Saturday, September 19, 2009

Naomi Klein trumps the doomsters

"(Neo-conservatism is) not some new invention but capitalism stripped of its Keynesian appendages, capitalism in its monopoly phase, a system that has let itself go -- that no longer has to work to keep its customers, that can be as antisocial, antidemocratic and boorish as it wants." Naomi Klein, "The Shock Doctrine"
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I'm a great fan of James Kunstler's, "Clusterfuck Nation" blog. The prophet Jeremiah has nothing on Jimmy Kunstler's "Lamentations".

Probably the most prolific and apocalyptic of the "doomsters", Kunstler is always entertaining and thought provoking and though seen by many as extremist, in my opinion his diagnosis falls far short of being pessimistic enough.

Maybe it's because I've just been reading what is probably the most important political agitprop text of the XXI century, Naomi Klein's Polaroid of evil, "The Shock Doctrine",
but I wonder how someone as justifiably alarmed and dramatically pessimistic about America's statu quo as James Kunstler is, can, at the same time, be such a starry-eyed optimist about human nature and the way, and for whose benefit, the world is run.

Kunstler sees our present wasteful system collapsing and being replaced by a healthy return to the soil, where the far flung suburbs are abandoned in favor of small cities populated by craftsmen surrounded by small, labor intensive farms that will supply them with food. Rather like the Middle Ages, but with Internet.

Here is a typical sample of his work:
American perestroika really boils down to this: we have to rescale the activities of daily life to a level consistent with the mandates of the future, especially the ones having to do with available energy and capital. We have to dismantle things that have no future and rebuild things that will allow daily life to function. We have to say goodbye to big box shopping and rebuild Main Street. More people will be needed to work in farming and fewer in tourism, public relations, gambling, and party planning. We have to make some basic useful products in this country again. We have to systematically decommission suburbia and reactivate our small towns and small cities. We have to prepare for the contraction of our large cities. We have to let the sun set on Happy Motoring and rebuild our trains, transit systems, harbors, and inland waterways. We have to reorganize schooling at a much more modest level. We have to close down most of the overseas military bases we're operating and conclude our wars in Asia. Mostly, we have to recover a national sense of common purpose and common decency. September 14, 2009
Everything he says above makes sense to me as I'm sure it does to many people. The problem is that the public affairs of America have become a pantomime run for the benefit of special interest groups and what is worse a great percentage of the population are perfectly aware of this but impotent to change it.

To cut to the chase, Milton Friedman and his "Chicago Boys", Ronald Reagan, Alan Greenspan, Dick Cheney and George Bush, at the head (or the tail) of a legion of think tanks and lobbies have hollowed out America's institutional infrastructure, while filling their pockets and the pockets of those who sail in them and have impoverished millions of people all over the world in the process.

This is how the Nobel Prize winning economist, Joseph Stiglitz reviewing Naomi Klein's, "The Shock Doctrine" in the New York Times puts it:
Market fundamentalists never really appreciated the institutions required to make an economy function well, let alone the broader social fabric that civilizations require to prosper and flourish.
How does this democratic dysfunction work in America's daily life? In this case Arianna Huffington channels the "dark side" better than Stiglitz:
Listening to President Obama's heartfelt, well-intentioned, but ultimately naïve speech on financial reform today, my mind kept flashing on a story I heard the last time Washington, in the wake of the Enron scandal, promised to reform Wall Street. The story came from a friend who took a family trip on a cruise ship. Her 10-year-old son kept pestering the crew, begging for a chance to drive the massive ocean liner. The captain finally invited the family up to the bridge, whereupon the boy grabbed hold of the wheel and began vigorously turning it. My friend panicked -- until the captain leaned over and told her not to worry, that the ship was on autopilot, and that her son's maneuvers would have no effect. And that's the way it is with our leaders. They stand on the bridge making theatrical gestures they claim will steer us in a new direction while, down in the control room, the autopilot, programmed by politicians in the pocket of special interests, continues to guide the ship of state along its predetermined course.
These groups have no concern for the general welfare and as long as their itches get scratched, they could care less if the rest of the population lives in rags... countries like this abound in the world. Why should Kuntsler think that the USA would be any different?

Often formerly prosperous countries have slid of the graphs when their money ceased to have value.
Imagine the dollar collapsing. Here is what it might look like:
The dollar dropped to the lowest level in a year versus the euro as Federal Reserve Chairman Ben S. Bernanke’s declaration that the recession is likely over led investors to sell the U.S. currency and buy riskier assets. Bloomberg

Move over Japan. Investors spent a decade borrowing in zero-interest-rate yen and putting the funds in higher-yielding assets overseas. It’s the U.S.’s turn to flood the world with cheap funding and the risks of this going wrong are huge.(...) imagine what might happen if the world’s reserve currency became its most shorted. Carry trades are, after all, bets that the funding currency will weaken further or stay down for an extended period of time. It’s also a wager that a central bank is trapped into keeping borrowing costs low indefinitely.(...) The dollar-carry trade says nothing good about confidence in the U.S. economy. It’s also a reminder that the side effects of this crisis may be setting us up for a bigger one. William Pesek - Bloomberg
The possibility of the dollar collapsing is the leitmotif of much of today's international economic commentary. This would cause great hardship world wide, but I imagine that the Chinese and the EU are already preparing themselves for that eventuality. It is a chilling possibility that only a war or a plague might be enough to move the dollar back up in value as a momentary "refuge".

If the dollar so fell in value that it ceased to be the world's reserve currency, then the USA would need to export massively to gain hard currency.
The USA hardly manufactures anything anymore, so what to sell?

We often forget that the United States is the world's greatest exporter of agricultural commodities: wheat, rice, corn, soybeans and yes, if we needed the cash badly enough, oil. This is one of the great differences between America and the developing world's other former empires: America itself can be pillaged.

I remember that the late Peter Drucker was worried, way back during the "Japan is number one" panic, that the USA would simply end up supplying grain to the Japanese.

If the dollar goes blooey the Chinese will be happy to buy our commodities, on the cheap, just as they are happy to buy oil from Sudan or soybeans from Argentina.

I think the most likely model for America's future, on much more massive scale of course, would be that of Argentina and Uruguay -- Brazil seems to be more sensibly run -- once they were wealthy countries with highly educated middle classes and strong social nets, which now find themselves prostrated by Chicago Boys induced debt and corruption, at the mercy of the world's commodity markets.

So what I envisage is not the disappearance of America's great cities, as Jim Kuntsler does, but their conversion into the South American mixture of a tiny group of wealthy owners of the natural resources,
their foreign currency safely stashed offshore, who live in well guarded communities, protected by bodyguards, who fly in private helicopters over the squalor of immense, sprawling, sordid, miserable trailer park like slums, where desperate people live by their wits, selling drugs, or their bodies, where gamines scavenge in garbage heaps, where in order to feed the rest, parents sell their prettier children into prostitution, so the rich of the world can come to America for sex tourism, like they do in Cambodia or Thailand.

I can imagine, because I have seen it happen in other places, that this could lead to the rise of fascist populism, antisemitism, military coups, martial law and much desperate violence.

It really doesn't take much imagination, just studying what happens when resource-rich countries that once had a prosperous middle class take this path.

So, having read Naomi Klein, I'm afraid I don't see Jim Kunstler's Arcadia coming, not with the political and economic leaders that control America today and in any foreseeable future. DS


Anonymous said...

I, too, was a great fan of Kuntlser’s Clusterfuck Nation blog until he had this to say about the Gaza massacre at the turn of the year:

“The Hamas rocket attacks against Israel of recent days guaranteed a sharp response from Israel -- and now, of course, Hamas is playing the crybaby card: "... what'd we do to deserve this...?" Well, you fucking fired a bunch rockets into Israel. Did you ever hear of cause-and-effect?”
Dec 29 2008

“Lately, another large cohort on the political Left adopted the Palestinians as their "pet oppressed minority group du jour." This branch of Jew-haters emanated out of the humanities departments of the universities, when the faculty got bored with the Nazi holocaust, or wished to stake out some new turf in the arena of multiculturalism for the sake of academic advancement. (It even included some ethnic Jews intoxicated by new horizons in victimology.) To a certain extent, it was an academic fashion choice.”
Jan 12, 2009

Kuntsler has many valuable insights to offer about our coming dystopian future but so do many others who are not racist bigots so I choose to read them and give Clusterfuck Nation a pass.

David Seaton's Newslinks said...

Yeah, I remember Kuntler's take on Gaza too. I didn't like it either and it distanced me from him. I cut hims some slack on that though simply because he's Jewish. I admire Jews who aren't Zionists, but I don't demand it of them.

Having said that, I don't think that Kunstler is in anyway a person of the left, just that he sees that the "American Way of Life" is running out of road and he gets his knickers in a twist about it.

I like him because he is generous with ideas and insights.

bailey said...

For many of us that read Kunstler every monday that particular piece was a huge turn off, jarring even.
But then, I just spoke with mio marito and he's in Geneva visting his Italian sister and Israeli husband and the mother's coming in from Israel tomorrow so tonite he's going to make his brother in law sit thru some-adam sandler-movie-with john turttoro playing the bad palestinian guy, so maybe there's som redemption even as Israel continues to get away with murder.
But I agree, JK's generous and very spot on, very.
I luv Naomi Klein, the only trouble with so much of these prescient intellectuals is that their stuff is too real to deal with...let's hope for a better revolution than what we're seeing from the IT boy Glenn Beck.

Anonymous said...

Just a comment from the last article. The confederate flag isnt incorporated ANYWHERE on the SC state flag. I grew up there so you can trust me on this. Your probably thinking of Georgia. Get it right.


Anonymous said...

Eh, cant blame you for choosing not to post the other comment I gave before that. I wouldnt want to get lynched on this site for telling people Kuntsler and Klein are reactionary blockheads. All statists are and cant ever possibly be "radicals" on anything.


Forensic economist said...

Adam - having done a little googling, you are right, it was the former Georgia flag not the South Carolina flag, which features a palm tree. Given that the flag in the picture was next to a "Wilson for President" sign, and Wilson is known for voting for flying the confederate flag over the South Carolina statehouse, I jumped to a conclusion. Sorry.

However, it is worth noting that the TEA marcher was not flying the current Georgia flag, but the 1956 - 2001 version which does incorporate the old confederate stars and bars. That version became too controversial for the state of Georgia and was replaced. The protester was making a statement not of where they were coming from geographically but politically.

Forensic economist said...

David -

On the carry trade and inflation -

We are currently in a mild deflation (12 mo not seasonally adjusted CPI down 1.5%). The fed would love to get this back over zero and is pumping liquidity out.

However, the "carry trade" means that it will just be swapped into foreign currencies. Low interest rates are not going to stimulate anything in the US, and the hoped for inflation will be exported. The US will likely continue on a deflationary path just like Japan in the '90s.

Unfortunately the rest of the world will not benefit from the decline - relative or absolute - of the US and the dollar. Who will the Chinese sell to? Who will the Canadians sell to? Where will poor Mexicans go if there are no jobs building houses north of their border? If the dollar loses its reserve status, will trade have to be done in a multitude of currencies, thereby costing more? And if the dollar falls far enough that American wages are - God forbid - competitive with Mexican, will the rest of the world really buy what we have to sell if we are not importing from them anymore?

It was an unsustainable prosperity anyway, but the reckoning is coming for the whole world.