By Kumar David –
“This country belongs to the people who inhabit it. Whenever they grow weary of the existing government they can exercise their constitutional right of amending it, or their revolutionary right to dismember or overthrow it.” ~ Abraham Lincoln, First Inaugural Address, 1861.
The term ‘economy’ is constrained and narrow, the phrase ‘material and social conditions of life and the interface between State and citizen’ is clumsy but better conveys my import. I have no choice but to keep switching terminology as this column progresses. True, America is still the “greatest power on errthth” (said with rasping tongue on dry palate) but it is also a very troubled nation in a turbulent world. I have a gut sense that the Biden Presidency signals a transition between what is and what may be. Let my mind roam through this maze; without imagination we are dullards. It’s not that Old Joe is great or god’s gift to America, it is that matters have come to such a pass that it is not possible to run away any longer. America lives on borrowed time and fake money thanks to the world’s greed for the almighty dollar. The US runs up ever more debt and prints ever more dollars and the world chases them in perpetual defiance of financial gravity. This has to give! It will in three ways – (a) domestic instability – drawn out or sudden, (ii) wakeup and change, (iii) withdrawal from global dollar veneration. Or more likely an interweaving of all three in now indeterminate proportions.
My conjecture, for the purposes of today’s essay is that Old Joe, perhaps kicking and screaming, will be a step in the direction of option (ii). Commentators these days are stodgy and dull; instead, let us be bold. In these strange times imagination is more real than prosaic reason. I begin with the proposition that the Biden Administration intends to and will be the antithesis of Trump since its domestic and global credibility are predicated thereon. Next it will have to address social problems that were the grounds for the rise of the Trump Base. It will have to address them from premises where it can, in the end, say: “Trump was an aberration, his methods were wrong. We overcame crises from diametrically opposed premises on race, economy, climate, global engagement and moral values at large”. Third, not only this presidency but what becomes of future presidencies will depend on whether the Biden experience stands or falls. In other words I am making the case that we are at an inflexion point in American history. At an inflexion or a saddle point a momentous transition can materialise but it is an uncertain switch which may flip in unexpected directions.
Luck has been on Biden’s side so far and he is cashing in. There has been a 70% reduction in the rate of spread of covid since mid-January. Ninety million vaccine doses have been distributed and three-quarters have found their way into people’s arms. Biden is backed by a scientific team headed by Anthony Fuchi, America’s and perhaps the world’s leading expert on infectious diseases and the team includes Professor (Ms) Rochelle Walenky of Harvard Medical School and current head of the Centre for Disease Control, and health-care businessman Andy Slavitt who signed on as Presidential Covid Advisor. US scientists in tears say “Oh my god what a change”. On other matters too the US has given notice: Return to the Paris Accord, WHO and Iran Nuclear deal. US allies are ecstatic and ungrudgingly make room for the big guy calling it a reassertion of American leadership or a return of the prodigal, depending on whether the speaker is of Anglo-Saxon/Germanic or a Latin-derived tongue. The switch from a Neanderthal to a Homo-sapiens variant of genus Americanus is widely welcome. The icing on the cake was Percy’s arrival on Mars.
Yet things are bad for America though Biden glows in redeemers luck. Some scientists on US TV say the country will lick the pandemic by Christmas even if the fast spreading British and South African mutants prove stubborn, but others reckon that unless tough measures as in S Korea, China, Taiwan and New Zealand are adopted this will not be possible. Americans, unlike people elsewhere, are uncooperative though science has got the virus by the balls, and if it sets its sights it can subdue it. However, more critically, this is not the case with socioeconomic ‘epidemics’ which span all dimensions – class, state, poverty, wealth & income, race and politicos hungering for eternal power. In respect of the last cancer, be it America or Lanka, vermin behaviour is similar.
While Biden has scored some successes his greatest challenge, the one that will decide his fate, is how his Administration addresses the economic conundrum that underlies partisanship, sparks social instability and nurtured the extremism which burst out in terrorist proportions on Capitol Hill on 6 January. So much has been written about inequality in the world’s richest country that I can get by with one graph. The top 10% in the US take 50% of national income as in 1929 in the period leading up to the Great Depression. The forty years from the end of WW2 to the mid-1980s spans the four decade dream of American exceptionalism; the shinning city on the hill, the immigrants’ beacon, the apogee of welfare capitalism when income distribution was fairer. But that was then. Wealth inequality now is even worse than income inequality. The top 5% owns nearly 70% of all wealth and the median wealth of the poorest 20% is either zero or negative (indebted). The median wealth of White families exceeds $150,000, Latinos $6500 and Blacks $3500 – 2016 statistics. Wealth-Income inequality is but a single indicator; I do not have the space to enumerate other inequities such as healthcare, education and housing. Inequality and inequity almost completely explain why so many are angry and why nearly 75 million Americans voted for an insolent, uneducated scoundrel.
What can a new administration, even if well-intientioned and willing to go the extra mile do? Inflection is not revolution, nor are Americans ready to countenance structural overturn of property relations. Capitalism has accomplished “wonders surpassing Egyptian pyramids, Roman aqueducts and Gothic cathedrals”; it has conducted expeditions that have reached the planets of the sun. Still it caries within it the seeds of its own decay. That came to pass in the Great Depression and again in the Great Recession of 2009. The point is how governmnets and the entrenched global economic order dealt with the downfall this time. No, not by classic cleansing of the Augean Stables as Adam Smith anticipated nor by Schumpeter’s creative destruction. Finance capital was too entrenched to be thus overthrown. This time the tools were different; creation of gigantic debt. Not only Sri Lanka, though we are among the most foolish at the game, in America, Europe, Japan and everywhere, central banks are issuing electronic paper-mony like spillage gushing from a raptured sewer.
I cannot inundate you in a statistical flood; one barchart must suffice. The chart makes a point needed for this essay, Bidden’s impasse. The raputre spurted out stimulus packages (grants to bankrupt businesses and to banks deemed “to big to fail” that their bankruptcy would entail a threat to the system itself). Quantitaive Easing (QE) poured astronimcal quantities of central bank (CB) money into financial houses, banks and insurance companies. CB funds purchased their bonds at low or negative real interest rates and thus found its way into stock-markets and prime property creating an asset boom and the largest flare-up of income and wealth inequality in capitalism’s history. In America alone this injection reached nearly three trillion dollars in 2020 before the December $960 billion ‘Covid Package’. The Fed’s net balance-sheet (net because short-term support is recovered at intervals) swelled to $5.3 trillion in March 2020. At one point Bank of America’s Mark Cabana feared that “Unlimited QE and emergency liquidity programmes will see the Fed balance sheet double in size (to $10 trillion) over 2020” (CNBC, 27 March, 2020). Biden is now comitted to another $1.9 trilllion to fight the pandemic, provide essential public assistance and rebuild infrastructure. This is unavoidable and has my support. (Wipe that smirk off your face; no I don’t have a vote in the US Senate!)
Forget the plethora of hard to remember stats; the simple point is this, I cannot see how the US, whoever the president can escape from a stranglehold that has become perpetual indebtedness. US National Debt (debt owed by the Federal Government will reach $27 trillion as you read this, and that does not include unfunded future Medicare and Social Security commitments; add such omissions and the US is looking at future Federal indebtedness of about $125 trillion (see www.truthinaccounting.org/). This leaves out State Governments, Commercial and household debts, which technically are not Biden’s nightmare. With a massive commitment to infrastructure and a targeted push to renew of capitalist entrepreneurship, can the Biden Presidency pull America out of the hole? Not unless it is accompanied by economic restructuring which is doubtful.
Before closing I need to comment on the Bidden Inflection Point from the perspective of human rights, relations with China and Russia and Israel-Palestine conflicts. In my view there will be no big change except the nuclear arms agreement with Russia. The rhetoric all round will be more decent than Trump’s. It is on Palestine that we will see the worst. There are too many pro-Israeli incumbents at the heart of the Presidency and Biden will do no more, and maybe less, than his predecessor to ease the misery of the Palestinians. On human rights, Gotha will be disappointed to learn that despite the Core Group watering down the Geneva Resolution, Biden Administration is likely to be more forceful than Putin and Kim embracing Donald Trump.