America’s Financial Armageddon and Afghanistan

[Donnachaidh]

http://www.counterpunch.org/2011/09/14/america%E2%80%99s-financial-armageddon-and-afghanistan/

As the U.S. economy grinds down to a finish, it becomes increasingly difficult to measure whether Washington understands the importance of how to deal realistically with the worsening crisis in Afghanistan. Left off the front pages during the recent obsession with the debt crisis, Afghanistan has lurched back onto the scene in ways that are reminiscent of the Soviet collapse of two decades ago. After ten years of war, it seems Washington not only continues to lack a comprehensive understanding of Afghanistan, but it lacks an understanding of its own role in creating both the economic and political catastrophe it now faces.

Even less understood is how the political decisions of the late 1970s are tied to the current simultaneous financial and foreign policy crisis. Nor is it understood how Washington and Wall Street set the stage for America’s financial downfall by using Afghanistan as an investment bank throughout the 1980s to renew the Cold War instead of reinvesting in America’s civilian economy.

Much like today, the America of 1979 faced a crossroads. Vietnam, two oil shocks, a disintegrating infrastructure, a beleaguered manufacturing base and the loss of strategic ally Iran had shown that America was a vulnerable colossus. Thirty five years of economic Cold War against the Soviet Union and China had produced a vast arsenal of nuclear weapons that were proving as useless as they were unusable. World War II had set the stage for the happy marriage of war production to business — pulling the U.S. out of the depression by doubling the Gross National Product in one year (1940). The Cold War ushered the financial benefits of the 1940s into the 1950s and 1960s. But these expenditures came at a massive expense to the civilian economy and not just in terms of tax dollars. Weapons development of the post World War II years lured America’s best and brightest away from the civilian economy and even the real world of guns, tanks and armies into a world detached from time, space and money. While Germany and Japan rebuilt their civilian industries free from defense spending, the U.S. moved into ever higher levels of technology, glorifying and expanding the influence of the defense industry into every fabric of American life.

Originally termed Military Keynesianism to describe the buildup of the German defense industry prior to World War II, America’s military Keynesianism of the Cold War was the unseen hand of government supporting the American economy, balancing the cyclical ups and downs of the market by providing 16 percent of the Gross Domestic Product in 1950s and 9 percent in the 1960s. By 1963 defense spending accounted for 52 percent of all the research and development done in the United States. But by the mid-1970s, a stagnant American economy combined with the Arab oil embargo and inflation brought on by the Vietnam War exposed the weakness in the system. As German and Japanese manufacturers battered their American competition in the marketplace, the defense-heavy American economy faltered.

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