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The Bubble of American Supremacy: Correcting the Misuse of American Power by George Soros

 

Rating: (Mildly Recommended)

 

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Bursting

Attentive observers already know that George Soros is trying hard to defeat George W. Bush. One small aspect of that campaign involved publishing Soros’ latest book, The Bubble of American Supremacy, which contains little new information, and not much that will persuade anyone undecided in the 2004 presidential campaign. What Soros does in this book is assemble and organize his past writing and thinking, and apply it to what he believes has gone wrong under Bush’s leadership. Soros refutes the neocon philosophy that guides the Bush administration’s policies and tactics. Here’s an excerpt, all of Chapter 11, pp. 176-188:

 

It may be surmised from the closing remarks of the last chapter that I have become rather rabid in my political views. This is a novel experience for me. I used to be rather balanced between the two main parties, seeing some good and some bad in each and leaning only slightly toward the Democrats. Even today, I remain rather even­handed by finding much to criticize in the leadership of the Democratic Party. Certainly I did not use to consider it a matter of life and death which party won the elections. I do now.

I attribute this change not to some sudden quirk in my character but to a qualitative shift in the role that the United States plays in the world. I believe we have left near-equilibrium conditions behind and entered far-from-equilibrium territory.

To explain what I mean by this statement, I must invoke a theory I developed in connection with the stock market. I believe something akin to a boom-bust process, or bub­ble, is occurring now in connection with the Bush admin­istration’s pursuit of American supremacy. I realize that comparing the present situation to a stock market bubble is a flight of fancy, a fertile fallacy, but it is worth pursuing because it casts new light on the predicament in which we find ourselves. We are caught in a quagmire in Iraq. How could that happen? The comparison with a boom-bust process helps to explain it.

The important thing to understand about stock market bubbles is that they do not grow out of thin air. They have a solid basis in reality, but reality is distorted in the partici­pants’ minds by a misconception. As I explain at greater length in the appendix, there is an inherent discrepancy between what people think and the actual state of affairs. Normally the discrepancy is kept within bounds by a self-correcting process: People notice that outcomes fail to correspond to expectations and adjust their expectations accordingly. These are what I call near-equilibrium condi­tions. There are occasions, however, when a trend that manifests itself in reality is reinforced by a bias or miscon­ception prevailing in the market, or vice versa. A boom­bust process gets under way in which both the prevailing interpretation and reality itself are propelled into far-from-equilibrium territory.

Eventually the gap between reality and its false inter­pretation becomes unsustainable and the bubble bursts. That is what happened in the case of information technol­ogy. The technological advances were real, but their im­portance was exaggerated. Initially, the exaggeration accelerated the innovations, but eventually, the self-rein­forcing process became unsustainable. In that instance, the boom was sustained longer and the reversal came later than I and many other so-called experts anticipated. The bust was correspondingly more severe.

Exactly when the boom-bust process transgresses nor­malcy and enters far-from-equilibrium territory can be es­tablished only in retrospect. During the self-reinforcing phase, market participants are carried away by the prevail­ing bias and fail to notice a growing discrepancy between their beliefs and reality. The misconceptions may be tested, and if the trend survives the test, the misconcep­tions are reinforced. This widens the gap and sets the stage for an eventual reversal. Although this course of events seems to have an inexorable quality about it, a boom-bust process can be aborted at any stage and the adverse effects reduced or avoided altogether. Few bubbles reach the ex­tremes of the information technology boom that ended in 2000. The sooner the process is aborted, the better.

In my view, the Bush administration’s quest for American supremacy qualifies as a bubble. There is an underly­ing reality: The United States does occupy a dominant role in the world. There is also a prevailing bias, a misinterpre­tation of the underlying reality. I have described it as a crude form of social Darwinism that regards life as a struggle for survival in which the survival of the fittest is determined by competition, not cooperation. In the economy, the com­petition is between enterprises; in international relations, between states. To date, America has clearly emerged as the fittest. There has been a reflexive interplay between the prevailing bias and the underlying reality, a benign circle that has reinforced both. The distortion of reality became evident only when the election of President Bush brought into power a group of ideologues who believed in the pur­suit of American supremacy by military means. That is when the pursuit of self-interest was carried too far. Until then the self-reinforcing, self-correcting process had stayed well within normal bounds. It was the terrorist attack of September 11 that allowed the advocates of American su­premacy to carry the nation behind them, and it was with the invasion of Iraq that we entered far-from-equilibrium territory.

It is one thing to give commercial enterprise free play, but quite another to unleash military power. There has al­ways been a connection between business and the military, and it has always been suspect. President Eisenhower spoke of the military-industrial complex. The nexus between big business and the military can corrupt both. His­torically the United States has been relatively free of this influence because it had kept its armed forces small; only after World War II did conditions change, and President Eisenhower was astute enough to warn against the danger. In other countries the connection between big business and the military has been much more pronounced. It could be observed in Imperial Germany and Japan and was at the root of fascism.

As discussed previously, the neocons behind the Project for the New American Century advocated greater military spending, and many of them were associated with the de­fense and oil industries. For instance, Richard Perle, who received no salary as head of the Defense Policy Board, made a lot of money as a corporate consultant. Dick Ch­eney was president of Halliburton before he became vice president, and Halliburton’s lucrative contracts in Iraq are well known. I do not say that the neoconservative ideology was based on monetary interests—I am no neo-Marxist—— but there is an undeniable two-way, reflexive connection.

Until recently the reflexive connection stayed well within the bounds of normalcy, as demonstrated by the lack of progress in implementing the neoconservative agenda prior to September 11. In spite of a determination to introduce discontinuity into American foreign policy— anything but Clinton—Cohn Powell at the State Depart­ment was able to maintain a large degree of continuity.

Then came the tragedy of September 11, and that is when the process entered far-from-equilibrium territory. As I hope to have shown, it was not so much the terrorist attacks themselves that created an abnormal situation but the Bush administration’s response to them. President Bush declared war on terrorism, and by linking terrorism with weapons of mass destruction, he gained a mandate for invading Iraq. The occupation forces of Iraq, in turn, provided a suitable target for terrorists, and we have be­come snared in a quagmire.

The public did not realize that declaring war on terror­ism and attacking Iraq was not the appropriate response. Even today, many people believe that September 11 justi­fies behavior that would be unacceptable in normal times. The ideologues of American supremacy and President Bush personally never cease to remind us that September 11 changed the world. It is only as the untoward conse­quences of the invasion of Iraq become apparent that people are beginning to realize that something has gone woefully wrong.

We have fallen into a trap. Traps work by getting people or animals enmeshed in them; cool heads are needed to extricate oneself. The motivation of the suicide bombers seemed incomprehensible at the time of the attack; as we look back now, a light begins to dawn: They wanted us to react the way we did. Perhaps they understood us better than we understand ourselves.

As a proponent of radical fallibility, I am reluctant to as­cribe too much foresight to anyone; yet in retrospect I can discern the vague outlines of an imaginary master plan conceived by an evil genius called Bin Laden. From his perspective our civilization is degenerate. It is rich and powerful but devoid of true faith. It needs to be destroyed ftir the faith to prevail. The only way to destroy it is by ex­ploiting its weakness: the fear of death. It will respond to a terrorist attack by lashing out against an unseen enemy. Since the perpetrators remain invisible, the instinctive re­action will claim innocent victims. The victims will be Muslim, and Islam will be radicalized, provoking a general confrontation between Islam and the West. Although the West enjoys material superiority, Islam will prevail be­cause it has a major competitive advantage: It is not afraid of death.

Events so far have lived up to this putative Bin Laden’s wildest expectations. The twin towers of the World Trade Center actually collapsed, making the attack more spec­tacular than could have been imagined. And President Bush responded by declaring war on terrorism. The real Bin Laden clearly expected a counterstrike in Afghani­stan; that is why he had Ahmed Shah Massoud, the only commander capable of mounting an effective campaign against the Taliban, assassinated two days before Septem­ber 11. The invasion of Iraq was an unexpected gift. American soldiers on Arabian soil are serving as a magnet, attracting al Qaeda—trained terrorists from all over the world. Sleeper cells are coming alive. Around three thou­sand people with al Qaeda connections are said to have disappeared from Saudi Arabia. Some of them must be ac­tive in Iraq. President Bush is right in saying that Iraq has become the central front in the war on terror. Wittingly or unwittingly, he has played right into the hands of the terrorists.

I have been arguing that while the public has reacted instinctively, the promoters of American supremacy sur­rounding President Bush had a master plan of their own. They brought the plan with them when they came into of­fice, and they adapted it to the circumstances when the terrorists struck. In effect they exploited the instinctive re­action of the public for their own purposes. But they did not anticipate the untoward results. Judged by its own cri­teria, the Bush administration’s pursuit of American su­premacy has been a dismal failure.

The two master plans have something in common with each other and with a stock market bubble: They are ini­tially self-reinforcing, but eventually are bound to be self­-defeating because they are built on a misinterpretation of reality. This is borne out by a closer consideration of the master plans themselves. We have no difficulty in seeing the absurdity of al Qaeda’s master plan of preserving the purity of Islam through terrorism, although we are more inclined to call it evil rather than just false. And rightly so. What can be worse than killing innocent people in the name of religion?

We may have more difficulty in perceiving the absurd­ity of pursuing American supremacy through military means, because we have learned to rely on military power and we feel the need for it particularly strongly when our very existence is threatened. We do not think of ourselves as being guided by an ideology; we consider ourselves much too pragmatic for that. Yet ideology has come to play an abnormally large part in deciding government policy, and the discrepancy between perceptions and the actual state of affairs has also grown abnormally wide. This could have happened only by a self-reinforcing process that gathered strength gradually over the years.

Indeed, that is what happened. Once market funda­mentalism allied itself with religious fundamentalism it managed to capture the Republican Party. The social Darwinist ideology was reinforced first by the success of globalization, then by the collapse of the Soviet system. It is only with the election of George W. Bush that the prag­matism of geopolitical realists yielded to the revolutionary zeal of the advocates of American supremacy, and it is only after September 11 that the supremacists gained the upper hand.

We should not push the analogy with a stock market bubble too far. Comparing the pursuit of American su­premacy to a stock market bubble is an imperfect fit. If we treat it as a fertile fallacy, however, it can provide some valuable insights.

In the early stages of the process, the participants in a bubble do not see the absurdity of their convictions; on the contrary, reality seems to confirm their perceptions. Only at a later stage does the divergence between expecta­tions and the actual course of events become apparent. Then there is a moment of truth followed by a reversal. When the reversal occurs, it becomes self-reinforcing in the opposite direction, and depending on how far the bub­ble was inflated, it can cause a lot of damage.

The important thing to remember about a bubble is that there is nothing preordained about it. Boom-bust processes can be aborted at any time, and the sooner it happens the less harm they do. There are random fluctua­tions in stock prices every day, and they do no harm. It is only when critical thinking is suspended or suppressed that the reflexive interaction between reality and its inter­pretation can get out of hand. That is what happened in the aftermath of September 11.

Where are we in this reflexive process? We stand either at the moment of truth or at a testing point that, if it is suc­cessfully overcome, will reinforce the trend. We shall not know which of these alternative applies until the presiden­tial election.

The quagmire in Iraq ought to serve as the moment of truth. Whatever the justification for removing Saddam Hussein, there can be no doubt that we invaded Iraq on false pretenses. Wittingly or unwittingly, President Bush deceived the American public and Congress and rode roughshod over the opinions of our allies. The gap be­tween the administration’s expectations and the actual state of affairs could not be wider. The fallacy in waging war on terrorism has been demonstrated on the ground in Iraq. Our soldiers have been forced to do police duty in combat gear, and they are being killed. We have put at risk not only our soldiers’ lives but the combat readiness of our armed forces.* ‘We are overstretched and our ability to project our power has been compromised. Yet there are more places where we need to project our power than ever before. North Korea is openly building nuclear weapons; Iran is doing so clandestinely. The Taliban is regrouping in the Pushtun areas of Afghanistan. The costs of occupa­tion and the prospect of permanent war are weighing on our economy, and we are failing to address many festering problems both at home and globally. If we ever needed proof that the neocon’s dream of American supremacy is misconceived, the Iraqi quagmire has provided it.

Unfortunately, al Qaeda has not yet reached the mo­ment of truth. As a result of our reaction to September 11, its master plan is still in the self-reinforcing phase. Far from reducing the terrorist threat, the war on terrorism has actually increased it. We find ourselves trapped in Iraq, and it will be difficult to extricate ourselves. With­drawing from Iraq is not an option: It would hand victory to the terrorists and do irreparable damage to our stand­ing in the world. Yet the clamor for it is bound to rise. This could lead to a catastrophic reversal, similar to what happened in Vietnam.

Where do we go from here? As I keep insisting, history is not predetermined. I can see a number of scenarios. One is that the Bush administration toughs it out and actually manages to stabilize the situation in Iraq. Another is that the Bush administration recognizes its mistakes and tries to correct them by jettisoning the ideologues of American supremacy ensconced in the Defense Department. The actual course of events is likely to fall between these two extremes. President Bush will try to muddle through by getting both the Iraqis and the United Nations more in­volved. According to form, elections are not decided on foreign policy issues. Afghanistan is already off the radar screen; if Iraq can be brought under wraps and the econ­omy shows some signs of improvement, President Bush can hope to be reelected. He can then learn from the mis­takes of his first term and revert to the continuity that Cohn Powell at the State Department sought to preserve.

I do not think this scenario is realistic. We have moved too deeply into far-from-equilibrium territory to return to the status quo. America’s standing in the world has suffered too much damage, and opposition to the United States has gained too much momentum, not only in Iraq but worldwide. All the other problems of global capitalism that the Bush administration shunted aside will also con­tinue to intrude.

  I favor a third scenario, namely, a profound reconsidera­tion of America’s role in the world along the lines sketched out in this book. That will require not only the rejection of President Bush but the adoption of a more positive vi­sion for America. It will not be easy to convince the world that we have changed our spots—remember how Gorba­chev failed to persuade us?—but we must make the effort if we want to escape from a vicious circle of escalating vio­lence.

 

*For a cogent analysis, see Wesley Clark, Winning Modern Wiry: Iraq, Terrorism, and the American Empire (New York: PublicAffairs, 2003).

Soros’ opinions are thoughtful, and his presentation is clear and direct. Readers who agree with him will enjoy turning the pages of The Bubble of American Supremacy. Readers who disagree are unlikely to bother reading this book. One more takeaway that I think summarizes his opinion: “Our nation must concern itself with the well-being of the world. We will be the greatest beneficiaries if we do so.” (p. 30).

Steve Hopkins, September 25, 2004

 

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The recommendation rating for this book appeared in the October 2004 issue of Executive Times

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