Until the
industrial revolution single artisans engaged in the complete production
of articles, implements etc. Adam Smith in his “Wealth of Nations”
elucidated how the production of pins broken down into separate
repetitive stereotyped steps of production assigned to a team performing
separate steps, increased productivity manifold. Instead of a single
artisan producing ten pins a day, five persons working at different
steps of manufacture of pins could produce hundreds of pins per day.
This assembly line process increased worker productivity and led to
specialization by division of labor on an industrial scale by Henry
Ford’s car assembly line. It is also a probable basis of origin of the
Indian caste system which in the form of priest, soldier and farmer
antedates India and was a societal hierarchy prevalent amongst the
ancestor Proto-Indo-European speakers in Caucasus and southern Ukraine,
who migrated peacefully to Mesopotamia, Iran, India and the rest of
Europe.
Textiles were the earliest industrial products and the rise of Japan,
Korea, Taiwan and recently China, India, Pakistan, Bangladesh and others
followed the same path of industrialization as the original,
Netherlands, Britain and America. All the above countries ascended the
value chain by using protective tariffs to develop other industries like
machinery, electronics and automobiles. Soon after the industrial
revolution, machines often made workers redundant and thus occurred the
revolt of the Luddites. Excess production of textiles and manufactured
goods required bigger markets and that is why Admiral Perry’s American
fleet was sent to threaten Japan to forcibly open up to trade. Other
countries like India (best textiles up to 1800 AD) and China were de-
industrialized and like African colonies for Europe and Caribbean and
Latin American countries for the US, served to export cheap raw
materials to Europe and America and became captive markets for their
expensive manufactured products. The Japanese unlike other Asian
countries learnt the proper lesson and took to rapid industrialization
from the Meiji restoration to become an industrial, maritime and
military power strong enough to score a decisive naval military victory
against vastly bigger Russia in 1905. Theodore Roosevelt, a warmonger
himself was awarded the Nobel Peace prize for successful mediating the
truce between Czarist Russia and Imperial Japan.
Japan earned a seat at the table of great powers. It was the only
non-European one and somewhat resented. Its disadvantage was a small
territory and scarce resources, so it to took to colonizing like Britain
and captured Korea and Taiwan and later Manchuria. The US with its
penchant for trade embargos stopped selling it scrap metal, crude oil
etc., precipitating the attack on Pearl Harbor. This provided FDR a
legitimate excuse to join WW2, which he had been itching to openly,
instead of previously secretly aiding Britain with arms and materiel.
President
Woodrow Wilson had used similar skullduggery to embroil America in WW1
despite promises to stay out. He did this without regard to tens of
thousands of US citizen casualties to salvage the huge loans of US banks
to the British government which would have been lost if Germany won.
Wilson’s arrogance and stupidity led to crushing unbearable war
reparation burdens on Germany by France and Britain setting the stage
for the demise of the League of Nations, hyperinflation of the Weimar
Republic and the ascent of Hitler, the Nazi Third Reich and WW2. The
follies of WW1 also partly caused the Russian Revolution and the
emergence of Communist USSR. The greed of France and Britain is the
cause of the current Middle East mess in Iraq and Palestine.
Germany was no innocent angel. It had committed genocide in Africa in
the WW1 era. The Nazis started the separatist tendencies of Croatia and
thus sowed the seeds of the present mess in Yugoslavia, as did the
Ottoman and Austro-Hungarian Empires. Present NATO powers are still
making matters worse by granting independence to Kosovo and carrying out
color and floral revolutions in Georgia, Kirghyzstan, Ukraine and
setting up missile defenses in Poland and the Czech Republic. The USSR
then promoted strife in China and Korea and Japan was a ruthless
perpetrator of atrocities throughout Southeast Asia and China. The
progress of colonization, military strength, industry and developed
nation economies depended first on coal (steam power, electricity and
naval steamships) and later on cheap oil (diesel engines for tanks,
warships and automobiles). Japan, Korea, Taiwan and now China and to a
lesser extent India took the next step up in the value chain from
textiles to automobiles and electronics.
Cheap oil and crooked policies of vehicle manufacturers and the
government in America allowed GM to buy up the Los Angeles rail tramcar
system and scrap it. Eisenhower built up the interstate highway system
promoting car use over longer distances. This led to the development of
suburbia and exurbia in the US with abundant land. The better off
people, mostly white, abandoned the cities with increasing
African-American populations. Deteriorating inner city real estate
values led to decreased real estate tax revenues leading to
deterioration of city public schools dependent on those taxes. The
reluctance to live in mixed neighborhoods and the impoverishment of city
populations due to exodus of good manufacturing jobs, first to the outer
suburbs and later to cheap wage countries, worsened urban poverty and
increased crime and drugs. A similar thing is happening to Britain now
though it is much worse in America with its foolish policy of gun sales.
Paul Kennedy in the book “The Rise and Fall of Great Powers”
comes up with a rule that great powers fall by overreaching when their
declining economic power is unable to finance their military ambitions.
The Roman, British and Soviet empires fell when their economies
collapsed due to huge military expenditures. Constant skirmishes between
the Byzantine (Constantinople) and Sassanid (Iran) empire weakened them
so they were ripe for picking by the Islamic hordes (Turkish from
Central Asia and newly Islamicized Arabs respectively). Other empires
flourished by tribute from colonies. America has used the dollar’s
international reserve currency status by printing dollars and by
increasing debt (Read the book “Empire of Debt” or Chalmers
Johnson’s “Nemesis” and the other two of the trilogy)
America, the richest and the militarily strongest power in world
history, began using indiscriminate massive aerial bombing of civilians
in WW2 (Dresden in Germany, Tokyo, Hiroshima and Nagasaki in Japan) but
the tactic led to a standstill in Korea, a defeat in Vietnam and
hemorrhaging bogging down so far in Afghanistan and Iraq. The last wars
are projected to cost three trillion dollars with no end in sight. There
have been nearly 5000 deaths of coalition forces and contractors, 30,000
injured and some mental or physical disability in hundreds of thousands.
The current wars became necessary for control of cheap oil to make the
economy run, but has resulted in price approaching 120 dollars a barrel.
The economic consequences are a severe curtailment of US citizen
lifestyle. If one rounds up the median US household annual income to
40,000 dollars with deductions of 45% (25%federal taxes, 7.5% state and
local taxes, 7.5% social security taxes, 5% health insurance), it leaves
a disposable income of 22,000 dollars annually. A home mortgage plus
real estate taxes or apartment rent of 12,000 a year leaves just 10,000
dollars a year for utilities (telephone, heat, air conditioning,
electricity, water, sewage disposal), food, gasoline and car payments
and maintenance, clothing, travel and entertainment. Rising petrol
prices at nearly four dollars a gallon and sharp food price increase
(milk up 26%, wheat up 400%, eggs up 60%, fruits, vegetables and meats
up 10%) leaves the family budget in the red and the average household
credit card debt is now over 9000 dollars with interest charges of 18%.
Falling home prices and resetting higher mortgage rates create a bigger
problem. Nearly a quarter of home owners presently owe more on their
mortgage than their house is worth, as they have been withdrawing equity
from their homes for purchases and vacations through home equity loans.
This is why they walk away and let the home be foreclosed by the lender.
The foreclosed home swells the large inventory of unsold new homes and
for sale old homes, accelerating the downward spiral in home prices.
Indian home
prices will suffer a similar fate.
The US
economy is 75% dependent on consumer spending, but the consumers are
maxed out and in dire straits. The mortgage, credit card and automobile
loans are in increasing default and securities created from these loans
have been sold to banks, brokers, investment banks, insurance companies,
pension plans and sundry investors, who now have stopped receiving
interest and principal payments. They are compelled to write off these
assets as non-performing, which shrinks their balance sheet and makes
them reluctant or unable to make further loans or take market risk. The
Central Banks of the US and UK are taking on these bad loans and in
return are giving the institutions, government securities and cash,
ballooning the money supply and spurring galloping inflation.
The days of big moneymaking in finance and investment banking are over
and large layoffs are raising unemployment, further weakening the
economy.
The US in a debt spiral with ten trillion dollars of debt, fifty
trillion dollars of unfunded liabilities, nearly trillion dollar annual
deficits each in the budget, trade and current account and five hundred
billion dollars a year in off budget war expenses. Thus control of
trillions of dollars of oil and gas assets of Iraq and possibly Iran are
becoming a necessity.
Necessity
ignores and will not stop for legal, moral or ethical constraints.
Irrespective
of who becomes the next president and despite what they say now, none of
them will withdraw from Iraq or stop threatening Iran. Some forecasters
are predicting an abandonment of outer suburban and exurbia housing due
to rising home heating and commuting expenses and a return to row homes
with shared walls to reduce heating bills, commute time and expenses.
Militarily there will be swing towards isolationist policies, withdrawal
from the present over 700 foreign bases and more fair and balanced trade
rather than free trade, especially if the present desperate gamble in
Iraq fails.
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