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ECONOMICS AND FINANCE

INCOMPETENCE – AND HENCE FAILURE – IS BUILT INTO US "DEMOCRACY"

2/16/2020

3 Comments

 
Vince Dhimos answered a question at the Spanish-language sector of Quora.
My translation of the question and my answer are as follows, with text added after publication shown [in brackets].
 
WHAT IS GENERALLY WEAKENING THE US?
 
https://es.quora.com/Qu%C3%A9-est%C3%A1-debilitando-en-general-a-Estados-Unidos/answer/Vince-Dhimos
 
The root cause of US weakening can be summed up in one word: incompetence.
 
And this incompetence underscores the crucial difference between Western democracy, which emphasizes political and ideological solutions to problems, and Eastern democracy, which uses a direct approach, solving problems by allowing only competent experts in the fields in question (military affairs, economics, diplomacy) to solve crucial problems affecting the nation and its people.

This morning I received, coincidentally, news of two examples of how the US is being weakened by incompetence.
 
One example is the news that the US trade deficit with China is bigger than when Trump took office. It has shrunk a bit since the previous year, and Trump claims that this is proof that his trade war is effective. This is utter nonsense. His tariffs on imports from China are making consumer goods more expensive for Americans and are contributing to inflation. Further, the Chinese retaliatory tariffs on imports from the US are still hurting farmers.
 
Trump, who has no training in macroeconomics, has made the disastrous decision to start a trade war, although no competent economist has approved this decision. He made the decision based on the anti-China prejudices of his electorate. Neither Trump nor his electorate have any competence in the area of macroeconomics and international trade.
 
Another example is the fact that the Pentagon is eliminating one of two programs for development of hypersonic missiles. This is especially critical at this time because Russia now has several hypersonic missiles in its arsenal and, according to high-ranking General John Hyten, the US does not have anything that can match them. Further, at the same time, the US is now investing in the construction of 2 new aircraft carriers for the Navy.
 
The irony of this is that, even as Russia is deploying hypersonic missiles that cannot be intercepted and can easily destroy aircraft carriers, which the Russians call "floating coffins," the US is investing in targets for these missiles! [The Pentagon’s procurement system is based on political considerations that have nothing whatsoever to do with national defence, as we showed here].
 
Another example is the US oil and gas industry, which is investing heavily in shale extraction at the instigation of the Trump administration. Trump and the conservatives who voted for him believed implicitly that the US could and should be the largest oil producer in the world. They were right that this was possible, but none of these people had any in-depth knowledge of the industry they were promoting. While it is true that the shale oil industry has caused a major increase in employment, the problem is that the investors in shale oil and gas are not making a profit and the leading companies in the industry are going bankrupt or are abandoning their shale projects because the world energy prices are too low for profit making. [We posted on this here and here].
In Russia, decisions about how much oil and gas to extract and how to do this are made not by ignorant politicians and their fan club but by experts who understand the economics of the business. The failure in this industry is due to the fact that Western democracy simply is not efficient or competent. Thus, while the US can be the largest oil producer in the world, it cannot make a profit, and consequently, it is gradually being forced to abandon the shale energy industry.
 
If the Russians had been making the decisions about energy extraction in the US, they would have put their shale extraction projects on hold until such time as the world energy prices were high enough to sustain the shale projects. That future moment would have been the opportune time because it would be a time of crisis in US energy and the US could have benefitted from energy independence. But because the US invested early in shale oil and gas, much of the US reserves will be depleted in the future time of need.
 
Another example is the repo market crisis. The repo market is dedicated to high-interest short-term business loans. The Federal Reserve’s short-sighted policies – ie, low interest rates and abundant credit – have created a crisis in businesses that require quick loans for business investments. Since the interest rates set by the Fed are very low (and must be because of prior bad Fed policies), banks have no incentive to lend much money and business has trouble finding loans. As a result, the Federal Reserve is forced to print massive amounts of dollars. But this is fraught with the risk of inflation, or even hyperinflation, of the kind we see in Argentina or Venezuela. Further, there is no way out of this situation because the Fed’s policies have eliminated all alternatives. Slowly, the US economy is parasitizing itself.
 
Another example is the bullying of other countries, including US allies. The best example of this is the US third-country sanctions on the Russian gas pipeline project Nord Stream 2. This is a naked attempt by the US to force Europe to buy its high-priced gas and to stop buying cheap Russian gas. Europe is furious at the US for this unfair trade practice. It is also angry that the US has tried to cut off European trade with Iran. As a result of these heavy-handed practices, many countries, including Russia, China, other BRICS countries, India, Turkey, the EU and others are working very hard to unseat the US dollar as the dominant world reserve currency and are using local currencies instead of dollars in their trade settlements.
 
The above examples are not nearly exhaustive but they serve to show how incompetence – not Russia or China – is the main enemy of the US.
 
None of the foolish policies that are weakening the US could have emerged in an Eastern democracy like Russia because they are all examples of total incompetence in the respective fields, ie, economics, military affairs, diplomacy, etc, and in Russia, for example, the decision makers are technically competent and their methods are based on solutions to problems, not on garnering votes for candidates.
Western democracy simply cannot compete with the other two world powers. Some would say that China is not a democracy, but actually, in the broad sense, it is, because in the broad sense, democracy is government with the consent of the people, and the Chinese people are generally content with the way their government operates. After all, it has generated growth of over 7% annually for several decades. The only impediment to this growth is, ironically, the US “democracy,” which now seeks to destroy it.

3 Comments
John McClain
2/16/2020 01:28:54 pm

It seems we are not ruled by "Americans" but foreigners, taxing us to death, warring us to death, expecting to leave when we collapse, our infrastructure neglected to failure, and insane policies for community, city, state and Country, running us to death.
There seems to be deliberate purpose in this, we are to collapse, when we are finally broke.
Semper Fidelis,
John McClain
Vanceboro, NC, USA

Reply
Vince
2/16/2020 05:18:54 pm

I agree, John. It honestly seems as if the Establishment is deliberately trying to destroy America. For what pupose I can't imagine. It looks Satanic to me.

Reply
John M Stassi
2/17/2020 11:39:06 am

Much of what is described in this article is simply the unavoidable consequence of the USA having positioned itself is under the thumb of a very deadly combination:
>> shareholder capitalism; and
>> unlimited election spending by corporations.

Here is the widely-acclaimed prophet of the first of these, Milton Friedman:

Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible. This is a fundamentally subversive doctrine.
-- Milton Friedman, Capitalism and Freedom (1962)

And here is the Supreme Court ruling that opened the floodgates for the latter:

Citizens United v. Federal Election Commission, 558 U.S. 310 (2010), is a landmark United States Supreme Court case concerning campaign finance. The Court held that the free speech clause of the First Amendment prohibits the government from restricting independent expenditures for political communications by corporations, including nonprofit corporations, labor unions, and other associations.

Here is an excerpt from Justice John Paul Stevens's dissent in that case:

“At bottom, the Court’s opinion is thus a rejection of the common sense of the American people, who have recognized a need to prevent corporations from undermining self-government since the founding, and who have fought against the distinctive corrupting potential of corporate electioneering since the days of Theodore Roosevelt. It is a strange time to repudiate that common sense. While American democracy is imperfect, few outside the majority of this Court would have thought its flaws included a dearth of corporate money in politics.”


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