The troubles at Kabul Bank stand as a parable for the sometimes malign effect that the influx of billions of foreign dollars has had on this impoverished country since 2001. While the Western money spent has done a great deal to create a modern economy, much of it has been captured by a tiny minority of well-connected Afghan businessmen and politicians, and much of it illegitimately. The loss of seven hundred million dollars or more at Kabul Bank represents a significant percentage of Afghanistan’s gross domestic product, which stands at only about twelve billion dollars.
“We have two forms of money here: poppy, and American dollars,” says a beardless 33-year-old Helmand farmer named Rehmatou as he leaves the Marine base with his fertilizer. “This is our economy. The Taliban aren’t pressuring me—that’s just a story you see on TV. I grow for myself. I smuggle for myself. The Taliban are not the reason. Poverty is the reason. And they’ll keep growing poppies here—unless they’re forced not to. Force is the solution for everything. As we say in Pashtu, ‘Power can flatten mountains.’”
“Red Dawn 2,” the forthcoming sequel to the nineteen eighties B-movie about a Soviet occupation of America, was shot last year in downtown Detroit. A long-abandoned modernist skyscraper coincidentally undergoing demolition served as a backdrop for battle scenes between American guerrillas and the Communist occupiers, now Chinese. For weeks, Chinese propaganda posters fluttered in the foreground of the half-destroyed office building, whose jagged entrails were visible through the holes opened by the wrecking ball. It was an uncanny spectacle: the very real rubble of the Motor City’s industrial economy serving as the movie backdrop for post-industrial America’s paranoid fantasies of national victimization.
F. Scott Fitzgerald was right when he declared the rich different from you and me. But today’s super-rich are also different from yesterday’s: more hardworking and meritocratic, but less connected to the nations that granted them opportunity—and the countrymen they are leaving ever further behind.
IF YOU HAPPENED to be watching NBC on the first Sunday morning in August last summer, you would have seen something curious. There, on the set of Meet the Press, the host, David Gregory, was interviewing a guest who made a forceful case that the U.S. economy had become “very distorted.” In the wake of the recession, this guest explained, high-income individuals, large banks, and major corporations had experienced a “significant recovery”; the rest of the economy, by contrast—including small businesses and “a very significant amount of the labor force”—was stuck and still struggling. What we were seeing, he argued, was not a single economy at all, but rather “fundamentally two separate types of economy,” increasingly distinct and divergent.
This diagnosis, though alarming, was hardly unique: drawing attention to the divide between the wealthy and everyone else has long been standard fare on the left. (The idea of “two Americas” was a central theme of John Edwards’s 2004 and 2008 presidential runs.) What made the argument striking in this instance was that it was being offered by none other than the former five-term Federal Reserve Chairman Alan Greenspan: iconic libertarian, preeminent defender of the free market, and (at least until recently) the nation’s foremost devotee of Ayn Rand. When the high priest of capitalism himself is declaring the growth in economic inequality a national crisis, something has gone very, very wrong.
Read the full article here. Read more articles from the January/Feburary 2011 issue of The Atlantic here.
“As an example, she described a conversation with a couple at a Manhattan dinner party: ‘They started saying, “If you’re going to buy all this stuff, life starts getting really expensive. If you’re going to do the NetJet thing”’—this is a service offering ‘fractional aircraft ownership’ for those who do not wish to buy outright—‘“and if you’re going to have four houses, and you’re going to run the four houses, it’s like you start spending some money.”’
“The clincher, Peterson says, came from the wife: ‘She turns to me and she goes, “You know, the thing about 20″’—by this, she meant $20 million a year—‘“is 20 is only 10 after taxes.” And everyone at the table is nodding.’”
“We continue to listen to the same people whose errors in judgment were central to the problem,” said John Reed, 71, a former co-chief executive officer of Citigroup Inc., who estimated only 25 percent of needed changes have been enacted. “I’m astounded because we basically dropped the world’s biggest economy because of an error in bank management.”
“We continue to listen to the same people whose errors in judgment were central to the problem,” said John Reed, 71, a former co-chief executive officer of Citigroup Inc., who estimated only 25 percent of needed changes have been enacted. “I’m astounded because we basically dropped the world’s biggest economy because of an error in bank management.”
Anyone who has lived through the global bubble and bust of the last few years may wonder what’s so great about a consumer society. In the United States, the idea that we have reoriented our economy toward consumption and don’t make things anymore has become a standard lament, not a sign of progress. But China is a long way from consuming too much. Saying that China does not have a big-enough consumer economy is really another way of saying that not enough of its resources reach the broad mass of its people. If they had more resources, they would surely spend more. This is why the recent labor strikes, and the pay increases that followed, were so important. They were a sign that Chinese households might start to enjoy more of the fruits of the long boom.
Much of what investment bankers do is socially worthless. “I asked him how he and his co-workers felt about making loads of money when much of the country was struggling. ‘A lot of people don’t care about it or think about it,’ he replied. ‘They say, it’s a market, it’s still open, and I’ll sell my labor for as much as I can until nobody wants to buy it.’ But you, I asked, what do you think? ‘I tend to think we do create value,’ he said. ‘It’s not a productive value in a very visible sense, like finding a cure for cancer. We’re middlemen. We bring together two sides of a deal. That’s not a very elevated thing, but I can’t think of any elevated economy that doesn’t need middlemen.'”
Going to war with Iraq would mean shouldering all the responsibilities of an occupying power the moment victory was achieved. These would include running the economy, keeping domestic peace, and protecting Iraq’s borders, and doing it all for years, or perhaps decades. Are we ready for this long-term relationship?
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