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Bush works against the interests of his base even as he relies on
them to help carry out his destructive policies, while bin Laden
works against the spirit and letter of Islam even as he depends on
zealots to carry out his own imperialistic pipe dreams. The Bush
Qaeda now has a very stark problem to confront: Dubya has made clear
that he is more interested in encouraging globalization and the
outsourcing of jobs than in protecting the country from disaster and
terrorism. The Dubai ports debacle was not just a two-week-long
political game. It was a potential lesson, calling attention to the
importance of the infrastructure, the declining state of the U.S.
economy, and the mercurial and troublesome nature of the American
subconscious. If Americans don’t wake up pretty soon, they will find
out what it’s like being the economic colony of people who can make
things.
“The United Arab Emirates are threatening to not buy any of
our products…oooooh!...We got them there too, we don’t MAKE any
products in America anymore!” – Jay Leno’s monologue, The Tonight
Show
The Republicans, swords drawn like a modern-day army of Don
Quixotes, have emerged victorious from a battle with phantom
windmills of their own construction. They have brought down the
threat of Dubai Ports World, complete with displays of 21st century
machismo. One wonders whether or not their theatrics will once again
distract the American people from looking closely at the underlying
systemic causes of a rather small symptom.
Bush’s Qaeda
Perhaps the depth of the reaction to the Dubai deal was partly
the result of the administration of George Walker Bush and its
demonization of the Middle East. Apparently Bush’s base did not
notice when Bush held hands with the now King of Saudi Arabia and
kissed him goodbye. Bush’s base did follow the implications of
Bush’s linking of Saddam Hussein with Osama bin Laden by blaming all
Arabs for September 11. Lord knows, yours truly did not make the
connection, burdened as he is by an avid reading of world history.
But then, the Republicans have been making their living by giving
subtle hints like “states rights” and “crime” to indicate to their
base, wink-wink nudge-nudge style, that they don’t like
African-Americans either. The politics of subliminal racism seem to
have caught up to the Republican elite, getting in the way of their
real goal, a globalization for, by, and of the elites.
Apparently the Bush supporters thought that they could depend on
the Gulf States, such as Dubai, in order to prop up the dollar by
making oil an exclusively dollar-denominated commodity, even as the
Bush base could be made to foam at the mouth about A-rabs when it
served Bush/Cheney/Rumsfeld to develop war hysteria. The reason for
this contradiction may lie in the striking similarity between the
English word base, to which Bush talks exclusively, and the Arabic
word Qaeda (قاعده), which also means base, which never varies as
Osama bin Laden’s focus. In both cases, a certain cognitive
dissonance is necessary; Bush works against the interests of his
base even as he relies on them to help carry out his destructive
policies, while bin Laden works against the spirit and letter of
Islam even as he depends on zealots to carry out his own
imperialistic pipe dreams. The Bush Qaeda now has a very stark
problem to confront: Dubya has made clear that he is more interested
in encouraging globalization and the outsourcing of jobs than in
protecting the country from disaster and terrorism.
Not only did Bush claim that he would veto what would have been a
veto-proof vote in Congress to upend the Dubai deal, in India he
declared that the loss of jobs through outsourcing is OK [1] . Apparently he has picked up
whatever intellectual disease Thomas Friedman also contracted in
India. Bush, like Friedman, seems to think that the entire Middle
East can be transformed by war and that terrorism can be wiped out,
but there is nothing that can be done to stop globalization. Perhaps
all of those aircraft carriers and stealth bombers are no match for
containerized cargo ships. How far the American public is willing to
go may be another question, because apparently they are more upset
about losing ownership of the country that they live in through
globalization than they are about losing their jobs through
globalization.
Losing the Mandate of Heaven
At a profound level, they may be, surprisingly, correct. As
Friedrich List wrote almost two centuries ago, if one is rich, but
can’t produce more wealth, one becomes poor, while if one is poor,
but can produce more wealth, one becomes rich. “The power of
producing wealth is therefore infinitely more important than wealth
itself”.[2] The normal way of comparing the
health of national economies, the Gross Domestic Product, or GDP,
can be misleading, because that GDP is generated by the capital
assets of country, which have been, in the American case,
approximately three times as large as the GDP that it generates. In
a sense, not having a job but having the factories and
infrastructure that generates jobs is better than having a job with
nothing to back it up. The U.S. is fast approaching the latter
condition.
The physical infrastructure of a country can be thought of as its
most basic component. After all, civilization was created in order
to coordinate the efforts of large numbers of people for the purpose
of building irrigation projects, canals, roads and even pyramids.
There may be a “collective subconscious” understanding among
civilized peoples that there are certain components to the structure
of society that are fundamental, even if those components are not
publicly acknowledged. For instance, it has taken thousands of years
to refine the techniques necessary to convince young men that they
should do what is the exact opposite of what they would naturally
do, risk death, in order to serve the purposes of the state in war.
The history of working out these techniques has been obscured by
time, but whatever techniques are used, by Bush’s Pentagon or Bin
Laden’s suicide bombers, these techniques seem to work at a
subconscious level. When the Republicans make the Democrats go into
their “eyes-in-the-headlights” routine every time the Republicans
mention terror or September 11, the Republicans are probably
operating at this level.
Perhaps the same process has occurred in the subconscious of most
people in terms of their understanding of the infrastructure: they
intuitively sense that a compromised infrastructure is extremely
dangerous. Like floods in dynastic China, it may be that the
catastrophe of Katrina and New Orleans has signaled that the mandate
of heaven has been lost by the Bush family. According to a poll by
the Pew Research Center, the most common word people now use to
describe President Bush is “incompetent”[3] . Dukakis losing to George Senior by
arguing that he was more competent is one thing; letting critical
levees break is another. Allowing ports, which have served as the
lifeline of civilizations for centuries, to fall into the “wrong”
hands, apparently stimulates the same part of the brain as images of
September 11. It is an unacceptable threat. But since this author
would prefer to operate at the level of consciousness, I will
attempt to develop a rational framework for understanding the
infrastructure.
The State, front and center
Civil engineering professors teach their students that there are
four main components to the infrastructure: water, transportation,
energy, and communications systems. Guaranteeing the integrity of
these systems is so crucial that I will make explicit what most
economists grudgingly admit: the state is responsible for these
infrastructure systems. In other words, the state has always had a
very large role to play in the economy and always will. “Getting the
government off our backs” by disengaging from the infrastructure, as
we saw in the case of Katrina, quite literally leads to disaster and
the end of civilization.
As we can see from this list —
- water,
- energy,
- ransportation and
- communication
— the role of infrastructure is not trivial, in fact, it is at
the foundation of civilization. These systems are necessary for
political activity to exist, much less economic processes. To admit
that the government must be intimately involved in the very center
of the economic system is to admit that the government is an
indispensable part of an economy. Let us look at these four systems
a little more carefully.
Water
Water systems are so necessary that the modern city is not
possible without them. Probably the most important invention of the
industrial revolution was not textile machinery but the water
systems of London, built in the early nineteenth century. Before
that time, all cities depended on the constant inflow of people from
the country, because there was so much disease as the result of the
unsanitary conditions of the city that the cities had higher death
rates than birth rates. The sewer system of London, along with the
provision of clean water into the city, changed all that. Now cities
could expand, which was crucial for the industrial revolution,
because the cities were the focus of most manufacturing activity and
most technological innovation. Small cities could never have been
the catalysts for the industrial revolution. The world’s great
cities filled that role, cities such as London, New York City,
Berlin, Paris, Tokyo, or the Italian cities.
The Italians had a head start on this process, as Rome was built
to a great extent on its spectacular system of aqueducts and urban
water systems. Once the barbarians destroyed that system, the
population of Rome decreased from over one million residents to
12,000. The historian Wittfogel famously described ancient
civilizations as “hydraulic”, because of their dependence on large
infrastructure projects to irrigate crops, control floods, and
create canals for commerce. The U.S., too, passed a tipping point
when it created the Erie Canal, connecting New York City with what
is now referred to as the Midwest. New Orleans, that other great
city of American commerce, as we now know, was completely dependent
on water projects. Moving further West, and skipping a city that is
the complete creation of water projects, Las Vegas, we find that the
early history of Los Angeles was the story of the theft of Northern
California’s water, as shown in the movie Chinatown. As global
warming raises the oceans, the coasts of all continents will be the
scene of vast gate-building in order to save their great cities.
Transportation
If water is the first and most basic of infrastructure systems,
transportation is perhaps the most visible. The Romans again showed
the importance of this infrastructure system for the political
construction of a society. Transportation binds together an economic
area, without which the market cannot exist. The market square is
used as a metaphor for “the market”, but there is no use in having a
market if there is no way to get the merchandise to the market.
Production, too, depends on transportation; the assembly line in a
factory is a transportation system, and the wider production
transportation system is the network of air, rail, and trucks that
move parts through the production process. It is the governments’
responsibility to construct the transportation network. It is even
possible for the state to control the vehicles that use the
transportation network, such as in the case of buses and public
rail. When private companies build cars and planes, they don’t have
to build roads and airports. When people buy goods from abroad or
make them to sell abroad, they don’t have to build or maintain the
ports. And they seem to want the government to control the
transportation infrastructure, as we saw in the case of Dubai Ports
World.
Energy
Energy and communication might seem to be less involved with the
state, but their movement occurs on the territory of a state and
though its airwaves, and so the state must step in to guarantee
their safe use. Particularly in the era of electricity, furthermore,
the generation of energy onto electrical grids becomes a monopoly,
and thus is privatized only because of an ideological
fundamentalism, not because it is more efficient. Most electrical
utilities are still public-owned, as they all should be. Not only is
the utility a monopoly, but the grid encompasses the whole system,
and a failure in one part can bring down the rest. Such a situation
means that one institution needs to be able to manage the system as
a whole with no margin for error, and that agent can only be the
state.
The energy system and transportation system obviously intersect,
as in the case of automobiles and gasoline. America is not addicted
to oil, as the President declares, it is addicted to the automobiles
that need oil. Nobody wants a barrel of oil in their living room,
but most people want a car or two in the garage. This creation of an
automobile/petroleum system was quite intentional and was aided and
abetted by the state. Its continued existence requires the massive
intervention of the state, including a huge U.S. military apparatus
whose mission, more and more, is to make the world safe for
automobiles.
There may come a time, which we have probably already reached,
when this system is no longer practical. Whether because of the
dwindling supply of petroleum, the cost of wars over its control, or
the horrors of global warming, a transformation will need to occur,
and only the state will be up to the task. One possibility is to
convert all coal-powered plants to clean coal technologies that do
not generate greenhouse gases, and use this network to power a huge
expansion of electrified rail, buses, and small private automobiles.
Only the state has the financial and political power to channel what
will become, one hopes, a social consensus to move from petroleum to
clean electricity for the energy infrastructure, and from large cars
to small electric cars,[4] and mass transit, for transportation.
Such a transition will be spoken of in hushed tones as “epochal” and
“history-turning”, because fundamental changes in the infrastructure
create fundamental changes in national and global civilization.
Indeed, the ports which Dubai is so interested in owning have
been part of this global civilizational turning point, in the form
of globalization. Globalization would simply not be possible without
huge containerized cargo ships and highly computerized container
port systems. The Sopranos might be northern New Jersey’s most
famous residents, as fictional as they are, but the most important
resident of “North Joisey” of the past 50 years was the trucking
company owner who first developed the idea of a standardized
container in the 1950s.[5] In turn, these continental and global
transportation systems would not be possible without their attendant
communications systems.
Communications
When the U.S. Federal government made continent-spanning
railroads possible by granting rights-of-way, they also made the
great communications revolutions possible by giving part of the same
rights-of-way to telegraph companies. Without the telegraph,
railroads would have been much slower, because the telegraph was
necessary in order to let stations know the whereabouts of the
various trains on the various lines. Before the telegraph, trains
would often run into each other. The modern extreme version of this
problem is the overworked air traffic controller trying to keep
dozens of planes from crashing into each other over an airport. The
telegraph, phone, and now internet have served to make commerce
possible in ever widening circles. Much of the growth of the last
twenty years has been a result of expanding this communications web
into the household. U.S. News and World Report breathlessly informs
us that the South Korean government is providing broadband
communications to every household there, while the magazine
complains that the U.S. is behind the curve in cellular technology
and internet use.[6] The difference is that east Asian
nations look to their government to provide a world-class
infrastructure, while the U.S. is dominated by a free-market
ideology and an Administration that is more interested in the
short-term profits of major multinational corporations than in the
long-term state of the infrastructure. Cities in the U.S. may be
ahead of the Feds: Philadelphia is setting up a city-owned WiFi
(wireless internet) system that all its citizens can use.[7]
Youse guys owe us, pay up
Large chunks of American infrastructure systems are up for sale
to foreigners, a state of affairs that eventually hit a collective
nerve with the ports deal. Like a tooth that has been rotting for so
long that the nerve is affected, the U.S. economy has been rotting
away for a very long time, and the rot touched a nerve. The
mechanism for this rot is the following: the U.S. manufacturing base
is disintegrating,
- leading to huge trade deficits,
- leading to foreigners holding huge piles of dollars,
- leading to foreigners only able to buy the United States as a
way to dispose of those dollars.
The U.S. elite have been having a party, and the creditors have
to take away the furniture to pay for it. The natives didn’t seem to
notice when the Brits took the sofa, but they got upset when Arabs
went for the sink. Dubai might have thought they were doing the U.S.
a favor by recycling dollars, but most Americans still do not
understand how the U.S. fits into the global economy.
As reported in the book, Confessions of an Economic Hit Man,[8] the industrial countries have been
luring poor countries into their financial web by selling the poor
countries huge infrastructure projects that they can’t afford,
allowing for the cold embrace of the International Monetary Fund,
which sucks the remaining life juices out of the country. A similar
dynamic may begin in the center of the industrial core, the United
States, since the U.S. has gotten into worse debt than the victims
of the economic hit men.
The U.S. is getting to the point where most of the goods that are
consumed are coming from abroad, and the U.S. isn’t exchanging
nearly enough goods and services to pay for them. If we look at the
data for 2004, we find that 60% of the value of manufactured goods
used in the U.S. came from imports.
Within manufacturing, the most important sectors are often
referred to as “engineering industries”, because they involve the
most engineering, their construction is very complex, and they are
used to create virtually everything else in the economy.[9] If the U.S. loses these industries it
will be dependent on people who do make “engineering” products.
For the most crucial sector, industrial machinery, 47% of the
value of consumed goods in the U.S. comes from foreign sources. For
electrical equipment, appliances, and components, the figure is up
to 60%; for transportation equipment, including cars, 58%, and for
computers and electronic equipment, those great saviors of the
American economy, 40% of the consumed value of goods came from
foreign countries.[10]
The figures given above do not consider exports as part of the
total consumed in the country, because exports are consumed in
another country. Some might object that by not considering exports,
the relative health of the U.S. economy is being unfairly judged, as
exports are produced in the U.S. and thus would indicate that the
U.S. can make more goods. Thus, it might be better to look at the
trade deficit as a percentage of U.S. consumption, as opposed to
just imports. Except for industrial machinery, this different look
does not much change the general picture: the percentage for
manufacturing as a whole goes down from 60% to 48% when we use the
trade deficit as our measure; for computers, from 60% to 45%; and
for electrical equipment and vehicles the figures are virtually
unchanged. Since exports of industrial machinery are still
relatively healthy, the machinery trade deficit is fairly small. But
even here, the problem is that industrial machinery firms are
increasingly foreign-owned.
Nurse, call the doctor
Worse, the trends are all down, as the following graphs show:
The Dubai ports debacle was not just a two-week-long political
game. It was a potential lesson, calling attention to the importance
of the infrastructure, the declining state of the U.S. economy, and
the mercurial and troublesome nature of the American subconscious.
If Americans don’t wake up pretty soon, they will find out what it’s
like being the economic colony of people who can make things.
[1]
Reuters, 3/3/2006, “Bush
defends India job outsourcing”.
[2]
Chapter 12, Friedrich List, The
National System of Political Economy.
[3]
“Bush approval falls to 33%,
Congress earns rare praise”, March 15, 2006, http://people-press.org/reports/display.php3?ReportID=271
[4]
Such as Daimler’s GEM, http://www.gemcar.com/
[5]
For a short history, see http://en.wikipedia.org/wiki/Containerization
[6]
U.S. News and World Report,
3/27/2006, “Can America Keep Up?”
[7]
http://www.gcn.com/print/24_6/35315-1.html
[8]
See “Economic Hit Man John
Perkins: ‘We have created the world’s first truly global empire’",
at http://www.sandersresearch.com/index.php?option=com_content&task=view&id=703&Itemid=5
[9]
See “Before the Economy Hits the
Fan” at http://www.sandersresearch.com/index.php?option=com_content&task=view&id=678&Itemid=62
for more details, or “Why manufacturing and the infrastructure are
central to the economy”, at http://wwweconomicreconstruction.com/JonRynn
).
[10]
The data for this discussion is
taken from the interactive summary tables on the website of the
Bureau of Economic Analysis, http://www.bea.gov/Under the
Industry title, click on Annual Industry Accounts, then under
Input-Output (I-O) accounts, click on Interactive Tables, then click
on the Continue button of the guest account. Alternatively, to get
to the same page, go to http://www.bea.gov/bea/industry/iotables/prod/table_list.cfm?anon=147
Then ,click on "The Use of Commodities by Industries after
Redefinitions" (1987, 1992, 1997 to 2004). If you have gotten this
far, you will see a button for “select level of aggregation”.
“Sector” gives a more aggregate view, including manufacturing;
“Summary” shows the level of detail below, showing, for instance,
the engineering industries. |
