Casino Capitalism and Collapse of the American Economy
By Susmit Kumar, Ph.D.
With the advent of internet technology and subsequent integration of national and global economies in the last couple of decades, brilliant brains have devised methods to generate money for millionaires and billionaires by moving money from one place to another any place in the world by the click of a mouse button as well as playing, and by creating financial instruments (derivatives, credit default swaps, etc.), that resembles casino games, which create trillions of dollars of investments on paper. The hedge funds play these casino games, but the ultimate losers are the common people.
A BRIEF HISTORY OF THE GLOBAL ECONOMY
Until 700 to 800 years ago, the various continents exhibited little difference in wealth and poverty. The industrial revolution in Europe, however, created vast differences in wealth between rich and poor countries due to the fact that the colonies were deprived of the use of the “new technologies.” As shown in Tables 1 and 2, the economies of Third World countries like India, China, and Brazil were comparable to those of what are now the developed countries until 1750, but due to exploitation of their resources and trade restrictions their economies declined.
During the 18th century, for example, the British imposed trade restrictions on Indian textile exports, which were better than British machine-manufactured textiles, to safeguard its own textile industry. India experienced zero per capita growth from 1600 to 1870, the period of growing British influence. Per capita economic growth from 1870 to independence in 1947 was a meager 0.2 percent per year, compared with 1 percent in the UK.
The U.K. and other European countries achieved tremendous economic growth in the 1800s at the expense of the economic growth of their colonies until the two world wars ended this scheme. The U.S. then took over economic leadership when European nations had to take American war loans and due to the boost these wars gave American industry. The U.S. supplied billions of dollars’ worth of munitions and foodstuffs to the Allies during two World Wars, and the Allies had to borrow money on the New York and Chicago money markets to pay for them. By the late 1940s, the U.S. gross domestic product (GDP) was almost half of the world’s GDP, and American companies were working at full capacity. This contrasts dramatically with post-war Europe, most of whose factories had been completely destroyed. In addition, technological advances in both ocean and air transport during the war made the transportation of goods cheap, integrating the American economy into the world economy.
The war also caused the demise of the world’s two main colonial powers, Britain and France. Britain’s national debt was about 250 percent of its GDP in 1946. This forced them to grant independence to most of their colonies, which were too expensive to keep within the colonial fold.
World War II also saw the emergence of the U.S.S.R., which initially demonstrated tremendous economic growth. Soviet rulers claimed that they would surpass the economic might of the West, but after a few decades the Soviet economic miracle fizzled out once the drawbacks of communism, including inefficiency and relatively poor productivity, crept into the Soviet economy. This finally led to the collapse of the Soviet empire in 1991.
Due to the Korean War, the Japanese and South Korean economies were rebuilt on the ruins of World War II. After the oil price increases in the late 1970s and subsequent inflation, U.S. industries started shifting their production to East Asia, creating the four “Asian Tigers,” namely, South Korea, Hong Kong, Taiwan, and Singapore. Since these four countries were too small to produce all the manufactured goods needed for the U.S. consumer market, Chinese businessmen in Hong Kong, Taiwan, and Singapore invested in countries like Indonesia, Thailand, and Malaysia, where the Chinese origin people had a monopoly on industry. This finally led to the rise of China. The losers were American workers, who were laid off on a large scale. The advent of information technology in the mid-1990s created jobs in the U.S., but to satisfy the profit demands of Wall Street investors, CEO’s had to send information technology jobs to countries like India, Ireland, and Philippines.