Tuesday, July 13, 2010

Independence Day

I spent two weeks in Ecuador. I had made elaborate plans to post this and another blog in my absence. But technical difficulties made that impossible. Belatedly, therefore here is

Independence Day

July 4 has passed once again; it is time to ask ourselves what we are celebrating.

Independence from Britain was won so long ago; perhaps it is no longer worth commemorating. But if we look around at other countries, we can see that we still have a precious independence many other nations lack.

It is not uncommon, especially in the smaller countries in Latin America that the American ambassador tells voters to chose one candidate rather than another in an upcoming election. Such pronouncements, moreover, are not just random private opinions of the ambassador, but carry an implicit threat that if the people elect someone not favored by the United States government there may be repercussions. The US may withhold aid; the country’s creditors may demand faster repayment. Various shadowy US government agencies such as the CIA may try to foment a military coup against an unfavored elected government.

So far no foreign country would dare to insert itself in our domestic politics and in the people’s choices for who shall lead our government. We are independent. We can run our own affairs without interference from abroad.

It is not clear, however, how long this independence will last. We are no longer economically independent and have not been so for a long time. We frequently refer to ourselves as the richest and the most powerful country in the world but that, by now, is a massive self-deception.

Our foreign debt stands at more than $13 trillion. That amounts to 89% of our GDP. If we were to try to repay all our debts in one year, we would have no more than 11% of what we produce annually today for our own needs. Our interest payments in 2010 amounted to $248 billion. The countries we owe most money to are:China,  Japan, Great Britain, Brazil, Hong Kong, Taiwan and Russia.

As our debt grows, these nations will be more reluctant to lend us money. They will begin to doubt whether we will be able to repay our debts or will be able to pay the huge interest on them. They will demand a higher and higher interest rate. It will be more difficult for us to keep going because loans will be hard to get. That is the situation of countries like Greece which need to accept advice and criticism from other countries. They are subject to external pressure because they owe so much money that no one wants to lend them more. Once that happens they face bankruptcy. Nations facing bankruptcy need bailouts from other nations. They are not  powerful.

How long will it be before the Chinese, to whom we owe  close to $1 trillion, will pressure the US electorate to vote for one candidate rather than another?

Our self-image as the richest and most powerful country in the world has led us into two wars we do not seem to be able to end, let alone win. In order to finance these wars we keep running up debts and pretty soon we will be a debtor nation that is dependent on its creditors. Once dependent we will have to accept unasked-for advice, interference in our politics and whatever else suits those who hold our bonds.

We are not as rich nor as powerful as we think. Our independence, for which we must be grateful,  is very precarious.