Kennedy And Reagan Share The Blame Too

Without excusing their contemporaries, some people trace the roots of the economic difficulties in which America finds itself now to three decades ago; to the era of President Ronald Reagan. But I believe that the trouble began sooner than that; in the era of President Jack Kennedy. And the reason why it was difficult to notice the build up of the difficulties which led to the current condition is that mature economies doing well tend to do even better before they enter a dangerous period at the end of which the good times disappear. And when the good times are enjoyed here and now, people refuse to think that the bad times are lurking ahead.

In fact, it was not until the decade of the Nineteen Seventies that the price of copper cracked the one dollar mark per pound, a sign that the world economy was undergoing a serious transformation. But the phenomenon was not given the importance it deserved then, especially if you compare it with how we treat the fluctuations in the price of copper today. We now say that copper has a PhD in economics because it has earned the reputation of being the best predictor of where the economy will soon be going. Congratulation, Doctor Copper!

When in the Seventies copper cracked the one dollar barrier, people understood what the reason was; they could see that the war in Vietnam was making America buy copper like an alcoholic was buying his booze. But the connection was never made with the notion that – like Europe before it – America had exhausted its natural resources, and was now dependent on the rest of the world for what it needed to feed its war machine, and by implication run its industrial economy as advantageously as before.

And not too many people could see that this fact had fundamentally altered the world economic equation. To be sure, it was Jack Kennedy who got America into a war that turned out to be costly both in lives and in treasure, but this was erased from memory in favor of the one about the President who reduced the taxes, and thus spurred the economy to grow at a higher rate. The good times were here again and nobody cared about anything else.

What happened over the ensuing decades was that many nations in the world began to industrialize, and the hard working people that populate them made products that were cheaper than the products made in America. With time, those people improved on the quality of their products, thus made them better and cheaper still than those made in America. This has had the effect of putting factories in America out of business, and of putting Americans out of work.

However, the consumers that enjoyed having a high rate of consumption never lost their appetite to consume even when they were out of work. They maintained the old lifestyle, and bought the foreign products with the same enthusiasm they used to buy the locally made ones. The difference, however, was that they now bought on credit. They paid little of what they owed, and thus ran a huge tab as individuals and as a nation. It was the start of the troubles that plague America today.

What added to the problems that were started in the Kennedy era were the actions that were taken in the Reagan era. This American President also started a costly war, though it was a cold war and not a hot one. What the President did, in fact, was launch an arms race against the Soviet Union, forcing it to do likewise and go bankrupt in the process. The scheme worked in that the Soviet Empire collapsed but not the American Republic whose economy was more modern. It was also transformed into a war economy, and spurred further by the fact that President Reagan had reduced the taxes. As in the Kennedy era, the good times were here again and nobody cared about anything else.

But when you come right down to it, you see that the two massive wars – one hot and one cold – put an end to the American supremacy rightfully earned during the Second World War and for a period after that. Looking back, it can be said that the Vietnam war broke America's back and gave the Four Asian Tigers (as they were nicknamed) the opportunity to take its place as the preeminent industrial power.

As to the arms race against the Soviet Union, it did succeed in collapsing that empire, but did also plant the seeds for the hollowing of the American industrial economy in favor of China, India, Latin America and – surprise surprise – Russia as well; now free of the burden of its Soviet past.

Thus, it can be said that Ronald Reagan helped destroy the Soviet Empire by weakening its economy, but he also helped weaken the American economy; and the effect of that is beginning to be felt on the Republic.

Time will tell for how long the damage will be sustained and how far it will go.