The Big Takeover

[Kaliayev]

This is an excellent and highly informative article by one of my favourite American journalists, and I highly recommend anyone interested in the ongoing economic crisis should read it.  Matt Taibbi explains the political consequences of the crisis in bleak and easily understood terms:

The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.

The crisis was the coup de grâce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. And so the gambling-addict leaders of companies like AIG end up not penniless and in jail, but with an Alien-style death grip on the Treasury and the Federal Reserve — "our partners in the government," as Liddy put it with a shockingly casual matter-of-factness after the most recent bailout.

The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron — a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers.

Full article at: http://www.rollingstone.com/politics/story/26793903/the_big_takeover/print  Its fairly long, but worth it.

[Sibling Chatty]

Bookmarked to read on a better day. Taibbi's good.

[beagle]

Agree up to a point, but never ascribe to conspiracy what can be explained by cock-up. They were ably assisted by politicians keen to keep the good times rolling. In America, the demolition of Glass-Steagall, and in the U.K. a ballooning public sector, huge deficit, and lowering of the bank capital adequacy rules (by you know who) and exclusion of house prices from the inflation figures.
The Tory press has been saying for years that an ever decreasing savings ratio must inevitable lead to the bubble bursting at some point, they just didn't predict where the bubble would be.

If it is a Machiavellian plot, then it's backfired IMHO. Both the US and UK are now a few failed treasury auctions away from disaster, and more than ever, the future looks Asian.

[Kaliayev]

The quote does take it out of context somewhat, but Taibbi seems to believe it was more a cock-up taken advantage of than conspiracy as well (given the man has spent a lot of time - needlessly, IMO, but nontheless - debunking the Truther crowd and several other popular conspiracy theories I feel I should give him credit there).

However, the effect is as good as anything that could have been planned.  And while in the long term, it is indeed stupid and foolish...well, whenever have these people given a shit about the long term anyway?  They're the same sort of mindset who set out to ruin the entire of Russia to benefit the emerging oligarch class (the same people, in some cases), its not like they really give a shit how crap things are, so long as they are on the top of the pile once it all goes to hell.

And yes, though I must point out not only the Tory press gave warnings about this.  I dabbled in economic security issues about three years ago, and my American lecturer in the topic (liberal by most standards) placed a lot of emphasis on the problems of savings.  I did my own research on foreign investment and bank ownership, which I submitted as part of a paper, and we jointly decided we were fucked if a crisis ever hit the banking industry.  As did David Hale a year later, for the Brooking's Institute.  Lots of people got it right, but of course, none of us will ever be listened to.  Still, I'm much better sitting on the sidelines going "you suck!" than coming up with my own solutions, so that's fine.

I'm not so sure the future is Asian...in the short term at least, though I'd like to look at anything that suggests otherwise.  China's fate seems strongly tied to America's, and although their banking system is certainly more robust, their financing of their own bailout seems every bit as corrupt. And Japan's trade is going down the drain.  I have a friend teaching over there and she is seriously considering leaving this summer, once her contract is set to be renwed, things are getting so bad.  The two Koreas. the Phillipines, Indonesia et al will almost certainly follow the fortunes of the US, Japan and China, as they have previously.

[beagle]

I'm not so sure the future is Asian...in the short term at least, though I'd like to look at anything that suggests otherwise.  China's fate seems strongly tied to America's, and although their banking system is certainly more robust, their financing of their own bailout seems every bit as corrupt. And Japan's trade is going down the drain.  I have a friend teaching over there and she is seriously considering leaving this summer, once her contract is set to be renwed, things are getting so bad.  The two Koreas. the Phillipines, Indonesia et al will almost certainly follow the fortunes of the US, Japan and China, as they have previously.

Well, it's more a historical inevitability argument (see, Tories can do Marxism) than statistics. It goes like this:

Once upon a time the great and innovative Powers were the big countries with big populations, India and China.
Then some Europeans worked out that all it took to rule the World was a reasonably temperate climate (so the institutions weren't washed away each rainy season), some coal and superheated water (to wipe out the economies of scale), and a political system slightly more stable and  less arbitrary than anybody elses.
This combination was sufficient to maintain supremacy for a couple of centuries. Admittedly in that time power around shifted in the West, but it was generally heading to the most populous country that had worked out the "banging the rocks together and not shooting too many of your own people" paradigm.

However, pretty much the whole World has mastered the trick now, China has woken up from the sleep of which Napoleon so approved, and once again power will shift through economies of scale to the most populous countries.
There's nothing special about the U.S./ U.K. middle classes (other than a propensity to live beyond their means). One day, the populous Indian and Chinese consumer will make them peripheral to the World economy.

Short term, perhaps the most obvious marker was Geithner's market gaffe about the possibility of a global currency.
Already the U.S. cannot afford to offend Zhao and China, because the Chinese are already in a position to pull the temple down, the only reason not to being it's not in their immediate interest.

Anywhere near convincing you?

[Sibling Zono (anon1mat0)]

From here it looks like the difference between medium term and long term, in the short to medium term Asia is too linked to the US to pull ahead, but long term they do seem to have certain advantages (as beagle points out) that should put them on top if they do their jobs properly.

Now the question is if those big population markets will be able to overcome the limitations inherent to their size.

[Kaliayev]

I'm not so sure the future is Asian...in the short term at least, though I'd like to look at anything that suggests otherwise.  China's fate seems strongly tied to America's, and although their banking system is certainly more robust, their financing of their own bailout seems every bit as corrupt. And Japan's trade is going down the drain.  I have a friend teaching over there and she is seriously considering leaving this summer, once her contract is set to be renwed, things are getting so bad.  The two Koreas. the Phillipines, Indonesia et al will almost certainly follow the fortunes of the US, Japan and China, as they have previously.

Well, it's more a historical inevitability argument (see, Tories can do Marxism) than statistics. It goes like this:

Once upon a time the great and innovative Powers were the big countries with big populations, India and China.
Then some Europeans worked out that all it took to rule the World was a reasonably temperate climate (so the institutions weren't washed away each rainy season), some coal and superheated water (to wipe out the economies of scale), and a political system slightly more stable and  less arbitrary than anybody elses.
This combination was sufficient to maintain supremacy for a couple of centuries. Admittedly in that time power around shifted in the West, but it was generally heading to the most populous country that had worked out the "banging the rocks together and not shooting too many of your own people" paradigm.

However, pretty much the whole World has mastered the trick now, China has woken up from the sleep of which Napoleon so approved, and once again power will shift through economies of scale to the most populous countries.
There's nothing special about the U.S./ U.K. middle classes (other than a propensity to live beyond their means). One day, the populous Indian and Chinese consumer will make them peripheral to the World economy.

Short term, perhaps the most obvious marker was Geithner's market gaffe about the possibility of a global currency.
Already the U.S. cannot afford to offend Zhao and China, because the Chinese are already in a position to pull the temple down, the only reason not to being it's not in their immediate interest.

Anywhere near convincing you?

Heh, Marxism.  I always preferred Foucault, though Gramsci's an alright read.

OK, in the very long term, their populations should, in theory, carry them to the heights of power, I agree.

However, eventually is a very long time and they will have to survive as unitary states first, and I don't believe for a moment that is a given.  The normal historical state of China is that of various warring factions.  And two of the four pillars of state power for the current ruling elite, seem imperiled (ideological and economic) and could be the conditions for another falling apart, if not checked properly and if they mesh with other factors, such as rising Chinese nationalism.

India, equally, has problems.  Between the Naxalite rebellions and Muslim insurgents, the country could soon become a hollow state.

Also, we might have to consider there may be social and economic advances in Western countries in the meantime which may not appear among Asian giants - new ideologies and modes of living which are more efficient and productive.  Its not likely, but depending on what time frame we are considering here, its possible.

In the long term, I would hedge my bets on Asia, I would have to admit.  The context of the statements in my previous post were more short term.  However, I'm not really convinced its a given, or historical inevitability, only that there is more of a chance of things falling into place that way, given how things currently stand.  The future is, as they say, uncertain.  Even if China develops as planned, it cannot play the role of world hegemon for at least another 80 odd years, and lots can happen in the meantime, especially without a powerful state to try and order the international system.

[beagle]

Even if China develops as planned, it cannot play the role of world hegemon for at least another 80 odd years, and lots can happen in the meantime, especially without a powerful state to try and order the international system.

Sort of depends what you mean by hegemon.  If you mean unrivalled production capacity for goods and weapons I'd say around 20 years; if you mean able to veto any policy it doesn't like by threatening to  bring the economic house down, I'd say now.

[Sibling Zono (anon1mat0)]

Another argument is the ability of the west to sustain its own markets, if the current trends of production displacement continue a 'wealth balancing*' is likely and such contraction would benefit the east and its level of influence. 

All this assumes some sort of political stability that may not be warranted, and we could have revolutions and wars in the interim, making most predictions moot.

* jobs go to the cheapest possible provider, raising the unemployment in the rich countries and lowering it in the poor ones, distributing the wealth (or the poverty depending on how you look at it) in a more uniform way. Add higher productivity by the use of technology and the rate of change is even higher.

[Kaliayev]

Even if China develops as planned, it cannot play the role of world hegemon for at least another 80 odd years, and lots can happen in the meantime, especially without a powerful state to try and order the international system.

Sort of depends what you mean by hegemon.  If you mean unrivalled production capacity for goods and weapons I'd say around 20 years; if you mean able to veto any policy it doesn't like by threatening to  bring the economic house down, I'd say now.

I meant in the classic International Relations sense of the overbearing military, economic and cultural power in world affairs.  Sorry, I should have made that more clear.  At the moment, China is certainly a great power certainly, but not a hegemon.

Also, their ability to project power seriously sucks.  Their logistics are a wreck and I cited the 80 years time period because that is, at least according to current estimates, how long it will take China to create a first class blue water Navy.  A lot of hegemonic theorists place too much emphasis on naval force, I would admit, but even so, hegemon's usually sustain their position by beating the crap out of anyone who imperils the prevailing political-economic order, and if China cannot secure international trade to the degree the USA or British Empire did, then I suspect it will be rather short-lived in its hegemonic role.

Also, with Russia, Japan and India on its borders, things could get...very interesting.  The US helped set the Great Game II into motion after invading Afghanistan, but I sometimes wonder if they knew exactly what they were doing.  Brezinski aside, of course, but since when did the Bush administration ever listen to him?

[Kaliayev]

Another argument is the ability of the west to sustain its own markets, if the current trends of production displacement continue a 'wealth balancing*' is likely and such contraction would benefit the east and its level of influence. 

All this assumes some sort of political stability that may not be warranted, and we could have revolutions and wars in the interim, making most predictions moot.

* jobs go to the cheapest possible provider, raising the unemployment in the rich countries and lowering it in the poor ones, distributing the wealth (or the poverty depending on how you look at it) in a more uniform way. Add higher productivity by the use of technology and the rate of change is even higher.

True, particularly the second point.

Those 3D printers might be a great leveller, if they can ever be made cheap enough for mass production and sale.