Thursday, August 27, 2009

Are Politics In Japan A Sign Of Things To Come In The United States?

For anyone who hasn't recognized this fact as of yet, politics and government are the primary variables which will determine the future of the American economy. It is impossible to look into the future without considering these variables. In fact, at this point nothing else really matters as it pertains to economic futures. Our economic model is broken. We cannot put a patch on it and expect everything to be all better. This is not a "recession". It is a permanent change in trend. A new future.

The uninformed are watching CNBC-type media and the Wall Street bobble heads for some indication of the economy. The informed are watching what is going on in Washington as interests jockey to determine a new economic future. A new future is coming and it will be very different. How do I know this? Because government plays the most important role in the economy. It sets the rules. And money is pouring into the massive Washington bubble to try to affect those rules as I type this. Don't be too hasty to assume all of that money will carry the day. Just a matter of a dozen months ago we had reached a new economic golden age, or so we were told by elitists and their henchmen in the media. After the economic bubble popped, the velocity of money in the economy imploded. In other words, stimulus had no lasting effect. After the political bubble pops, the velocity of money in Washington will see the same outcome. In other words, the lobbyist money bubble is going to collapse and there is nothing that can be done to stop it.

Many had high hopes for change across a wide spectrum of economic issues with the election of a new U.S. President but that hasn't lasted long. President Obama's approval ratings in some midwestern states, where he won the popular vote, has dropped into the mid thirties. Cut nearly in half in a handful of months. Political pundits and politicians are extremely vulnerable to misreading the consensus building amongst the population. Consensus for a government that actually represents the people. The lack of effective leadership in Washington only reinforces my expectations that the future is not going to turn out the way either political party anticipates. Nor will it turn out the way Wall Street anticipates either politically or economically.

Japan is obviously well ahead of the U.S. in dealing with its economic crisis. Theirs has lasted a complete generation. But theirs was also very different. There was an uneasy but growing perspective in Japan that the economy had finally started to show sustainable growth in the 2004-2007 time frame. We now know this is not the case. And it's quite apparent people in Japan are just about fed up with the existing political apparatus. Since Prime Minister Koizumi retired, they have sacked leader after leader. Four prime ministers in four years to be exact. (Likely soon to be five in five years.) Now it appears Prime Minister Aso is close to getting drop-kicked into political pergatory. Regardless, it is an upstart political party that is affecting change in Japan. Sound familiar?

This would be the first time in most of our life times that Japan's pro-business Liberal Democratic Party has lost a major national election involving the future of the prime minister. (Similar to recent events in Mexico where one party rule has finally been defeated.) And that would play quite nicely with our post earlier this year highlighting the potential for a splinter from the Democratic party winning the U.S.'s 2012 Presidential election. Or, at the minimum, some outcomes that are extremely unexpected by America's political elites.

Let's be clear about something here. I hear the argument time and again that pro-business is the only logical stance our government can take because without being pro-business there would be no jobs. This is a complete fallacy. In fact reality is just the opposite. Being pro-business destroys economic opportunity. Pro-business government creates a very unhealthy dynamic of the blending of power between the ruling elite and their corrupt intertwined relationships with business. The revolving door of corruption between business and politics and the seamy favoritism or cronyism that crowds out a society of meritocracy. We have highlighted Mexico as being a never-ending example of this dynamic. The political-business apparatus is heavily influenced by a handful of rich families which essentially control the country. This dynamic keeps the jack boot of tyranny on the economic opportunity for the hard-working people of Mexico through affecting policy decisions benefiting a very few. This corruption is the most significant driver for immigration across the American border. Were I Mexican, I would be the first in line to leave the country. If American politicians were really serious about immigration reform with Mexico, they would demand political reform in Mexico. And they have all of the levers to accomplish it. Without the United States, Mexico would see widespread chaos and a collapse under its corrupt political structure. In fact, with the American economy unable to prop up a corrupt apparatus in Mexico, that's exactly what we see today.

The distinction we need to make is that America was not founded on a pro-business government. Nor was our wealth created by pro-business policies. We did not become the greatest economic miracle in history with pro-business government. These are lies of the mind perpetuated by a belief system. A belief system reinforced by corruption in our society today.

We talked specifically about policies and ideals that made American great incessantly over the years. You might wish to look back over the summer to my titled 4th of July Tribute to get a better sense as it pertains to this post. But, what made America great was government policy that was pro-market. Pro-market is pro-meritocracy. That is definitely not pro-business. Pro-markets is a populist policy. In fact, when Federal Reserve policies turned radically pro-business, we went from a tone of supportive of saving the banking system to unsupportive of bailouts for well-connected businesses at the expense of saving the overall banking system. This pro-business policy is actually contributing to the destruction of our banking system. Of healthy banks that are being infected with unhealthy policy dynamics. We became extremely critical of a policy that is rationalized as being necessary. The Federal Reserve just can't let mega institutions fail and cause an economic collapse but they could easily remove these sources of systemic risk from the banking sector via an orderly bankruptcy and, where appropriate, a breakup, removal of failed management and a reintroduction into the private markets as smaller component firms.

How ironic it would be were Japan's pro-business party to lose this election and our pro-business parties were also to lose for the first time in modern history.

On the note of pro-business, banking monopoly and winds of political change in the air, let's talk about another form of monopoly in America. That would be political parties. We need to bust up the political monopoly of two parties just as we need to bust up any other monopoly. But, to do it we need a grass roots populist movement just like what is happening in Japan.

The two party system limits the debate in this country and the free flow of ideas. It's no different than a bank monopoly or an monopoly in automobiles or computers or any other dislocation in the economy. Frankly, the two party system is completely anti-democratic. That is why there is some evidence Thomas Jefferson wanted to ban political parties. Can you imagine how different our leadership would be with no party affiliation? To in fact, be elected based on merit rather than political connections granting them access to major corporate funding and money granted by political parties. Throw in publicly funded elections and we have an election process based on a meritocracy where stooges with big party money would be unable to gain a disproportionate advantage. Where ideas in Congress would need to be debated on merit as opposed to being pushed or hushed by the gatekeeper party stooges. Voting blocks would need to be formed based on debating specific issues instead of falling in line behind partisan party stooges. It would be ...... democratic.

Here is the biggest hypocracy of all. Many of the Congresspeople are opposed to worker unions. And over the years they have supported political decisions to break worker unions. But in fact these very stooges are members of the most corrupt unions in this country - the political party unions.

The world, it is a'changin.
posted by TimingLogic at 10:23 AM