How did we turn our economy over to the mercies of Chinese lenders, Arab oilmen, and domestic speculators? Kevin Phillips can tell you.
Since the late 1980s, the U.S. government has pursued a tacit policy of bailouts and buyouts to insulate Wall St. from the worst consequences of its risks. During the '90s, as services replaced manufacturing as the single biggest part of GDP, one of the new heavyweight sector's jobs was to invent ways of shoveling more debt onto people's shoulders: the hallmark, Phillips notes, of a world power in decline.
Some of what's forecast in Bad Money, which came out this spring, has not yet come to pass. But the fact that Phillips so acutely nailed the vulnerability of the late, great credit market does not bode well for other targets, among them alternative energy, "less a green breakthrough than a green illusion." The fuel that powered the American century is near its peak, and much of what's left is controlled by state-owned oil companies unwilling to trade sweet crude for weak dollars. The companies that sell to U.S. consumers may soon be mere refiners of whatever Venezuela or Abu Dhabi will sell them. The implication: Drill, baby, drill.
Or, as costs surge higher and the American reputation continues its global freefall, amp up the partisan blame game. Another sign of a nation in decline, Phillips notes, is a calcified two-party politics in which both sides promise their respective happy days are just a vote away. No. Market triumphalism is in hiding behind the bookshelves in the Reagan library, where it ought to be sealed up for good. Everybody knows by now that history, writes Phillips, "had not ended; the muse had merely started learning Mandarin, Hindi, and Arabic... and pondering what might befall a world economic power that so worshiped its markets as to entrust them to hedge funds, bad quantitative mathematics, and banks like Citigroup."
What now? Phillips offers a silver lining: Unlike Great Britain, the Netherlands, or Spain before us, the U.S. owns two coasts and the thousands of square miles between them. Whether it's energy independence or a solution to urban poverty, the politics of land use will figure greatly in how we break our fall.