To Collapse or not to Collapse: Is America Doomed
To Collapse or Not to Collapse: that is the question…
When I think about the United States of America, I do not allow the single thought that everything will ruin. It was before I read the astonishing book by Jared Diamond “Collapse: How Societies Choose to Fail or Succeed”. The book presented so many historical facts and evidences upon the societies which collapsed due to objective and subjective reasons that I spontaneously began to analyze the current situation in the United Stated and think what it can lead to? According to shocking official statistics of the United States of America, the country is almost facing the new economic recession in 2008. The level of unemployment rises, prices for food and energy increase, and industries along with financial markets are facing hard times. But nevertheless, I believe that the alarm is vain and the country is not to collapse, even though objective reasons state the opposite.
2. Jared Diamond’s “Collapse: How Societies Choose to Fail or Succeed”
Jared Diamond describes his book in the prologue in the following way: “…I compare many past and present societies that differed with the respect of the environmental fragility, relations with neighbors, political institutions, and other “input” variables postulated to the influence of the society’s stability. The “output” variables that I examine are collapse or survival, and form of the collapse if collapse does occur” (Diamonds 18). I consider the book to be very persuading, but it lacked optimistic constituent, which is very important in our lives and may turn the worst situation upside down. But I took the presented information very seriously and consider it to be one of the most important books that I have read in my life. Diamond reminded his readers about what is really important in the world and what governments and societies mustn’t do and what they should take care of. Diamond presented eight basic factors that contributed to the collapse of the societies in the past. They are: problems with soil and water management, overfishing and overhunting, deforestation and natural environment destruction, growth of human population, and increased per-capita impact of people. Diamond also introduced four factors that people should consider at the present moment: climate change that is cause by people’s activities, energy shortages, buildup of toxic chemicals in the environment and finally full human utilization of the Earth’s photosynthetic capacity. To my opinion, stated factors concern each country in the world, and cannot relate to America in particular, as these are environment factors that each government should consider and make subsequent laws and regulation for improvements. But I agree that military actions and economic factors can be the delay-action bomb that leads to collapse.
3. Economic Situation in the United States of America
At present moment the U.S. economy is in the very dangerous state, and government should be very careful, as even small shock is crucial to pushing the economy over the safe edge. According to the Blue Chip consensus, the probability of the recession in the country is about 40%, which is very high index. There are about seven main threats to the economy of the country that concern credit markets, capital spending, oil prices, exports, housing, consumer spending and taxes. Speaking about credit markets, it is necessary to pay attention to Libor rate and interest rate spreads. The spread between the Libor rate and the 3-month Treasury bill is about 75 basis points, when usually this spread is not greater then 10. The only way out of crisis is when the spread returns to its normal state. Another big problem in the sector is short-term credits, on which big businesses rely very much.
Capital spending are facing problems in the sectors of investments in core equipment and profits. If many companies are unable to borrow money from banks for their immediate funding needs, they have to turn to their own internal funds, and as many companies are slowing down in gaining their revenues in 2008, they experience lack of current assets and thus firm are unable to increase their profits. Managers are not willing to start new projects and to invest a lot, when the economy of the USA and global economies are slowing down and they are feared to loose everything.
Oil prices are very much connected to the core inflation rates. The good sign for the economy of the United States is that core inflation is moderate so far. But there is still the threat that inflation can push prices even at higher levels. And even though global economy was able to adjust the price for barrel oil at level of $ 80, it is still the question whether the global economy is able to develop and thrive with slow down of American economy.
Also a good sign for American economy is exports, which are growing due to dollar weakening. U.S. producers are taking larger market share at the global market and U.S. economy is slowing transforming from being nation-oriented and building many homes for its citizens to the country that produces tradable goods. This kind of transformation is expected to diminish the huge current account deficit. But still growth of export depends on two other variables: dollar value and growth rates in America’s trading partners.
United States situation with housing is very harsh, and even though building companies are trying to decrease their inventory of unsold homes, they are not successful enough, as sales are constantly falling along with new construction. Even official inventory statistics do not reflect real situation on the market, as it doesn’t take into consideration canceled sales.
Consumer spending is connected with employment growth, which keeps high wages. But the problem is that the job growth has decreased significantly for the last three years and the same tendency is keeping in 2008. Blue Chip consensus predicts that in 2008 the consumer spending can be the lowest for the last 17 years.
It is important to mention that federal government is very much concerned with the prospect of recession and thus has cut rates of fed funds by a full percentage point, but it might be meaningless, as people already have taken so many debts that they will not take on more.
Speaking about unemployment rate in the United States, it is important to mention that as to the March and April 2008 the level is 5.1, while in January it was 4.9 and in February, 4.8. The productivity level was 1.9 as to the December, 2007. Inflation level as the April, 18 2008 is 4.0, with the 4.1 overall forecast for the whole month. The inflation is expected to decrease up to 3.4 % in September, 2008. GDP growth (April, 18 2008) is at the level of 0.58 %.
American people are facing many taxes on the day-to-day basis. The most apparent taxes are payroll and income taxes. There are also sales and excise taxes, property and many others.
Government is trying to cope with the difficult economic situation in the country. The Economic Stimulus Act of 2008 was signed by the President Bush. The tax deduction of $600 per person was made to stimulate the country out of the current economic crisis. And even though President Bush is not willing to accept publicly that the United Stated are facing the recession, he will spend about $150 billion dollars (or 1% of the GDP) to struggle with the stagflation on inflation to prevent the recession. But most economists, politicians and analysts believe that Economic Stimulus Act of 2008 will not be successful enough in stimulating economy of the United States for several reasons. First, they suppose that most people will immediately spend obtained tax deductions. And the problem is that most people (according to statistical data) prefer to buy goods and merchandise that are manufactured in other countries, and thus stimulate foreign economies. The other reason is that annual budget of the United States have already borrowed a lot of money from other countries, especially from China. And therefore the propose stimulus package implies the purchase of more Chinese goods by American people. The best way to cope with the recession is the creation of new working places, and it becomes obvious that tax rebate will not create many in the country, as it is too little to encourage the start of new businesses. It could be more efficient to make the larger tax cut for new businesses or small companies for the creation of new jobs. The economy needs stimulation also because of the mortgage crunch. As tax rebate has no influence upon the monthly wages of the employees, they will continue to make their mortgage payments on the monthly basis. From one side, tax rebate is a good aid to people to pay off their rising debts, but from the other side, it is still not enough and some additional programs or financial aids will be very valuable.
As inflation, or cost of living, is rising quicker then salaries do, economy needs a great stimulation. To be more precise, salaries and jobs are decreasing. The price of gas and oil are the primary concern. And tax rebate has nothing to so with creating new jobs, as I have already mentioned in the previous paragraph, as well as with increasing salaries. It will be most likely just spent on expensive gas, instead of improving the state of U.S. economy.
And finally referring to the most important reason of the difficult economic situation of the country- it is war in Iraq. As tax rebates are planned to be made, it will only increase country’s borrowings and hurt the economy further. It has nothing to do with the problems of war financing at all.
To my opinion to cope with crisis, the government should directly address main reasons for it and try to solve existing problems directly. The tax percentage decrease for the first time will be very efficient, as when taxes are decreasing- economy starts to rise immediately, along with rising salaries and creating new jobs.
4. Diamond’s “Complex” Societies and their Collapse
Tainter defined the complexity of the society in the following way: “Complexity [as applied to the characterization of a society] is generally understood to refer to such things as the size of the society, the number and distinctiveness of its parts, the variety of specialized social roles that it incorporates, the number of distinct social personalities, and the variety of mechanisms for organizing these into a coherent, functioning whole. Augmenting any of these dimensions increases the complexity of the society” (Tainter 23).
Everything that I have mentioned regarding the economic situation in the United States is very serious signs and the government should take necessary steps to improve the situation. But to my opinion, it has nothing to do with the collapse of complex society, described by Jared Diamond. In the book, as I have already mentioned, Diamond presented the ideas of Joseph Tainter, who wrote “The Collapse of Complex Societies”. Tainter claims that centralized decision making, high flow of information, resources pooling, as well as formal command channels characterize the complex society. And such structures have the ability to withstand productivity deficiencies and fluctuations. And continues: “With their administrative structure and their capacity to allocate labor and resources, dealing with adverse environmental conditions may be one of the things that complex societies do best. It is curious that these societies would collapse when faced with precisely those conditions they are equipped to circumvent … as it becomes apparent to the members or administrators of a complex society that a resource base id deteriorating, it seems most reasonable to assume that some rational steps are taken toward resolution. The alternative assumption – of idleness in the face of disaster — requires a leap of faith at which we may rightly hesitate” (Diamond 420 quoting Tainter 50). Tainter thought that there is little probability that complex societies collapse due to environmental reasons, but Diamond argued that it happened many times in history. Diamond presented several possible explanations for the collapse, that I do not agree and I will later explain why. In each described case that central problem is around the process of group decision making. He says that the group or the society may not anticipate the problem and when it emerges it is already late, as the society may have no similar experience in the past or may assume that it already faced it when in reality the situation is absolutely different (Diamond 421). Then the society may fail in proper analysis and in the understanding of the new problem. The society may also not pay enough attention and use enough resources for the observation and examination of the phenomenon that is the reason for the problem. And he also suggests that the new problem may even remain unnoticed due to different reasons (Diamond 424-425). And finally, in case the problem was already notices, analyzed and understood, there can emerge the clash of interests, as some people will benefit from it, and other will envision the situation detrimental to their interests. I do not deny the important of the discussed issues, but I believe that United States of America are not in the described situation and will not collapse.
Diamond sees large agglomerations of people that governed by centralized institutions as the society. This opinion seems false to me. The presented the Soviet Union and the Empire of Alexander as examples of societies. But obviously it was not truly so, as they broke-up simultaneously with the deaths of their outstanding military leaders and collapse of the military powers. Real societies do not need the centralized power for the establishment of unity and cohesion. And I am sure that societies are formed independently from the government organization. The true society is united by the mutual interdependence, cooperative exchange between peoples and labor division.
Economic situation of the United States of America is very difficult and the country is almost facing the recession. There are many threats to the economy of the country that concern credit markets, capital spending, oil prices, exports, housing, consumer spending, taxes, poverty, war in Iraq. But event though the situation is that bad and from the first glance hopeless, the country will not collapse. And even though the unemployment level is rising, there are about 23 million people facing poverty, the stock market is almost dead, inflation increases and salaries remain the same, the prices for gas and wheat are at the highest level for the last two decades (or even for the longer period), the society and the government is able to cope with the crisis and will not collapse. But the United States still should be very careful with the use of the natural resources and take care of the environment, as the Earth’s natural resources that are depleting are not that easy overcome, as the economic crisis.
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