Virtually every conscious step of the Administration of President Barack Obama and the overwhelming Democratic Party majority in Congress has been to increase the size and role of government in the economy and society, and to decrease, limit, and control the position of private enterprise and capital formation. Given that this progressively contracts and ultimately eliminates production, and reduces the inherent asset base of the country its raw materials and productive intellect to a null value, the tradable value of the U.S. currency will inevitably decline. We cannot be swayed by the enormous wealth of the North American continent. Almost all areas have an inherent wealth of some kind, but assets left idle in the ground or infertile in the brain define countries which fail, or are not victorious in their quest for unbridled sovereignty.
Thus, a decline in currency value is exacerbated, or accelerated, by the increasing supply of money, inextricably depreciating its value, particularly at a time of decreasing productivity in vital perishable and nonperishable output.
The U.S. Obama Administration has focused entirely on an agenda of expanding government the seizure of the envied (and often ephemeral) "wealth" of the producers without addressing the process of facilitating the production of essential commodities and goods. Even the USSR and the People's Republic of China, during their communist periods, focused albeit badly on the production of goods and services, when they realized that the "wealth" to be "redistributed" existed only as the result of production and innovation. The U.S., meanwhile, heavily as a result of policies of the former Clinton Administration, has "outsourced" production, and the State that is, the Government cannot easily, in the U.S., become the producer.
President Obama has addressed the U.S.' economic crisis by expanding government, and government-related, employment in nonproductive sectors, while at the same time blaming and punishing the private sector for all of the U.S. ills. Empowered by the extended franchise, this was the politics of envy now becoming enabled. Moreover, the populist, short-term response to the major oil-spill in the Gulf of Mexico was clearly geared toward (a) transforming a crisis into an opportunity to pursue a green energy agenda by highlighting the evils of the fossil fuels on which the U.S. remains dependent; (b) ensuring that the President was not blamed for the poor crisis response; and (c) ensuring that the Democratic Party did not suffer from the crisis in the November 2010 mid-term Congressional elections.
The result of all the Obama initiatives has been to expand government and reduce or absolutely control and tax the private sector, even though, without the private sector, the U.S. has no viable export or self-sustaining capability. The net effect has been to mirror and overtake the situation in which, for example, Germany found itself a decade ago: without the ability to retain capital investment or attract new capital investment. And in order to restrain capital flight from the U.S., the Obama Administration seeks to further control worldwide earnings of U.S. corporations and citizens. For other reasons, the U.S., believing that it still dominates the technology arena, has imposed greater and greater restrictions on international exports of technology through its ITAR (International Traffic in Arms Regulations) and the Foreign Corrupt Practices Act.
All of this conspires to limit investment in U.S. manufacturing and restrict foreign interest in U.S. exports because the regulations are being enforced merely for political punitive reasons. The U.S. is making itself increasingly unappealing to foreign investors and has, as this writer has noted, made the appeal of the U.S. dollar as the global reserve currency evaporate, saved, for the moment, only by the lack of a ready alternative. That situation will change within a very few years.
Thus, the U.S. has, in the space of a couple of years: (i) so dramatically inflated money supply that the value of the dollar is only shored up by the lack of international alternative currencies to act as reserve trading currencies; (ii) so dramatically inflated public debt, without stimulating economic growth, that U.S. economic performance will continue to decline on a national and a per capita basis while competitive economies, such as the PRC and Russia, will grow, reducing strategic differentials; (iii) severely punished the private sector, thereby reducing the opportunities and incentives for strategic capital formation, and in particular punishing the industrial production and energy sectors, almost ensuring major dislocation to the delivery of U.S. basic needs in the near-term; and (iv) so blatantly reduced its strategic capabilities through all of these actions and in its diplomatic and military posture as to guarantee a reduction in U.S. strategic credibility. Concurrent with all of this is an increasingly punitive taxation framework.
The near-term impact will include rising domestic energy prices, possibly even before the November 2010 mid-term Congressional elections, which could result in the Democratic Party losing its substantial majority in both Houses. Even on this matter, Democratic Party ideologues have attempted to suggest that this is exactly what the country needs: expensive energy in order to facilitate change to "green" solutions. This defies the historical reality that preeminent powers must always have vast energy surpluses and use.
So much damage has been done to the U.S. strategic posture in just two years (although building on a base of inefficiencies which have been growing since the end of the Cold War), in many respects equal to the 1917 Russian Revolution (but without the bloodshed), that it is difficult to forecast whether because of a changing global environment the U.S. can, within a decade or two, recover its strategic authority and leadership. Domestically, the massively statist and interventionist approaches of the Obama Administration have polarized the country, and the response will be reactive rather than innovative, inducing a period of isolation and nationalism, but with grave difficulty in rebuilding confidence from the international investment community.
Artificial, wealth-induced complacency following the end of the Cold War led to fury when economic collapse inevitably occurred in 2010, leading to draconian restraint in public spending in many societies, but particularly Greece and Spain. It is said that tourists are warned not to feed bears in Yellowstone National Park, in the U.S., because the bears do not understand when the tourists have run out of food. State-fed populations in Europe, the U.S., and Australia (see below) equally do not understand when the free ride is over, and work must recommence.
Germany, France, and the United Kingdom have begun the arduous path back to recovery, but the euro may, as a currency, have been irrevocably damaged, and the European Union itself may have spent the term of its virility. Clearly, the wealth-induced complacency, which had the compounding effect of allowing a decline in a sense of national survival and national identity among the European Union (EU) component states, has led now to a revived but as yet unrealized sense of nationalism. This is beginning to lead to the recognition of the cohesive national efficiency required for survival and competitiveness. It can be said that the EU destroyed nationalism, without replacing it with any mechanism to create a new sense of social cohesion, thus removing Europe's capability for economic competitiveness, self defense, or ability to define a new culture (and identity) to replace the national identities. Had the British Labour Party Government of outgoing Prime Minister Gordon Brown persisted in office with his slavishly doctrinaire governance and demonstrably unworkable socialism, led by a privileged ιlite of Labour mandarins wallowing at the trough it is possible that an economic recovery in the UK would have been problematic. It may still be problematic. And in this, Brown was a prototype Obama, with his rank sense of entitlement. Even now, the British political psyche is fractured along geographic lines, and, wealth-induced, considers itself effectively "post-industrial", and therefore beyond the need for a manufacturing (or even agricultural base). Thus, even though the UK is now far more dependent on a maritime trade base than at any time in its history, it is incapable of defending or projecting that maritime base; neither does it have the wherewithal to trade.
The Australian Government of Prime Minister Kevin Rudd has like the Obama Administration in the U.S. and the Brown Administration in the UK demonstrated its absolute lack of experience in management, economics, or real-life work skills. A decision by Prime Minister Rudd to impose a new "super tax" of some 40 percent on resource companies miners, who produce most of Australia's export wealth suddenly highlighted the reality that the mining companies did not need to put their investment into Australian projects.
It also highlighted the fact that foreign investors did not need to invest in Australia, and that capital could move as it always does away from draconian tax regimes. As Chilean Mines Minister Laurence Goldborne said in June 2010: "Just because you have resources doesn't guarantee investment." This is something which the governments of most African states know.
In Australia, the realization of the over-reaching greed and envy-inspired approach of of the proposed new tax laws in turn led much of the ruling Australian Labor Party (ALP) and the profoundly leftist Australian media to begin their drift away from Rudd, leaving him with the prospect that he could either be abandoned as party leader before the late-2010 general elections, or be faced with the prospect of becoming Australia's first one-term Prime Minister. The question remains, however, as to whether the markets will still be there when the ruin of trust in Australian export and investment reliability is addressed by a future government. The People's Republic of China (PRC), Australia's major export client state, and Russia are now developing vast iron ore reserves on their mutual border, possibly in the near future obviating the need for much of what Australia exports.
In the meantime, both Kevin Rudd and the opposition Liberal Party have essentially embraced the move by Australia to see itself as a pseudo-post-industrial society, gradually eroding the independent and innovative manufacturing sector which had been a hallmark of Australian economic growth. A pseudo-post-industrial society is one which believes that it can live solely on the intrinsic value of its currency, without the necessity to sustain a balanced agricultural and industrial base to preserve sovereign independence. A true post-industrial society something thus far a utopian dream can produce all of its food and goods with a minute fraction of its population, which would largely be left to address intellectual pursuits.
Australia, thus, faces a major challenge to its comfort, wealth, and security when value perceptions, investment, and clients evaporate. We see, then, in the very deliberate acts of envy and entitlement politics, the seeds of national collapse in Australia, the U.S., and Western Europe.
Some of the Western powers have slumped before, and recovered. The United States has yet to demonstrate this resilience. Other Western societies have slumped, and have yet been protected by a strong regional system so that their societies could prosper under foreign protection. The Netherlands, Spain, and Portugal, for example, retained stable and individual prosperous societies and yet never recovered their strategic leadership, relying, instead, on the power of their region for economic and security protection. States which remain dependent on others for their protection never fully regain their wealth and freedom.
States such as New Zealand depend on their greater neighbors for protection. But wither New Zealand if Australia fails? Wither the Netherlands today if the European Union fails? And wither the United States if its fortunes erode? Re-birth is, as Britain has found through history, as did Rome, more arduous than that first, pure flush of strategic victory.
The West is at its watershed, not because of a threat from a less-productive society. The collapse of the West is not because Islam is at the gates. Islam is at the gates because of the collapse of the West.