[Mb-civic] An American empire? Who are we kidding?

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 An American empire? Who are we kidding?
 http://www.japantimes.co.jp/cgi-bin/geted.pl5?eo20041115a2.htm
 Last gasp of U.S. hegemony
 The Japan Times: Nov. 15, 2004
 By KEVIN RAFFERTY
 Special to The Japan Times

  HONG KONG -- Sometimes it is difficult to fathom the mind of Mr.
Market. After the Congress Party won the Indian election, the stock
market plunged. After U.S. President George W. Bush's re-election was
confirmed, markets everywhere were almost dancing with joy, seemingly
oblivious to $50-a-barrel oil prices, the bloody mess in Iraq, the threats
from al-Qaeda, America's jobless recovery and its yawning deficits.

   TV's talking heads were jubilant, declaring that a victory for tax
 cuts that would boost economic growth and send Wall Street and other
 markets soaring. Perhaps it was the hallucinatory effect of the election
 slogans that had many voters believing that God and American guns could
 keep gays and terrorists at bay while restoring peace, harmony and
 prosperity to the world.

   The reality is that Bush will be forced to make hard choices, and the
 American people will have to face pain for their profligacy. For the rest
 of the world, U.S. difficulties will bring hardships.

   But while the rest of the world has the potential to recover, this is
 the beginning of the end of U.S. hegemony. It will be a tougher new
 world that emerges, but as with the British Empire or Ancient Rome,
 there is nothing God-given or eternal that says Washington must rule the
 world forever.

   Perhaps the only good thing about the U.S. election was that it was
 over quickly and cleanly. However, the whole pantomime performance of 
the
 poll should raise doubts about the efficiency and validity of its
 contribution to democracy.

   Bill Bonner of the Daily Reckoning said he had been hoping that both
 candidates would lose. He cynically noted that Americans are proud of
 their democracy: It gives them an opportunity to change leadership "by
 fraud, rather than by force. The candidates stir up the mob of lumpen
 voters however they can, dredging from the bottom of the pot the most
 sordid and titillating sentiments. One offers visions of apocalypse, and
 stands tall as the man who can protect them. The other says he will give
 voters more pills, at someone else's expense of course, and a whole new
 range of bribes while also cutting the federal deficit in half!

   "No matter that the promises are implausible, impossible, oxymoronic
 or merely stunningly counterproductive, the crowd takes to it like a shot
 of Jack Daniels after escaping from a dry-out center."

   Bonner does exaggerate, but the problem with this U.S. version of
 democracy is that the demos gets a single chance every four years -- or
 two years if you count the congressional elections -- to make their
 voices heard.

 Since both houses of Congress now have stronger Republican majorities,
there is little to stop Bush doing whatever he wants, especially now that
he has the moral advantage of a 51 percent majority of the popular vote.
In 2000 Bush lost the popular vote and won in the electoral college only
after the intervention of the Supreme Court. But that did not stop him
from opening a perilous second front in the war against terror on the
basis of badly flawed intelligence.

   As a European, I find it hard to understand how the American people
 can swallow Bush's contradictory claim that the war against terror is
 going jolly well but that, since the danger is greater than ever before,
 he is the leader to keep America safe. I pray that in the wake of his
 triumph, he listens to British Prime Minister Tony Blair's pleas that
 renewed efforts must be made in the quest for a Middle East peace as the
 key to defeating the terrorists.

   The war in Iraq is more than a sideshow. Indeed, it is an expensive
 drain in both manpower and money on an already overstretched American
 economy. This is the real problem that Bush faces, and it will not go
 away even if he zaps all the terrorists from Iraq to Afghanistan.

   Stephen Roach, Morgan Stanley's perceptive economist, drew attention
 to the fact that some of the numbers are nothing short of frightening.
 The U.S. currently has $38 trillion in debts, and there is a $54 trillion
 federal funding gap -- the difference between what the government is
 committed to pay out and what it will receive in tax revenues.

   Not to worry, say cheerful economists who point to the fact that,
 although the 3.7 percent growth in the third quarter was a bit below
 expectations, consumers are still spending. In fact, consumer spending
 accounts for about 70 percent of the U.S. gross domestic product.

  By many measures, Americans are far better off than they have ever
been, with more electric devices and gadgetry crammed into even bigger
homes. The average American house was 135 square meters in 1970 -- 
today
it is 201 square meters. And of course those homes are worth more and 
more
when measured in dollars -- the world's monopoly money.

   But, Roach noted, America's net national savings rate fell to a record
 low of 0.4 percent early last year. It has risen slightly to just 1.9
 percent. Roach warned that, with such low domestic savings, America
 imports foreign savings to fund economic growth. "The external deficit
 [has] risen to 5.7 percent of GDP." The U.S. is now absorbing more than
 80 percent of the world's surplus savings, "requiring $2.6 billion of
 capital inflows each business day to fund its domestic saving shortfall."

   The U.S. is spending at all levels like there is no tomorrow. The
trade deficit is hitting new records. The budget deficit is growing and
will grow faster while Iraq bleeds American money. Meanwhile, a
demographic time bomb is ticking as aging baby boomers reach retirement
age. The number of Americans aged 65 and above will rise from 12.4 
percent
of the total population to 18.2 percent over the next 25 years, though
that's well after Bush leaves the White House.

  When will the economic nuclear explosion occur? Like riding a bicycle,
continuous momentum is important. The situation may continue as long as
the rest of the world is prepared to accept dollar assets.

  Roach concluded that savings is the sustenance of long-term growth for
any economy. And yet America is lacking in savings as never before. It has
finessed that shortfall by consuming the wealth generated by asset
appreciation and by drawing heavily on the world's pool of surplus
savings.

   In my view there is nothing stable about this arrangement. In fact,
 there is a growing risk that America's savings shortfall will only
 intensify in the years ahead -- especially given Washington's total
 lack of fiscal integrity. As always, the flows will give the impression
 that this outcome is sustainable. In the end, nothing could be further
 from the truth. -------- Kevin Rafferty, a former managing editor for the
 World Bank, is author of "City on the Rocks, Hong Kong's Uncertain
 Future" (Viking Press, 1990).

***


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