It seems the main thread running through these economic cycles is the ability of those in power to accumulate most of the wealth. Growth is bottom up, not top down, so this starves the base for the comfort of the wealthy. My theory for reversing this process is that when the current credit crisis erupts, to start a discussion of how money is a public utility, supported by public taxation and it should be treated as such. Similar to a public road system. That way wealth would be more of a personal effort to improve ones community and environment, not accumulate enormous amounts of currency. Your house, car, business, etc. are private property, but the roads linking them are not. Money has far more in common with the roads then as a form of private property. Here is an essay I wrote on it last spring;
http://www.exterminatingangel.com/index.php?option=com_content&task=view&id=203&Itemid=118

Ian, which is a pleasure to read and to consider during these days of declining American imperial hegemony.

Dispassionate and considered discussion gives us a more profound appreciation of not only how we got to where we are, but what are the likely roads forward. Thank you so much.

Allow me to make the friendly amendment of the parallel between Russia and the United States. Of course it is a famous parallel, explicitly argued since the work of Alexis de Toqueville in the 1840s. Nonetheless it came up in my own work over the week-end in a new way.

Scientists in both the U.S. and the Soviet Union were aware in 1939 that the discovery of nuclear fission, together with the fact that the process produces more neutrons than it uses, opened the way for the construction of an energetic weapon, what we now call the atom bomb. So in response to the Einstein letter FDR authorized a so-called Committee on Uranium; in the Soviet Union in 1940 the Academy of Sciences set up a Uranium Commission in response to the requests of scientists for further investigation.

But neither blue-ribbon panel accomplished much: uranium was scarce and only seven-tenths of one percent of it is fissionable. That part cannot be separated from the non-reactive part by chemical means. Besides, the members of the panel were exploring a scientific question rather than pressing a national priority.

The Germans invaded the Soviet Union in June of 1941; Pearl Harbor brought the United States into the war in December of 1941; and in 1942 -- surprise! -- both the United States and the Soviet Union started work on building an atomic bomb in earnest.

Turning back to the world of political economy, the Soviet Union went bust in the 1990s in large measure because no one believed any more in Communism; the U.S. population is most of the way there as well. We're no longer the 'can-do' people. Just contrast the outpouring of energy which greeted the destruction of San Francisco in an earthquake a century ago with the silence and apathy following the destruction of New Orleans in a flood a couple of years ago.

No more than anyone else can I predict what the future holds: but the prospect exists of the vaunted United States joining the Third World just as has the Russian Soviet Federated Republic of yore.

Rise and Fall of the Great Powers made it obvious to me when these things started happening in the U.S.

We're not going away, Ian. Change is coming. It just isn't going to be easy or painless.

“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”

Charles Darwin

My theory is that if America is to survive at any level as an economic power, the growth will come from the bottom. I speak as a working scientist, doing R&D in the medical imaging field. I have lived in cities, and in gun-rack country, and I have worked with scientists from all over the globe. What is unique in America is a class of reasonably educated hackers (hardware and software) who grew up with a Chevy on blocks in the back yard. There is a fund of creativity and hands-on practicality here that the system (despite its worst efforts) has yet to eradicate. Only the Russians (in my experience) seem to match this.

I have sat on government granting boards for small business innovative research grants, and have seen this kind of stuff bubbling up. The best of it is what I call 'boutique manufacturing,' based on some unexpected technical innovation. A Ph. D. might come up with the idea, but it's good ole boys and beer bellied bikers with pony tails, and 40 something grandmas that make it work.

I'm not saying we can or will do it; only that we might; and that if we do, I am guessing that the impetus comes from the bottom.

i love the choice of illustration.

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this post immediately arrested me with a memory of a comment.
it took me a while, a short while, to track it down:

http://agonist.org/nar/20071025/too_bad_the_neocons_cant_read#comment-134152

http://www.alternet.org/audits/65838/?page=entire

Bush's Response to 9/11 Was Deadlier Than the Attacks Themselves
By Chalmers Johnson, Tomdispatch.com. Posted October 24, 2007:
'There is, I believe, only one solution to the crisis we face. The American people must make the decision to dismantle both the empire that has been created in their name and the huge, still growing military establishment that undergirds it. It is a task at least comparable to that undertaken by the British government when, after World War II, it liquidated the British Empire. By doing so, Britain avoided the fate of the Roman Republic -- becoming a domestic tyranny and losing its democracy, as would have been required if it had continued to try to dominate much of the world by force. To take up these subjects, however, moves the discussion into largely unexplored territory. For now, Holmes has done a wonderful job of clearing the underbrush and preparing the way for the public to address this more or less taboo subject.'

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my own feeling:
we were never meant to be an empire. i remember as a child learning of the monroe doctrine and having a "Huh?" moment when it didn't sound right, like a distinct klunker note. later reading strongly impressed upon me that it was teddy roosevelt who gave our imperialism the biggest push (and clout) with his fixation on us becoming *the* major sea power...

An Ottoman warning for indebted America

By Niall Ferguson

Published: January 1 2008 18:37 | Last updated: January 2 2008 08:07

Future historians will look back on the current decade as a turning point comparable with that of the Seventies. No, not the 1970s. This is not going to be another piece pointing out the coincidence of an unpopular Republican president, soaring oil prices, a sagging dollar and an unwinnable faraway war. I am talking about the 1870s.

At first sight, the resemblances across 130 years may not seem obvious. The 1870s were a time when conservative leaders such as Benjamin Disraeli, British prime minister, were powerful and popular. It was a time of falling commodity prices, after the financial crash of 1873 and the opening up of the American plains to agriculture. And it was an era of currency stability, as one country after another followed the British lead by pegging to gold.

Yet, on closer inspection, we are indeed living through a global shift in the balance of power very similar to that which occurred in the 1870s. This is the story of how an over-extended empire sought to cope with an external debt crisis by selling off revenue streams to foreign investors. The empire that suffered these setbacks in the 1870s was the Ottoman empire. Today it is the US.

In the aftermath of the Crimean war, both the sultan in Constantinople and his Egyptian vassal, the khedive, had begun to accumulate huge domestic and foreign debts. Between 1855 and 1875, the Ottoman debt increased by a factor of 28. As a percentage of expenditure, interest payments and amortisation rose from 15 per cent in 1860 to 50 per cent in 1875. The Egyptian case was similar: between 1862 and 1876, the total public debt rose from E£3.3m to E£76m. The 1876 budget showed debt charges accounting for more than half of all expenditure.

The loans had been made for both military and economic reasons: to support the Ottoman military position during and after the Crimean war and to finance railway and canal construction, including the building of the Suez canal, which had opened in 1869. But a dangerously high proportion of the proceeds had been squandered on conspicuous consumption, symbolised by Sultan Abdul Mejid’s luxurious Dolmabahçe palace and the spectacular world premiere of Aïda at the Cairo Opera House in 1871. In the wake of the financial crisis that struck the European and American stock markets in 1873, a Middle Eastern debt crisis was inevit­able. In October 1875 the Ottoman government declared bankruptcy.

The crisis had two distinct financial consequences: the sale of the khedive’s shares in the Suez canal to the British government (for £4m, famously ad­vanced to Disraeli by the Rothschilds) and the hypothecation of certain Ottoman tax revenues for debt service under the auspices of an international Administration of the Ottoman Public Debt, on which European bondholders were represented. The critical point is that the debt crisis necessitated the sale or transfer of Middle Eastern revenue streams to Eur­opeans.

The US debt crisis has taken a different form, to be sure. External liabilities have been run up by a combination of government and household dis-saving. It is not the public sector that is defaulting but subprime mortgage borrowers.

As in the 1870s, though, the upshot of this debt crisis is the sale of assets and revenue streams to foreign creditors. This time, however, creditors are buying bank shares not canal shares. And the resulting shift of power is from west to east. ...

I look around and see unabashed conspicuous consumption--the McMansions, SUVs and ridiculous lifestyles. The developed world consumes resources and emits toxics at a clip that's 32 times faster than the rest of the world.

There is no way that the developed world will voluntarily curtail its wasteful habits. So it's time for reality to kick in. A major economic collapse might just do the trick. The great depression certainly molded the psyche of my parents.

In my neighborhood, if you can call it that, we have houses with 7,000 square foot footprints that house two people. As long as the money and credit hold out, there's no stopping this.

It takes catastrophic events to get people to change their habits. Mr. Bush and his cabal may be doing us a favor in the long run.

“Stop throwing the Constitution in my face. It’s just a goddamned piece of paper!” - George W. Bush

One of my favorites.