Saturday, May 17, 2008

uncle sam, mama spider

the animal kingdom provides many examples of how a parent can nurture its offspring to ensure survival. male emperor penguins guard eggs under their bellies for months in extreme cold and keep an emergency stash of food in their throats for the newborn chicks. in another sex-role reversal, female seahorses inject fertilized eggs into the male, whose body nurtures the young in a process that resembles pregnancy.

spiders offer one of the more gruesome methods of child-rearing: a mother Diaea ergandros spider lays about 40 eggs and then fattens herself up eating insects. when the eggs hatch, the babies grow strong by sucking blood from her legs. this might sound like a charming version of nursing, like we see in mammals, but there's more. as the mother weakens from this feeding the babies then inject her with venom. she then dies and they devour her entire body.

obviously, the mother allows this to happen. because her offspring survive, she has fulfilled the darwinian mission of reproduction.

I believe a similar process is now underway in the global economy. for years, the US nurtured countries such as taiwan, japan, germany and china with a steady flow of dollars. by running large trade deficits and educating their executives, we let them boost employment and build a middle class. they sucked money from our economy much as baby spider suck the blood their loving mother. let's view the size of china's economy relative to its trade gap with the US to illustrate:

(source for china GDP ... source for US trade gap)

our massive demand for everything from electronics to cheap clothing and and shoes provided sustenance for other economies as they took baby steps into the modern capitalist system. but it went further than that. like other doting parents, we provided leadership and protection. washington was the strongest proponent of trade integration, pushing for the creation of pro-trade institutions like the WTO, NAFTA and even european integration. while the US was never a perfect parent, there can be no argument that we provided an umbrella under which trade could expand .. we provided a model: the integrated industrial corporation. our business schools and universities educated their leaders. our currency served as a global gold standard, and our debt market still provides benchmark interest rates to anyone needing to borrow. finally, our military supremacy and commitment to wilsonian principles allowed countries to feel safe and focus on economic growth rather than self-defense. (while many will dispute this and look to things like the war in iraq, I contend that the US was pretty well behaved for a country that so clearly had global dominance. if we thought like other countries, such as russia after WWII or european kingdoms before 1800, we would have used our supremacy to conquer the world.)

so far, we've merely nurtured our offspring with our lifeblood and leadership. but now, the US seems determined to go all the way and sacrifice itself so that its children can move all the way to adult status. friday's WSJ offered some deeply troubling examples of this trend:

1-After embracing Washington in 2003, Libya is now souring on its ties to the US. an american law passed in january lets people sue libya and companies that do business there, like exxon and chevron. why? to compensate victims of libya's state sponsored terrorism, even though most such action occured more than 20 years ago. the article also points out how companies from south korea, iran, india and thailand are growing rapidly in libya, while US firms are nowhere to be seen. most important, libya is an exciting emerging market. not only do they have oil. but quaddafi now realizes he has more to gain from liberal economic policies than he does from the country's old-fashioned statism. its oil, beautiful country and location, plus its relatively moderate islamic practices, seem to lay the groundwork for a very bright future. instead of nurturing ties with libya, our government seems determined to burn bridges with it. this also reminds me of congress's inability to approve the free trade pact with colombia.

2-Exxon CEO rex tillerson says the US should pump more of its own oil rather than asking for OPEC to produce more. he apparently criticized president bush for failing to pursuade congress to permit more offshore drilling. given congress's hostility to bush and his previous failure to open up ANWR, there's little surprise in this. but it shows how much the average american is vulnerable to swings in the internation energy markets. with oil breaking out to record levels, this problem is only going to get worse. every extra dollar americans spend on gasoline means one about one fewer dollar that stays in the US economy. (I say "about" because the US still produces a lot of oil, so some high prices help people in places like texas.)

3-the government's approval ratings are at record lows. bush's is 31%, while congress has an 18% approval rating. it should come as little surprise as both political parties skirt major issues and focus on empty rhetoric.

4-democrats in the house refuse to fund troops in iraq and use the bill to promote more unemployment benefits for ordinary americans. while both of these issues might be important, the backhanded way of separating hiding them like this does little to promote transparency or good will. if the democrats want to deny funding for the troops, they should come out and say it openly.

5-evidence suggests hank greenberg did nothing wrong and never should have been forced from the helm at AIG. it's increasingly clear that eliot spitzer's antics as attorney general did little to help the economy or financial system. no victims were helped by his attacks on wall street. if anything, he just made it harder for one of the most lucrative industries to do businesses in the state.

now, for disclosure, #4 and #5 are both opinion pieces. but they illustrate how unaccountable government has grown in this country.

many people like to blame george w bush for our country's problems. I think he has been a terrible president for his poor leadership and inability to execute on many of his objectives. but I think the seeds of these sad years were planted long before he took up residence at 1600 pennsylvania ave.

in fact, on many of the cases I cite above, bush is on the right side of history. he has supported closer ties to countries like libya, opposing the bill that would expose them to mass-tort actions. he has obviously tried to promote more domestic oil production from places like ANWR, only to fail. in fact, the scariest thing for me is that he seems to be taking the right side on many issues, and he will soon leave office in disgrace.

given the current weakness of republicans, I fear the possibility obama will be elected president. I don't dislike him, but also don't like him very much. looking over his website, I see little that distinguishes him from the great mass of liberal democrats out there. there are a few random ideas like promoting manufacturing and promoting free trade, but considering his own party's recent actions on these fronts, I don't have high hopes for anything to get done.

watching his speeches, I also have the sense that he's just another politician. his youth and race make him seem different. his moderate and likeable persona and off-beat looks make him more palatable to voters tired of bush's swaggering patriotism and black-and-white morality. but, I see little more than a longing for "change" in his message.

I might add that this impulse for "change" often produces some of the worst outcomes in a political system. for example, voters' disgust with business as usual in caracas brough hugo chavez to power in 1998... an election I personally witnessed.

while obama is clearly more respectable now than chavez was then, it shows the danger of a disenfranchised and alienated electorate. I personally think if obama is elected, little will change and in four years, we'll be seeking something else. I think the next president faces the hardest challenges of any leader in a long time.

anyway, each of these actions listed above show how the US seems determined to destroy its leadership position in the world. look at how we refuse to make citizens of iraqis who have served as our intepreters. look at how we treat leaders in other countries like colombia and libya who have made efforts to work with us. look at how our own mechanisms of government undermine our own businesses such as AIG to little positive effect. the fact of the matter is the US is still living in the 1980s, when we could do as we pleased because we were the world's leading power. when the other option in the world was the USSR, others were willing to put up with a lot of our nonsense. now that we're increasingly just another country, their goodwill towards us will fade rapidly. I still think we have ugly prospects ahead, characterized by a weakening economy, capital flight and self-delusion about our own greatness. the worst thing is we still have so much further to fall.

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