IN October 2002, as they were engaged in the pretence of negotiations with United States President George Bush over a resolution authorising war against Iraq, members of the U.S. Congress began to report an alarming drift in the public mood. Messages from their constituencies opposing war outnumbered those supporting military action by a clear factor of 10. This could have been partly on account of the better degree of organisation in the anti-war camp, which the constituents supporting war saw no need to emulate. But it could also be an index that the polls showing majority endorsement of a war against Iraq had got it wrong - that the outcome of the so-called public opinion polls was largely a self-fulfilling prophecy. When confronting a question about the horrors of September 11 and what it takes to prevent their recurrence, most respondents had little difficulty endorsing the recourse to "all necessary means". And in the hands of the canny polling agencies, which know what will sell, this variety of response was quite seamlessly transformed into the explicit approval of war.
In early February, The New York Times columnist Thomas Friedman, an unrelenting champion of the U.S.' civilising mission in the Arab world, woke up to a troubling reality. Irrespective of what the polls say, he argued, he had, in the course of travels and speaking engagements all over the U.S. in recent months, not encountered a "single audience... where... there was a majority in favour of war with Iraq".
Political opposition, to the extent that it exists in the U.S., has been marked by an eagerness to do the bidding of the U.S. administration. The Democratic Party, with the exception of three Congressmen who made the trip to Baghdad in October 2002 to urge a policy of conciliation, has been pitifully quiescent. A brief awakening of conscience on the part of the prospective candidates for the 2004 presidential elections was promptly extinguished with Secretary of State Colin Powell's speech to the United Nations on February 5.
With no political medium to articulate mass sentiment and the media being either diffident or firmly in lockstep behind the U.S. administration, the general sense of disquiet is yet to force itself into the attention of a callous administration. But the causes of the growing anxiety are not far to seek. The year 2002 was the third in a row when stock markets in the U.S. closed lower. The incurable optimists among the investing public, still heady from the 1990s boom, were convinced that three consecutive years of decline were just not possible. They have taken the worst hit from the year's performance of the markets. Also bleeding are the pension funds that have been invested in the stock market, imperilling the retirement plans of the older among the post-Second World War "baby-boom" generation, who would in normal circumstances go out of the workforce beginning 2005. Since early 2000, the total loss of share market value in the U.S. economy has been $8 trillion.
The ongoing recession is now firmly dated to March 2001, just two months into Bush's tenure. Since that month, the U.S. economy has seen the loss of 2 million jobs. The unemployment rate has remained constant at 6 per cent only because it is tallied in relation to the number of job-seekers, which has fallen drastically in a gesture of dejection at the state of the economy.
The drop in stock markets is having a knock-on effect in terms of shrinking savings and reduced consumer expenditure. Companies are trying to retrench the massive capacities they built up over the 1990s. And the growing budget deficit means that the U.S. government will be unable to pick up the slack.
The social impact is already evident. Late-September 2002, the U.S. Census Bureau reported that the number of people living in poverty rose by 1.3 million in 2002, pushing up the total number of the poor to 32.9 million or 11.7 per cent of the population. This is the first time that the number of the poor has gone up in the last decade. At the same time, the median household income fell by 2.2 per cent in 2002, for the first time again in a decade.
Bush's response has been typical for a man who reduces all economic problems to the single dimension of tax. As he proclaimed in the course of his last State of the Union address to the U.S. Congress: "Jobs are created when the economy grows; the economy grows when Americans have more money to spend and invest; and the best and fairest way to make sure Americans have that money is not to tax it away in the first place."
This reflects, as Nobel Laureate and economist Joseph Stiglitz has pointed out, a serious crisis of the imagination. And there is no way that the U.S. will be able to pursue the second phase of Bush's tax-cut programme, fight a war and attend to the growing social crisis at home, without plunging the budget into deeper deficit. Economist Paul Krugman has pointed out that Bush's budgetary sleight-of-hand has converted a projected surplus of $270 billion in 2002 into a projected deficit of $300 billion this year. The fiscal deterioration of $570 billion, he has said, is entirely on account of the reckless programme of tax cuts that Bush ran his 2000 presidential campaign on and implemented soon after assuming office without the slightest concern for the larger implications.
Growing budget deficits in future would, in turn, mean growing international indebtedness. The U.S. current account deficit, today over 4 per cent of the gross domestic product (GDP) - largely on account of personal consumption and private investment - could well climb higher. But the surplus economies - continental Europe, the oil-exporting Arab states, East Asia and Japan - would be less willing to finance this deficit if the stock market continues its plunge and recessionary conditions make interest cuts necessary. Further, with a U.S. recession depriving many of these states of an engine of growth, they may be inclined to pull themselves out of the mire by diverting their surpluses into a domestic investment programme.
It is a serious conundrum that even the International Monetary Fund (IMF), with its programmed Panglossian optimism, has been unable to resolve. The IMF has only recently awoken to the growing divergence over the last decade between the deficit and surplus economies. And all the scenarios it has sketched for a redressal of this increasingly unviable situation, seem to indicate an enervating economic recession, growing dissensions among nations and at least a temporary eclipse of the central pole around which the world economy today revolves. The IMF, with its evasive proclivities, chooses not to pose the problem in quite the same way, but the import of its various scenarios is starkly clear.
It is a curiosity of the IMF's recent analysis of the growing divergences in the global economy that the main countries that are in chronic deficit - the U.S., the United Kingdom, Australia, Canada and New Zealand - share a fairly well-defined cultural and linguistic identity. They also tend, with reservations in the case of Canada and New Zealand, to be in favour of an invasion of Iraq. The surplus countries, notably those of continental Europe, in contrast, tend to be seriously opposed to the war, though Japan has recently very enigmatically said that its conduct in the event of a war would be that of an "ally of the U.S".
The U.S. has stockpiled energy reserves and could potentially ride out the expected spike in petroleum prices when war breaks out. The rest of the world, however, may not be quite so fortunate and the expected deflation of budgets that an oil price hike could cause globally will feed back into the U.S.
It would be an engaging pursuit to look for the underpinnings of global political divergences on the problem of Iraq in the economic fundamentals. And it is a curiosity of the regime that prevails in the U.S. now that their actions tend to widen both kinds of divergence. U.S. Defence Secretary Donald Rumsfeld has been the pivotal figure in the political theatre. Just prior to the decisive sitting of the U.N. Security Council, Rumsfeld sniffily dismissed the opposition of France and Germany to the proposed war plans as irrelevant. The two countries that constitute the political and economic axis around which European unity is built, he said, were "the old Europe". Soon afterwards, Rumsfeld's "new Europe" - the former Soviet bloc nations of the Czech republic, Hungary and Poland, joined elements of the "old" such as Italy, Portugal, Spain and the U.K. - in an extraordinary public display of solidarity with the U.S.
Initially it seemed that the full-page advertisement in prominent newspapers by eight heads of state and government had been orchestrated by the U.K. It later emerged that the editorial page staff of the Wall Street Journal - consistent cheer leaders for Bush's war plans, as also for every sordid political conspiracy in the U.S. over the last 10 years - had initiated the campaign. It was no coincidence then that the advertisement was published for the U.S. market in the Wall Street Journal, enabling the paper to editorially thumb its nose at The New York Times. But for the Times' subdued and occasionally sceptical attitude towards the war plans, it would have been the logical outlet for the advertisement, argued the Journal.
Rumsfeld was soon back at his project of rubbing the Europeans the wrong way. Just prior to a visit to Italy and Germany, he warned that the latter country's opposition to war would put it in the unsavoury company of such states as Libya and Cuba. And shortly after arriving in Munich to attend an international security conference, he made the rather artless comment that French opposition did not surprise him, since that country had a natural proclivity to go against the grain of common sense.
The European reaction has been restrained so far. There is little doubt though, that the uncanny coincidence of political and economic divergences between the U.S. and its erstwhile allies is creating a major rearrangement of the pieces in global power politics. It was the older President Bush who in 1991 announced his intention to erect a "new world order" on the smouldering ruins of Iraq. His son may well see the prophecy come true, though not quite in the manner foreseen by the zealots of U.S. exceptionalism.
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