Yes, it happened at the Davos conference of bigwigs, insiders, and their sycophantic hangers-on, where the elite meet to munch canapés and discuss the way the world works, or, in this case, the way it isn’t working. The conference was heavy with the sort of pessimism that doesn’t usually accompany a gathering of the rich and pompous, yet instead of the usual self-congratulatory vaunting of their own virtue and “concern” for the world’s peasants, these aristocrats of the conference table were less than ebullient about the downward spiral of the global economy which, you’ll remember, yesterday was touted as the savior of us all, but these days is portrayed as the instrument of our collective doom.
While the walkout of Turkish Prime Minister Recep Erdogan grabbed the biggest headlines he didn’t like it when David Ignatius of the Washington Post shushed him in favor of letting former Israeli Prime Minister Shimon Peres drone on uninterrupted the real shocker was Vladimir Putin’s peroration, which sounded more like Ron Paul than the leader of a nation that has intruded the state into the economy and polity in a big way.
Putin likened the economic crisis the world is facing to “the perfect storm, which denotes a situation when nature’s forces converge in one point of the ocean and increase their destructive potential many times over.” This is very similar to the apocalyptic tone not only of Rep. Paul, but of gold bugs and libertarians outside the Beltway: save your candles, the dark ages are coming!
Yet our leaders were unprepared: in spite of strong indications that the crisis was breaking over our heads, only a prescient minority realized that our chickens were coming home to roost, while the “majority strove to get their share of the pie, be it one dollar or a billion, and did not want to notice the rising wave.” As the Remnant looked on, Western elites were oblivious to their onrushing doom:
“I just want to remind you that, just a year ago, American delegates speaking from this rostrum emphasized the U.S. economy’s fundamental stability and its cloudless prospects. Today, investment banks, the pride of Wall Street, have virtually ceased to exist. In just 12 months, they have posted losses exceeding the profits they made in the last 25 years. This example alone reflects the real situation better than any criticism.
“The time for enlightenment has come. We must calmly, and without gloating, assess the root causes of this situation and try to peek into the future.”
Well, perhaps he was gloating just a little, but who can blame him? After all, the high-and-mighties of the West had recently undergone a spasm of unrestrained hubris, from which we have only just begun to recover. This manic mood was given expression not only by the Bush Doctrine and its attendant military campaigns, but also by a mad triumphalism that predated 9/11 and really started with the fall of the Soviet empire. The “unipolar” delusion distorted our thinking and gave rise to all sorts of grandiose projects that wound up costing us dearly.
One of those projects was and is the encirclement and economic strangulation of Russia: the ill-fated “color revolutions,” the deployment of “soft power” in the service of penetrating the former Soviet republics with “civil society” organizations, funded and directed by Western governments, and the challenge to Russian predominance in the “near abroad” of the Caucasus and central Asia, where the U.S. seeks to build bases ostensibly to fight the “war on terrorism” in Afghanistan and Pakistan. That this dagger pointed at the throat of Kremlin leaders will have to be withdrawn, albeit reluctantly and temporarily, is doubtless where the gloating comes in.
So far, Putin’s critique is pointed, yet hardly shocking. Well, hang in there, dear reader, because we’re just getting to the good part:
“Add to this colossal disproportions that have accumulated over the last few years. This primarily concerns disproportions between the scale of financial operations and the fundamental value of assets, as well as those between the increased burden on international loans and the sources of their collateral.”
This realistic perspective is in sharp contrast to the frantic gyrations of our own political and financial leaders, who are wholly invested in maintaining that disproportion in all its gargantuan perversity. Collateral? Real value? Such bothersome impediments to omnipotence have long since been thrown overboard by the Washington-Wall Street crowd. As a top White House aide once told journalist Ron Suskind, guys like him disdainfully dubbed “the reality-based community” who “believe that solutions emerge from [their] judicious study of discernible reality” aren’t clued in to the new reality:
“That’s not the way the world really works anymore. We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality judiciously, as you will we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors and you, all of you, will be left to just study what we do.”
The same hubris that drove the Iraq war and led us to believe we could “transform” the Middle East, as some of the more perfervid neocons insisted, drove our financial leaders over a similarly steep cliff. The empire is now crumbling, along with the economic assumptions that financed it, as Putin points out:
“The entire economic growth system, where one regional center prints money without respite and consumes material wealth, while another regional center manufactures inexpensive goods and saves money printed by other governments, has suffered a major setback.”
Whether the Russian leader has been boning up on the works of the Austrian economists and has absorbed or at least understood their critique of central banking as the flaw in the otherwise beneficial ointment of Western-style capitalism, or has independently come to similar conclusions, is open to speculation. Suffice to say that the parallelism is astonishing. For the long period of American economic and imperial expansion, the dollar was the reserve currency of choice, its markets the freest and most profitable in the world. As we enter a perhaps even lengthier period of decline, the leading indicator of our protracted contraction is the end of the dollar-denominated world economy. Whereas the Chinese premier, in his Davos speech, merely called for closer monetary regulation and restraint on the part of his American trading partner, Putin called on the markets to dump the dollar.
Putin accurately describes the bubble of American supremacism and diagnoses its cause. It was “brought about ,” he avers, “by excessive expectations. Corporate appetites with regard to constantly growing demand swelled unjustifiably. The race between stock market indices and capitalization began to overshadow rising labor productivity and real-life corporate effectiveness.” The industrial West engaged in an orgy of consumption, without producing any more indeed, while producing much less. Our entire system was and is based on the generation of “unearned wealth, a loan that will have to be repaid by future generations.” It all “would have collapsed sooner or later,” and “in fact, this is happening right before our eyes.”
As America’s political leaders rush to reinflate the bubble, Putin would let it pop:
“This means we must assess the real situation and write off all hopeless debts and ‘bad’ assets. True, this will be an extremely painful and unpleasant process. Far from everyone can accept such measures, fearing for their capitalization, bonuses, or reputation. However, we would ‘conserve’ and prolong the crisis, unless we clean up our balance sheets.”
In short, the malinvestment engaged in during the bubble years must be liquidated. The longer we try to conserve enterprises supposedly “too big to fail,” the more painful and prolonged will be the process of economic recovery. This is precisely what libertarians such as Ron Paul and analysts such as Peter Schiff have been saying all along.
Unlike Barack Obama and his advisers, whose faith in government action is near religious, Putin warns against “excessive intervention in economic activity and blind faith in the state’s omnipotence.” It may be a “natural reaction” to turn to an increased state role in such times as these, yet “instead of streamlining market mechanisms, some are tempted to expand state economic intervention to the greatest possible extent. The concentration of surplus assets in the hands of the state is a negative aspect of anti-crisis measures in virtually every nation.”
Oh, but this is my favorite part:
“In the 20th century, the Soviet Union made the state’s role absolute. In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated.”
I lived to see an American president red-baited by the Kremlin! That, in itself, is utterly amazing, and proof positive that we have indeed slipped into an alternate universe, a Bizarro World where history runs backward and in reverse. Sounding more like Barry Goldwater than any Russian leader I ever heard of, Putin took aim at the Obama-commies:
“Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors, and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state.”
Those remarks would not be out of place coming out of the mouth of a Republican congressman and a fairly conservative one inveighing against the “stimulus” package. Putin goes beyond even this, however, when he warns against the danger of military Keynesianism:
“Unfortunately, we are increasingly hearing the argument that the buildup of military spending could solve today’s social and economic problems. The logic is simple enough. Additional military allocations create new jobs.
“At a glance, this sounds like a good way of fighting the crisis and unemployment. This policy might even be quite effective in the short term. But in the longer run, militarization won’t solve the problem but will rather quell it temporarily. What it will do is squeeze huge financial and other resources from the economy instead of finding better and wiser uses for them.”
Paul Krugman and his media echo chamber happily inform us that it doesn’t matter how or where we spend the money, just as long as we “stimulate” the economy with massive injections of monetary steroids. So why not military spending lots more military spending? After all, this is a point both conservatives and liberal Keynesians can agree on, as Putin surely realizes. I suspect his call for disarmament will be largely ignored, along with his insight that demilitarization will “bring significant economic dividends.”
That a Russian leader is now telling Americans that their turn toward statism and militarism is harmful both to themselves and to the world is a turn of events no one of my generation could possibly have imagined, certainly not anyone of libertarian inclinations. It is a sad and telling commentary that no American leader of any stature, aside from the previously mentioned Rep. Paul, has the courage to tell us what we need to hear.