“America in Decline,” says Noam Chomsky
In the 1980s and 90s, a set of policy prescriptions enforced initially by the International Monetary Fund and World Bank, and later by“free trade” agreements, forced poor countries to adopt fiscal austerity, “labor market liberalization,” privatization of public sector enterprises, and dismantling of social safety nets. The policy framework became known as “the Washington Consensus,” stemming as it did from the US Treasury Department, the US-led international financial institutions, and economists trained at US universities. [The term was coined by John Williamson, a DC-based think tanker, in 1989.] The policy prescription was designed to meet the needs of international investors.
Washington, which was never under IMF and World Bank discipline, retained some degree of autonomy from policies imposed on debtor economies, though it must be said that US adoption of “Free Trade” agreements, welfare deform, and Fed Reserve obsession with restraining inflation suggest that the Washington Consensus was at home in the nation’s capital.
In any case, those days appear to be over. The Standard and Poors downgrade of US treasury bonds is proof that even the US of A can be forced to live by rules it has imposed on weaker economies. Austerity budget here we come.
Noam Chomsky links the weaker position the US finds itself in to “financialization (the shift of investor preference from industrial production to so-called FIRE: finance, insurance, real estate) and the offshoring of production.”
In an article published last week, Chomsky says“the ideological triumph of ‘free market doctrines,’ highly selective as always, administered further blows, as they were translated into deregulation, rules of corporate governance linking huge CEO rewards to short-term profit, and other such policy decisions.”
The article covers ground Chomsky addressed in a talk at World Fellowship, July 27. Speaking to the largest group the leftist retreat center had seen in decades, Chomsky said U.S. power was at its peak immediately after World War Two, and that it has been on the decline ever since. At that time, policy intellectuals laid plans for “a global system dominated by the U.S.”
“Those principles are still operative but the capacity to implement them is reduced,” he said.
The decline in U.S. ability to dominate the world is not a bad thing. The question is what will replace it.