United States Copying Germany in the Near Future?

State of the Union 2012: What A Journey It Has Been





It is election year in America and 18.3 million voters that matter are beginning to get involved in the future of planetary development:

(16 million households with $100,000-$1 million in assets worth $5.6 trillion total
2.2 million households with $1 million-$10 million in assets worth $6 trillion total
100,000 households with $10 million+ in assets worth $2.2 trillion total)

The other 96 million household block with less than $100,000 in assets worth $3.4 trillion total generally takes political cues from the movers/community role models and doesn't have enough cohesion and purchasing power to afford favors from the white house.

The Pragmatist was started in 2009, shortly after 16 million small time shareholder households showed surprising mobilization (possibly indirectly helped by factions in the military that got truly scared by the long term implications of the financial crisis and who thought McCain wont be prudent). Time to look back and see what this magazine got right, what wrong, and where we are today.

Obama had compared steering United States to making very small degree changes in direction of a large cruise ship. Short term, nothing appears to change but on a 2-3 decade horizon, tiny movements of the wheel to the left or right can bring the ship to surprisingly different destinations. The intensity of elite factions fighting over this wheel (and therefore their small shareholder auxiliaries/proxies also fighting) has been intensifying in first 2 years as predicted. However, The Pragmatist dramatically underestimated just how paralyzing and intense it got (troubling intra elite infighting that we haven't seen since the 1850s).

Scramble for resources saw well publicized spats between California and Texas, gridlock among shareholders' representatives in Congress to the point of using default as a bargaining chip(!), popular 4 star general fired for assuming resources for Afghanistan will continue indefinitely, Lockheed Martin relocating headquarters from California to DC, and CNN totally joining with NBC as propaganda outlet of the shareholder faction in control of the White House currently.
 It also appears that the White House was either unable or too incompetent to provide enough favors to friendly elite factions in swing states to aid in reelection (the Mormon from Detroit leads by 1% on average in swing states while the 16 battleground states have had an average 16% drop in housing prices without much specifically focused federal help).

Recently in 2012, this infighting has quieted down somewhat since the economy has been improving for some time now for the relevant voting blocks. Rather than using the cruise ship analogy again, lets use one of a B-52 Stratofortress taking a nosedive in 2008. It took years for the old but well built giant plane to be brought out of the nosedive, under some control, and to level its flight so it doesn't smash into the ground. Many, perhaps most of its parts have rusted and bolts have gotten lose (insufficient care was taken of the plane for some time). Recently, pieces of the plane were thrown out by the crew with plans to throw out more as the pilots frantically wrestle with the controls (military leaving Iraq and parts of Europe, Ares 5 program being abandoned, various cost cutting that would have been unthinkable before the nosedive, etc). This lightened the load and reduced the strain on the superstructure somewhat.

A process had also began to tighten the bolts in the engine room. We saw Putin-esque negotiating practices between federal center of force and auto industry, private deal making with British Petroleum,  and getting the 5 major banks to throw $25 billion to settle the fraudclosure investigation. Board of Bank of America alone handed over $12 billion to get feds off their backs. We even had Robert Gates begin to crackdown on business tie corruption among retired generals. It doesn't matter whether the executive branch finally has more room to maneuver or has been purposefully goaded to become more forceful, the fact remains that things are now moving along a bit quicker.

The Pragmatist predicted that IF Federal center of force:

a) does not attempt some sort of debt restructuring before 2012 elections and
b) does not purposefully and methodically begin the road towards emulating Germany's hybrid mid level state capitalist system (where major business shareholders, labor, and state always sit around the table to jointly negotiate national strategy)

THEN we may see social instability rise dramatically which would then make purposeful recovery and lifting of the plane into new heights a lot more difficult longer term (by late 2020s).

As for a), the feds have 1.1 trillion shortfall to fund this year and are getting creative again by announcing plans to introduce brand new floating rate treasury bills to try to bring new investors that are not currently content with near zero interest. Real meaningful debt restructuring is not talked about as there appears to be a wait and see attitude in terms of trying to outlast the Eurozone.

As for b), the recent state of the union speech hinted at the federal government becoming the navigator, enabler, conditional supporter, and even occasional manager of large business. Interesting proposals are mandating that high schoolers legally remain in school until age of consent and pushing companies to cooperate with local governments to begin blue collar training in while in school. It demonstrates that American elites have truly run out of their own ideas and are now resorting to catch up copying efforts of FDRist elite clusters in other parts of the developed world, (ironic if not tragic considering Washington DC educated and pushed more advanced FDRism on Germany and Japan).

This year we will see whether waiting this long to announce that German FDRist model is somewhat desirable was a prudent strategy for the factions backing Obama or whether they'll regret that they didn't go for somebody more forceful like Hillary (who proved herself recently as de facto second president by beginning worldwide decolonization while saving face. Here's a small example of the process happening in many parts of the world. Whether Japanese are telling to leave while allowing US to save face or US leaving while conveniently developing difficulties in maintaining imperial presence is irrelevant. The causal flux is hard to disentangle. What matters is that DC is finding ways/reasons to reduce spending.)

Obviously many high net worth shareholders in places like Texas will not be happy with a strategic shift towards a more German/French/ style capitalism. Their frustrations are further compounded by the total disintegration of GOP as a national party (which is being demonstrated in the current primary race by regional shareholder clans pushing their candidates to the last and possibly towards brokered convention and oblivion). The frustration becomes even more acute considering the dramatic demographic and economic shift to the south and west away from the regions of traditional power (northeast and north in general). It is not too far fetched that the financial backers from newly empowered states may ask their political appointees to seek greater economic autonomy for a number of states. It'll be interesting to see how accommodating the feds will be if Obama is reelected (even FDRist federal Germany has states like Bavaria whose shareholders are allowed to run their business a lot more freely from directives of Berlin).

Much will depend if the southern and western shareholders choose to behave themselves by not purposefully damaging the economy during the fragile "plane still sputtering and flying horizontally trying to gather momentum to eventually lift" phase. It may very well be that the plane is too decrepit/obsolete to reach certain altitudes anyway but purposeful undermining of the engine room (to get somebody like the phoney from Detroit in) may very well smash it. On a related note, prime minister Netanyahu knows all this and may wish to indirectly aid some American shareholders by creating a situation where provoked Iran drives the price of oil up, throws a wrench into the American recovery process, and thus allows a more militarist GOP candidate to win on the platform of Obama's weakness and insufficient economic management. Much will depend on how carefully Panetta manages to make clear that Netanyahu will clearly be on his own and perhaps even be given the Mubarak treatment if Netanyahu gambles with getting involved in US economy and election process.

So that's 2012 for now. Lots of egos involved and real economic recovery roots actually being seen JUST as people are finally becoming educated about the horror of it all. A delicate situation considering humans usually start getting restless just when things are perceived to be improving but are seen as not improving fast enough. That is classic political science (Soviet economy began to improve in 1989 after 4-5 years of major intra elite infighting). This time around there are major players in the world who want to help the plane chug along for at least a while longer while they help themselves to some spare parts. We'll see how it holds up.