In his 1961 farewell speech, President Eisenhower warned the nation against the potential rise of a “Military-Industrial Complex”, a potential alliance of ambitious officers and defense-oriented corporate chiefs with the capacity to become a “state within the state”, and take advantage of the Cold War to exert undue influence on American politics.

Possibly thanks to his warning, this never occurred in the U.S. But such a complex did arise in our Cold War adversary state, the USSR. There elements within the government, the military and the armaments industry cooperated in the creation of a privileged sector, which gathered to itself the lion’s share of state revenues, scientific talent and political influence.

The Soviet industrial-military complex not only sucked the economy dry, it also involved the Soviet Union in a number of questionable foreign ventures, both expensive and dangerous, and which distracted the leadership from pressing issues of internal governance and productive investment.

While the USSR acquired world-class armed forces, it also locked itself in a military doctrine based on past wars and neglectful of future threats. Despite having contributed to the U.S. failure in Vietnam, the Soviet military leadership ignored the potential of asymmetric warfare and thereby dug their army’s grave in Afghanistan. The end result of their hubris was the collapse of Soviet power and the dissolution of the USSR.

The Soviet Union was a tyranny, and its end a blessing for all mankind. But the errors of other states, even enemy ones, can provide a useful perspective for evaluating our own policies.

And the question is worth asking: Are we in the U.S. making a similar mistake?

As the Cold War ended and our brand of capitalism was declared triumphant, we allowed our own “complex” to build itself: not a military one, but a Financial-Political entity of equal reach and power. 

For the last two decades the growth of the financial sector has far outpaced that of the economy. A close alliance has developed between Wall Street executives and Washington politicians, reinforced by revolving-door appointments and backed by intense lobbying and massive campaign contributions. What is good for Wall Street is now accepted as being good for the country.

The question here is not one of moral equivalence between Soviet and U.S. conditions, but of political wisdom: Is it prudent for any state, be it democratic or authoritarian, to allow within itself a privileged entity that is, by its very position and the power it wields, at least partially above, or to put it more accurately, “aside of the law”?

The growth of the Financial-Political complex has appeared benign until recently. Indeed many have praised and encouraged the “new financial capitalism” that the complex created, the growing economic activity that followed and the huge tax revenues that flowed from it.

Until, of course, the bill came due.

As the “New Financial Capitalism” acquired global reach it brought a series of bubbles and crashes in its train: the Asian crisis, the dotcom bust, and finally the current Great Recession. Connected to these were other disturbing phenomena: large and growing trade deficits, the decay of U.S. manufacturing, increased reliance on foreign lenders. Income inequality has skyrocketed while the wages of the majority stagnated.

The last crisis also gave us the Great Unemployment’.

When the New Capitalism crashed worldwide, saving the financial sector was the government’s primary concern, and it was accomplished regardless of cost. Trillions were deployed to provide the banks with liquidity. The general population got extensions in unemployment compensation.

The financial sector, supported by taxpayers, is back to New Capitalism activities, profits and bonuses, which appear to be necessary for the general welfare. The rest of the population is unemployed, under-employed, or hanging on for dear life.

Is there something unequal here?

This is not a sound foundation for growth and stability. Neither were the long queues in Soviet groceries while well-financed and protected industries were building more submarines and advanced jet fighters.

The people eventually caught up and disposed of the status quo.

What happened there could also happen here. We should take heed.

This entry was posted on Monday, March 8th, 2010 at 10:31 pm and is filed under The People's Business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.