America's loss of lives and treasure in the debacle in Iraq, while considerable, will not permanently damage this great nation. We are too big, too blessed by geography and history to have to pay the full price for our errors. Even the geopolitical disaster of a war whose only victor is Iran will not really hurt us. Other nations in the region, Israel, Lebanon and the Sunni Kingdoms of the Gulf will suffer more than we from the spread of Shi'ite theocracy.
The greatest loss is to our reputation. Our weakness, our demonstrated inability to defeat even a medium sized enemy inevitably means we will be less feared while our perfidy, our willingness to lie and torture means we will be less respected.
This is the cost of Bush's unnecessary war. Like a profligate heir, he has tossed away the good will we Americans had earned over the past century. The credit we had obtained, the respect for America all over the world, for liberating Europe, for defeating communism, for blue jeans, Marilyn Monroe, and rock n roll has unfortunately been diminished.
Yet this too, we can survive, if manage to stop repeating the errors that led to this disaster. Short sightedness, cowardice and self-serving behavior are the hallmarks of both the decision to go to war and its execution. We now know that Colin Powell had grave doubts about the wisdom of this war. He knew Saddam was no threat to America. He knew that any cost benefit analysis indicated its dangers far outweighed any advantage it could bring us. And yet, he went to the United Nations and lied. Had he resigned, had he let the world know what he really thought, had he done what an honorable man would have done, he might well have prevented this calamity. But he didn't. He went along. He didn't do his duty to his country; instead he did his duty to his employer, and to his career.
One hundred years ago, the United States was the world's greatest debtor nation. After the Civil War, we borrowed massively, mostly from Britain, to develop our railroads, our industry, to build a nation from the Atlantic to the Pacific. These huge investments paid off and by the 1920s the United States repaid its debts, became an economic powerhouse, was the world's largest creditor. An educated workforce, productive factories, modern management, fertile land, America could out-produce the rest of the world in manufacture, mining, agriculture. The world craved our goods while we were almost self-sufficient. For most of the century, until 1973, our exports were far greater than our imports. The great economic dilemma of the early post war years was the "dollar shortage": how could Europe and the world afford to buy the food, natural resources, machinery they desperately needed from America while America needed almost nothing from the rest of the world.
Those days are long gone. The US is again the leading debtor nation in the world. But this time, we borrow not to invest, not to build factories, not to develop the nation, but merely to consume. Today the difference between what we import and what we export, (in other words between what we produce and what we consume) is over 6% of GDP. Our government budget deficit (the difference between taxes and government spending) also equals 6% of GDP. These twin deficits are higher than Argentina's when its economy collapsed.
Today's trade and financial flows are counterintuitive. During the 19th century, the advanced nations (Britain, France, Germany) lent money to the developing nations (the US, Argentina, Australia) so that they could build the infrastructure needed so as to supply Europe with cheap food and raw materials. These exports repaid the debts. Now, the Chinese, with their huge savings surplus lend Americans the money so that we can afford to buy their products. Instead of investing in their own country, they buy US assets as a way to keep the dollar strong and their own currency competitive. If America's function in the world economy 50 years ago was as the low cost producer of almost everything, now it is the ultimate consumer. Funded by the savings of the rest of the world. It is the American consumer's willingness to incur further credit card debt that keeps factories in China humming.
The fundamental danger to America, then, is our dependence on foreign savings and our lack of competitive advantage. Up til now, the Chinese, the Japanese, the East Asian tigers, and the oil producing states have been willing to invest their export earnings in our economy, buying American assets, buying government bonds. Were they to stop funding our imports, interest rates would jump and the dollar would collapse. Americans would not only need to live within their means, they would also have to pay for the past 30 years of profligacy. At some point, the free ride will end. At some point, the United States, like all other debtors, will have to export its way out of trouble.
The possibility that Asian Central Banks would shift their assets out of US treasury bonds is a much greater threat to the American way of life than terrorism ever could be. This is the obvious long-term external threat to America and so should be the primary concern of the United States government. It isn't because current account deficits are a complicated topic that do not lend themselves to easy answers. Any solution involves sacrifice and any politician that asks us to sacrifice for our future good suspects he will soon be out of a job. It is much easier and more profitable to prattle about weapons of mass destruction, about bringing democracy to the benighted even as we abandon our own civil liberties.
Lyndon Johnson was a man of considerable flaws. He claimed to have had sex with more women than Kennedy. He became a millionaire on a Senator's salary. He stole elections. He enacted pernicious legislation that served the Texas oilmen that funded his rise to power. But when he became president he used that power to finally bring Blacks into the mainstream of American society. When he signed the 1964 Civil Rights Act, he realized he was abandoning the South to the Republicans for a generation. He was a man who loved power, who loved the Democratic Party but he loved America even more. He was unethical in his rise to power but once he had it, he strove to do good.
On a profound level, our mistakes in Iraq are moral ones. Politicians lied. Journalists let them. Well-connected businessmen got fat contracts that, had they gone to Iraqis could have built a constituency within Iraq for the American occupation. No one saw their duty first to their country, or even to the truth. This moral flaw is what worries me most about the Iraq war, that makes me worry for the future of my country.