America - A Bankrupt Empire: Financial instability rooted in economic 'blowback' from our disastrous foreign policy

America – A Bankrupt Empire
Financial instability rooted in economic 'blowback' from our disastrous foreign policy
by Justin Raimondo
http://www.antiwar.com/justin/?articleid=12259

As the stock market gyrates, and Federal Reserve Board meets by videoconference to inject emergency funds into the system, Chalmers Johnson's warning that the US empire is not sustainable – that "this is the way empires end" – resonates rather ominously.

Johnson, whose most recent book is Nemesis: The Last Days of the American Republic, the third volume in his "Blowback" trilogy, argues that military expenditures are a drain on the productive capacity of the economy, and that the mistaken idea of what he calls "military Keynesianism" will eventually be our economic undoing. The US economy, he avers, has become increasingly dominated by what President Dwight Eisenhower dubbed the "military-industrial complex." Rampant militarism has diverted vital resources away from productive use and lines of research, and given other countries – Japan and the EU – the technological edge. This trend has also hollowed out our economic base, caused a debilitating decay in the physical infrastructure, and led to a growing debt – that is an economic time-bomb that seems to be exploding … now.

How many Americans realize the US military budget is greater than that of the rest of the world combined? This doesn't include our "off-budget" expenditures in the Iraqi and Afghan theaters, which surpass the combined military budgets of Russia and China. For the first time, the bill for the "defense" of the United States – a task left to the Department of Homeland Security [.pdf], not the Defense Department – exceeds $1 trillion. And that's just what's public: the secret "black budget" costs are unknown, and on this score Johnson advises us to heed economist Robert Higgs, who advises us to take any official Pentagon figures and simply double them.

Empires are expensive, and the American version has a peculiarly altruistic twist to it, in that, as Garet Garrett remarked, "everything goes out, and nothing comes in." We've financed it all with deficit spending, and rather than impose direct taxation – always a risky proposition – the powers that be have simply set the printing presses of the Federal Reserve on overdrive, creating a huge bubble that's about to pop. As Johnson points out, the whole system is financed by massive borrowing:

"On November 7, 2007, the U.S. Treasury announced that the national debt had breached $9 trillion for the first time ever. This was just five weeks after Congress raised the so-called debt ceiling to $9.815 trillion. If you begin in 1789, at the moment the Constitution became the supreme law of the land, the debt accumulated by the federal government did not top $1 trillion until 1981. When George Bush became president in January 2001, it stood at approximately $5.7 trillion. Since then, it has increased by 45%. This huge debt can be largely explained by our defense expenditures in comparison with the rest of the world."

Just as the worldwide Islamist insurgency sparked by Al Qaeda is blowback visited on us by the exigencies of the cold war era, so what we are experiencing, today, is economic blowback from our reigning ideology of military Keynesianism, which has built an economy embedded with a fatal flaw.

In the wake of World War II, the fear of another great depression was rife, and this was a motivating factor in the growth of the "defense" sector – neatly rationalized, as Johnson points out, by the Pentagon's NSC-68, a document outlining US strategic doctrine authored by Paul Nitze, which proclaimed the cold war dogma of "guns and butter":

"One of the most significant lessons of our World War II experience was that the American economy, when it operates at a level approaching full efficiency, can provide enormous resources for purposes other than civilian consumption while simultaneously providing a high standard of living."

Except it wasn't, and isn't, so.

Public works, in the form of ever-higher military spending, created an ever-expanding war-industry that sucked vital resources into avenues that led to a cul de sac, i.e. that had no productive use, such as nuclear bombs. Our mighty nuclear arsenal, which continues to expand even after the Soviet meltdown, represents trillions of dollars in frozen resources which go nowhere – that is, which produce no goods, and yield no continuing economic benefits. This has led to the fatal distortion of the American economy, and the massive misallocation of scarce resources: it is the root cause of the collapse of the US manufacturing sector. As Johnson puts it:

"Over time, a commitment to both guns and butter has proven an unstable configuration. Military industries crowd out the civilian economy and lead to severe economic weaknesses. Devotion to military Keynesianism is, in fact, a form of slow economic suicide."

Not only has America fallen behind by failing to modernize its capital assets and losing its technological edge, it has also corrupted its own currency. By exponentially expanding credit, the Federal Reserve is weighing down future generations with an unprecedented albatross of debt. The sheer weight is crushing the vitality out of the American economy, as military development crowds other investments out of the market. The dollar is no longer the currency of choice: the Euro has taken its place. All that has to happen, as Johnson points out in the video above, is for the Saudis and other oil-producers to demand Euros instead of dollars, and we're sunk.

What is likely to stop the rise of the American empire dead in its tracks isn't a sudden upsurge in the antiwar movement, the election of a rational President, and/or a sudden radical reversal by the policymaking elite after more than half a century of folly – it's bankruptcy that will do it, long before any of these possibilities have a chance to take shape.

Not that this is anything to anticipate with glee: it means social and political disruption on a scale we have scarcely experienced before in this country, perhaps even a revolution. It surely means the end of our republican form of government, and the institution of something less free, less secure, less faithful to the teachings and traditions of the Founders. It almost certainly means the end of constitutional government in America, and the beginning of our long, slow decline – or, perhaps, a more dramatic, meteoric descent than anyone now imagines.