America’s New Political Era



What follows is likely to be of little interest to those, like ourselves, who are obsessed by the week-by-week price of polyethylene (PE).

But a strong US economy is essential for a healthy global chemicals industry, and what is being attempted right now to revive America doesn’t appear to be working.

Happy New Year to all our readers and here’s hoping that optimism and ingenuity will triumph in 2012 and beyond.

By John Richardson

THE American historian Arthur Schlesinger Jr. has, among others, argued that America tends to experience waves of alternative activism and retreat, according to economist Jeffrey Sachs in his excellent book, The Price of Civilisation.

Thus in the 1870s and 1890s, for example, the great national industries – railways, steelmaking, oil, meatpacking and retailing by catalogue – first came into existence on a continental scale, writes Sachs.

Government stood in the shadows as the robber barons took control, leading to the Gilded Age, he continues.

Then came the reaction, first by the prairie populists, who, like the Tea Party, protested against the evils of Wall Street.

This was followed by the Progressives, who more systematically rolled out a series of reforms designed to restrict the corporate abuses of the financial sector and the robber barons.

The Progressive Era began to wane in the 1910s, and was swept away by the pro-business decade of the 1920s, when the US longed to return to normality after World War I.

“The Roaring Twenties, the prelude to the Great Depression, had strong similarities to 2008: very rapid financial innovation, soaring inequalities of wealth and income, a culture of financial speculation, real estate booms fuelled by easy credit, and then finally a financial crash,” writes Sachs.

The Tea Party has expressed popular anger at the failure of Washington to help America’s beleaguered middle classes, which have seen their income levels stagnate and employment prospects decline.

Those who fund the Tea Party back tax cuts, deregulation and smaller government as solutions to America’s problems.

But it can be argued that these very three policies are the root cause of the crisis facing the middle classes.

Tax cuts have disproportionately benefited the richest few percent of America’s population.

As we describe in Chapter 3 or our e-book, Boom, Gloom & The New Normal, deregulation has resulted in dysfunctional oil markets that are now dominated by financial speculation (Fellow blogger Paul Hodges further illustrated in this point in this post from yesterday).

Thus the price of oil kept rising in 2008, even when it was evident that demand destruction was being caused by expensive gasoline etc. The subsequent collapse in crude in Q4 of that year was a major factor behind the global financial crisis – as was, of course, deregulation in derivatives trading that led to the sub-prime mortgage disaster.

Since 2008, the US policies of quantitative easing and the huge bailout of the financial sector have primarily benefited the people who caused the crisis in the first place, the bankers – perhaps because of the close relationship between Wall Street and the financial sector.

Sachs’ prescription for rescuing America’s middle class includes government investment of a different kind – in education and infrastructure, and, dare we mention it in the current political climate, tax increases.

This would require a strong new political movement in the States, perhaps akin to what occurred during the Progressive Era.

Occupy Wall Street might become such a movement if it develops a coherent political philosophy.

Sachs expresses great hope that the Millennials, those born aged between 18 and 29 in 2010, could be a driver of such a major political re-alignment.

They are, he says, hooked on the Internet, rather than the TV addiction of the Baby boomers, and thereby could well use social networking to drive a new political movement.

The Millennials are also more ethnically diverse, socially liberal and better educated than the generation before – and more trusting of government, hence their support for Obama during the 2008 campaign, followed by disillusionment.

There is hope then, provided the biggest challenge of them all is also recognised and dealt with by the government, corporations and the American public: Demographics.

The ageing of the Baby boomers is radically changing the quantity and nature of demand in the US economy, requiring government, companies and the general public to think and act very differently.



, , , , , , , , , , , , , ,

Leave a Reply