Memo To: President George W. Bush
From: Jude Wanniski
Re: A Death in Genoa
The world leaders gathered with you in Genoa last week for a G-8 meeting tried to ignore the attendant demonstrations, as if some people are always protesting everything. The exception was French President Jacques Chirac, who noted that when so many people go to so much trouble to come to a far away city and protest, there must be a genuine grievance. The photograph of the boy about to throw a fire extinguisher at a police car, a moment before the rifle aimed at him in the picture fired and killed him was on the margin. There were no deaths when the protestors took the trouble of going to Seattle for the last summit of global leaders, when President Bill Clinton attended. The next summit, I read, is being planned for a mountaintop in the Canadian Rockies, where the G-8 will be far from the shouts and banners at the mountain’s foot. It is an eerily appropriate picture, for it may be that the protestors are complaining about their world leaders being out of touch with ordinary people on a number of issues that are of profound importance to ordinary people.
One of the real barriers you face to a truly successful tenure in the White House, Mr. President, is the fact that you were never an ordinary person and you will never know what it is like to be one. Your father and your grandfather were silver-spoon babies and so were you, which gave the three of you a great many advantages that ordinary people do not have when facing the bottom of the ladder. This is not a criticism of you, only an observation that you should bear in mind when you think about the tasks ahead of you in the most important job on the planet. I think the American people and the people of the world are as impressed as I am that you seem to be struggling to get in touch with the masses. But unless you put your finger on what it is the ordinary people of the world want and need, you will fail, and all the talk of compassion and all the photo ops with minority kids and compromises with Democratic pols will count for little.
The NYTimes will tell you the Genoa protests are an expression of outrage that you would not sign on to the Kyoto Treaty on global warming, but the Times is hopelessly out of touch with ordinary people and has been for decades. One of your achievements to date has been to reject the impulse that first led you to support the idea that mankind is heating Mother Earth with too much economic growth. Nor does The Wall Street Journal get close to the people at the bottom of the pile when they write them off as hooligans, ruffians, Luddites who are resisting the advance of civilization. The Journal editors look down from their mountaintop and proclaim that the free marketplace will sort things out, with the help of technological advance. From his prison cell, I think Unabomber Ted Kuczinski is closer to the truth, that technology plus the jungle of the marketplace is a mindless combination that is increasingly wrecking the lives of most of the ordinary people on earth -- always excepting those who live and hold their meetings at the top of the mountain.
When I ask the leaders of the ordinary people what they want, they tell me “access to capital and credit.” That is shorthand for “opportunity to get from the bottom of the ladder to the top, if at all possible.” The people of the world want what we once had in the United States, which is a “fluid society,” where the combination of hard work plus capital gave everyone at least a shot at the brass ring. The Europeans have had stratified societies for centuries and nothing much has changed lately. They now have the beginnings of political union and are about to turn their national monies into euro cash, but even this is a great source of difficulty for ordinary people. I first warned 24 years ago that a common currency would run into problems in Europe unless it were linked to gold, because the tax systems are so different in each of the countries. The daily and weekly changes in the euro’s value cause capital to flow from one country to another -- and back again -- to make the market adjustments. It’s not a terrible problem for the folks at the top of the mountain, but the people on the bottom feel like nomads, having to follow the capital flows where the free market takes them. Globalization is maddening to them, a good reason to protest in Genoa.
When I met with Treasury Secretary Paul O’Neill in April, I tried to explain to him that global capitalism cannot function with a floating unit of account. We have learned this over the last 30 years since President Richard Nixon floated the dollar and left the world for the first time in recorded history without a “money” anchored to the planet. The liberal and conservative economists who supported Nixon at the time are not about to say the experiment has not worked as advertised, which is why in the end it will be up to you if anything is to be done about this. I wrote yesterday at my website about Mexico’s farmers, who are being crushed by the current dollar deflation. So are Argentina and Brazil. When there is a floating unit of account, errors constantly accumulate in the market guidance of capital and make capital that much more difficult to form. If there are problems here in the U.S., imagine what it is like where the poorest people live, forced into pre-civilized barter systems where high-tech is a fairytale, capital almost non-existent, and disease and malnutrition the only reality.
I’m not a foe of globalization, Mr. President, although I have sympathized with Ross Perot and, at times, with Pat Buchanan. The problems associated with it are very high, especially with a rootless currency. The single death in Genoa last week may be only the first of many, as the dollar deflation unravels our economy and transmits more financial turbulence around the world. It may not even be safe upon that mountaintop next year.