Category: The Twilight of Neoliberalism Page 2 of 10

This is a story as old, and probably older, than civilization and isn’t unique to elites.

It is the question of group interest versus individual interest; or national interest versus internal group interest.

National advantages have to be sustained. If you have a technological lead, you don’t give that lead to another nation which is a competitor. If you have a production lead, you don’t help a competitor improve its production anywhere near close to yours. You may give them something from the prior tech generation, maybe, but never the current one.

This is unfortunate, a better world could be created with more sharing, but that would require a world in which nations and elites don’t compete with each other in devastating ways.

In our world, however, when nations get an advantage, they use it to hurt other nations: in the case of extreme advantages to conquer them, in the case of more relative advantages, to take hurt them economically. A recent example is how Germany used the Euro and the EU to damage the manufacturing industry of other EU nations: the Euro was priced too high for them to compete, but was lower than the German Mark would have been and the result was devastation to countries like Italy, especially when added to the inability to control currency issue and interest rates that the Euro essentially imposes.

This is a case where a regional elite in a federation put themselves before the rest of the federation, leaving the federation as a whole weakened.

Most people have forgotten just how much industry, technology and people Britain shipped to the US. This made the US overtake Britain as the prime industrial power decades, maybe even generations before it otherwise would have. That allowed the US to impose its peace terms in World War I, and after World War II to subjugate Western Europe, including Britain, and force Britain to divest of its Empire on unfavorable terms which crushed its economic viability.

It’s important to note that there are periods where this doesn’t happen. Britain’s rise, economically, started when it decided to stop allowing the export of raw wool to the Netherlands in order to force the creation of its own woolens industry. Once Britain gained a technological lead it had laws forbidding people with important skills and knowledge from going to other countries to share that knowledge and it carefully protected its industries thru various mercantale policies.

These sorts of policies work and exist when elites in a country have the feeling that the rise and fall together. But by the late 19th century British elites were in cut-throat competition with each other. If you didn’t keep up, you got bought out or couldn’t sustain your estates.

With large numbers of elites threatened with dropping out of the real elite (people with power and money, not just enough wealth to not worry about money) elites were willing to betray and policies were changed to allow the export of technology, skilled workers and knowledge. Since the US was a continental state with a larger population, such transfers, though they made many individual investors and capitalists in Britain richer, not only weakened Britain’s position, but inevitably lead to America becoming more powerful than the US. (Remember that the UK essentially won the war of 1812.)

Now note that some transfer to weaker allies can work out. The US was damaged by Japan’s rise after WWII (as anyone who was at least a teen in the 80s remembers) but because Japan had a smaller population and less of a resource base, Japan could not overtake the US, despite fears at the time. The same is true of South Korea and Taiwan, neither of which could have industrialized the way they did without US aid.

Making them rich industrial nations made them stronger allies and while it did weaken the US relatively, it improved America’s geo-strategic position in some ways.

Understand that America had very protectionist policies for a very long time, and they worked. Industry was built behind significant tariffs, intellectual property was stolen wholesale (the Brits of the 19th century were as upset about it as Americans are now at China) and trade was carefully managed.

Generally speaking, American elites, especially after the civil war, were united in feeling that America’s increased power was their increased power and wealth.

This remained true thru the first two and a half to three and a half decades after WWII, but it changed with the ascent of Reagan. In the old system, regional elites were protected and monopolies were heavily regulated. This started chanting in the 70s, with the rise of huge conglomerates, but was formalized in 80s under Reagan, which is when consolidation really took off. As various industries entered competition to buy out their rivals, those who were bought out left the true elite: they might have a lot of money, but they no longer had the power created by control.

This process lead to desperate need for profits: anyone who fell behind, even just by getting richer slower, was in a position to be bought out and thus thrust out of the elite.

And so American elites sought higher profits, even if it meant moving industry and technology overseas to the only country (India was not really a contender) which was larger, in effect, than the US: China.

This was precisely the mistake made by Britain and had the same consequences: the loss of the manufacturing lead, which will be followed by loss of the technological lead, the delay probably being two to three decades.

American elite competition became too fierce, internally. Threatened by loss of elite status, American leaders sold their country’s lead in order to maintain and indeed, increase their internal power within the US. America became relatively weaker, but those elites who retained elite status: who won the internal competition, became more powerful within a weaker America.

There were plenty of knock-on effects from this: soaring inequality, for example and popular dissent. The rise of Trump and so on is a direct result because part of elite competition was to find ways to take from the middle and lower class. It wasn’t just about going overseas. But high inequality societies, all else held constant, are weaker than more egalitarian ones, so this too was a weakness and the political instability and weakening of citizenship and consumers also hurt the US.

In a real way this is just the large scale of something which happens to groups: if the group doesn’t work for most of the group, if people don’t feel that making the group better off makes them better off, then people betray group interests since group and individual interests have become dis-aligned.

Great leaders have always understood this dynamic, and it is at the heart of “we must all hang together or we will all hang separately.” Like many such statements (another is “a rising tide lifts all boats”) it is not descriptive: it is prescriptive. One must make it so that betraying doesn’t make more sense than looking after group interests. If a group doesn’t, the group will become weaker and in worst case scenarios, group members may lose everything.

Indeed, as I’ve noted before, I expect Britain to break up and become England, Scotland and Ireland. There is a very good change England will become, essentially, a third world nation again.

But this process takes a long time. The initial betrayers lived 170 years or so ago. They died long before the cost came home, many even before the cost of post-WWI humiliation. This is another version of the death bet: “this will hurt terribly, but I’ll be dead before it does.”

I don’t think America’s decline will take as long Britain’s has, but it’s also cushioned by the fact that America is a continental power. Russia is far from what it was, but still a great power, and the same will remain true for the US for a long time, absent break-up, because of its sheer size and momentum.

Still, elites betrayed and the price will be America supremacy, long before it had to happen. Perhaps that loss is a good thing: the US was not a particularly kind Hegemon, especially after the fall of the USSR, and perhaps a two-polar or multipolar world will be better, though it’ll be hard to disentangle and be sure of that simply because of the crushing costs ecological collapse, climate change and human population overshoot.

Nonetheless, elites which did not engage in cut-throat internal competition would have hung onto power longer. They are losing their power precisely because they betrayed internally, and that led to external betrayal.

(See also: The Red Queens Race, Neoliberalism & Why Healthcare is Being Privatized.)

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