The American Debt Issue of 2011 and the Logic of Capitalism

July 21, 2011

By Matt Johnson

US National Debt Chart 2010

While dealing with the vulgarities and deception of American “debates” on economic issues is normally not my thing, the recent discussions about American debt default have been more absurd than normal. If anything proves general illiteracy on basic economic topics, this typically media-crafted debate does. Yet, few have noticed.

Nothing makes sense about how the media have crafted this debate. Debt means two things relative to the federal government: debts owed to foreign investors, and debts owed to domestic ones. Hence, it is the global elite, by and large, who control this debt, including banks, corporations and states.

American debt, both public and private, amounts to about $60 trillion, with private sector debt being far higher than the government’s. The American taxpayer will not balance his books, so why should the federal government?

I wonder how much debt, in the broader sense of the word, the U.S. actually owes. I recall fevered discussions at the University of Nebraska about how much the U.S. owes to the United Nations. Professor David Forsythe would pontificate ad nauseam on how much is owed to the UN. I, a lowly graduate student at the time, made the error of raising my hand and asking, “Yet, David, did not the U.S. fight a large part of the war that made the UN possible?” In other words, since the U.S. lost almost 500,000 men and financed the war efforts of the Soviet Union and Britain in that conflict, how is it even remotely possible that we “owe” the UN anything?

Well, you don’t talk like that to tenured professors.

When we consider international political economy, we are speaking, of course, about the “rules of the game.” The global political and economic Regime is the creation of the United States and its post-World War II supremacy. Even the Soviet economy was largely the result of American and Western investment, though this topic has long been thrown down the memory hole. Israel is exclusively based on American dollars, as is Egypt, Taiwan and South Korea. Who owes what to whom?

The point is that the U.S. created the present global trading regime—for better or worse—and has spilled much blood and treasure in defending it. Trillions of dollars in foreign aid, low cost loans, security, legal enforcement, NATO operations, diplomatic missions, U.S. backed investment, infrastructure improvements and hundreds of other immensely expensive operations were financed by the endlessly bamboozled and clueless taxpayer. Yet we’re the ones in debt?

It is suspicious how none of this is considered as part of the American balance sheet. None of the monies were ever repaid for the U.S. role in World War II, or in any battles against the USSR. How many billions are owed to the U.S, by Great Britain or France? Why is this never considered as part of the American macroeconomic picture?

In fact, America remains a creditor nation in a very real sense. The world owes it its very existence – the U.S. created the present New World Order, while those who have profited from it hold that it owes the U.S. nothing, and—the very epitome of chutzpah—the lowly taxpayer owes them money.

The American taxpayer is considered an ignorant golem, a mercenary force that could be used to create and defend the new economic order. This order made a tiny percentage of the globe’s population wealthy, while the taxpayer was cast away into the dust to eke out a living paying the wealthy the cost of making them wealthy. Like it or not, this is the logic of modern capitalism.

How much did the U.S. taxpayer spend to defend the world since 1900? How many have died in the wars that made others wealthy? Why is this not even an issue? Where are the tin-pot patriots?

Debt? America has no debt—the world owes it an immense sum.

What made China wealthy? The American consumer. What made the EU wealthy? The American consumer, and this, after the Marshall Plan and the American efforts to rebuild a destroyed Europe with taxpayer cash. Has this been repaid with the requisite interest? Yet, their success could not have existed unless the U.S. a) created the system in which this trade could flourish and b) that the U.S. consumer bought and paid for every scrap of metal used in the Japanese, German, Korean and Chinese economy. Even more, it was largely American investors and scientists who created this technology that is making China and India rich in the first place.

This is the logic of capitalism: An American car is made in China. It is the product of American minds, technology, labor and consumption at every single step of its development and production. The result? The U.S. owes China money. This is how oligarchy works.

While the Chinese elite, for example, claim the U.S. is massively in debt to them, the fact remains that there is not an atom of their productive capacity that was not developed in the West and perfected by the United States. Nothing in the Chinese economy could exist unless American consumers did not themselves go into debt to pay for it and American technology went into creating it.

USD100-bills going down drain

Yet, American labor remains passive while their children are handed a massive and unrepayable bill for wealth their parents created. If the minimum wage were equivalent to American labor’s productive power, it would be well over $50 an hour. Where does all that excess value go?

Needless to say, this is not an apologia for the New World Order. For all its injustice, it is an American creation root and branch. For better or worse, the current global trading system is based exclusively on American cash, blood and, just as important, its massive market that has kept global capitalism afloat even while the American consumer has gone into un-repayable debt. Britain, China, Japan, Korea, India, Taiwan, France, Saudi Arabia, Bahrain, Oman, Qatar, the UAE, Germany, Malaysia and the rest of the global first-world could not have made a nickel without American protection, investment and consumption. Regardless of whether these elites deserve their power is a separate issue—their power is based on the sacrifices of the American taxpayer and consumer at all levels. Yet they dare lecture the U.S. on being “in debt.”

The fact that the U.S. can be considered “in debt” is the height of absurdity and shows the literal and metaphorical bankruptcy of modern economics. If the U.S. is “dependent” on foreign oil, just how long would these oil-producing states last without American protection?

The United States, if it were sane, would simply repudiate all its present public and private debt, at least to foreign creditors. She would announce that the American market is henceforth closed if there is even the threat of any financial retaliation. She would announce that this debt repudiation is a) a reward for the constant sacrifices of the American taxpayer and b) the price that China, Korea, Taiwan and the rest will have to pay to get the U.S. market back.

The fact that the U.S. market is the very linchpin of global capitalism and the only reason it still functions has yet to be introduced into this media controlled “debate” over American debt. The U.S. market, itself, is the American nuclear weapon in global economics, yet it has never been used. In fact, there is no “global economics” without the American market.

Since this alleged “debt” is held by the world’s elite, and this elite controls nearly every facet of American life, it is difficult to see how the world’s “sole superpower” is in any position to make demands at all. Yet, our own consumer dollars are the chief weapon that sits in the silo, collecting dust while the Regime figures out how to suck yet more from the ignorant and indebted American consumer.