9/3/00
3:44 am GMT

Losing control? Bomb Baghdad!

Phil Murphy explains how a new sense of crisis in the USA prompted the June missile attack on Iraq

Many observers recognised that the strange story of an alleged Iraqi assassination plot against former president George Bush was a bizarre justification for president Bill Clinton's military strike against Baghdad in June. There was clearly something else going on here. The fact that Washington's latest showdown with Saddam Hussein conveniently occurred at a time when Clinton's popularity at home had collapsed suggested to many that the president's motives were primarily domestic.

The Financial Times thought that the US missile attack may have been designed 'to increase popular support for a president whose first few months in office have been marred by dither in the White House, and whose authority over a congress nominally controlled by his own Democratic Party has been shown to be tenuous' (28 June 1993). Others, too, believed that the attack vindicated the recent warning from Ross Perot that Clinton was planning a foreign war to distract from his domestic difficulties.

These people were right to search for a motive in America rather than Iraq, but they seriously underestimated the issues at stake. American and other Western leaders have often launched the odd foreign adventure in order to overcome a temporary slump in the polls at home. However, the US attack on Baghdad, like the US-led assault on Mogadishu a few days before it, was symptomatic of a more significant problem facing the Clinton administration.

Today the American government is beset by a political crisis far more profound than the usual ups and downs of the opinion polls. Barely six months into office, Clinton's already looks like a lame duck presidency, devoid of direction or coherence. The political malaise in Washington has created a deep sense of failure, of things being out of control, of a government unable to govern. And this mood of crisis at home has encouraged the government to seek to re-establish its authority on the international stage, through bloody stunts such as the bombing of Iraq.

The sense of things being out of control has been brought home to the US authorities by the disintegration of their putative economic recovery. The rapid collapse of belief in the economic upturn has been a body blow to the self-confidence of America's rulers. More than any other factor, this growing sense of failure has pushed the Clinton administration into fabricating some challenges in the third world which might provide easier targets than the US economy. The bombing of Mogadishu and Baghdad was the outcome.

'The roaring '90s'

Clinton's inauguration in January was accompanied by euphoria about a US economic upturn. Growth of nearly 5 per cent in the final quarter of 1992 was taken as proof that the corner had finally been turned. Newsweek was characteristic of the new mood, conjecturing about 'the roaring '90s' and claiming that not since the 1960s had the US economy seemed so ready for a period of solid growth (22 February 1993).

A few months later the upturn had been exposed as a fantasy. In the first quarter of this year output growth fell away to less than 1 per cent. Government purchases have fallen, as the government cut military spending in response to the $300 billion federal budget deficit and burgeoning national debt.
A series of weak economic statistics during June, including a significant dip in manufacturing and a plunge in the sales of new houses, was capped in the first week of July by a renewed rise in unemployment. The chief economist at Nomura Securities in New York spoke for Wall Street when he noted a new pattern of 'gravely disappointing' economic news. Share prices fell, as the recognition dawned that the recovery was only superficial.

In reality there has been no relapse in the US economy this year. Nothing has really changed in the economic fundamentals. The recession technically ended in 1991, when the economy stopped contracting. But the American economy has remained in a state of slump, lacking any dynamic that could generate a genuine upturn.

What has changed dramatically has been the perception of the state of the economy. Today's deep gloom is the pay-off for yesterday's delusions about a dynamic recovery which never existed in the first place. After the inflated expectations earlier in the year, the reality that the slump continues has hit harder now and heightened the feeling of malaise. These dramatically changed economic perceptions have exacerbated the wider sense of a lack of control and authority in Washington.

At the start of the year, those celebrating an upturn tried to disregard the long-term problems of low US investment. It should be obvious that no recovery can be sustained unless driven by real productive investment in new, more efficient, plant and machinery. What the pundits and politicians did earlier this year was to hype a few figures for sectoral investment growth from late 1992 as evidence of solid growth and recovery. But there never was an investment boom.

Overall real productive investment in the USA has grown more slowly than in all previous post-recession periods. Total real non-residential fixed investment only rose by just over 1 per cent in 1992, after a 6 per cent fall in 1991. Even if manufacturing investment growth this year lives up to the most optimistic projections of over 5 per cent, its absolute level of will still be below 1990 levels at the end of 1993.

Fewer new jobs

Much of the recent industrial investment which was used as 'proof' of recovery in fact went into office computers, rather than new plant. This suggests that the drive in US industry has been to cut unproductive administrative jobs rather than to finance productive expansion. The recovery of employment levels has been well below the norm for a post-recessionary period. Since the US recession ended in 1991, the economy has generated less than one million jobs, compared with an average of about eight million in the first two years of previous recoveries.

The current slump is the end product of an extended period of stagnation. For five years American industrial capacity has been growing at about 1.5 per cent a year, just half the rate of the early 1980s. This decaying industrial capacity has resulted in imports taking 24 per cent of the US market, up from 20 per cent in 1989. That significant jump was one more piece of evidence which was discounted in the earlier talk of an upturn.

Yet a quick look at a well-publicised OECD report published last year would have highlighted the perennial problem of low investment in America. During the second half of the 1980s net investment in the USA was, by some distance, the lowest proportion of GDP of any of the 24 OECD countries.

Low US investment means low productivity growth, down from an anaemic 1.3 per cent per annum in the 1970s to a meagre 0.8 per cent in the 1980s. And low productivity growth means declining competitiveness. More and more, American industry has found its goods outpriced in world markets. Once-profitable companies and even whole industries have gone under. And because there has been no real post-recession investment revival, they will continue to do so. The record losses reported earlier this year by industrial giants General Motors and IBM were initially dismissed as incidental. Now that these companies have announced more plant closures and many more job cuts, the reality of slump is coming home.

Triple-dip?

The hype about recovery has now been replaced by concern about a triple-dip recession, a sure sign of the downbeat mood. In June, the Commerce Department's leading indicator index showed the sharpest fall for two and a half years, reflecting a drop in retail sales and factory orders and a stagnating level of industrial production. The White House budget director Leon Panetta conceded that the figures 'confirm again that this is not a typical recovery. We continue to run the danger that we are not going to be able to move the economy forward'. Even Clinton, who staked his claim to office on his ability to revive the American economy, has been forced to admit that 'the economy will have great difficulty in totally recovering in any short period of time'.

All the talk in America now is about the 'peculiarities', the 'abnormalities' and the 'untypical' features of this recovery. The fact that they cannot explain these features in any convincing way - with many Wall Street professionals admitting that they haven't a clue what's become of their predicted upturn - reinforces a mood of pessimism which has become almost as exaggerated as their earlier optimism.
The failure of its economic policy has reinforced the government's own sense of inertia and loss of authority. This depth of domestic unease is driving the Clinton administration to invent pretexts for foreign military adventures, through which it can reassert a sense of control. That is why the bombing of Baghdad will not be a one-off event. It is part of a pattern of ever-more militarised politics in the USA and across the West.

Reproduced from Living Marxism issue 58, August 1993

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