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20th Century Limited

by Dana Blankenhorn
May 30, 2014
in A-Clue, Crisis of 2008, Current Affairs, economy, history, Personal, political philosophy, politics, The 1974 Game, The Age of Obama
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Think of this as Volume 18, Number 21 of the newsletter I have written weekly since March, 1997. Enjoy.


FdrFDR faced two crises. One was an economic crisis, the Great Depression. The second was World War II, testing whether democracy could survive against the false choices of fascism and communism.

I would argue they were the same crisis. FDR's response to the Great Depression saved America for democracy, which was indeed threatened by extremists of the Left and Right. His response in World War II saved the world.

Our time is similar.

As the Great Recession fades into the background, America is facing the return of those false choices, both abroad and at home.


Putin hitlerVladimir Putin put them all in perspective through his “invasion” of Ukraine. Sending in troops under false colors, denying they were there, holding fake referenda managed by armed troops, claiming victory. Wash, rinse, repeat, accompanied by propaganda claiming that Ukraine is under the control of “Nazis” from which local Russians seek “liberation.”

This is precisely how Hitler moved in the run-up to World War II. The difference this time is that America has four times Russia's military strength, at a lower cost relative to its GDP. What's similar is that Americans are reluctant to use that strength.

If this were the 20th century the President would be screaming Munich. But this is not the 20th century. What Putin is offering is a false choice.

There's another way to beat him. Instead of playing the game the 20th century way, play it the 21st century way.

Obama as fdr time coverAnd it's that method the President is deploying. Economic sanctions can beat Putin because his economy is fully integrated with that of the West. We don't have to destroy his economy. We just have to force the oligarchs who control that economy into a choice, between Putin and their own economic future. Capital flight will do more to bring Russia to the table than 10 divisions could. It's just a question of how much pain the oligarchs are willing to suffer before they risk nationalization and join their money in the West.

That is being reflected in events. Putin's propaganda arm, called Russia Today, trumpets that his Gazprom has a “monumental” deal lined up with China, one that will supposedly make European sales of gas optional. 

How is that possibly good for the West?

Look at the price being charged, a price fixed by a 2014 contract which also includes Russia's commitment to built two additional gas pipelines between Siberia and China. It's $10/mcf, which is about $4/mcf BELOW the price Russia is getting from Europe.  China is also getting an equity stake in the fields, to make sure it's not being shortchanged.

China lane in chengduIn short, the deal is a sign of Putin's weakness  rather than strength. And the oligarchs who have benefitted so handsomely from their ties to the regime won't like this. They're going to be losing tons of money, as their profits are turned into a reactionary social program which, from their perches in places like London and Monte Carlo, is the opposite of inviting.

In any case, the Chinese money isn't really going to solve his short term problem. It's not as if all of today's capacity can be switched from delivery via the Ukraine to China at a moment's notice. Gas that isn't sold can't be stored, it has to be flared, as any oilman worth his Bakken acreage will tell you. And where is the technology to produce all this new gas going to come from?

Putin pretends to be winning, but he's losing. He can't afford the drastic growth in military spending that a Ukranian occupation would entail. He can't even do in his near abroad what the USSR did routinely in its near-abroad, which if you'll recall extended past Berlin into the heart of Europe. That's not winning.

So why are Americans playing the “false choice” game, acting as though democracy and free markets are “doomed” against threats from the far left and far right?

The crucible playbill by arthur millerIt's not the revolt of the hard right that's the problem in this case. It's the revolt of people in the center and the left who have given up on democracy. It's those who say “they're both the same,” that “we need a third party,” that “they're all corrupt” who are the gravest danger.

What our history doesn't record is that this was true in the 1930s as well. The people who were later accused of being Communists during the McCarthy Era were mostly liberal Democrats, but liberal Democrats who had despaired of Roosevelt confronting Hitler directly and saw Stalin as a viable choice. Cynicism was the enemy then, and cynicism is the enemy now. Those who became the McCarthyites, who supported them, were meanwhile coddling Hitler in far more profound ways than the college students playing footsie with Stalin.

That is why this mid-term election is important. No 6th year President has ever made progress in Congress. The closest was Bill Clinton, who held Republicans to a draw. George W. Bush's 2006 was the same disaster as Ronald Reagan's 1986 and Lyndon Johnson (who claimed the mantle of John F. Kennedy) suffered in 1966. Democrats won 15 Senate seats in 1958, Truman was hammered in both his mid-term elections, and FDR lost control of Congress entirely in 1938, to a coalition of Republicans and southern Democrats, which presaged the realignment of the 1960s. Even Calvin Coolidge lost ground in 1926.

So a draw in 2014 would be nearly unprecedented. Yet if the election were held today that's probably what Democrats would get. They're actually on the offensive in states like Georgia, Kentucky and Texas, while holding their own in states like Arkansas and Alaska that had been written off. The current “crystal ball” of conservative analyst Larry Sabato has Republicans gaining just 6-8 House seats.  It's a huge walkback from his January prediction that “Republicans could win it all.” 

They still could, of course.  But right now that's not the way I'm betting.

Elizabeth warrenWhat's out there is a rising populist tide, a wind that's coming from the left and not the right. Senators like Elizabeth Warren and candidates like Wendy Davis are the people causing the most excitement on the current political spectrum. The Obama people have been mostly staying underground, focusing on registering people and convincing them to vote rather than on advertising. As the “ObamaCare” law continues to take hold, the ground is likely to shift even further under Republicans' feet, despite what the Washington pundits say. (Rule number one about Washington pundits is they're usually a decade out of step with the national mood.)

If there are surprises coming, that's where they're probably coming from. And remember, even a draw at this point would be unparalleled success for a President in Barack Obama's position.

The fight is for a democratic system, and a free enterprise economy subject to the rule of law. That's what the fight has always been about, in America. What seemed to be an argument over order in the 1960s, about unemployment in the 1930s, about industrialization in the 1890s and about slavery in the 1860s was, and is always, the same fight.

It's a test of whether this nation, or any nation, dedicated to the proposition that all men are created equal, an long endure. The crisis is ongoing, but it's a test I really believe America will, in the end, pass, ushering a new politics and a new economics that is fit for the 21st century and the job of saving the Earth.

 

Tags: 2014 electionAmerican historyBarack ObamaChinaCommunistsElizabeth WarrenHUACNazisPutinU.S. historyU.S. politicsUkraine
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Dana Blankenhorn

Dana Blankenhorn

Dana Blankenhorn began his career as a financial journalist in 1978, began covering technology in 1982, and the Internet in 1985. He started one of the first Internet daily newsletters, the Interactive Age Daily, in 1994. He recently retired from InvestorPlace and lives in Atlanta, GA, preparing for his next great adventure. He's a graduate of Rice University (1977) and Northwestern's Medill School of Journalism (MSJ 1978). He's a native of Massapequa, NY.

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Comments 2

  1. Rick Alber says:
    11 years ago

    Can you clarify the He can’t even do in his near abroad what the USSR did routinely in its near-abroad, which if you’ll recall extended past Berlin into the heart of Europe. That’s not winning. statement, Dana?

    Reply
  2. Rick Alber says:
    11 years ago

    Can you clarify the He can’t even do in his near abroad what the USSR did routinely in its near-abroad, which if you’ll recall extended past Berlin into the heart of Europe. That’s not winning. statement, Dana?

    Reply

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