Peering Beyond the US Midterm Elections

October 19, 2010 at 11:17 pm | Posted in Political Economy | Leave a comment
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What is likely to happen if the Republicans win control of one or both houses of Congress? The issues underlying the discontent of voters stem from the loss of employment and increasing inequality; of losing homes sold on dreams while they see the bankers walk away with millions of dollars in bonuses; fear of a further erosion of jobs overseas or to immigrants; belief that if only government spending is lower, taxes will fall and conditions will be better for the poor.

Regardless of the propaganda that it is unfair currency manipulation by other countries that is leading to a loss of jobs, the underlying cause is very different and no politician or party has a solution to the problem. Well paying jobs are disappearing because of technological changes. The evidence is everywhere–growth of emails and the Internet leads to a decline of post office jobs; the internet is as much of a threat to shopping malls and big box stores as these were to main streets; automated check-in machines at airports decimates counter staff; Netflix has spelt the doom of bricks and mortar video stores. No political party or economist has the remotest idea of what to do in these conditions, least of all the know-nothing Republicans affiliated to the Tea Party!


If other countries were to raise the value of their currencies, it means that they will no longer buy as many dollars as they had to keep their currencies “undervalued.” It was the repatriation of current account surpluses and domestic savings from China and other countries through their purchase of US dollars that enabled them to manipulate exchange rates. This massive inflow of capital enabled the Bush–and now Obama–Administration to fight two wars in Iraq and Afghanistan while  cutting taxes. Without such capital inflows, taxes would have to rise or the US military will have to turn tail and slink back.

Perhaps, this is may explain why the US has swallowed a bitter pill and invited high Iranian representatives to in-depth briefings on Afghanistan by the military commander, General David Petreus and even begun to transport Taliban leaders to Kabul for talks in NATO aircraft. Iran’s footprint has also solidified in Iraq where the Shi’ite cleric Muqtada al-Sadr, allied to Iran, has emerged as king-maker. Any move against Iran will unravel US plans to withdraw from Iraq and Afghanistan.

Despite all this, if the Congress cuts taxes, it would mean cutting into the bone of welfare state, removing any semblance of a safety net under the poor. It will exacerbate the income gap between the rich and poor, already wider than at any time since the 1920s since a Republican victory in the elections will ensure that the rich cats will continue to walk away with bonuses in the seven and eight figures. Why else will they contribute so disproportionately to Republican candidates in the current election?

All of this does not even begin to address the military situation. What will the neocons make of the Taliban being invited back into power in Afghanistan and Iran exercising considerable influence in Iraq. And the Iraqi oil? Estimates of Iraq’s proven oil reserves has increased by almost 20 billion barrels but all of this is being exploited by Russian, Chinese, and other Asian companies–not US Big Oil!

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