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.

France's Sarkozy is in the Same Political Situation as George Bush

Considering the atypical polarization of French politics since the last election, Sarkozy's road to being elected again is the same as the one George Bush took. Mobilizing conservatives and defending an abstract French way of life



Jean-Marie Le Pen is very old. How old you say? He is older than even John McCain and might not live to see the next election to make opinions about it. Le Pen's participation during the 2007 French elections allowed Sarkozy to capitalize in the second round on some anti-immigrant National Front single issue voters. It wasn't the deciding factor in his victory but gave a taste of a demographic that can be courted in the future. Sarkozy realizes that he won due to greater infighting within the center left opposition and his Rudy Giuliani-esque law and order posturing. He knows the center left will reorganize a bit further to the right to undermine his support in the center and make a sustained coordinated effort to dislodge him in 2012. Five year terms allow plenty of space and breathing room to lick the wounds and make new alliances.

French center-left has more than enough tools and time to capitalize on the economic downturn, prevent Sarkozy's various short and long term economic stimulus measures from being successful, and exploit the potential rift between Paris and the new American administration (with Obama trying to make inroads with Muslims, Sarkozy finds himself in a difficult position). Sarkozy sees that the only way to solve the issue of illegal residents is to socially integrate them by legalizing their status. That of course would add to the numerical strength of voting blocks for candidates like Royale. The process of recognition and proper assimilation itself is political suicide for coalition building with conservative factions in society. Since the political hyperpolarization of 2007 election, it is very difficult for the president to peal away those who voted for Royale from the center-left. People's hatred of him is not waning.

As such, Sarkozy's only real options are:

1) to move further to the socially conservative right by getting the disgruntled La Pen voters to the polls in larger numbers than in 2007

2) to tap into the potential conservative factions of those who don't vote (even for Le Pen) because they know their guy wont win. This can even include those in France who still engage in Christian mythology but never bothered to really participate in the strictly secular French politics

3) to split the youth vote by polarizing the youth along nationalist militarist lines and using his own youthful energies to that end

4) utilizing increased support of the wealthy for media manipulation and social relations cover to achieve the above 3.

Sounds familiar? Yes. The president of France is George Bush in 2002. The economic crisis and gains by nationalist anti-immigrant parties in European Parliament allows Sarkozy a cover of international fiscal emergency and worry to mobilize new supporters. This would include the elderly and disgruntled underemployed young whites and involve constant play on their insecurities and passions. Such a road to 2012 reelections would have to be walked right away to build cultural momentum through media repetition.

The statement concerning Burqas not being welcome in France appears to be the first salvo in that direction. Since Obama criticized France in his Cairo speech by making a point to describe how America does not push secularism on its Muslims, Sarkozy can now begin to move away from public perception that he is more pro-American candidate than Royale by distancing himself from Washington's policies. Surrounding European countries are too preoccupied (with making their annual GDP reversals smaller than projected) to expand too much energy on lifting an eyebrow towards harder nationalist secularist tone coming from Paris. Sarkozy might not have EU's rotating presidency anymore but 2009 allows his country to be in the driver's seat of EU policy more than ever. Germany's focus on the upcoming elections takes Berlin out of the international picture briefly. Angela Merkel will not side her center-right Christian Democrats with Muslim immigrants abroad as she runs for re-election amidst a deep recession.

We can expect President's Union for a Popular Movement to gradually increase the use of social wedge issues like the Burqa ban and even a possible outreach to France's remaining Christian communities. He has already shown a willingness to appeal to militarists by advocating a stronger EU defense force and intervening to broker peace between Russia and Georgia last summer. As former minister of the interior and manager of police structures, Sarkozy is comfortable with rigid hierarchical organizations as well as interdepartmental cooperation between such structures. He really is well positioned to pick up the torch of the war on terror by stressing continental security and defense.

Using Turkey and Iran as geopolitical threats to European way of life plays well to demographics in key EU member states. Unlike Bush, Sarkozy has more skill and intelligence to create a domestic impression that he is a popular, competent, and moderate internationally. Currently, Paris is capitalizing on Washington's strategic public non-commitment to ongoing protests in Iran. Sarkozy's statement on defending women from disrespect (by not welcoming the fundamentalist Muslim requirement of a face cover) comes at a strategically appropriate time. The issue of speaking out against fundamentalist modes of life is bound to grow with the background of Iranian unrest and generate even more debate than before. The elevation of dialogue itself allows the president to show both the leftist anti-American youth and the anti-immigrant conservatives that he is serious about defending the French way of life autonomously.

The wild card is the international crisis itself and the depths to which United States' retracting economic bubble will pull Western Europe after it. As things stand now, continuous recession without further deterioration allows Sarkozy to claim he stabilized the country, to increase scapegoating, and to try to get re-elected on notion that you can't change horses in midstream when restructuring the economy. Conditions paralleling America's current slide into a deep depression are historically unpredictable however.

Future of NATO: Europe's Security Requires That Germany and France Take Charge

US style minimal state capitalism has proven to be structurally unstable and ideologically bankrupt. As Obama tries a domestic top down restructuring to save remnants of capitalism before the dollar defaults, central European region is left destabilized.




The process of wrestling NATO's control away from the Anglo-American partnership should start immediately while the international recession is relatively young. American economic collapse is forcing US leadership to copy its former ideological colonies of Germany and Japan when it comes to implementing state capitalism. That in turn will result in a power vacuum created in central Europe and major risk involving NATO's structure the way it is led presently.

US always had elements of state capitalism although private sector was far less regulated compared to US's more state centered ideological colonies in Western Europe. However, decades of de-industrialization, social/structural decay, and military build up brought the need to accelerate ideological compromise. We now see an American president insist on the need for state champions in energy and car production as well as utilization of state organs to shape private sector development. US still has what it takes to pull that off peacefully. If De Gaulle's France and Putin's Russia managed to create successful state backed champions under conditions bordering on civil war then Obama's America can do the same.

There is sufficient amounts of managerial experience and efficiency enforcement talent to be found domestically. Subsidizing cars and green energy will do for those industries what subsidies for agriculture did. That is, create industrial base for mass cheap exports abroad after years of hard work and political coalition pressure. That will take time however and in the meantime it makes strategic sense to extend state capitalism to biomedical, natural resource extraction, electronics, and agriculture sectors. These three fields, have the most potential for economic stimulation since they are one of the few things US still has an edge on internationally. American oligarchic demands and semi-privatized medical system have created the most advanced pharmaceutical and bioengineering research and development in the world. Bioengineering, organ growing, genetic modification, and resulting transhuman augmentation and life extension, are the best potential kernels of a new American economy. As such, if US government wants to take serious stabilizing steps to save bits of the old capitalist system, it needs to nurture, subsidize, and promote the biomedical sector the way it wants to with the car industry. Biomedical product exports are potentially worth trillions of dollars long term, especially if Koreans and Japanese can be brought aboard as collaborative partners.

If Obama administration is smart and wants to really make US economic decline gradual (rather than sharp and potentially violent), it will also use increasing state capitalism to try to catch up or collaborate with Japan in robotics. A friendly US-Japanese competition in robotic exports, to aging Europe, will bring additional stream of steady revenue to claw out of future dollar default. State control of agriculture and resource extraction is self explanatory when it comes to additional money for disgruntled desperate population. Global warming will allow more land cultivation for crops and the land is rich in coal, uranium, and gas (especially if Canada is brought on board to collaborate in Arctic exploration/extraction). Obama has taken the first steps of taking control of strategic sectors and the pace of state acquisition will accelerate. Proper state subsidies and investments must be made immediately so the lifeline industries are nurtured before the default on the dollar occurs.

How does this relate to central Europe? Central European states have embraced American style free market capitalism with open arms. Legions of US capitalist commisars have flown to educate the fresh faced leaderships of Baltic states and dissolved Warsaw pact members. The Soviet collapse has been so rapid and demoralizing that the ideology of minimal state capitalism has taken root deeply and broadly as far as the core states of the former Soviet Union itself. In many ways, central Europeans even outdid their American teacher (and new NATO master) in terms of lack of regulation, taxation, and lack of investment in real industry. The supposed success stories, of minimal state capitalism, have been shown in nearly double digit growth rates throughout the former socialist space. The small Baltic countries have shown their proud ability to stand tall next to other speculative paper tigers of Ireland and Iceland. Even the normally cautious American satellite of Germany got into the housing bubble creating action in the 1990s. Supposed post-industrial financial wizardry was so visible, that in 2003 Donald Rumsfeld even proposed to make central Europe the new ideological arm of American power projection.

Germany and France were no longer seen as reliable footholds to violently spread capitalism throughout the world. Franco-German leadership of Chirac and Shroeder were fine with the split between US and Western Europe since it allowed them to pursue their own independent state capitalism with European characteristics. They decided that US lacks the industrial production to continuously exert influence in central Europe. Leading Western European leadership decided to gradually play Americans and Russians against each other while competing with US and Russians in central Europe when it comes to financial investment. With no massive global ideological alternative to warn of the risks, even the neutral well managed Swedish banks poured money into"New Europe" states like Hungary and Latvia.

When the underutilized communist built infrastructure once again reached full capacity (and when a run on the banks collapsed structural pillars of American union's capitalism), central Europe went into an even deeper tailspin than United States. Not only did the ideology preached to them by America failed but now America itself is heading into the state capitalist direction of Germany, France, and Russia. We saw what happens when the core of an ideology promoting empire changes direction. The power elites of peripheral colonies (even those within the empire sponsored military alliance) often become disillusioned, demoralized, and run into increasing conflict with their own population. Khrushchev's thaw caused social unrest and colonial rebellion. Then of course Gorbachev's top down restructuring and liberalization didn't just pressure ideological satellites to split and pursue their own political development. It didn't just result in development of cultural/ideological differences so great that a common military alliance was deemed undesirable. It actually caused backward conservative regions of the federal union itself to secede so they can be free from the betrayal and influence of the liberalizing "capitalist" center.

Now it's unlikely that Obama's move towards restructuring of the state capitalist economy to make it more efficient will cause anything as drastic as any American region wanting to secede. After all, the great American melting pot and intermingling of ethnic groups produced a much more durable artificial nationality compared to the violence born Soviet one. Surely American evangelicals, blacks, northeastern secular liberals, and Hispanics can work out a way to peacefully decline and restructure without resorting to Yugoslav style nastiness. The last statements are not meant as sarcastic or alarmist. US state capitalist political system allowed some social popular pressure to be released continuously at the polls without being angrily pressurized for decades.

However, the demoralizing effect and demonstration of the minimal state capitalist failure will mean another economic/ideological collapse in the heart of Europe. We are seeing industrial drop offs in Hungary, Ukraine, and the Baltic states that resemble the early 90s and American reversals in the early 1930s. US never even had a large enough financial presence in their new ideological colonies since most of the housing bubble money came from EU heavy weights. That means that central Europe will drag economies of Western Europe down with them to an undetermined degree as German and Scandinavian Banks find themselves in a Baltic sub-prime mess of their own. With decrease of EU's economic support, American ideological betrayal, and Obama administration's lowered priorities for NATO expansion, regional vacuum can only be filled rapidly by Russia. Kremlin has tangible natural resource and energy exports as well as over 200 billion dollars in saved wealth. China's 500 billion bailout to create internal demand for its products is beginning to push oil price up again. This means that the oil based ruble is strengthening and can be used to rapidly exert political pressure in the region filled with devaluing currencies.

This is why the need for joint French/German take over of NATO is required. Rapid expansion of Russian influence, into a collapsing and socially unstable region (that is still overseen by American puppets like Yuschenko with approval rating of 4%), can result in a potentially violent confrontation with Anglo-American led NATO. US and England still have disproportionate influence within NATO's structure. Many within the Anglo-American leadership are ideological capitalist internationalists who might not want an American regional rollback. We have already seen how even the puppet leadership of the NATO aspiring country of Georgia can create a hysterical American led reaction. We cannot rely on Anglo-American internationalists within NATO, to properly handle the situation of minimal state capitalist collapse under the direct NATO umbrella itself. Potential for escalation and violence, would be much greater than during the daring NATO aggression against Yugoslavia in 1999. The world cannot rely on military leadership of an ideologically bankrupt and collapsing society to do the right thing and retreat when the dollar is devalued, social tensions are up, and elections are coming up.

French and Germans should begin efforts to become the new negotiating power center of NATO. If US decides to dissolve the alliance in retaliation, that is fine. Europeans already have protocols to make use of NATO facilities for a new European alliance. If US decides to stay (and still provide a nuclear umbrella to augment those of France and England), then that is the perfect outcome for the continent. It'll show American people that they are still relevant and soothe England's fears of being marginalizing completely. Berlin, Paris, and Rome can then pragmatically negotiate with Moscow on security arrangements for the continent. Only negotiation untainted by reactionary ideology can bring results. This solution allows coordinated preservation of North-Hemispheric stability in a time when state capitalism faces serious challenges from economic and social stagnation. Situation that leads to serious Western infighting, further deterioration of investor confidence, and potential escalating violence must not be allowed to happen. That would allow only China to remain the biggest planetary center of influence with 1 trillion dollars of saved wealth and the only major growing economy. Even briefly, that risks giving an opening that might prove difficult to close.