The Obama administration came to power with a promise to the electorate of less direct US involvement in the Middle East. However that never stopped them from pressuring Israel, especially to make dramatic concessions toward the Palestinians. After seven and a half years nothing has changed. Within the US Democratic Party, foreign entanglements and “free trade” treaties have become taboo. Yet, the desire to somehow force Israel into a suicidal withdrawal from so-called “Palestinian lands” (a term both historically wrong and legally incorrect) is the one foreign policy entanglement that many Democrats can agree upon.
On The Republican side of the US political ledger, there has been a revolution. For the first time since the election of Richard M. Nixon (1972), a Republican candidate for president has arisen who is neither a conservative nor a neo-conservative. Donald J. Trump captured his party’s nomination process on a loose platform of economic protectionism, means-tested foreign involvement and vague promises to somehow return good-paying American manufacturing jobs. These jobs have been lost (nearly 8 million of them) to cheap labor globalization. Trump has mobilized millions of white working-class voters who, like their British counterparts in the Brexit, have given up on the idea that the integration of the world’s economy has any benefit for them. He has also used the issue of illegal immigration (another source of cheap labor) for his own political advantage.
Meanwhile, there has been an equally potent revolution within the Democratic Party. A strong minority within the party has supported the candidacy of an avowed socialist. Such a candidacy hasn’t occurred within the American electorate in many decades, perhaps even a century. Bernie Sanders has astonished the US political elite by adopting policy positions far to the left of the traditional mainstream in Democratic Party politics.
On foreign affairs, Sanders would attempt to normalize relations with Iran, while declaring near unconditional support for a West Bank Palestinian state. Such a policy has shocked both Israel and the Sunni Arab states alike. The naivety of Sanders portrayal of Iran as a “normal” state is particularly distressing for Jordan and the Gulf Arab states. But for a candidate with a Jewish background, who has spent time in Israel and has family living in the country, his nonchalance with regard to Israel’s security dimension is both disturbing and incomprehensible. Also, his support for other traditional US allies in both Europe and Asia has been less than robust.
America has been the champion of a liberal world order since its victory in WWII (1945). It spent countless billions of dollars ensuring that neither socialist nor communist movements succeeded globally. The idea of a domestic socialist insurgency has always been like a fantasy, usually the extreme product of either guilt or rebellion by youth in the upper classes. Since the end of the “Great Depression” (1940), working-class Americans have supported a liberal world order almost without complaint. But within the last seven years, the US has become a very unhappy and unequal place. The accepted premise, that each ensuing generation will become “better off than their parents”, has now proven to be untrue.
This fact bodes ill for a sustained and logical US involvement with world affairs. Both Sanders and Trump emphasize either a complete abandonment or renegotiation of America’s trade policies. The threat of protectionism (and a kind of neo-isolationism) is inherent within both these approaches. Israel and many other US allies throughout the world must become cognizant that even a more traditional candidate, like Hillary Clinton, has become circumscribed (politically) by the economic challenges of the last seven years.
During recent years, the vast majority of Americans have seen their wages stagnate and their job security erode. The de-industrialization of the country has become the flip side to the integration of the global economy. This process has been going on since the late 1980s. But it was the housing crash of 2007 and its tepid growth aftermath, which has left the working class in America with an understanding of its troubled economic foundation. To understand the extreme economic unhappiness of working-class America is to understand their very real revolt against all the politicians of the so-called US “establishment”.
Since the late 1980s, the US has seen 55,000 manufacturing facilities leave for areas of the world with a much cheaper labor force. The inflation crisis of the late 1960s and 1970s was essentially defeated by a cynical policy that allowed for the disappearance of the US-based factory system and its secure and decent paying jobs. Countless hundreds of US-based communities have become devastated socially, emotionally and physically, as the good jobs became lost to China and other low-wage countries.
But such an effect was neither instantaneous nor immediate. Slowly (over three decades), but inexorably, the vast US manufacturing losses gathered steam. They have now created the opposite of inflation — i.e., a debt-accumulated stagnation caused by cheap products from abroad. Yes, inflation was conquered, but at what price? Cheap products from abroad have meant a cheapening of wages at home. The only way to keep such a system from collapse is through either extreme monetary or fiscal stimulus. Both of these stimuli have been rampant since the first stock market crash of 1987.
On the monetary side, three successive Federal Reserve chairpersons have kept interest rates on US debt artificially low for decades. Normally this would have ignited extreme inflation, but with the advent of cheap foreign-made products from abroad, the Fed had the unusual leeway to forgo such a worry. But in economics, there is no such thing as a free lunch. Three decades of monetary expansion (in order to keep the devastated US working class buying) have also led to an unprecedented expansion of both domestic and global debt. This debt has now accumulated to somewhere in the neighborhood of 220 trillion dollars worldwide.
But low interest rates and cheap debt are the source of constant financial bubbles. Such bubbles can take place in any market. In the 1990s, easy money (cheap debt) was the cause of the stock market dot-com bubble. Over the course of two decades, such debt was the cause of the housing bubble (1987-2007). In the Arab Middle East, it caused a food commodity bubble along with an energy-futures bubble. These two bubbles were partly responsible for the eruption of the Arab Spring.
But in the US, it was the bursting of the housing bubble (2007), which allowed the working class the necessary clarity to understand the extreme economic inequality rampant throughout the land. Until its collapse, US housing prices in total had risen more than 400 percent in twenty years.
In a working class neighborhood, a home bought for 25,000 US dollars in 1987 could have been worth over a hundred thousand dollars just twenty years later. Yes, products from overseas were cheap; but by 2007, housing inflation had become extreme. This meant that working families could borrow on their home equity without any trouble. This was due to the widespread belief (among everyone, including bankers) that housing prices would always continue to rise. This misguided belief had become a truism on Wall St. and at the US Federal Reserve. In fact, it had also become gospel at the White House and Congress. Of course, as we all now know, the entire US “establishment” was dead wrong about housing prices. But they weren’t alone. Investors around the world had bought a vast array of US housing bonds.
When the crash came, it came hard. Millions of working-class Americans lost their jobs. Bush and Obama (Republican and Democrat alike) bailed out the big banks and other “too big to fail” financial institutions. But in order to get the economy activated again (so the world wouldn’t fall into a second “Great Depression”), the Federal Reserve reinstituted the very same policy which caused the crash in the first place — extreme monetary expansion. The US government also increased the national debt to a whopping nineteen trillion dollars.
However, the housing market didn’t take off again. Instead, over the course of the last seven years, the American working class has witnessed the greatest boom for financial markets in American history. But unlike a house, working class people don’t invest their wages in stocks and bonds. On the contrary, the workers have watched the richest one percent of the US population capture ninety-nine percent of all the investment income generated since the crash of 2007. In other words, the wealthy do absolutely nothing in terms that working people can understand — like fixing a car or repairing a roof or nursing the sick. The wealthy have now generated “investment income” trillions of times greater than the entire working class of the US. In fact, the combined wealth of the top one-tenth of one percent of the US population is now equal to the bottom ninety percent!
Wall St. — through the concentration of wealth by banks and chain-store mega-corporations — have captured the income of working Americans and have recycled this money back to Wall St. This money is constantly being reinvested. But unlike the past, these investments are not directed toward industrial plant and equipment located within flourishing US communities with a strong base of small businesses. But instead, these investments remain stagnant on Wall St. and are directed toward sterile financial instruments.
It’s a rigged game. The rich (through hedge funds) actually borrow billions upon billions (from Wall St. banks) at record low interest rates. They do this in order to search out other financial instruments (somewhere in the world). Of course, they search for instruments which will pay them an even greater rate of return. All the time, these same “speculators” risk nothing, because their initial borrowings remain at rock-bottom prices. This is because the Federal Reserve feels that to raise interest rates might certainly cause another “Great Depression”. Over the course of the last ninety months, interest rates have been kept at near zero. For the rich, within this system, there is little to no risk.
Meanwhile, as the Fed worries about a “Great Depression”, for the vast majority of Americans, it has become a no-win situation. Because within this rigged financial system, investments directed toward Main Street USA languish. Is it any wonder that the US (like Britain, with Brexit) has a near electoral revolt on its hands? And in politics anything can happen, even a Trump surprise victory.
For the Jewish people, both in the US and Israel, America’s vast inequality means danger. First, the extension of the monetary policy initiated since the crash of 2007 has now run its course. Instead of economic success, an even larger financial crisis is imminent. Second, in this type of situation, there seem to always be scapegoats.
Both the far-left and the far-right in America have no love for the Jews. The far-right sees a mythical Jewish banking conspiracy at the root of the problem. The far-left knows better, but refuses to accept the Jews as a people with a legitimate homeland. The far-left hates Israel, and they attempt to assimilate Jews out of their own culture and history, into the left’s own narrative. During the economic depression of the 1930s, even in the US, anti-Semitism was rampant. Could such a phenomenon happen again?
Don’t be fooled; the American economic and political system is near collapse. And neither political party has the slightest idea how to begin to repair the damage. Long-time observers of the American political process have never witnessed the depth of the dysfunction. The current election cycle has exposed deep divisions in the American body politic. It is for reasons precisely like these (regardless of what the far-left says) that modern Israel was first imagined and later created through tremendous hardship and struggle. That struggle (against all odds) still goes on.
Could there be a flood of new American Jewish immigrants to Israel? Time will tell. However as of this July 4th, America has become a very unequal and unhappy place. There is little doubt that globalization is now in deep crisis. But unlike the last crisis of the 1930s, at least the Jews have a place to go. Israel remains a national home and a potential sanctuary. And if we as Jews are threatened, hundreds of thousands will want to return home.
This scenario is neither far-fetched nor dystopian. Global capitalism is now perceived by the majority of American youth as a system in need of replacement. But without an alternative that is both workable and inspiring, America’s unhappiness could turn dramatically against its own. This has become a country with a high level of anxiety. The usual political discourse has become very shrill. American politics has become less rational, as many people search for easy answers to complicated questions. Others search for a political savior. Trump appeals to one camp, while Sanders appeals to the other.
On America’s 240th birthday, the historic pragmatism of the country seems exhausted, barely able to supply a coherent way forward. Its citizens appear unhappy with their political leadership, and the future of the country is murky.