STWR - Share The World's Resources

Momentous change is approaching in American politics. Conceivably, the turning point has already arrived, too indistinct to recognize. We are witnessing the demise of the reigning economic ideology.

A deep shift of this kind is a very rare event, one that comes along only every thirty or forty years. Economic disorders accumulate that the orthodoxy cannot answer and may even have caused. Eventually, the ideological presumptions are discredited by real-world contradictions.

The last time this happened was in the 1970s, when economic liberalism foundered and collapsed. Ossified intellectually, unable to adjust to changed circumstances, the liberal order did not know how to deal with economic consequences like inflationary stagnation. As the long postwar prosperity lost its energy, so did liberal politics.

Something similar is happening now to the Republicans. Their problem is the underperforming economy, which must borrow to stay afloat and, roughly speaking, lifts only half the boats. The conservative order--inspired two generations ago by Milton Friedman and Friedrich von Hayek and brought to power by Republican ascendancy--pushed government aside so business and capital would be free to generate more lasting prosperity. But their utopian promise was not fulfilled. Instead, the right's principal product, one can say, was economic inequality.

The IMF’s meeting this spring was lauded as a breakthrough, with officials given a new mandate for “surveillance” of the trade imbalances that contribute significantly to global instability. The new mission is crucially important, both for the health of the global economy and the IMF’s own legitimacy. But is the Fund up to the job?

There is obviously something peculiar about a global financial system in which the richest country in the world, the United States, borrows more than $2 billion a day from poorer countries – even as it lectures them on principles of good governance and fiscal responsibility. So the stakes for the IMF, which is charged with ensuring global financial stability, are high: if other countries eventually lose confidence in an increasingly indebted US, the potential disturbances in the world’s financial markets would be massive.

The task facing the IMF is formidable. It will, of course, be important for the Fund to focus on global imbalances, not bilateral imbalances. In a multilateral trading system, large bilateral trade deficits are often balanced by bilateral surpluses with other countries. China might want oil from the Middle East, but those in the Middle East – with so much wealth concentrated in so few hands – might be more interested in Gucci handbags than in China’s mass-produced goods. So China can have a trade deficit with the Middle East and a trade surplus with the US, but these bilateral balances indicate nothing about China’s overall contribution to global imbalances.

In his radio address and press conferences this week, President Bush highlighted the Senate debate and vote on a constitutional amendment to ban gay marriage. He didn't mention that Congress is also geared up to repeal the estate tax -- and hand a staggering trillion-dollar benefit to the richest of Americans.

Similarly, the president has been touting the "success" of his economic plans -- profits up, stocks up, CEO salaries up. He has not mentioned that the Conference of Mayors reports rising hunger and homelessness in our cities. Or that wages for most Americans aren't keeping up with prices.

The administration, desperate to shore up its own base, is back to posturing on symbolic issues -- a constitutional amendment on gay marriage, a constitutional amendment on burning the flag -- and throwing money at the affluent who pay for the party. Meanwhile, the poor are simply ignored. The cities abandoned. Working people slighted.

Bush's budget simply abandons the cities. He would cut spending on a range of programs that go to the poor, the elderly and the disabled -- Medicaid, education, day care, home-heating assistance, special food assistance. He says this is vital to bring down the deficits. At the same time, he insists on new tax cuts -- largely for the very wealthy -- that add more to the deficit than the cuts for the poor save. And he demands increases in military spending and homeland-security spending -- even while cutting the programs for the poor.

Last week marked the beginning of the 2006 hurricane season, one that the National Oceanic and Atmospheric Administration predicts will be ''above normal,'' with four to six major hurricanes expected to form in the Atlantic.

Everyone agrees that we're into a decades-long cycle of intensified Atlantic hurricanes linked to a periodic 1-degree warming in the North Atlantic. Add an additional degree of ocean warming since 1970 from anthropogenic -- human-caused -- carbon-dioxide emissions, and you have the makings of a hurricane cycle that may never return to a more tranquil phase. Yet when it comes to the way we live in hurricane territory, we're stuck in the 1970s and 1980s, when a lull in storm activity aided and abetted unprecedented development along the Atlantic seaboard, helping assure that 17 of the 20 fastest-growing counties in the country were coastal.

Florida, which was lucky last year in comparison with Louisiana and Mississippi, is still a poster child for hurricane devastation. Flying into Fort Lauderdale, it looks like someone scattered blue Chiclets across the landscape. That's how many blue tarps cover roofs blown away by Hurricane Wilma. At the Broward County courthouse, windows are still covered in plywood eight months after the storm.

Overall environmental protection under the Bush Administration, a Republican Congress and Republican-appointed federal judges has fallen like bowling pins in a master's tournament.

Since taking office, President Bush has weakened environmental laws by applying a number of tactics, such as appointing industry lobbyists to head agencies, and changing or ignoring rules and enforcement.

A third of Bush's appointments to federal courts have worked as lobbyists for polluting industries, such as oil, gas, timber and mining. By May 2004, Bush had appointed over 100 former lobbyists and company lawyers to head agencies that regulate industry and the environment. These former lobbyists redefine policies to shift regulations in favor of their former clients, most often polluting industries.

Bush undid changes in Clinton policies to enforce environmental laws by rolling back over 300 regulations. Reversed policies include Clean Air and Clean Water regulations, mining regulations, the roadless forest initiative, the Northwest Forest Plan, Sierra Nevada logging policies, the ban on snowmobiles in Yellowstone Park, fisheries management, hazardous waste regulations and coastal zone planning. The administration encourages loggers, developers, snowmobilers and property-rights advocates to sue the government to overturn environmental regulations, and the Department of Justice, formerly entrusted with enforcing laws, defends environmental laws in language clearly intended to weaken them.

Do countries have a choice in their economic systems? In the past, countries could choose between capitalism and communism, but today the choice is smaller if we are to take the failure of socialist states at face value.

Neo-liberals asserted that democratic capitalism had emerged as the clear winner in the competition for promoting human happiness, a conclusion summed up in the memorable phrase “the end of history”. But economics is a difficult subject to predict, and there have been a cascade of papers in the last two decades showing that current democratic capitalism is not the only possible system and perhaps an unlikely bet for long-term survival. The source of these threats is surprising given that it has, in the past, promoted capitalist development: human knowledge.

The classical representation of knowledge’s effect on growth is through technology and technological innovation. Advances in technological knowledge may become more productive over time. When today’s scientists invent something such as a new power source, a cure for disease, or a new material, it is often not just better than before; its improvement over past science is bigger than all past improvements. The implications of accelerating technological productivity were heavily investigated in the endogenous growth theory from the early 1990s. Two of the most striking implications are that growth can continue at a high rate indefinitely, and incomes in poor countries may never catch up with rich countries, even if they follow exactly the same policies and savings behaviour. The balance of current thought is that at the moment technology is good but not that good, and developing countries can catch up with developed countries. The more startling predictions of endogenous growth theory were not incorrect, but the technology has not reached a stage where they come into effect.

George W. Bush has come out with harsh words for the governments of Bolivia and Venzeuela.``Let me just put it bluntly--I'm concerned about the erosion of democracy in the countries you mentioned,'' Bush said in response to a question put to him about Venezuela and Bolivia. ``I am going to continue to remind our hemisphere that respect for property rights and human rights is essential for all countries," he added.