NEW YORK - To some it signals the end of the American
empire, to others it's just part of the vicious capitalist cycle.
Either way, the litany of bad economic news in America has many
pondering where it all goes from here.
Millions of U.S. jobs have been lost and more layoffs are expected.
Banks have reined in lending after a credit crisis and a housing
collapse that has sent foreclosures surging.
On Wall Street, several investment banks have collapsed. The U.S.
stock market has lost more than 40 percent of its value. Behemoths like
Citigroup (C.N: Quote) have struggled to survive.
Tough times also threaten the once-mighty U.S. auto industry, with General Motors (GM.N: Quote) and Chrysler LLC seeking billions in aid from Washington and warning of potential collapse if they do not get a bailout.
"We are seeing the beginning of the end of the American empire,"
said Howard Zinn, author of "A People's History of the United States."
On the right, former International Monetary Fund chief economist
Simon Johnson sums up the view this way: "Capitalism is not dead, there
is no alternative to capitalism.
"The myth of wonderful capitalism is dead but not capitalism, just the nice warm fuzziness."
Every week, there is more hard-to-believe news; a Wall Street trader
arrested on charges of a $50 billion investor fraud, and the governor
of Illinois accused of trying to sell the U.S. Senate seat vacated by
President-elect Barack Obama.
There is now so little respect for President George W. Bush that an
Iraqi journalist threw his shoes at him on Sunday, a grievous insult in
Iraqi culture. Bush prepares to leave office next month with a
presidential legacy battered by the grim economy and the unpopular war
Everyone agrees the situation in America, now officially in recession, is certainly bleak.
"Everyone wants to save and no one wants to spend. That makes it
very hard to get growth," said Johnson, likening the U.S. economic
predicament to having fallen into a bathtub and struggling to get
traction to climb up the slippery wall.
THE COMING GLOOM
Experts are uncertain how long the American economic malaise will
linger. Some predict a year or two, others fear a slowdown of as long
as a decade, reminiscent of Japan's lost decade of the 1990s.
"Things are bad," said Alan Ruskin, chief international strategist
at RBS Greenwich Capital. "This is not a typical recession, but it is
still not like the Great Depression."
While there has been much talk about the misery of the 1930s, economists say this slump will not be so dramatic.
Massachusetts Institute of Technology economist Johnson noted, "If
you had gone to Tokyo (in the 1990s), you would have seen that it
looked quite respectable and people looked reasonably happy, but there
was no growth."
Likewise, he said Americans should brace for "low growth not fast
enough to create meaningful jobs for people" for the next five to 10
A poll released by Marist College Institute for Public Opinion on
Monday showed 24 percent of Americans thought it likely they would be
laid off or see their working hours cut in the coming year.
Andre Myrtil, who owns a small technology outsourcing business in
New York, sums up the business environment for many, saying he is
getting less work and companies are being slower in paying him.
"There's no work. My phone's not ringing."
"I'm not throwing in the towel yet," he said. "It can only get better, but time will tell."
Many believe the only way out of the mess is the government spending
huge amounts of money. But how much exactly is needed? "There is the
capacity to literally have helicopter drops of cash," Ruskin said.
Most expect Obama will approve a fiscal stimulus package worth
hundreds of billions of dollars soon after his inauguration on January
"American economic dominance has diminished and it is going to take
some time for our economy to grow again. We are in for an extensive
period of slowdown or decline," said Howard Chernick, an economics
professor at New York's Hunter College.
"There is really only the willpower of the government to get us out of this," he said.
As well as spending huge amounts of money as happened during
President Franklin Roosevelt's New Deal to confront the Depression,
Chernick said Obama must deliver on another of his campaign themes --
"Confidence will be a big issue and there, you can only hope," said
Chernick. "One of the lessons historians took away from the New Deal
was that Roosevelt had some potency, not just in fiscal decisions, but
in instilling confidence."
HOPE AND CONFIDENCE
But Zinn said, "Unless bold measures are taken to change the course of the nation, we are heading for trouble."
"Obama has not shown signs of being the right person for this. He has not shown the right boldness of vision."
For Zinn, Americans could push Obama to do what is needed with
actions like those last week when workers in a Chicago factory staged a
successful sit-in, demanding severance pay and vacation time they
earned before being laid off.
"That is a glimpse of what would be needed on a very large scale --
civil disobedience and direct action to dramatize what problems people
have ... to push Obama to being the kind of president he could be,"
For others, America must keep faith with capitalism.
"There is still some faith in markets even if there is now
acceptance that financial sectors need considerably oversight," said
Ruskin. "The problem is, the horse has shot out of the barn and is well
over the horizon."
(Reporting by Mark Egan; additional reporting in New York by Nick Zieminski; Editing by Peter Cooney)