We are going to continue in the stupid years. Our cars should tell us that much - big chrome grills, gas guzzlers, massive hulks of metal. And that's the cars, let alone the SUVs. When times get bad, the stupid get protectionist. It isn't the reactionaries that turn disaster into catstrophe, it is the "sensible people". The sensible people right now are pushing "energy independence" and "workers rights for trade". The sensible Republicans can't stomache another round of borrow and squander, so they are trying to slow it down. The country has lost faith in the George Bush Platinum credit card.
This means that there is a growing bipartisan consensus for doing the sensible thing and retrenching. Sensible people like Her Royal Clintonness, and John McCain. American will sensibly choose, given two Republicans, to vote for the one that is more Republican. It might not be John McCain.
Of course, this is what the reactionaries have been trying to convince us to avoid - retrenchment, slowing down expenditures, saving. All of that is terrible for a bubble economy. So while the "sensible" people push tax credits for minor amounts of energy energy effficiency, and "sensible" restraint of the war on terror and "sensible" amounts of fair trade, they are laying the ground work for a much greater catastrophe.
Sensible really isn't. Sensible is "let's not think about this as much". A great cry of "mommy, I'm confused! Make it all go away!" A realization that they don't understand how to deal with the outside world, and so, they are just going to stop.
Always happens, because the reality of a late cycle economy is that it has made a mess of international trading and financial arrangements. Sensible people decide that if they just slam the door tight enough, they can protect what they have made during the inflationary boom, and can weather the down turn, ready to come out in spring. Winterize the economy with protectionism, "rugged individualism" by whatever name, and force people to do business with Americans.
The rest of the world, however, never goes away. Instead, slamming the door shut does two things. The first is that the rest of the world does the same thing. Suddenly those who sell abroad are hammered by the very policies they supported. They wanted to protect their own job, not thinking that there is someone in France, Japan, England, China or where ever that wants to protect his job too. Trade is disarmament - both sides agree not to engage in a trade war, and everyone is better off.
The next problem is diminishing return. People will want the same things done as before - which means they have to be done here. That means doing them here at greater cost. Sensible people believe the world is zero sum, that there is a limited "lump of work" to be done, and that, pushing other people away from the lump of work means more for them. In reality, someone has to pay for the fact that costs have gotten higher.
If American decides to slam the door shut on energy, then we have to realize there is a trade off. We currently import about 2% of GDP as energy. That means that we will have to replace that 2%. That replacement isn't going to take 2% of GDP, but closer to 6% of GDP. The sensible people don't want to pont at which 6% of the economy we can do without. They all imagine that when the world is pushed out, they, as individuals, will be able to bum rush the lump of work better, and someone else will be out the 6%.
But it gets worse. If the US isn't using the cheaper energy, someone else will, and that means that the US will have to, bit by bit, shut the door on everything, because energy is fungible. We import not only energy directly, but indirectly. Now things get worse from there - once we stop importing just about anything, other nations ask "why, exactly, should we pay intellectual property rent to these people, when they won't by the stuff we make with it. The result? They simply start pirating intellectual capital. Good luck convincing another government that we just shut down trade with to aggressively enforce something which sends money from their economy to our economy.
And so our exports go down even more, and other nations wean themselves off our songs, movies and television shows. The pirate our designs, and sample the riffs. It's all out there.
Smoot Hawleyism - for such it is - is sweeping the left and the right, because the bulk of the left and the right can't grasp something that is deep in the reality of international economics - you can't walk away from the table.
In 1932, the odd thing about Hoover and FDR was that both agreed that the Depression was international in nature. The problem is that Hoover tried to deal with it by harrangues and threats, bad proposals and economic brute force. America was a net creditor, and threatened to walk away from the table. Even as America's leverage drained away with the stock market crash - because other elites had parked their money here - he kept at it.
FDR realized that America was isolationist, and that he could not get Americans to deal with the international problem while "one third of the country were ill clad, ill fed and ill housed". He waited. He was tempted on a number of occasions to precipitate action - contemplating an early war with Japan for example. But by and large, he let events in the world unfold, while he focused on reforming America. But he never lost sight of the larger picture, even if, from time to time, this longer vision made him misstep, as with trying to balance the budget prematurely in 1937.
In our own time, there has been no such visionary individual, who could wrap internationalism in the cloak of isolationism.
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What is the solution long term? In the end you can only pick the goals, the means will suggest themselves. Right now the sensible protectionist wants to cut the chords to the outside world. Retrench in their own minds. A retrenched America will be drawn inexorably to one solution for energy - low quality hydro-carbons. Global warming will vanish as a concern, as people will demand that their cars and SUVs have fuel, and will demand that their suburban homes maintain value. With the real estate bubble about to crash, and send a shock wave through the American economy - no pleas for environmentalism or the future will be listened to, in the gooey sands of Canada, and the sludgy super heavy oil of Venezuela, will be enough calories to keep the whole equation going.
In short, pick rugged self-reliance, and people will resource rape, because that is what America has inside its own borders - resources. Land, trees, coal, silver. This is the economy that the West had in the 1890's and early 20th century, back in the days when the state with the highest productivity per worker was - Nevada. Silver and gold.
Right now sensible people want to slow federal spending, stop the war in Iraq, and not cut taxes. But as Keynes pointed out, one man's expenditure is another man's income. End federal borrow and squander, and, the economy grinds to a halt. There won't be a surplus for fancy energy programs - people will bum rush what works right now - and that is extraction. Even crummy extraction.
Don't bother to rebuild New Orleans, it will be underwater again soon enough from the global warming. And you might want to cut down on your breathing, with the pollution, it is going to be dangerous for your health.
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Is there another way? Of course - but right now, we are in the stupid years. No one is going to listen. Not here, not elsewhere. Instead the vision of a closed up safe America is going to find a thousand prophets, preaching the gospel of protected, secure, safe, individual, independent - and bankrupt - America.