Why 'American dream' has become 'American illness

People's Daily, August 26, 2011

From self-confidence to frustration

After Americans succeeded in emerging from the "Great Depression" by adopting Keynesianism in the 1930s, the U.S. economy had been robust despite the impact of the oil crisis and the competition from Japan. Thus, Americans dubbed European society "Old Europe." Although Americans did not take pleasure in Japan's "lost decade," they were convinced that Japan could only get out of the trouble by adopting the U.S.-style capitalism.

However, the international financial crisis since 2008 has exposed the fundamental shortcomings in U.S.-style capitalism: being overconfident in the market economy, extremely inflated public greed and a debt-based consumer society. Americans were so confident in their economic system that they were hesitant and even unwilling to find its shortcomings.

When the bubble burst, many people lost both their homes and their lifetime savings and dreams because the savings should have been used as their children’s college tuitions and a guarantee of their comfortable lives after retirement. Economist Joseph Stiglitz said that the income of the U.S. middle class has stagnated for a decade. There is increasingly serious inequality in society, and poor Americans have fewer chances to move from the bottom to the top than Europeans. In a sense, most Americans were living in a state of delusion.

What is the cause of the "American illness?"

From Ronald Reagan to George Bush and from Alan Greenspan to Ben Bernanke, the U.S. decision-makers of the past 30 years are all believers of the New Classical Economics and Market Fundamentalism, and they shared the same belief as Adam Smith, which is that the pursuit of individuals’ personal desires can fully realize the common good.

According to this logic, since the foundation of the U.S. capitalist system is to pursue maximized personal interests, why do they blame only the bubble economy that was brought by financial derivatives created by bankers of the Wall Street?

Facing the financial crisis, Joseph Stiglitz said that they must clearly know whom to blame and at least know what is not right. Stiglitz found that the economic crisis cannot be ascribed to any individual behaviors under the U.S. capitalist system, and the problem is the system itself. He said that the U.S. economy has been based on an unsustainable bubble, and if this bubble is gone, the total demand will greatly decrease. He also said that the widening income gap is making incomes flow from the people who are willing to consume to the people who are unwilling to consume. And that will further reduce the demand.

As long as the production is larger than the consumption and the supply is larger than the demand, the U.S. and global economies will not be able to get out of the difficult position. However, the capital giants never support technical innovations or enterprise development actively, and they always favor the bankers who make fortunes quickly by using financial leverage. With the improper stimuli and irresponsible ratings added in, the disease of the U.S. capitalism is worsening to no end.

End of American dream

It used to be a common wish of countless people in developing countries to live as good lives as Americans did. They were told that as long as they adopted American capitalism, their wish would come true. However, people are becoming increasingly confused in the changeable global political and economic situation. "We should take this moment as one of reckoning and reflection, of thinking about what kind of society we would like to have," Stiglitz said.

The American dream has collapsed with the global financial crisis. Only certain self-deceiving people still believe that the American market economy is self-correcting, and the self-serving acts of market participants can help ensure equality and benefits for all. Stiglitz noted that the American-style capitalism has caused widespread income stagnation, and most of the increased national wealth has been transferred to the rich. Financial crises are becoming increasingly common. There have been more than 100 financial crises in the last 30 years.

The United States has been seizing the interests of other countries and adopting double standards under the disguise of the so-called Washington Consensus, which is evident from the way it handled the Asian financial crisis and its own crises. The United States and the International Monetary Fund urged Southeast Asian countries to cut deficit and government spending to deal with the Asian financial crisis, while the United States has increased deficit and government spending, printed more money and kept interest rates at near-zero levels to survive its own crises. It has been promoting American-style capitalism worldwide, and whenever its capitalist system causes a crisis, it is the entire world that pays the price for its systemic flaws. Before sobering up, countries that were intoxicated with the "American dream" have already suffered great losses.