America: Where Are We Today?

What country are we leaving to our children and grandchildren? The state of the union can be defined in three fields: outside of its borders, at those borders, and inside the country.
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What country are we leaving to our children and grandchildren? The state of the union can be defined in three fields: outside of its borders, at those borders, and inside the country.

The situation in the outside world can be best characterized by the title of the June 18 article of Mortimer Zuckerman in U.S. News & World Report, "World Sees Obama As Incompetent and Amateur." There are many similar articles, and only a few positive ones (mostly by well-known Democratic partisans, too).

The war in Afghanistan is going badly: no politically correct war is likely to be winnable. (Carl von Clausewitz used to say that wars are won by those who are more ruthless. Perhaps that verdict should be somewhat moderated, but it should not be forgotten, either. Compassion is desirable after the enemy is defeated.) In his June 21 column, Tony Blankley describes "... our Army's new rules of engagement, which are making our troops the laughing stock of the battlefield" and cannot be read without feeling "... something between nausea and fury -- or both." Okay, let's see what happens under General Petraeus.

From the perspective of my generation that has lived through the 1930s, I see striking similarity between the government of Neville Chamberlain and our current administration. But, for letting down Czechoslovakia, Chamberlain at least got a piece of paper called "the Munich Pact," that was of temporary value for the 1938 England. This administration gets nothing for letting down our friends and allies, from Poland to Israel -- not even a piece of paper of temporary value for the U.S. Zilch. (The "reset" agreement with Russia "fits Russia's desires to a T," as Blankley comments in the same article. That seemed to be the concerted opinion of a Washington think tank seminar of experts on foreign policy that he attended -- I thought they considered it a rare, genuine "win-lose" situation.) According to the Pew Global Attitude Project, in spite of his vain attempts to gain popularity there, the president's disapproval ratings in all Muslim-majority countries in the Middle East and South Asia range from 56 to 65 percent.

As for our borders, a country without secure borders is a joke. Our president probably has a great sense of humor. Much greater than that of the majority of Arizonians, which are closer to the jokers.

As for the situation inside the country, most of all I am afraid of double polarization -- along both the wealth and the racial lines. Any substantial polarization might lead to emergence of an autocratic regime, left or right, or to disintegration of the country, or both.

The economic crisis is very far from over. We have spent a lot of money on the stimulus. Results are much below expectations. We have more debt and fewer jobs. In my opinion, two factors had the most impact. First, a stimulus might invoke strong "animal spirits" only if there are ample inactive private resources. There are none to be counted on, so we have to be very careful. Second, if one has a boat-full of holes and tries to take water out of it, he must at least make sure that his scoop is not full of holes, too. "World Counts on U.S. Wallets" is the title of a recent article of Don Lee in a June 20 publication of Global Association of Risk Professionals.

Would the world's expectations be met? In his June 22 article in The New Republic, Clyde Prestowitz provides some answers. A Texas wind farm received a government subsidy to deliver energy -- and "promptly ordered its turbines from China. ... As for solar cells, ... Applied Materials, General Electric, and BP were moving their solar facilities and even in some cases their R&D to China." They did it before the crisis; they are doing it now; unless stopped, they will do it to infinity.

Will we ever do anything in that respect? Will we ever go beyond what looks like 247 (and counting) serious declarations of intent to punish the perps who manipulate the global markets and create unbalanced and dysfunctional world economy? Don't bet your farm on it (especially if it produces soy beans).

Sure, China let the yuan appreciate a little last week. Maybe we would be able to increase our exports to China of steel scrap, paper for recycling, timber, and other high-value products of American manufacturing, filling the holds of more than the current -- approximately one out of five or six -- ships that bring the Chinese products to the U.S. Let us wait though until a little later after G20 ends.

Of course, many of those difficulties the current administration inherited from its predecessors. Happens every time. But, for instance, the "reset" agreement with Russia surely is among its own best achievements. "He was supposed to be competent" -- such was the opinion of the middle class that elected the present set of political rulers. (The extreme left just put their thumbs on the scales.)

On June 4, Sandy Rios sums it up: "Our national debt is soaring, our borders being invaded by illegals and intruders, the unemployment rate climbing, home foreclosures rising, our coastal shorelines in peril with two wars waging, while our President has issued a proclamation demonstrating what really garners his attention: homosexual rights."

In a previous blog I have expressed horror of a potential economic policy, would McCain be elected in 2008. The listed above combination of concerns makes me wonder: "When I think of one, I prefer the other," as a wise French diplomat said 200 years ago. Not by economics alone ... Please include me out.

The world is full of Cassandras now. Indeed, it is extremely difficult not to be one when we are surrounded by flocks of black swans, "known unknowns" and "unknown unknowns," both with potentials to bring about catastrophic outcomes. An unpleasant duty, but still a civic duty. Maybe we can eventually persuade Americans to get their heads out of sand. Of course, not much hope here either.

* * *

Two comments. First, I am quoting in this blog several recent articles. If somebody said something reasonable, why invent the wheel anew? The voice of many well-known pundits, who have access to people and information is more convincing than the voice of one less-known me, who has no such access. (Of course, I am cherry-picking, too.) Besides, what is allowed to Mortimer Zuckerman may not be allowed to Vladimir Masch. They call it "shifting the blame."

Second, one reader of my last blog accused me of being one of those "reformed zealots" that supposedly come from Russia. To avoid similar attacks in the future, let me clarify. OK, I indeed am a reformed man. (Never was though a zealot of anything whatsoever. Except of a fundamental conviction that anything fundamental is very dangerous.)

My political reformation happened in 1937, when my family had an unpleasant (and fatal for one harmless man) encounter with the Soviet regime. Accordingly, I considered being there as a life on a volcano. I wanted to leave the USSR, later with my family, since then. It took me 36 years, till 1973.

My economic reformation continued from the 1940s to the 1960s. It is provable: in a 1967 article (in English, in an American scientific publication) that is available on my Web site ( I already proclaim the need to limit the balance-of-payment deficit for international trade (p. 88, Item 9).

American "mainstream" economists do not usually impose such constraints on their (as well as on Government's or Fed's) models even now. That absence of deficit constraints (or deficit taxes) is one of the main causes of the current crisis. That is a gross violation of the correct economic theory and a crucially dangerous disregard of vitally important practical necessity. It makes international trade perhaps the worst part of the "mainstream" economic theory. It is pure poison for the country. It is, at least, an economic misdemeanor -- or, most likely, an economic felony.

I pray that the American "mainstream" economists would be similarly "reformed." But I do not expect it. As I have said in a previous blog, according to the second law of Max Plank, science progresses one funeral at a time.

Doesn't it bother the international trade economists that this annoying man accuses them of seven mortal sins?

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