The US financial crisis, based on and accentuating a catalogue of neglect, blind greed and misguided policy, may propel the world's most developed state into oblivion, writes Gamil Mattar* In a matter of three or four weeks the US became the butt of sarcasm and schadenfreude, as criticism rained down on Washington from angry investors and frightened people who felt the rug of security being pulled from under their feet. Such emotions were fed by opinion pundits and economists who blew the stock market collapse out of proportion and distorted the image of the US. Such was the flood of malicious, though not unrealistic, commentaries that I began to view the whole of the US, the world's greatest power, solely in terms of the state of Wall Street, the world's most important financial marketplace, and the following words rang in my head: I used to rule the world Seas would rise when I gave the word Now in the morning I sweep alone Sweep the streets I used to own The mockers, the alarmists and even the exaggerators may be excused. The questions raised by the financial quake have no clear answers. What will happen to the global economic order, to the investment- banking sector, to the capitalist system? What is to become of privatisation now that the greatest capitalist power has stepped in to nationalise a number of financial enterprises? What will happen to that financial class that has managed within a few decades to dominate political, economic and social policy in many countries, not least of all in Egypt and most other Arab countries? Will some countries revert to isolationism in order to protect their developmental aspirations from the wild fluctuations of the international marketplace? Will India lead the way in this respect or will it, like China, slow the pace of its capitalist progress? What will happen to the fabric and garment manufacturing industry in Egypt now that it is linked to that sector in Israel and the US? Similarly, what will be the fate of this industry in Southeast Asia from which the US imports two-thirds of its clothing needs? What will the poor in America and elsewhere do? How will they vent their anger and frustration? Will they say that Washington and other wealthy nations have never acted so rapidly and generously in a crisis as they have to save Wall Street? Will they ask what actions officials from those rich and powerful governments took to help the victims in the US and the Caribbean from hurricanes Katrina, Ike and others, or to come to the aid of the Tsunami victims in the Indian Ocean and Persian Gulf apart from undertaking a few high-profile visits and, relatively speaking, dropping a few pennies in the hat? Here's what one American who was hit by the mortgage crisis had to say: "They've taken my home away. I live in the street now. The people who caused this are now being rescued while I still have no roof over my head." Frequent, too, are the commentaries these days that remark upon how the US managed to collect hundreds of billions of dollars in order to save bankrupt companies to the detriment of the capitalism that it holds so sacred and how similar this is to the American tendency to support dictatorships in order to secure its own interests but at the expense of another sacred principle, democracy. Over recent years, the US has disseminated a Wall Street culture, sometimes making it a prerequisite for assimilation into the global economy. The "money culture" is now a globalised culture. It is not only in the US that the greatest ambition of top university students is to work in the stock exchange, manage investment projects and become heads of departments in major banks. Here, too, our youth no longer dream of becoming an officer, an engineer, a doctor or an astronomer, but rather a stockbroker. Even many years ago people realised that this culture was rife with risks for all countries, the US included. As early as 2002, in the wake of the Enron and Global Crossing scandals, US Federal Reserve Chairman Alan Greenspan cautioned, "Capitalism has stopped working. There's something going on that is spoiling the financial system." Others have observed that the bankruptcy of those two companies in 2002 was a warning that was tragically ignored by the ruling elite in the US as was the warning implied in the attempt to bomb the World Trade Center in 1993. Decades of the prevailing socio-political economic culture have made businessmen and financial experts the masters of the world. This is how they were billed in Davos and this is how they have behaved in the many meetings in which they lay down the new moral code in accordance with which private gain takes priority over the public interest and which is founded on two pillars: the worship of money and the worship of the individual. No one can pretend not to have been aware, neither here nor in the West, or in the US in particular. Commentators had long since warned that globalisation had given the best it could and that now it was giving the worst, and that some of the worst had begun to wreak havoc on the American economy itself. After hundreds of pens have futilely warned of the pernicious consequences of the widening income gap, hundreds of new articles are appearing in the major newspapers of Berlin, Paris, Frankfurt, London, New York and Washington and are casting a portion of the blame for the financial crisis on the irrational complacency of the big-spending financial class, especially the senior management of major banks and companies. The excesses of this class have never been morally acceptable, they write, and now are politically and economically unacceptable. Economists whose pro-capitalist credentials are above suspicion now confess that they had wrongfully ignored major criticisms of the era of unbridled free trade and admit that it was unjust -- that even in the colonialist era of international trade wealthy nations had never been as tyrannically exploitative of Third World countries as they are today. Since we are living in a world in which economies are so intertwined that people's fates are closely bound together, it is easy to understand why the world is so concerned about the future of that country that has the largest economy in the world. What will become the country that controls, one way or another, the lion's share of the resources of might and energy is a legitimate line of inquiry. Indeed, it could be the most important question which politicians, economists and others of various walks of life and of all shades of opinion, should ask themselves. Is it true, for example, that the crisis exposed darker sides of the US of which many there were unaware and which had been completely hidden from people abroad? It is common knowledge that the US and other industrialised nations have not experienced an economic crisis of this magnitude since the stock market crash of 1929. All are simultaneously aware that south, east and part of western Asia were experiencing an unprecedented economic surge at a time when officials in Washington were trying to conceal the initial signs of economic meltdown in their country. We also know that the American people's confidence in capitalism has been deeply shaken. However, they have no alternative to this long cherished national creed. It will do little to tell them that capitalism without failure is like religion without sin. They were born and raised on a moral and ideological diet that refuses to recognise the possibility of a total or partial breakdown of the capitalist system. This probably accounts for the thick mist of American aphorisms and adages that have surrounded the crisis since it first erupted, all evocative of the American dream and way of life, and of the immutability of the American rock and of America's might to ride out all storms. These are the homilies that are so deeply rooted in the American experience since its emergence as an economic power that they are difficult to shake. But the recent crisis has cast a shadow over the ability of each and every one of these to remain a pillar in the edifice of American political culture. Many political leaders, as we know as well, were dissatisfied with the American prescription for economic progress. Most of them, however, never ventured to voice this openly until Bush went to the UN to appeal for the aid of the international community. At that point Brazil's da Silva, Argentine's de Kirchner, France's Sarkozy and dozens of heads of state and politicians from Germany, Britain, Russia, China and India lashed out at the American model. These were joined by African politicians who went to New York to ask for $72 billion to rescue the poorest continent in the world only to hear the US ask for $700 billion to rescue companies whose financial mismanagement shook their financers' confidence and brought them to bankruptcy. Even UN Secretary- General Ban Ki-Moon, to the surprise of all, broke with tradition and called for a new code of ethics for the global economy. The rules of play that the US had elevated to a charter for the way international institutions work collapsed with the same resounding crash as the American financial system. Meanwhile, in the US the American Society of Civil Engineers has deplored the US's deteriorating infrastructure and demanded urgent national attention to this vital field of public policy. According to a report issued by this society and cited in the last edition of The New York Review of Books, nearly 30 per cent of the nation's 590,750 bridges are "structurally deficient or functionally obsolete" and it will take "$9.4 billion a year for 20 years to eliminate all bridge deficiencies". The number of unsafe dams has risen by 33 per cent to more than 3,500. Public transit facilities -- including buses, subways, and commuter trains -- are "dangerously under-funded", even as demand for them has increased faster than any other mode of transportation. Current funding for safe drinking water amounts to "less than 10 per cent of the total national requirement", while "ageing wastewater management systems discharge billions of gallons of untreated sewage into US surface waters each year." Yet government investment in these vital facilities is generally held to be below the level needed simply to maintain them in their current poor state. With regard to air transport, there were 1.8 million hours of flight delays in the US in 2007, many of which were caused by demands for runways that exceeded supply. The American Society of Civil Engineers further claimed that it would take over $0.25 trillion to bring the nation's public school buildings up to "good" condition. According to The New York Review of Books article, while private investors and states and cities are devoting more attention to this need, "the federal government has failed to provide the leadership it alone can supply. Federal spending on infrastructure, corrected for inflation, is actually lower than it was in 2001... and this level of spending, as a share of GDP, is much lower than it was two or three decades ago." By way of contrast, the article cites The Economist which reports that China will spend $200 billion on its railways between 2006 and 2010 -- the largest investment in railroad capacity made by any country since the 19th century -- and that the Chinese plan over the next 12 years to construct 300,000 kilometres of roads in rural China, as well as 97 new airports. "The Chinese understand that economic power depends on these investments," the authors remark pointedly. The authors, Everett Ehrlich and Felix Rohattyn, relate that Congressman John Mica, the ranking Republican member of the House Transportation Committee, recently called for a $1.5 trillion infrastructure-spending programme, under both public and private sponsorship. But, they ask, where would the money come from? "The Iraq war drains our national resources, and the 2001 cuts in personal income, capital gains and inheritance taxes have slashed federal revenues." Therefore, Ehrlich and Rohattyn, both prominent economic experts, have appealed for the creation of a National Infrastructure Bank that would be funded by the federal and state governments and by the private sector. The bank would work along the lines of the World Bank, which is to say that it would only grant loans to entrepreneurs who wish to take part in "rebuilding America" on the basis of certain guarantees, an evaluation of the relevant feasibility studies and an assessment of the ethical and professional qualifications of those undertaking the project. Their appeal was echoed in a more general way by New York Times columnist Thomas Friedman who wrote that American society needed to break away from its dependency on "financial engineering" and to return to "real engineering". The financial crisis that jeopardises the US's stability, security and future, we know now, is little more than a glitch in a national order threatened with even more serious crises. We do not want to say, "Welcome, America, to our developing world." With better ethics, a stronger economy and greater respect for other nations, the US is worth far more to the developing world and to itself than if it collapsed and deteriorated into a developing country. * The writer is director of the Arab Centre for Development and Futuristic Research.
