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Prior to Vietnam, the US was in excellent shape, economically. If LBJ had refused to allow us to be sucked into that conflict and instead concentrated on domestic matters, I honestly think he would have gone down as one of the top 5 presidents in history. But as it was, he tried to do "guns and butter", which was a miserable failure on all fronts. Vietnam undermined his political capital, and it also crippled us financially to the point that the country was literally hemmoraging money. This is what led to Nixon abolishing the Bretton-Woods system (under which currency exchange rates were fixed) and adopting floating exchange rates.
While this was good at "creating wealth" in the short-term, it helped to complete the transformation of the United States from a production economy to a finance economy. This transformation was effectively completed with the election of Ronald Reagan, and his dismissal of much of the overarching ideology of the New Deal and its aftermath in favor of the lasseiz-faire approach of market fundamentalism. In this sense, we have been living under the shadow of Reagan for the past 24 years, including during the Clinton years.
The end result has been a steady erosion in the living standards of much of the middle class and working class, while the investment class has seen its wealth multiply at an obscene rate. The gap between the haves and the have-nots has skyrocketed over this period, and it shows no signs of abating.
But all of this has come at a cost. In order to keep its economy afloat, the US has been required to hog a majority of the world's investment capital for itself. This has meant that large amounts of money that could be used for stimulating economic growth throughout the non-industrialized world has instead been appropriated to sustain rampant consumerism and maintain a facade of economic hegemony for the United States. Given this, it's no wonder that people throughout the world are beginning to seethe at the United States for its foreign policy while they simultaneously long for the possibility of "striking it rich" that they believe the United States offers.
Add into this situation an overstretched military subject to an increasingly bellicose foreign policy that is only pissing off the rest of the world. Ties with other industrialized nations, while still friendly in official reports, have largely been torn to tatters in reality. The two biggest nations in the EU -- France and Germany -- have indicated that they want no part of our misadventurism in the Middle East. Britain has cast its lot with the US, hoping that this Anglo alliance can help improve its position within the EU, but this effort will most likely be as doomed as the US gets dragged down in Iraq.
As for the rest of the world, it now sees that the mask of "multilateralism" preached by previous administrations has been completely ripped off, showing US policy for what it truly is -- highly unilateral, unconcerned with global opinion, and willing to pursue wholly selfish interests irregardless of the expense to others. Despite the rhetoric expressed by John Kerry of going back to the foreign policy of the Clinton years, such a move is an impossibility, because it would amount only to trying to put the mask back on this hideous visage of US foreign policy after the rest of the world has seen its reality in plain view, and that visage has been burned into their memory.
Kevin Phillips, in his book, Wealth and Democracy, highlights the cycle that all relatively modern empires have followed, from the Spanish Empire to the Dutch Trading Empire and the British Empire. They are as follows: 1. A rise in manufacturing and trade that produces a large and vibrant middle class. 2. An expansion of area and influence that accompanies this manufacturing and trade. 3. The rise of speculative finance, which begins the hollowing out of the manufacturing base and diminishes the middle class 4. The growth of a wealth gap between the haves and have-nots, along with the continued and steady erosion of the middle class 5. Involvement in a protracted war, which overstretches the military and the economy 6. The decline of the empire, leaving a diminished nation but one with a more egalitarian spirit, domestically.
I'll leave it to you to guess which phase we're in right now....
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