Toshio Matsuda, Commentator & Intl Economist

Straight from the Shoulder No.502

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The history of the human race through the 20th century was truly a saga of war. Nations possessed cultural, traditional, religious, ideological and philosophical identities in which the peoples of those states took pride, right along with the patriotism they felt for their national flags, anthems and other symbols. Wars were waged as struggles for total hegemony, while spearheading those battles was politics. The history of politics and government, in other words, has indeed been the history of war. Through the end of the 20th century, it was political forces that championed nation states.

Politics was also the independent driving force behind the push to maintain, develop and further expand national security. It was for this basic reason that presidents, prime ministers and other national leaders stood for the national identity, and led their respective countries. In the United States of America, successive generations of presidents were chosen exclusively from among the ranks of the dominant (elite) classes. In that sense, November 4, 2008 the election of Barack Obama as the 44th President of the United States effectively brought down the curtain on the history of the American republic that had continued since 1776.

Barack Obama is a man who was chosen to occupy the office of U.S. President from the “masses.” In much the same way that the masses have no clear identity, President-elect Obama is also difficult to define. He is not a member of the elite. On the contrary, he is a product of the “ruled” class that has been governed and “provided for” by the elite for so long. A reversal in the ruling foundation of an entire country, let alone the U.S., the nation wielding with the greatest impact in the world, is nothing less than a full-blown revolution.

In this way, therefore, a quiet revolution has emerged in the U.S. This has been an upheaval carried out without the spilling of blood, and also without disturbing the world at large. We must pause and ask, therefore, why such a calm and quiet revolution unfolded in the U.S., in the midst of a total lack of awareness that such a transformation was in the making?

When the elite administer the government, the nation itself is the core focus, with politics carried out in proactive fashion on the basis of clearly defined objectives and strategies. In instances when politics is entrusted to representatives of the masses, the sense of independence vanishes from the government, which becomes subordinate. The political forces of a nation without an independent identity in place will no longer pursue dominance, and instead turn to international emphasis and cooperation. The economy of a country without identity shifts from market guidance to market collaboration. The driving force is drained from political and economic endeavor, strengthening the degree of dependence on other countries.

Now, even before Barack Obama has been sworn in as President, in the U.S. the policy measures announced by the Federal Reserve Board or the Treasury Department are being paid little heed. The election of Obama as President is symbolic of a revolution that will effectively transform America from a nation into an infrastructure. An infrastructure state without autonomy, which is populated by masses lacking identity, will remain oblivious to the revolution, and go on basking in the same old tried and tested lifestyles. Today, the U.S. has become the world’s sports arena, a global bazaar. In short, it has changed into an infrastructure without anyone really becoming aware of the transition.

Throughout the 20th century, American hegemony was largely supported by the strength of the dollar. Until recently the dollar was the core international currency, a situation that went a long way toward enabling the U.S. to push its debts onto the shoulders of the rest of the world. In other words, because the dollar was the currency used for international transactions, the greater the amount of international trade conducted between countries other than the U.S., the greater was the demand for dollars. Under that arrangement, Washington was able to print dollars equal to that demand growth, and in doing so pay off its own debts.

However, coming to the conclusion that such exploitation by the dollar could not be allowed to drag on forever, in 1999 the “euro” was introduced as a wide-area common currency spanning all of Europe. The unit has continued to expand its territory ever since. With the launch of the euro, therefore, the dominance of the dollar was instantly cut in half.

During the first quarter century of the postwar era, as long as the strength of the U.S. economy remained dominant, the world at large enjoyed the blessings of the dollar. Then, on August 15, 1971, the Bretton Woods system of monetary policy in which currency exchange rates were based on gold, notably for the dollar, was abolished. With this, the evils of adopting the dollar as the currency of choice became more easily recognizable, kicking off a sustained move away from the greenback. America has changed from a nation of twin deficits (budget and trade) to one of triple deficits (including household savings), and now ranks as a potentially economic bankrupt nation. Any further retreat from the system with the dollar as a core currency will find the U.S. with no feasible means of preventing its economy from going into genuine collapse.

The final chance to avoid this scenario lies in generating a new surge of interest in the New York market, perhaps along lines comparable to a permanent Olympic venue. When all is said and done, therefore, the survival of the U.S. economy depends upon the degree of capital that can be attracted from around the world to concentrate in the infrastructure of the New York marketplace.