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January 05, 2011

2010: The End of World War II

Military hostilities for World War II ended in 1945.  The fall of the Berlin Wall was a key turning point showing we had reached the beginning of the end of the Cold War which ended “officially” in 1991 with the dissolution of the USSR.  I would argue that 20 years after the end of the Cold War and we are finally and truly in a new era.

After World War II, the United States embarked on a possibly unprecedented effort in human history, to rebuild not only the allies but also rebuild the enemies of the war, using tools like the Marshall Plan and a new constitution and investment in and economic inclusion of Japan.  The goal was to raise the economic tide and thus lift all "country-boats".  Based on a model of non-military expansion of states and on inter-country trade rather than on wars and on monopolization of resources.  Russia declined to participate and with the advent of Communist China joining them in a bloc, the Cold War military and economic “containment” of their ambitions was sustained successfully for decades. Since then, economic integration has proceeded including them.

The fall of the Berlin Wall and declaration in 1991 of the end of the Cold War did mark a significant and and highly symbolic turning point.

But in 2010, we saw a remarkable economic economic situation: the United States economy struggling along with continued and expected unemployment near 10%, continued asset depreciation and many other weak signs from the Great Recession - the deepest economic slump with years forecast to recover housing and employment.  Yet the stock market did quite well on the strength of very strong corporate earnings. Earnings that would normally be depressed by a high unemployment and thus lowered spending rate. Earnings that were instead driven by overseas growth in sales and profits ... and hiring overseas, not here, as a result. Earnings that are expected to continue in 2011 well above the weakly growing US economy.

A strong US economy can help earnings, but earnings aren't primarilty dependent on the US economic market.  

The world economy is now largely, if loosely, integrated.  Many weak economies representing the vast majority of people around the world have grown stronger.  The most striking being the rise of China, which, in spite of huge numbers mired in deep poverty, now has a developing middle-class that is larger than the entire population of the United States.

And that worldwide integration of economies including Russia and China, lifting so many, is a great success, leveling the economic field by bringing others up.  The true end of World War II.

And that wasn't achieved via tax cuts for the rich (a third of the rich inherited their money, not earned it) and wishful thinking about how unregulated markets and the superrich would buy things to make it happen, but rather through deliberate policy choices and government investment financed by a tax system where those that benefited most financially from our system paid that forward in higher taxes. (The United States has the 23rd lowest tax rate of the top 25 economies of the world, so the problem isn't that our taxes are too high -- they are arguably too low.)

In this era, after years of denials successfully blocking timely action, global warming is now moving unstoppably with only the options of mitigation and adaptation, oil reserves have almost certainly passed “peak oil” as we have to go to ever greater and more bizarre lengths to obtain supplies, we have an tax system that encourages corporation to off-shore jobs to countries that exploit labor and defile "their" environment as if it wasn't connected to "our" environment.

What got us from 1945 to 2010 will not get us from 2010 to 2075.

Willful progress? The Tea Party's reactionary retreat? Libertarian's laissez-faire wishful thinking?  DC Republican's boorishness?  Which will best carry the US forward to 2075?


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