Slouching Towards Mammon

... Mammon led them on--
Mammon, the least erected Spirit that fell
From Heaven; for even in Heaven his looks and thoughts
Were always downward bent, admiring more
The riches of heaven's pavement, trodden gold,
Than aught divine or holy else enjoyed
In vision beatific. By him first
Men also, and by his suggestion taught,
Ransacked the centre, and with impious hands
Rifled the bowels of their mother Earth
For treasures better hid. Soon had his crew
Opened into the hill a spacious wound,
And digged out ribs of gold...
- Paradise Lost, Book i, 678-690

Stirling Newberry's come out with another fine analysis:

It makes many angry that, in a time when America seems to be strip-mining its environment, its credit and its people, we are ruled by the most reactionary American political party to take power since the days when strikers were shot by state militia units, a party that has chosen not to address any of these problems, but instead, tells us that all will be well.

For many, the theory of why this is happening centers around the top-down media system and its vitriolic faux populism that is used to cover an agenda of concentration of power and economic elitism, and an American public that is enthralled by the political machinations of the Republican Party. For others, the root cause is corporate-driven globalization, which sets the workers of different states and different nations against each other in a grim race to the bottom. It seems inconceivable to many writers that, in an era in which so much is headed in the wrong direction, the Republicans have been in the White House 6 of the last 9 terms, and have not lost control of Congress since the elections of 1994, except during a very brief period when the Democrats wrangled the Senate based on a party switch by a Republican. Not only this, but they have controlled the debate, pushing the Democratic Party farther and farther to the right. Even while the approval numbers of both Republican President and Republican Party are below 50% in recent polls, the media treats them with kid gloves, and the Democrats defer to Bush on what the agenda of the nation should be.

What has not been made clear to most people, even to many people who are following the deficits and problems in wages, is how all of these forces fit together and create an environment which is favorable to reactionary government and reactionary social movements. Americans are not as far to the right as the media portrays them, nor as far to the right as the Washington DC power structure behaves: Americans do not favor the war in Iraq, nor the Congress intervening in court cases, nor are they supportive of plans to cut Social Security benefits and turn the stock market into a giant uninsured savings program. And yet, the Bush agenda has moved relentlessly through Congress, and many Americans see Ronald Reagan through a haze of light, as if he set the country on a better road...

The key is not only oil, nor only money, nor only corporate concentration, but how each of these pushes the other along a cycle. Each one maintains the others in place. To understand how, it is important to look at the deficits that America faces.

The reality is that all of the deficit problems, the energy deficit, the trade deficit, the budget deficit, and the wages and wealth deficit, are connected, each one reinforcing the others. They cannot be solved piecemeal: increasing real wages will mean that Americans will burn more oil, and import more, which means a higher trade deficit. ..

The root of problem is that the American economy has become a giant "paper-for-oil" deal. We buy energy, both directly as energy, and indirectly by importing goods made more cheaply in other nations where people command a smaller bundle of energy...

Because America runs an energy deficit, and must import it, and we cannot export other goods to others to pay for it, we run a trade deficit. It is a problem because there is one scarce commodity which all others are denominated in: oil. Oil is scarce, not because there is not enough energy in the world, but because it is so much cheaper to extract energy from oil than from other sources, and oil can be used to transport goods and people.

The competition is not over scarce energy in itself, but over a particular form of energy which can be used to substitute for everything else. There is nothing in this world that one cannot get more cheaply by using more oil to get it - whether by importing it, mechanizing its production, or using more energy to extract it. ..

But what happens when America buys energy? What does that trade deficit mean? This is the second step of the vicious circle: while many nations sell some energy, a few nations export energy, but import virtually nothing. A nation like Nigeria, with a large population, does not pile up energy wealth because it has many demands on the flow of money coming in. A nation like Saudi Arabia on the other hand, which has a small population and a much greater concentration of the control of oil, piles up profits year after year. Those profits, rather than going into developing Saudi Arabia, are poured back into the US.

The reason oil causes a particular problem in the world economy is that one can make huge profits in an oil economy, without having the entire superstructure of a cosmopolitan, entrepreneurial, liberal and technological society around it...

This means the trade deficit creates an investment deficit: the US takes in more investment from the rest of the world than it sends out to the rest of the world...

However, with investment pouring in from nations where the investors are also the government, more and more control over the US economy at its highest levels is in the hands of the wealthy of nations like Saudi Arabia. Should they chose to pull their wealth from the US, or even simply stop rolling over their financing, the result would be a rapid drop in the value of US stocks and assets. This is what happened in the Summer of 2002...

To prevent investors in these countries from gaining control, the developed world, and particularly the US, is forced down a particular path: it must cut taxes on our wealthy, so that they match the taxes on the wealthy of Saudi Arabia. The "race to the bottom" starts at the top. This cutting of revenues is what drives the US budget deficit: without the reduction in revenues from upper-bracket tax rates being lowered, and without the interest on the National debt, there is no financial crisis. This means that the trade deficit, combined with the nature of a few energy exporting states, creates the budget deficit.

The money then comes back to the United States at the top of the economy - in the purchase of financial stocks primarily - and then filters downward. This "top down economy," called "trickle down economics," means that America cannot invest in getting out of the energy trap, because the very people who hold the purse strings have no interest in ending it...

...the reason Reagan won, and gradually pulled the media and much of the public mood behind him, was that in a world which is zero sum - and the amount of oil being the basis of profit meant it was zero sum - people become conservative, grasping at whatever bits of their bundle of ultimate scarcity they hold. It meant that allowing the rich to become richer was essential to keep America under the control of Americans. It meant that corporations had to be allowed to become larger and larger, so that they were harder and harder to hold accountable through political means...

The vicious cycle is this: that a cheap energy deficit created a trade deficit, creating an investment deficit, which then created the political pressure for a wages and wealth deficit, which, in turn, made the cheap energy deficit worse, and even more political pressure for even more inequality of wealth and to keep the one lever Americans still had - the ability to drive further to keep costs down, since they could no longer strike or organize to raise real wages. This started the cycle all over again. This is the key to the move to the right - by creating an economy which is determined by the scarcity of one commodity: oil, and a money system which bends around the dynamics of that one commodity, an environment is fostered in which people think as conservatives first...

And they not only gain power, they get filthy rich doing it.