A Superpower in Decline Is the American Dream Over?

Part 2: The Ownership Fetish


Nothing symbolizes America's dream more than ownership, that fetish that politicians, culture and the media have glorified and inflated since the beginning of the 20th century. Former President Franklin D. Roosevelt once said that a country of homeowners would be "invincible." "Owning a home lies at the heart of the American dream," former President George W. Bush said. And former President Bill Clinton said that one of the most important goals of his presidency was to create 8 million new homeowners.

In the 1960s, two-thirds of Americans already owned a home. The goal was to increase that percentage. The industry and banks played along, because the government encouraged home buying with subsidies and tax benefits worth about $100 billion (€72 billion) a year. Developers dreamed up entire neighborhoods in places with mild climates, like California and, most of all, Florida. There used to be 15,000 houses in Lehigh Acres, the Fort Myers suburb. By 2007, that number had jumped to 28,000.

"It was crazy," says Axel Jakobeit, a German by birth and American by choice, a real estate agent and investor in southwest Florida. Everyone was speculating in real estate, including secretaries, office workers and people who, as Jakobeit says, made $50,000 a year and were periodically up to $1 million in debt, because they were buying and selling multiple houses at the same time. When things were going well, that is. But, as always, things went well until they didn't.

Since prices have dropped, 11 million homeowners in the United States owe the banks more than their properties are worth. Houses are on the market for $80,000 that were built for $120,000 two years ago and have never been occupied. The unemployment rate is at 12 percent in Florida. Many people are leaving, running away and leaving everything behind, not just their dreams, but also their furniture, their keys and, most of all, their debt. Others are taking everything with them, from toilets to copper cable.

Americans Are Not Careful

"I had hoped that the Americans would change their way of thinking, that they would take responsibility and only spend as much as they made," says Jakobeit. But Americans aren't like that. Americans are not careful.

The political leadership, says Raghuram Rajan, deliberately made sure that people at the lower end of the socioeconomic scale were provided with low-interest mortgage loans, so that they would forget that their incomes were stagnating. "It was easy for people to get credit, and when home prices went up they felt rich, borrowed more money and spent it," says Rajan, who teaches at the University of Chicago. It's the old concept of bread and circuses. According to Rajan, this approach was easier for the people in power, on both the right and the left, than investing in education or health care.

But there are pain thresholds in every country, including one for debt. According to economists, that threshold is at 90 percent in the United States. When government debt reaches 90 percent of the gross domestic product, the country begins to feel sick. People lost confidence in a better future, investors stop investing, consumers stop buying and the economy stops growing. America reached its pain threshold in the second quarter of this year. Alan Greenspan, once the cheerleader of a society that lived beyond its means, is now urging the US to cut back on borrowing.

Greenspan was the first pop star of the economy, the face of what was then a new era, one in which the economy was shaking off government regulation and corporations no longer saw the state as a partner, but as an adversary. It was the phase of constant tax cuts, the stock market boom and the New Economy, a time economic liberals saw as an era of liberation. While Greenspan was in office, from 1987 to 2006, America experienced the biggest boom in its history and, at the same time, the economic, political and social triumph over the socialist model. US GDP doubled during that time. The only problem was that it wasn't real or robust, and that it was fueled by too much pretense and naïve hope of never-ending growth.

Weaknesses of the Old Order

When Greenspan came to Washington in 1967, as a campaign advisor to Richard Nixon, the old order of the New Deal was still in place. The unions were powerful. Big corporations like General Motors, General Electric and ITT controlled the market. But Greenspan felt that the old order was too sedate. He placed great stock in the experiences of his friend, the Russian immigrant and philosopher Ayn Rand, who wrote about the evils of collectivist systems. "What she did...was to make me think why capitalism is not only efficient and practical, but also moral," Greenspan said. "Parasites who persistently avoid either purpose or reason perish as they should."

Ronald Reagan was a rising regional politician in California at the time. He believed that the government was not the solution to all problems; rather that government was, in fact, the problem itself. In his biography, Reagan wrote: "People are tired of wasteful government programs and welfare chiselers, and they're angry about the constant spiral of taxes and government regulations, arrogant bureaucrats, and public officials who think all of mankind's problems can be solved by throwing the taxpayers' dollars at them."

The beginning of the 1980s offered conservatives the opportunity to reshape the country as they saw fit. Unions were suffering from a decline in membership. Technical advances enabled companies to produce smaller quantities cost-effectively and thus gain access to markets previously dominated by major corporations. Reagan took advantage of the weaknesses of the old order to deregulate the economy.

When air traffic controllers went on strike for higher pay, Reagan fired them and banned them from federal service for life. He also deregulated the telecommunications industry, the shipping industry, banks and commercial aviation, and he lowered the maximum tax rate from 70 to 28 percent.

The Need for Lower Interest Rates

The United States became a different country, a radical, free, forward-looking and bold country -- a triumphant country, or so it appeared.

Exporters from other countries surged into the American market, first from Japan and later from China and India. The Internet became popular. The deregulation of the financial markets awakened interest in stocks as a financial investment. The retailer Wal-Mart displaced automaker General Motors as the world's largest company. In this new order, the consumer was among the winners. The investment fund was the modern advocacy group. Banks became more important, and the banking industry had managed to double its profits since the 1970s. Shortly before the crisis, almost 40 percent of American corporate profits were made in the financial sector.

But was it healthy and sustainable?

Fast money was too sexy. In those days, before the crisis, 40 percent of Harvard graduates were taking jobs in the financial and business sectors, earning three times as much as their fellow graduates working in other fields. Trading in financial products had become more lucrative than producing goods.

But because this remnant of the economy still needed to be kept happy, consumers had to keep on consuming, buying bigger cars and bigger houses. Consumer spending made up more than 70 percent of total economic output. But consumers were also spending more than they made, and the savings rate was shrinking. Americans made up for their stagnating or declining earnings by borrowing money. This created a need for lower interest rates.

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lakechamplainer 11/01/2010
1. If 1/3 sit in front of computers, of course low standard of living
I think the main reason US standards of living have stagnated is the ocmputer, for several reasons 1. Simply put, if 1/3 of the workforce sits in front of the computer, 1/3 of the work force is not doing something productive - farming, making furniture, teaching, cooking, etc. 2. Computers are used by management to monitor employees, which limit productivity 3. Capital spent on computers, which is almost all not providing a real return on investment, is capital not put into productive use. There are some good uses for computers, for example on controlling/monitoring high speed, high quantity production or assembly or packaging lines, but these are the exception to the rule.
esperonto 11/02/2010
2. Florida
Goodbye to it. Florida was always a skid row state, coursing with drug addiction, prostitution, voodoo, mafia, Cuban terrorists, and hurricanes. You see the failure of this new suburban retirement planning, but in fact this is only a small superficial section of Florida. Much of florida has always been homeless, poor, police brutality, and skid row. You can search through youtube to see pictures of police cutting up the tents of homeless people, young kids beating up homeless. The dream was only a superficial segment of Florida, that excluded much of the population. That is the most naive thing of all. For a state with only a shallow sense of community and grift work for old retired rich people and down to earth, straight forward Mexican slavery with all the bells attached. To me the only wonder is that people only feel sorry for these oblivious home owners! This is shot in Saint Pete Florida, a relatively small city: http://www.youtube.com/watch?v=LrPdZmPB36U The reason they do that is not just about the physical act of removing homeless. Its psychological harassment to criminalize the minds of the tent owners. After their tents are cut up, their minds become more guilty, and they have more of a marked look. Normal people will realize they have been marked subconsciously. That is the mentality of the American South: guilty until proven innocent. I guess if I was a genius like these police I would understand that being smart and successful means being ruthless. Really smart people hate the poor and want to destroy them. When you are really smart and well pampered, nothing is better than killing the poor, destroying their homes in Palestine, or killing them in Afghanistan. When you are really intelligent, rich and successful, nothing is better than eating human flesh. Maybe you would care for a tomato instead: http://www.gourmet.com/magazine/2000s/2009/03/politics-of-the-plate-the-price-of-tomatoes I know, If I had some self respect and pride or patriotism, I could kill and enslave the poor with a clean conscious like normal sane people. Then I would only worry about some middle class home owners and take the idiotic European view of the "American Dream". If I believed in the God, I could enslave and kill like a real Christian.
sirajul 11/02/2010
3. American dreams are at loggerheads
A great article by Spiegel, and I like to thank Spiegel staff writers Klaus Brinkbäumer, Marc Hujer, Peter Müller, Gregor Peter Schmitz and Thomas Schulz for this thorough 6-part story on America's past, present and future. With the midterm elections holding today, and both Democrats and Republicans distancing themselves from the brand America, the country's leadership, as hinted by the storywriters, is coming to an end. Indeed, American leaderships have had hands in the initiation of the losing, though not publicly. Many months before the actual changing of the America, a political swing is on the move. Its scope and extent remain unclear, yet the seeds of a new foreign policy have clearly been implanted. The earlier strategy, which treated diplomacy as a second choice and saw the military pre-emptive strike as America's fundamental right, has verified to be unsuccessful. Despite the consequences of who are going to be the actual rulers in America, the return of the 'Right' is alarming. 'The demonisation of political opponents, the end of debates, the condemnation of intellect, these are all maybe ominous signs' that the American dream is over.
esperonto 11/02/2010
4. computers
Zitat von lakechamplainerI think the main reason US standards of living have stagnated is the ocmputer, for several reasons 1. Simply put, if 1/3 of the workforce sits in front of the computer, 1/3 of the work force is not doing something productive - farming, making furniture, teaching, cooking, etc. 2. Computers are used by management to monitor employees, which limit productivity 3. Capital spent on computers, which is almost all not providing a real return on investment, is capital not put into productive use. There are some good uses for computers, for example on controlling/monitoring high speed, high quantity production or assembly or packaging lines, but these are the exception to the rule.
Lets not forget computers control heart machines in hospitals, etc. I don't think computers can be blamed entirely. And you know farming and furniture making still go on, but as you know, capitalism has monopolies on small business. If IKEA makes furniture, how can I make furniture? If a giant corporation owns many hog farms, how can a normal person own a hog farm? Nevertheless, there are many people who are still farmers, furniture makers, etc. One thing that may have suffered is fine art. Painting, drawing, and many of the fine arts that were more prominent in the 1960s before computers are now completely passe. Also there is a "buy local" movement to counteract your problem of online shopping. At least where I live, people are encouraged to "buy local". I have seen it in other towns as well. I think the movies people watch decrease the standard of living. I was on a greyhound bus recently and it had movie screens in it that played an extremely stupid movie. Though I couldn't hear it, because I refused to put on the earphones, these monitors were reflected all around the bus in the windows at night. I was bombarded by one of the most stupid movies I have ever seen about someone who works in the house of congress who becomes Noah and builds an ark. I felt after I had seen its flickering mobs of bamboozled actors that my quality of reality had been reduced, even without hearing any audio. Its no wonder I have no TV and mostly watch older movies that have no special effects or CGI graphics. Definitely TV, Mass Media, and Hollywood films these days are reducing the population to very shallow reality. I have been very picky to choose only real socialist news and older movies with bad camera work and live action stunts where appropriate. Look at this for instance. I dont like the song so much, but this guy goes crazy. He jumps around with a kind of energy they don't have at all in these computer generated imagery movies. He does backflips off the wall. I am not even that old. This way before my time. http://www.youtube.com/watch?v=FW02c5UNGl0 Hong Kong films used to be like that in the 1980s. Stephen Chow for instance is extremely good. Many Kung Fu films are also quite good for this kind of humor action. A fat guy is often his side kick. The fat guy is maybe even as funny as him. He dresses up as a girl sometimes. http://www.youtube.com/user/tithya0youtube#p/u/206/hnMwKnkeYGY CGI just gives like magic powers to the director. It provides too much fantasy. The plots of these films get really stupid. I mean, Congressman transforms into Noah? Retarded. Still, some computer art is quite good, like this comical portrayal of Evelyn Rothschild and Rockefeller: http://www.youtube.com/watch?v=B7Tz8l-t1o4
esperonto 11/02/2010
5. Travel
Zitat von lakechamplainerI think the main reason US standards of living have stagnated is the ocmputer, for several reasons 1. Simply put, if 1/3 of the workforce sits in front of the computer, 1/3 of the work force is not doing something productive - farming, making furniture, teaching, cooking, etc. 2. Computers are used by management to monitor employees, which limit productivity 3. Capital spent on computers, which is almost all not providing a real return on investment, is capital not put into productive use. There are some good uses for computers, for example on controlling/monitoring high speed, high quantity production or assembly or packaging lines, but these are the exception to the rule.
I have used computers for so much though. Once I got a job online in Turkey. I ended up going there for 9 months! All because I applied for a job online and emailed to a Turkish business owner. If it were not for internet, I would never have been in Turkey, so I can thank computer for that. Computer is very fun for me. I use it mainly to gather information. For instance, if it wasn't for the USA Esperanto website, I might not speak Esperanto. I did a mail order course with them for a certificate. It was by normal mail, but essentially I applied for it online here: http://esperanto-usa.org/ Educational tool unparalleled. Now I can read a book in Esperanto almost fluently.
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