The wrong-way Corrigans who engineered the U.S. train wreck

America’s decline counts as probably the most precipitate in history. So who’s to blame? America’s ideology-blinded media have a lot to answer for.

As recently as 1965, when I started college, America had the world at its feet. Its decline since then must count as the most precipitate of any major nation in history. As my former employer and supporter the late Sir James Goldsmith remarked in 1994, “What an astounding thing it is to watch a civilization destroy itself.”

Who’s to blame for this epochal fiasco? It is a question that future historians will debate for centuries. Let me give them some advance help with their inquiries.

Among the several culprits surely the most egregious has been the American press. Naive and incompetent press coverage has created feedback loops that have resulted in the American electorate voting for — and American leaders pursuing — policies that, had the facts been objectively presented, would long ago have been revealed as counterproductive if not disastrous.

Don’t get me wrong. I am not suggesting that every editor or writer is purblind, let alone stupid or venally complicit with corporate America’s globalist agenda (though some of them certainly answer to one or more of these descriptions). Many of my friends are media professionals who are as alert to the issues as I am. The problem is that the best of them have had their careers stalled or sidetracked precisely because they have been right on the issues. In the American press these days, nothing, it seems, succeeds like mediocrity.

Here are just some major American policy fiascos in recent decades in which the press has played a starring role:

The Iraq war. Not only did the American press sign off on the war but in many cases did so with such fanaticism that it knowingly distorted or even misstated the facts. Amazingly, though Donald Rumsfeld was forced to resign and George Bush and Dick Cheney have had their reputations ruined, virtually none of the editors or writers who greased the skids for the Iraq disaster has suffered the slightest obloquy. And, of course, idealistic fellows that they are, none has felt it necessary to resign. On the contrary some have gone on to ever greater heights.

Should they have anticipated the outcome? Well, others did (for what I wrote at the time, click here: ). Indeed not only did most of the more intelligent of my friends and associates predict the fiasco but so did the vast majority of capable observers outside the Washington-New York-London echo chamber. And even in London, where many observers are prey to the same ideological blindspots as their counterparts in New York and Washington, most of the non-Murdoch press either opposed the war or at least raised serious questions about it. Yes, many nations were persuaded to join the “coalition of the willing” but with the exception of Tony Blair’s Britain they made only token contributions as a quid pro quo for favors from the Bush administration. Japan’s decision to provide a few hundred troops for quasi-policing duties in Iraq’s most peaceful province, for instance, bought, among other things, another five years of exemption from American demands to open the Japanese market. (Reality note: Japanese markets still remain substantially closed, not least the rice market which the American press in its wisdom reported had been thrown open to American exports in the early 1990s.)

The subprime disaster. Virtually none of America’s most prominent and widely promoted press commentators saw the 2008 financial collapse coming. Quite the contrary, many of them served as cheerleaders for the ever wilder Wall Street excesses that led to the disaster. Yet the outcome hardly came as a surprise. As far back as 2002 several prominent sources were already warning of the dangers of the inflating bubble. They included the Washington-based analyst Dean Baker and the billionaire investor Warren Buffett, and they were soon joined by the Yale economist economist Robert Shiller and the financier Jim Rogers. Even after the Basel-based Bank of International Settlements issued a particularly blunt warning in the summer of 2007, the commentariat slumbered on. Yet this again was hardly rocket science. The fact that radical deregulation of American finance would lead to ever greater waste, volatility, mispricing, and outright malfeasance was already obvious to some of us as far back as the 1990s. (For my 1999 analysis of the dangers of deregulation, click on this link: )

Foreign indebtedness. America’s increasing foreign indebtedness “does not matter” has long been the mantra of the faux- sophisticated commentators of the elite press. First enunciated in a slightly different form as “the trade deficits do not matter” and aired originally in the Wall Street Journal‘s editorial pages in the late 1980s, this idea quickly came to sweep editorial boards right across the American media establishment. Yet anyone who did a little digging discovered that it had originated merely as the special pleading of the foreign trade lobby. For foreign lobbyists, the logic was obvious: if the United States was to continue to run ever larger trade deficits (the current account deficit has increased sixfold since 1989), it would have to be persuaded go ever more deeply into hock to foreigners. The point of course is that trade deficits and foreign indebtedness are two sides of the same coin. Basically the lobbyists were wishing on America the same profligate policies that bankrupted the Ottoman Empire a century ago. But why did the editorial boards of America’s most “respected” newspapers go along? Why indeed. They were somehow persuaded that America’s increasing indebtedness was a demonstration of national strength, rather than weakness. Supposedly the trend was driven not by the American trade problem but by America’s “unique attractiveness” as a place to invest. Although a few foreign investors may have viewed the United States as a sure-thing investment, the central banks and finance ministries of East Asia, who have, of course, long accounted for the vast bulk of foreign purchases of American government debt, have had no such illusions. They have known all along that their investments would never earn a profit and that in the long run the dollar was headed off a cliff. In “eating” vast amounts of American government debt they were simply facilitating America’s increasing purchases of their exports (had they not done so, the dollar would have collapsed). In essence they were building their economic muscle at America’s expense. What is indisputable is that in the space of little more than a decade, the United States went from being the world’s biggest creditor to the world’s biggest debtor. Yet all along the American press hailed the policies that created this result as strengthening, not weakening, American power. The result today is that the United States is so heavily dependent on foreign finance that the central banks of China and Japan have an effective veto on American policy.

The manufacturing implosion. As America’s trade deficits have soared, the American media have hailed the collapse of American manufacturing as “creative destruction.” America has been portrayed as triumphantly leading the world into a new postindustrial era and American service workers were sure to move to ever higher levels of prosperity. By contrast manufacturing could safely be relegated to low-wage economies. After all, modern manufacturing supposedly consisted merely of labor-intensive “snap together” assembly work of the sort that China specializes in. Although this argument has lately been presented with less swagger than it once was (the New Economy stock collapse of 2000 has taken its toll), it still goes a long way towards explaining the elite press’s “let them eat cake” attitude towards the collapse of American manufacturing. Unfortunately it makes no more sense to believe an economy can thrive on services alone than human beings can live on carbohydrates alone. For one thing, service businesses are generally poor exporters, and this, of course, goes a long way towards explaining the disastrous trend in America’s trade figures. Moreover advanced service businesses create a bad job mix, because they tend to recruit merely from the top end of the educational hierarchy, leaving the bulk of the nation’s labor force out in the cold. Then there is the fact that service jobs are labor-intensive, whereas jobs in advanced manufacturing can be enormously capital-intensive (particularly in the sort of producers’ goods industries, invisible to the consumer, that are the mainstay of such high-wage exporting economies as Germany and Japan). Not only are capital-intensive jobs well insulated from low-wage foreign competition but they hold out the prospect of strong productivity gains that lead in turn to better wages.

Japanese trade barriers. Though you would never know it from American press reporting, American policy towards Japan has been badly mismanaged for decades. The most obvious evidence is trade. Not to put too fine a point on it, Japanese mercantilism has played a decisive role in emasculating America’s manufacturing prowess. Yet rather than challenge Japanese trade policies, American commentators have often acted as apologists for them. The story of U.S.-Japan competition in the car industry illustrates the point. The Japanese have kept their home market as a protected sanctuary, where, operating in cartel fashion and free from effective foreign competition, Japanese car makers have generally garnered super-rich profits. These profits have been the ultimate source of the massive investments in both manufacturing technology and R & D that have enabled the Japanese to pull far ahead of the U.S. industry.

Meanwhile, the Japanese have kept the American competition pinned down in the American market — at times, particularly in years past, selling at little more than marginal cost. Even Korean carmakers are shut out of Japan — and this despite the fact that Korea and Japan do huge trade in other areas. (Korea is Japan’s third-largest trading partner and Japan is Korea’s second.) Perhaps the most telling evidence is that while for nearly a decade France’s Renault company has nominally controlled Japan’s second-biggest showroom network (via its stake in Nissan), it has never been allowed to sell more than token numbers of French-built cars in Japan.

In recent decades the American press has generally swept such evidence under the carpet, arguing that Detroit’s failure in the Japanese market merely reflects the fact that American cars are not configured for Japan’s drive-on-the-left roads. This is a classic case of the American press being bamboozled by East Asian special pleading. The fact is that, via European subsidiaries such as General Motors’ respected German brand Opel, the Detroit Big Three do make plenty of cars configured for Japan but these have been systematically shut out of the market.

In any case the sort of wealthy Japanese who buy foreign cars often actually prefer to have the steering wheel on the “wrong” side because in a country where trade barriers have ensured that foreign cars are extremely expensive this configuration is a status symbol. Even Rolls-Royces and Jaguars, which in their “natural” state as sold in Britain have their steering wheels on the right, are sold in Japan with the steering wheel on the left! All this notwithstanding, the Wall Street Journaland the New York Times have repeatedly over the years alleged that a failure to make cars configured for Japanese roads has been the key to understanding the absence of American cars on Japanese roads.
Countless other examples could be cited of how tone-deaf the American press is in Japan.

A particular favorite of mine is the story that Japan’s so-called lifetime employment system is supposed to be breaking down. This canard has been a hardy perennial of American press coverage of Japan since the 1960s. I counted five sightings in the New York Times alone in the 1990s. Yet the fact is that the system is stronger today than when I moved to Japan in the mid-1980s. Why do American correspondents keep repeating this error? Partly it is a matter of culture blindness. Partly it stems from the fact that Japanese spokesmen encourage foreigners to believe the system is “crumbling.” Why because if they were to admit that the system was a going concern they would have to go on to acknowledge that one of essential conditions for it to work is that Japanese markets have to be well protected against imports.

Let’s get back to Sir James Goldsmith. As he observed in 1994, America’s fundamental problem is that it has failed “to re-examine the validity, under totally new circumstances, of [its] economic ideology.” The major reason this is not more obvious to American economists is that they believe what they read in the American press. Reporters and editorialists consistently — and often outrageously — bend the facts to fit an outdated ideology and the rest, as they say, is history.

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