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Monday, July 31, 2006

Oh What a Tangled Web

Robert Reich looks around the world and sees a great big interconnected mess:

The Mess, by Robert Reich: Watch or listen to the news and you'd think the world were divided into isolated little packets of facts (Israel, Lebanon, and Hezbollah or China and North Korea or American consumers pulling back from the malls, or the US stock market rallying) but look more closely and just about anything of any significance is related to everything else.

The Middle East has become an even hotter tinderbox now. Bush and Rice want to let Israel continue its bombing for some time more, to soften up Hezbollah before any cease fire and peace talks. But that strategy is a miniature version of the wrong-headedness of the administration's attack on Iraq. It has made it even less possible to be a moderate in the Arab world, pushing more Muslim Arabs into the radical camp, and under the sway of radical fundamentalist clergy who want to eliminate Israel, punish the infidel America, and abolish all remnants of modernity from their lands. Igniting radical Muslim rage is the necessary and inevitable result of the US-led strategy in the Middle East, and this rage seriously threatens the moderate Arab regimes across the region, including Saudi Arabia.

One sure-fire consequence is mounting fear and uncertainty about future oil supplies. (Iran itself controls about a quarter of the world's oil.) This, in turn, is pushing up oil futures and, inevitably, all energy prices. China and India are desperately short of their energy needs even now. Both are scrambling to establish more secure sources. China is being pushed closer and closer to Russia, its old nemesis, into a marriage of convenience between Russia's energy assets and China's needs. America's bungled foreign policy is also fomenting a new kind of anti-Americanism across Latin America, boosting Hugo Chavez (Venezuela supplied 11.8 percent of US oil last year), who's now threatening that any American action against his country will result in a cut-off of oil to the US and talking up his friendship with Iran.

Oil is over $75 ... already. Expect further hikes. Even before Hezbollah, Lebanon, and Israel, higher energy prices were spreading throughout the US economy, causing prices to rise even though the real median wage is still stuck in the mud. US consumers are nervous about rising prices and a slowing economy. The Fed is nervous about inflation. It may well increase short-term rates again August 8th, which will slow the US economy further. We haven't seen this combination of inflation and slowing growth since the bad days of stagflation.

US foreign policy is a total mess. But so is the US economy. And the latter makes voters mad. Republican politicians up for reelection this November 7th (any House member facing any serious opposition at all, a third of the Senate) are trying to distance themselves from Bush. Bush is in Florida today trying to talk up the economy today but most Americans know he's full of sh%#. Unlike foreign policy, it's impossible to tell Americans lies when they can see for themselves the depth and breadth of the lie all around them in the economy they live inside.

The economy leads back to foreign policy. Lieberman and any other Dem who supported Bush's insane Iraqi policy is under pressure. When Iraq returns to the front pages, even Hillary may have to recant her initial vote of support and call for a pull-out starting before the end of the year.

Everything is related to everything else. Foreign policy, global economics, home economics, and domestic politics cannot be disentangled. It's all a mess.

    Posted by on Monday, July 31, 2006 at 12:06 AM in Economics, Politics | Permalink  TrackBack (1)  Comments (1)

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