Wednesday, August 10, 2011

America, Irrationality and the Irony of Turned Tables

While it was more than a little nervous making to watch the Tea Partiers playing chicken with a national default from overseas in South America (Will our money still be worth what it’s worth today? Will FAA shut down and will that affect our ability to fly home on time? Will the problems we’re causing nations around the world mean we have to endure abuse as convenient targets for anti-American sentiment?), my sister, nephew and I managed to get home just as the default avoiding deal was signed in Washington. But the damage had already been done.

The Clarin, Argentina’s largest daily, a self-described (debatably) centrist paper, had this to say about America’s costly game of chicken:

"After weeks of irrationality (Congress) began to put the national interests over the interests of the parties. Even though it is too early to say who has been the winners and the losers in this negotiation, there is no doubt that the loser is the country. The image of the United States has deteriorated enormously thought the whole world. If the accord is approved as predicted, the United States will not fall into default and will continue paying its debts. But the political default has already taken place." - Ana Baron, Washington correspondent, "Obama announces an accord to avoid default on the debt" Clarin, 1 August 2011, p. 24.

From this American’s perspective, Baron has it pretty well nailed. Who can trust a borrower who sends out conflicting signals about the willingness to pay its bills? And who can respect a nation whose political process threatens to imperil the financial welfare of most of the world? Irrational, indeed.

What was particularly amusing was arriving home to word that China, America’s largest lender, had deemed it necessary to lecture America on its irresponsible ways with other peoples’ money. In a commentary carried by the state-run Xinhua News Agency, Beijing responded to the S&P decision by saying:

"The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," Xinhua said. It said the rating cut would be followed by more "devastating credit rating cuts" and global financial turbulence if the U.S. fails to learn to "live within its means." "China, the largest creditor of the world’s sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China’s dollar assets," it said. Xinhua said the U.S. must slash its "gigantic military expenditure and bloated social welfare costs" and accept international supervision over U.S. dollar issues.

- Alexa Oleson, “China tells U.S. to get over ‘addiction to debt’, Beijing: Credit rating cut just the start” Chronicle-Herald.CA online source published Aug.7, 2011, found at, Aug. 10, 2011.

While it’s not terribly comforting to hear one’s major debt holder responding in such a manner, the likelihood of China calling in its loans anytime soon is small. Moreover, as a friend of mine whose husband is from Taiwan noted, this is little more than China doing a little opportunistic grandstanding. Surely we Americans can recognize that given our own habit of patronizing the rest of the world since WWII.

But what is most ironic to this frequent traveler in the third world, particularly in Latin America, was the terms of the Chinese demands. Beijing demanded that the US slash its “gigantic military expenditure and bloated social welfare costs.” Such terms are hardly original to the Chinese. While cuts in military expenditures have rarely been demanded in Latin American countries (indeed, just the opposite), the IMF and World Bank have regularly not only demanded that social welfare programs be slashed as a condition of their loans, they have imposed draconian “structural adjustment” plans to insure that such occurs. The targets of such cuts have inevitably been education, health care, housing and infrastructure, areas of expenditures which were meager to begin with and which deleteriously impacted the most vulnerable of third world citizens least capable of defending themselves.

This “Washington Consensus” as it has been termed is almost uniformly loathed throughout Latin America and has prompted nations from Brasil to Bolivia to reject new IMF loans and to refuse to meet their conditions on old loans. Indeed, in both Brasil and Argentina, many people were more than happy to tell me on my recent visits there that it was precisely the point that their nations got off the IMF toxic gravy train that their countries began to rise from the muck of underdevelopment. Another irony, no doubt.

America is getting a little taste of its own medicine from the Chinese. And while we are able to ignore it for the time being, the future does not bode well for America vis-à-vis the rest of the world financially. Indeed, one of the reasons Brasil and Argentina did not suffer as deeply as Europe and China in the first round of Mr. Bush’s Depression in 2008 is simply because they had already stopped doing a lot of business with the Yanks upon whom they had formerly been highly dependent. Not surprisingly, this was the source of a great deal of pride in the conversations I held with cab drivers and friends in Argentina coupled with rhetorical inquiries about why we Americans can’t figure this out.

Maybe we should take the Chinese advice a little more seriously. Both Argentina and Brasil ended large expenditures on their militaries in the mid-1980s. In Brasil, it was due to the failure of the military dictatorship and its reliance on loans with major strings attached to insure a productive economy, a path that caused all of Brasil, military included, to confront the reality that their current path was not working. In Argentina, the testosterones on steroids machismo that led Argentines into an ill-advised war with the UK over the Malvinas resulted in a massive defeat, a major loss of life of young servicemen, most of them teenagers, and a huge debt to pay for that fiasco. Both nations simply woke up one morning in the mid-80s, had a Larsen cow moment (Grass! We’ve been eating grass the whole time!) and said, “No more!” They reduced their militaries to a minimal status, began to spend on infrastructure, health and educational services and both countries began to rise from the ashes to become players in world politics and economics today.

My primary question in going to Brasil for my Fulbright trip (details coming!) was simply, “What could we learn from Brasil?” I think we’ve come upon an immediate and obvious answer here. Lyndon Johnson, G-d rest his sorry Texas hide, was simply wrong about this. We cannot have both guns and butter. Indeed, given our failure to realize that earlier, we may not be able to have either for awhile until we’re out of the debtor’s prison in which two invasions of Iraq, an invasion and occupation of Afghanistan and our insistence upon being the king-maker in the Middle East – all the while subsidizing the wealthy so they don’t have to pay taxes - have already imprisoned us.

If the American empire collapses, it will simply be because the American people simply stopped paying attention to the reality of the world in which we live. The answer to my question upon departure is simple – we could learn a lot and it could actually save our nation. The question I bring back from my sojourn in the rising second world is simply whether we will acknowledge the lessons which they have provided us, lessons which stare us in the face, or ignore them to our peril. Frankly, given the "irrationality" we all watched from Argentina last week, I’m not terribly encouraged about what I suspect the answer will be.

The Rev. Harry Scott Coverston, J.D., Ph.D.
Member, Florida Bar (inactive status)
Priest, Episcopal Church (Dio. of El Camino Real, CA)
Instructor: Humanities, Religion, Philosophy of Law
University of Central Florida, Orlando

If the unexamined life is not worth living, surely an unexamined belief system, be it religious or political, is not worth holding.

Most things of value do not lend themselves to production in sound bytes.

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