by Mark Steyn
It’s not, and it never can be. In Sebastian Faulks’ novel A Week in December, set during the great unraveling of 2008, the wife of a hedgefundy type muses:The essential change seemed to her quite simple: bankers had detached their activities from the real world. Instead of being a “service” industry—helping companies who had a function in the life of their society—banking became a closed system. Profit was no longer related to growth or increase, but became self-sustaining; and in this semivirtual world, the amount of money to be made by financiers also became unhitched from normal logic.
It’s one thing to have a financial sector that provides a means for wealth creators to access equity to advance economic growth. But, by the time you’re using the phrase “credit default swap” without giggling, by the time you’re trading not only in derivatives of derivatives but in derivatives of derivatives of derivatives (seriously), you’re several links unhitched from any tangible reality. Tom borrows money from Dick, who turns a nice profit by selling Dick’s debt to Harry, who covers himself against the risk of Dick’s
We’re in a worse state than Jonathan Swift’s banker—we cannot reliably say who has our bonds and therefore our souls. Thanks to the packaging, repackaging, subcontracting, and outsourcing of even routine mortgages, millions of home “owners” have no idea who really holds their property or the terms by which they can be expelled from it. And nor do the banks. According to the Office of the Comptroller of the Currency, by 2010 the U.S. financial system “owned” more than 230 trillion dollars’ worth of derivatives—or about four times the entire planet’s GDP.102
It was Polonius who advised, “Neither a borrower nor a lender be,” and America at the dawn of the Obama era was approaching that blessed state. A man who borrows $400,000 for a house he cannot afford isn’t really a “borrower,” is he? After all, by 2008 every politician agreed that the priority was to keep people in “their” homes, and the Congressional Progressive Caucus was soon calling for a “moratorium on foreclosures,” which is a polysyllabic way of saying there’s no need to make your monthly payments. In what sense then is such a man “borrowing”?
And the banker who loaned the 400 grand isn’t a “lender” of anything terribly real, is he? Not in an era of banking as performance art. “We refused to touch credit default swaps,” the author and investment adviser Nassim Taleb said. “It would be like buying insurance on the Titanic from someone on the Titanic.”103 But a lot of people did just that. The Canadian commentator Jay Currie, waxing lyrical, put it this way: “If two people make a bet on the fall of a raindrop and each puts up, say, their shoes, the bet is a real 104
Except that many people made real-world decisions with their dead imaginary money. You thought the house you bought for a hundred grand was now worth a quarter-mil and so you took out a home-equity loan to buy a camper or to send your kid to private school. Your stuffed animal has died, but you’ve still got a real vet’s bill to pay.
And then, just to pile on, the government steps in to replace all that dead imaginary money with real (or realish) money. Having, in effect, colluded in the destruction of meaningful risk-evaluation, Washington decided it was obliged to act—not to prevent a Thirties-style “credit crunch” but to prop up an unsustainable form of mock credit that had led to the crisis in the first place. The state’s response to the downturn was to insist that we needed to re-inflate the credit bubble. If someone punctures your balloon, you can huff and puff into it all you want, but you’re never going to get it up in the air again. The Obama administration blew a trillion dollars of “stimulus” into the punctured credit balloon, and it flew out the gaping hole in the back, dropped into the Potomac, and floated out to sea.
“Borrowing,” continues Polonius, “dulls the edge of husbandry”—and that goes double for government, whose husbandry is dulled in the best of times. The state spends too much. So the individual spends too much. The state hires too many people on whom it lavishes too many benefits. So those foolish enough to remain in the private sector have to pay for the benefits of the public sector, and fund both their basics (housing) and their baubles (plasma TVs) through debt. At the start of the Reagan administration, America was the world’s largest creditor nation and its citizens had a 10 percent savings rate.105 Not today: By 2007, the average U.S. household had debts equivalent to 130 percent of income.106 Keynes’ view of the economy derived from the premise that a government treasury was not a family purse, and so the state, unlike the household, could borrow to
SLOW BOAT TO CHINA
The intellectual cover for America’s structural deformation was provided by “globalization.” Some of us have always been in favor of the “global economy.” If I want to buy a CD or a sofa, I don’t think it’s any business of the government whether it comes from Cleveland or Milan or Ougadougou. As Adam Smith and John Stuart Mill will tell you, free trade has been indispensable to economic vitality from the Netherlands to Bengal. But you no longer hear much about “free trade.” That humdrum, prosaic supply-anddemand concept yielded to a glittering new coinage: “globalization,” less a commercial mechanism than an ideology.
But what does this mysterious metaphysical force called “globalization” actually boil down to? At the end of 2008, a few weeks after Barack Obama’s historic election, the media reported on America’s Christmas shopping spree. “Retail Sales Plummet,” read the headline in the Wall Street Journal. “Sales plunged across most categories on shrinking consumer spending.”107
That’s great news, isn’t it? After all, everyone knows Americans consume too much. What was it that then Senator Obama had said on the subject only a few months before? “We can’t just keep driving our SUVs, eating whatever we want, keeping our homes at 72 degrees at all times regardless of whether we live in the tundra or the desert and keep consuming 25 percent of the world’s resources with just four percent of the world’s population, and expect the rest of the world to say, ‘You just go ahead, we’ll be fine.’”108
And by jiminy, we took the great man’s words to heart. SUV sales nosedived, and 72 is no longer your home’s thermostat setting but its current value expressed as a percentage of what you paid for it. If I understand the
And yet, strangely, the Obama administration wasn’t terribly happy about the Obamafication of the U.S. economy. The Democrats immediately passed a bazillion dollar “stimulus” package to “stimulate” us back into our bad old ways, and, when that didn’t work, Ben Bernanke at the Federal Reserve printed another gazillion dollars in “quantitative easing” to lure us back into the malls.
And how did the rest of the world, of whose tender sensibilities Senator Obama was so mindful, feel about the collapse of American consumer excess? They were aghast, and terrified—as you would be if you suddenly found yourself strapped into a nightmare ride on a one-way express elevator into the abyss.
They didn’t put it that way, of course. Economics correspondents instead penned erudite thumbsuckers about how the global economy needed to restore aggregate demand. Which is a fancy term for you—yes, you, Joe Lardbutt, the bloated, disgusting embodiment of American excess, driving around in your Chevy Behemoth, getting two blocks to the gallon as you shear the roof off the drive-thru lane to pick up your $7.93 decaf gingersnap-mocha-pepperoni-zebra mussel frappuccino, which makes for a wonderful thirst-quencher after you’ve been working up a sweat watching the 78” TV in your rec room with the thermostat set to 87. The message from the European political class couldn’t be more straightforward: if you crass, vulgar Americans don’t ramp up the demand, we’re kaput. Unless you get back to previous levels of planet-devastating consumption, the planet is screwed.
“Much of the load will fall on the U.S.,” wrote Martin Wolf in the Financial Times, “largely because the Europeans, Japanese and even the Chinese are too inert, too complacent, or too weak.”109 The European Union 110 Britain, France, Germany, Italy, and Spain are advanced economies whose combined population adds up to that of the United States. Ma
ny EU members have enjoyed for decades the enlightened progressive policies that Americans didn’t find themselves on the receiving end of until the Obama-Pelosi-Reid era. Why then are these advanced societies so “inert” that their economic fortunes depend on the despised, moronic Yanks?
Well, that’s globalization. All the stuff that used to be made in America is now made somewhere else. But the people who buy it are still Americans. That part hasn’t changed.
So, if Americans don’t make any of this stuff, where do they get the money to buy it?
By borrowing it. Once you’re paying what citizens of free societies do in taxes, what’s left barely covers room and board. So life’s little luxuries—or cheap plastic Chinese-made luxuries—have to be paid for through debt. So Americans buy toys that so enrich the Chinese they can afford to lend huge amounts of money to America to help our government grow even bigger so that Americans will have to borrow even more money for the next generation of cheap Chinese toys.
Hey, it’s globalization. What could go wrong?
Entire countries—not just the Third World assembly plants, but G7 members such as Canada—have economies overwhelmingly dependent on access to the U.S. market. “Globalization,” translated out of globaloney, means the American shopping mall is all but singlehandedly propping up living standards from Ontario to Indonesia. In 2010 U.S. consumer debt (that means us: not the spendaholic rulers but the spendaholic subjects) was about $2.5 trillion, or the combined GDP of Canada and India.111 That seems like a lot of money to borrow in order to buy electronic amusements for a lifestyle we can’t afford.
But the Chinese are smart guys. They must know that, right?
Undoubtedly. But the dollar is the global currency and so, unlike Zimbabwe or even Iceland, America gets to borrow money in its own bills,
Yes, but why is the dollar still the global currency if America’s the biggest debtor nation?
That’s about image, too: America is seen as the guarantor of global order.
But, as noted earlier, when money drains, so does power—and very quickly, as the British learned after World War II. Today, money is draining across the Pacific. China Minmetals is a Fortune 500 company owned and controlled by the People’s Republic.112 By the way, read that sentence again and imagine what an H. G. Wells time traveler from the early Sixties, from the time of Mao’s Cultural Revolution, would make of it. Yet in the Fortune Top Ten there are three Chinese companies against two from the United States.113 And China Minmetals is serious business: they own the Northern Peru Copper Company in Canada,114 and the Golden Grove copper, lead, zinc, silver, and gold mines in Western Australia,115 and the mining rights to a huge percentage of Jamaican bauxite.116 China’s Sinopec bought up Calgary’s Addax petroleum117 and 9 percent of the Alberta oil sands business Syncrude,118 and have massively expanded oil production and development in Sudan and Ethiopia. China’s Sinochem took over Britain’s Emerald Energy.119 You remember all the “No Blood for Oil” chants back in 2003? Relax, it’s our blood, their oil. The biggest foreign investor in post-war Iraq is the developer of the Ahdab oil field, the China National Petroleum Corporation.120
Think of it as the first settlers did vis á vis the Indians: the ChiComs sell us trinkets in exchange for our resources. Lenin boasted that “the capitalists will sell us the rope with which we will hang them.” His fellow Communists in Beijing inverted the strategy to lethal effect: they sell us the rope, and sit back to watch us hang ourselves.
And, where money flows, power follows. Having turned resource nations in Africa into de facto protectorates, China has moved on to the 121 Beijing is also the biggest foreign investor in post-bailout General Motors: they bought 18 percent of the Obama administration’s IPO in 2010.122 If the Obamaapproved Chevy Volt isn’t environmentally friendly enough for you, wait for the new Chevy Rickshaw. Can you still, as Dinah Shore sang, see the USA in your Chevrolet? The Chinese can.
Like America, China has structural defects. It’s a dictatorship whose authoritarian policies have crippled its human capital. It has too many oldsters and not enough youth, and among its youth it has millions of surplus boys and no girls for them to marry. If China were the inevitable successor to America as global hegemon, that would be one thing. But the fact that it is incapable of playing that role is likely to make things even messier, more unpredictable, and far more destabilizing.
They have our souls who have our bonds. In their decadence, much of the western elite now think the answer to our worsening problems is not merely Chinese money but Chinese-style dictatorial government. If you support Bush’s “Patriot Act,” you’re endangering civil rights. But if you support eco-totalitarianism, it’s totally groovy.
In 2008, David Suzuki, Canada’s most famous environmentalist, suggested that “denialist” politicians should be thrown in jail.123 Mayer Hillman, senior fellow at the Policy Studies Institute in London, thinks democratic dissent from conformocrat-enviro-hysteria needs to be suppressed: “When the chips are down I think democracy is a less important goal than is the protection of the planet from the death of life, the end of life on it. This has got to be imposed on people whether they like it or not.”124 If the people are too foolish to vote as their betters instruct, then it will have to be “imposed.” The earth is your führer. James Hansen, head of NASA’s Goddard Institute, agrees on the inadequacy of America’s “democracy” (his scare quotes) and argues that (to quote the article he wrote for the South China Morning Post) “Chinese Leadership Needed to Save Humanity.”125
The New York Times’ Great Thinker Thomas Friedman regularly channels his inner Walter Duranty: “What if we could just be China for a day?” he fantasized. “Where we could actually, you know, authorize the right solutions. . . .”126 Ah, yes. “Authorize” the “right” solutions without all that messy multi-party democracy getting in the way: why, in Beijing, where they don’t suffer the disadvantages of free elections, they banned the environmentally destructive plastic bag! In one day! Just like that! “One-party autocracy certainly has its drawbacks,” wrote Friedman. “But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages. That one party can just impose the politically difficult but critically important policies needed to move a society forward in the 21st century.”127
Ooooo-kay. But, pardon my asking, forward to where?
When the New York Times’ most prominent writer comes out in favor of dictatorship, and no one else in the smart set calls him on it, you get a glimpse at the very least of the scale of elite contempt for popular sovereignty and the republic’s animating principles. In breaking faith with the American idea, the political class got everything wrong: they exported millions of low-skilled jobs but imported millions of low-skilled workers; they fund both sides of the war on terror out of a wanton hostility to domestic energy production that leaves us dependent on noxious oil dictatorships that use their profits to wage civilizational warfare. And, having gotten us into this mess, the way to get us out is “China for a day.” This is the logical endpoint of a cocooned conformocracy: Big Government having “imposed” the problems in the first place, only Even Bigger Government can “impose” the solutions.
Never underestimate the totalitarian temptations of the smart set. We’ll hear a lot more of that in the years ahead.
In this chapter, Steyn writes:
“Barack Obama is so smart he had a fake Martin Luther King quote sewn onto the Oval Office carpet.… Barbra Streisand is so smart she sonorously declaimed to a Democratic
So what’s your best “Liberals are so smart they …” line?
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CHAPTER THREE
THE NEW ATHENS
The Drowning City
MR DIMPLE: Believe me, Colonel, when you shall have seen
the brilliant exhibitions of Europe, you will learn to desp
ise the
amusements of this country as much as I do.
COLONEL MANLY: I do not wish to see them, for I can never
esteem that knowledge valuable, which tends to give me a distaste
for my native country.
—Royall Tyler, The Contrast (1787)
From the Times of London, May 6, 2010:The President of Greece warned last night that his country stood on the brink of the abyss after three people were killed when an anti-government mob set fire to the Athens bank where they worked.1
Almost right. They were not an “anti-government” mob, but a government mob, a mob comprised largely of civil servants. That they are highly uncivil and disinclined to serve should come as no surprise: they’re paid more and they retire earlier, and that’s how they want to keep it. So they’re objecting to austerity measures that would end, for example, the tradition 2 You read that right: the Greek public sector cannot be bound by anything so humdrum as temporal reality. So, when it was mooted that the “workers” might henceforth receive a mere twelve monthly paychecks per annum, they rioted. Their hapless victims—a man and two women—were a trio of clerks trapped in a bank when the mob set it alight and then obstructed emergency crews attempting to rescue them.
Unlovely as they are, the Greek rioters are the logical end point of the advanced social democratic state: not an oppressed underclass, but a spoiled overclass, rioting in defense of its privileges and insisting on more subsidy, more benefits, more featherbedding, more government.
Who will pay for it? Not my problem, say the rioters. Maybe those dead bank clerks’ clients will—assuming we didn’t burn them to death, too.
America and Greece are at different stops on the same one-way street, all too familiar to us immigrants. There’s nothing new about Obama: been there, done that. Nothing could be less hopeful, or less of a change. He’s the land where we grew up, with its union bullies and marginal tax rates and government automobiles and general air of decay all re-emerging Brigadoon-like from the mists entirely unspoilt by progress. It’s like docking at Ellis Island in 1883, coming down the gangplank, and finding everyone excited about this pilot program they’ve introduced called “serfdom.”