.Cartoon 679: Pinstripe Suits

The argument can be made that over the last 70 years Wall Street has usurped democracy in America. They have bought politicians, restricted their own regulation, and blocked longer term investments by government and those in the public interest. In short, they created a situation where only immediate profits were facilitated. They made America a corporate welfare State.

The explicit axiom that is never stressed is that Capitalism is an inherently unbalanced system. It is ultimately a self defeating winner take all economic approach. Inevitably trade imbalances result and overtime it will cause the financial demise of the recipient of the imbalance.

America was willing to have a trade imbalance with certain nations, such as China, because it believed that it could turn the situation around at some point in the future generating fantastic financial returns. China represented a gigantic new emerging capitalist market. But the Chinese are managing their economy very tightly. American Capitalism can not carry the tremendous trade imbalances and not have immediate new markets for offsetting profits.

Wall Street placed a bet. Things were in place. America was “the” financial powerhouse with globalization. It achieved this through granting access to its domestic market. America has the most powerful high tech military in the world. America had a Congress and Administration anxious to please Wall Street to insure re-elections. The effort to utilize all this together was in establishing a new Capitalist market in virgin territory. The desire was a new market over which it would have total control. The answer is seducing the sacred societies of the middle east to America lassiez-faire capitalism. But a beach head was required from which it could spread. The answer was Iraq. A case could be made that Iraq was a lawless nation or even involved in 911. But Iraq already had large capital intensive projects in place embodying its infra-structure.

America went in to its invasion of Iraq to destroy as much infra structure as possible. It would then contract to rebuild what it had been destroyed by paying itself with oil revenue. Do you remember the argument with our allies over the rebuilding contracts before the war started? The goal was to turn Iraq into another Columbia, a captive of American market largess.  But America provided incompetent in managing its own privateering in Iraq. This opened up the political backlash of the insurgency. Instead of a quick new capitalistic market being created, America created a graphic example of capitalism’s failure. 

The financial drain of the war and its management has resulted in a loss of face of America as the world financial leader. Wall Street slipped to number two behind the London financial market in 2007. In a panic, Wall Street embarked on ever more risky financial schemes. In September of 2008 the American financial collapse was in full view.

The bet that was placed failed. Not only is the middle east resistant to the American form of capitalism, but other countries as well have backed off. The failed bet will result in reduced military spending and deployment, greater financial market regulation, a government somewhat more sensitive to investment in the public good and nations less looking to America for leadership.