Listening to Kindleberger …
“As I add the symptoms of aging: the demands for tariff protection and subsidies; intensive lobbying by contending interests for government favor; decline in productivity growth; low rates of savings and high levels of national, corporate, and housed debt; rising incomes of stars in finance, industry, sports, and entertainment and slippage of real income in the lower ranks; spread of gambling and probably, though data are shaky, white-collar crime; and a weakening of responsibility in the international economic area, from rising debt to the United Nations for peacekeeping, increasing demands for contributions to such American-led efforts as the Gulf War, plus many others, I side with the pessimists. A special issue of The Economist is entitled “A Survey of America: The Old Country”. An article by Diana Pinto states: “For those living in Europe there is a palpable feeling that the United States is becoming less crucial and relevant, that it will be even less so in the years to come …”
That’s Charles Kindleberger speaking in 1996. It sounds familiar.
National decline is not always a steady course. It can slow down, speed up, and sometimes reverse course temporarily. Britain’s fade from hegemony began in the 1870s and did not reach its final stage until the postwar dismantling of its empire. That’s roughly eight decades of decline. Using Kindleberger’s focus of the 1970’s as the beginning of the end for the US, we are fast approaching that last stage of collapse. Watch out for the flailing and thrashing of a monster in its last years of life.
And then what?
Perhaps it’s better to ponder the alternative. Or to ask a different question: if people like Kindleberger were talking like this back in 1996, why did American leadership fail to arrest the decline? Why wasn’t something done to change the course of history? Is it inevitable that all empires, such as America’s, fall into ruin — at least relatively if not absolutely?
Kindleberger was, of course, trying to develop a theory of imperial rise and fall. His analysis ranged over centuries and various examples from the Italian City-States, through the Low Countries and Britain, and ending with the United States.
His last chapter — the one on the United States — makes for rather depressing reading, full as it is, with a long list of very contemporary issues. So, I repeat: why did America’s elite so utterly fail to react to the various problems that Kindleberger and others were carefully and expertly laying before them?
Because, I suspect, like so many elites before them, they were benefitting form the status quo. They had insulated themselves from decline. They had created moats — to borrow a phrase from Warren Buffett — to protect their own wealth and privilege from the ravages of the loss of national innovative energy and progress. Indeed they had tapped into the flow of wealth so deeply that they themselves became a cause of decline. In one scathing paragraph discussing the lack of saving at the national, corporate, and household level he dismisses Reagan’s tax cuts as an abysmal failure. The so-called “Laffer Curve” that justified handing tax breaks to the very wealthiest were laughable. They simply induced excess and lavish consumption. In his words:
“Increased skewness in income distribution should raise savings in the upper quintiles, but seems not to have done. President Reagan’s program for tax reductions 1981 was intended to increase savings and hence investment. It failed. As the marginal tax rate was reduced from 70 to 28 percent … retained income seems to have been spent on consumption: second and third houses, travel, luxury apparel, cars, jewelry, yachts, and the like, rather than being saved and invested. Some savings were held in liquid form to take advantage of “investment” opportunities in funds for mergers and acquisitions, takeovers, or arbitrage in securities of companies possibly subject to takeovers; in other words, held liquid for trading in assets rather than being invested in capital equipment for production.”
You can almost hear Kindleberger’s moral reproach. American decline was rot from within, and has its roots in the excessive, self-regarding, and corrupt activity of its elite class who gathered wealth for itself even as the rest of the nation began to suffer from stagnation, steady loss of service, lower standards of living, and, ultimately, even shorter lifespans. The detachment of that upper layer from the realities below was shocking, and it continued even as the populist revolt against its excesses gathered speed.
This is why I reject the idea that Trump’s autocratic style represents the end of American democracy. That ending came long ago. It came when the upper class cut itself off and ignored the very essence of democratic governance. That essence is the continuation of class conflict: it is the struggle for a fair distribution of both income and wealth. Modern democracy was never the creation of clever philosophers and political theorists whose ideas filtered through the years into serious consideration. It was the consequence of the struggle of the industrial working class to seize status and wealth from its overseers. It was the result of raw power exhibited by the masses. That is, naturally, an uncomfortable narrative to integrate into a national myth. So the alternative, that democracy was a gradual and inevitable expansion of power into the lower classes by a benevolent and enlightened elite was used to hide the ugliness of reality. Democracy as a “set of values” is so much more benign sounding than democracy as “power struggle”. And it is much more easy to water down and then eliminate. Which is what the neoliberal program was designed to do back in the 1970/1980s.
So here we are. The sense and reality of decline are abundant. We have fallen into an autocratic style of government. And America is now closer in friendship with its fellow autocracies than it is with its erstwhile democratic allies. The rot is deep and the foundation weak. Only a renewed sense of solidarity and struggle can refresh and reform the system. Until then we need to listen to Lenin:
When the “lower classes” do not want to live the old way and the “upper classes” cannot carry on in the old way, we are living in revolutionary times.
And then what? Indeed.
