so, will the USA`s tendency to invade other countries increase, now that its own manufacturing industry is going down the drain?

- If a country has a lot of oil and a strong services industry, can it keep its high standard of living even without a strong manufacturing industry?

- Is there any other reason (other than control of international natural resources) involved in spending $350 billion dollars more on a military, than needed?

- What would happen if the oil producing countries switched to the Euro? Can they do that? Why don`t they do that? And was Iraq about to initiate something like that?

Your insight will be greatly appreciated.......

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Romair:
Most of the military spending in USA comes back to the economy through military industrial complex and personel spendings. Actually much smaller share of 300 billioin dollars is used in importing items from China than Wal-Mart , Home Depot and Loews of this world. These 3 chain stores alone are adding huge percent in trade defict with China or trade surplus for China. Military on the other hand pays too much for the same Chinese made items but produced within USA. All the congressmen, senators and governors lobby with the military to spend in their constituencies.

I am not supporting this level of military spending because less military spending means less budget deficit. I am strictly talking about trade deficit here.

Maharana:
I don`t think danda can improve economy. Actually using danda on smaller weak countries costs money. What have USA gotton from Afghanistan for 10 billion dollars or more it spent on war? The pipleline is a pipe dream and recovering 10 billion 10 years later mean breaking even with recovering more than 20 billion dollars. That will be the day! Same is true for 80 billion dollars spent on Iraq war. The biggest challenge to US economically is coming from Europe and Euro in particular.

Empire or illusion, they seem to be having great fun while they are at it.

Which is more than what can be said for other parts of the world.

And with the population of young people dropping drastically in Europe, they can probably take over?

13 by arjun_m on July 2, 2003 7:29pm PT

Leave it to our Hindu Boy to make it a Pakistan centric issue.
So much hatred in your vains for Pakistanis, did one of us
ran off w/your wife?