Friday, August 5, 2011

The American Challenge

The book of Jean-Jacques Servan-Schreiber “The American Challenge” (1967) became an international best-seller. He saw in the US a model of modern neo-capitalism which stood in stark contrast with the rigidities of the European, mostly French, business culture, shackled in interventionist state policies. JJSS became in a fortnight a French JFK. He opened the way for the Fukuyama school of thought.

The financial crisis which hits the United States today is serious. The disease is a known quantity but the therapy under consideration verges on the tragic/comical. The growing deficit, the number of unemployed, the looming loss of competiveness, create a climate of uncertainty which could very well spread. The Dow Jones is in free fall for causes which are more rooted in an ambient sense of distrust than in a specific isolated cause. The absence of logic and of a more structural alternative create a multiplicative effect. There are many reasons for alarm but in the end they do not add up. In reality there is plenty of cash in the United States, but it is currently saved rather than spent. The economical crisis is hostage to a seldom seen political dysfunction. The Tea Party's populist appeal is the main culprit because it stands in the way of a more rational exchange of views on ways to reverse the negative trends which might fatally multiply if not properly addressed. There is a vicious disconnect between economic reality and political agenda. As long as the two do not overlap, the spill will continue in the absence of a common diagnosis. Opposite camps do not have to agree as long as they speak the same language. One is free to be pro- or anti-Keynes, as long as he or she is familiar with what Keynes suggests and does not stop questioning the rational of this expanding Babel.

Before considering investing, spending, and employing, the American banks, consumers and investors need some confidence-building measures in the States but also from abroad, from Europe (in growing disarray) in the first place. US Lawmakers act as if they never heard about globalization or read Keynes, Krugman and Co. In all fairness the Obama Administration has been most disappointing. The administration’s lack of creative involvement is equally to blame for the suicidal behavior of the American stock market. The longer the stalemate lasts, the more difficult it will become to convince manufacturers to switch from the lull of cheap productivity to the bold resumption of re-employment and investment.

The negatives are plentiful. The political Kabuki game leads to gridlock, or worse to incomprehensible arrangements which only Dr. Mabuse might come up with. The presidential elections next year are a hurdle as well. All candidates prefer to agitate rather than to reason. President Obama has been a very disappointing player in this latest comedy of errors. He has his priorities wrong and while alienating progressive Democrats he has at the same time been unable to attract Independents who are currently abandoning ship. Despite the fact that the United States still has the knowhow to fix the problem, the captain looks lost in a script which does not suggest a remedy. Likewise the Republicans are obsessed by retaking the White House for one of them, even if it is Mickey Mouse, and at any price. In the media the debate is sophisticated but I start to wonder if the politicians ever consult those articles which suggest solutions which are transparent and make economical sense. The “tax tabou”, a Republican mantra, is not unlike a Catholic dogma. You are not invited to understand it, you are obliged to swallow it. We do not need to return to Leviathan to understand that the State needs income, that banks need to finance and lend, that inflation should remain under control and that debt (and the interests which come with it) should be reversed. Today those evidences are buried under the tombstone of demagogy.

Nevertheless the assertions of JJSS remain valid. Fortunately, Silicon Valley is at a considerable distance from Washington, D.C. Wall Street has a surplus which an opportunistic and potentially dangerous bull market hides from view. Main Street has become the ultimate victim of the surreal games congressmen and women play, while having been elected in the belief that they would clean house. What we got is a tribe of amateurs instead. This mega-church of freshmen and women spews a toxic messianic message which also starts to undermine America’s credibility and ratings worldwide.

It could have been expected that this overtired, overspending, overstretched country would wake up with a hangover. Electing Obama was a natural choice. I still believe that most of his intentions are good but he has let his vision be overtaken by unwelcome distractions – healthcare reform in the first place- which gave his contenders stepping blocks for attack. The irony is that the “less government school” has now come up with yet another commission to examine the patient and come up with suggestions by year’s end. All this might be hilarious if it were not so absurd.

The financial toolbox made in USA is still available. The United States can overcome the crisis as soon as the cloud of parochial argument is lifted. Congress should consider reading JJSS to correct the current prevailing outdated fallacies, but in the short term one does not perceive a change of direction. This might be a sign of self-preservation because if politicians ventured further and read their own bills they might throw up.

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