Volume 44, Number 174,
July-September 2013
The Decline of the United States:
Global Historical Context
Alejandro Dabat and Paulo Leal

Global capitalism is made up of a set of diverse types of national capitalism surrounded by globalization, as well as some of the factors described in the introduction. Consequently, the hegemony of US neoliberal capitalism does not necessarily imply a unique global capitalism, as we have seen in this and other works. Although US capitalism is still dominant at the global level due to the factors described here, it is no longer the most dynamic and competitive version, as a result of some of its most important national aspects. These include the neoliberal, militaristic and imperialistic state, the speculative and parasitic nature of its financial system, the short-term and overly global outlook of its productive businesses, the decline of the scientific-educational system and the extreme consumerism of its society, together with rapidly growing social inequalities.

At the base of these issues is the systemic functioning of current US capitalism as the articulation of the grand moneyed ownership and monopolies with society and major institutions of the nation, such as markets, business, the state, universities, social institutions and other methods of communication that shape public opinion (Packer, 2011). In the context of market fundamentalism and the neoliberal globalization observed by Stiglitz, this combination gave rise to profiteering, speculative and consumerist economic dynamics, defined by short-term profitability and investments, the sending of jobs to lower income countries and unsustainable spending for world hegemony, which distorted and impeded the enormous potential of the knowledge economy.

As a political-social entity, the current US neoliberal State is part of a broader process of decline, privatization and the breakdown of institutions and public spaces as we have seen, under the pretext of what Packer (2011) metaphorically calls “organized money.” The fundamental public functions of the state have been broken down by: a) chronic under financing due to reduction in taxes on high income and systematic tax evasion; b) the incessant rotation of jobs among high-ranking civil servants and government officials as well as financial managers and directors of big business and the industrial-military complex (the “revolving door,” according to Roubini and Minh, 2010); c) the widespread institutionalization of bribery by lobbies and d) the official collusion of company executives in the face of exorbitantly high incomes (Stiglitz, 2010).

This has led to a notable weakening of public functions to benefit private interests, such as the loss of the fiscal capacity of the State to assume the high levels of investment required for the economic, scientific-technological, social and environmental demands of modern societies. With the exception of military spending and business subsidies (such as the enormous rescues during the crisis), this has strongly affected spending on health, education, social security and physical infrastructure. There has been serious deterioration in the maintenance of bridges, highways, power grids, dams, airports, canals, public buildings and communication networks, which has led to disasters such as the collapse of the levees in New Orleans or the Minnesota Bridge (Stiglitz, 2010). But something similar has also been happening to the new informational infrastructure (Baller and Lide, 2006).17

Regarding national production and companies, Porter (1998) emphasizes the greatest weakness of the US business model:18 the short-term logic of profitability imposed by capital that is separate from productive management. Additionally, the unrestricted monopolistic use of knowledge (a system abusive to patents), as well as the displacement of production abroad, especially through subcontracting, has come at the expense of developing domestic production.19 In terms of the produced value-in-use, the electronic and information technology sectors are more and more oriented towards gadgets20 or military production, despite enormous energy, environmental, public health and educational needs. Military production has been so high because of foreign militarism and interventionism, which raised military spending for the country from 3% of gdp in 2000 to 5% in 2010 (World Bank, 2012), as well as the enormous weight of arms exports, the massive open internal market for civil use that overestimates domestic criminality or the equipping of Mexican narcotrafficking.

In the social arena, real salaries have either stagnated or fallen, while quality of living has worsened and unemployment has increased as labor informality has risen (Stiglitz, 2012). All of this has been linked to exporting jobs abroad, the growth of subcontracting, undocumented migratory labor (OIT, 2011), lower numbers of families with pension or retirement plans (Statistical Abstract, 2012), mass firings in 2009 and 2010 (5.8 million and 2.6 million, respectively), as well as four million families that were evicted from their homes between 2007 and 2011 (Stiglitz, 2012). These tears to the social fabric, in addition to the millions of mentally ill war veterans, the free sale of sophisticated combat arms and the business of prison privatization21 have created conditions favorable to criminality and the explosive growth of rates of imprisonment, which have gone from 139 inmates per 100,000 people in 1980 to 502 in 2009 (Statistical Abstract, 2012).

In summary, this new type of US capitalism has lacked sustainable mechanisms of social inclusion such as those included in the New Deal or the Second World War, based on employment and higher salaries. What has been offered this time around is a temporary and unsustainable increase in consumer credit for families, far above employment levels, salaries and general living conditions (Leal, 2011).22 In reality, this insufficient means of inclusion was just another mechanism of the financial bubble, which demonstrated the long-term infamous incapacity of the current speculative neoliberal capitalism in the country to build an inclusive hegemony that could bring sociopolitical sustainability to the regime.

Over the period studied, it could be said that in the US, national labor productivity fell (from 2.5% annual average for 1990-2000 to 1.4% for 2000-2010), national income growth per resident was nearly zero at 0.7%, social inequality grew significantly (Gini coefficient), coming close to the critical level of 0.5% that defines the most unequal nations in the world (Statistical Abstract and Stiglitz, 2012) and the long-term foundation for sociopolitical sustainability was undermined. This, in combination with the vertiginous global ascent of China and other developing countries has severely impacted the global hegemonic position of the US.

17 According to Baller and Lide (2006), the predominance of the United States in broadband and fiber optics at the start of the 1990s was no longer so at the end of the century, meaning the nation lost its international ranking in broadband speed, according to the oecd, going from first to fourth place by 2001 and the start of the century, to spot 19 by halfway through the past decade and falling to 15 by 2006.

18 The same tendency to seek short-term profitability has been aggravated by the equally harmful trend towards the disproportionate increase in income for executives (disproportionate self-allocation of bonuses) at the expense of shareholders. This inter-company conflict of interest has given rise to the so-called “hostile takeovers” of the new type of speculative funds specialized in the indiscriminate acquisition of companies (equity funds) directly to shareholders (without agreement from the executives), supposedly to reorganize them, but many times to liquidate them. This process increased from 2003 to 2007 (Samuelson, 2007) and became an important part of the speculative boom that led to the crisis, at the cost of dismantling many companies.

19 Apple, for example, the most recent start on the US business stage, directly employees 63,000 people (43,000 in country and 20,000 abroad). But their indirect subcontracted employees are nearly 7,000,000 (ten times more), spread out over Asia, Europe and other parts of the world.

20 Gadgets are small hardware objects that are largely superfluous (complex mobile phones, iPods or iPads, videogames, personal organizers, watches, etc.) and sophisticated software accessories designed to provide information or improve the applications and services of electronic equipment.

21 The privatization of prisons and the consequent payments that the State must make per inmate have notably increased the number of prisoners among the most unprotected sectors of the population, such as African Americans and Latinos (see Pérez Silva, 2012).

22 From 2003-2009 household spending rose 20% against a 6% average salary increase (Statistical Abstract, 2012).

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 48, Number 191, October-December 2017 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
CP 04510, México, D.F. Tel (52 55) 56 23 01 05 and (52 55) 56 24 23 39, fax (52 55) 56 23 00 97, www.probdes.iiec.unam.mx, revprode@unam.mx. Journal Editor: Alicia Girón González. Reservation of rights to exclusive use of the title: 04-2012-070613560300-203, ISSN: pending. Person responsible for the latest update of this issue: Minerva García, Circuito Maestro Mario de la Cueva s/n, Ciudad Universitaria, Coyoacán, CP 04510, México D.F., latest update: Nov 13th, 2017.
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