THE CATERPILLAR STORY PART I

Part One, where the Caterpillar appears only at the very end, to take charge in Part Two.

This entry continues our discussion from the previous entry Industry And Finance. It looks at the disturbing trend of the past several decades in America, which overwhelmingly favors financial manipulation, deficit spending, and bubble economy in general, at the expense of solid capitalist production and economic stability. Superficially, it is easy to point the finger at the “Nixon Shock” of 1971, when the post-WWII financial system under the 1944 Bretton Woods Agreement, heavily favoring the United States, collapsed, ushering in an era of currency instability. My opinion here is twofold. First of all, President Nixon’s move was reactive rather than active, reflecting the objective reality that could no longer be squeezed into the convenient, but no longer practical economic regime of Bretton Woods. Besides, the American war in Vietnam, which the Nixon Administration had inherited and made every effort to end as soon as possible, was largely responsible for the changing circumstances, and made the collapse of the old financial system imminent.

Secondly, and more importantly, I find the end of Bretton Woods only marginally responsible for America’s subsequent economic woes. What happened was an international recognition of the fact that World War II had long been over and the world’s division into its winners and losers, favorable to the United States, was no longer valid. But the real problem for America after that was the collapse of her own internal economic discipline, deteriorating from bad to worse ever since, and as such it was a matter of domestic mismanagement (effective deregulation of key financial institutions, where fraud and recklessness had to be expected, in the climate of deficit spending and paper money inflation), rather than of some global reorientation.

But let us leave the financial crook’s paradise alone for now, and take a closer look at the situation in which the American industrialist found himself around that time.

The year 1972 was good for American business. In the spirit of Nixon’s détente, the colossal Soviet market was opening up to American products. Trading commissions were established, and multi-million contracts began to be signed on a regular basis.

It was a real bonanza for the classic American capitalist, and a huge boon for the American economy. For the Soviets, though, it was mostly a matter of great convenience to buy American products, but in their case it was not exactly a new lease on life. The rest of the capitalist world was quite anxious to sell its products to Russia as well, and Moscow had a range of products from different technologically advanced countries to choose from. Having been personally involved in these matters through my USA and Canada Institute and Soviet Ministry of Foreign Trade, and having visited twenty-two American cities in 1973-1974, negotiating with American industrial companies, I can testify to the fact that it was a huge deal for these companies and for America as a whole, while for the Soviets it was economically a matter of luxury, but politically extremely important as a tangible symbol of the US-Soviet détente.

Then rain started pouring on the trade parade. The 1974 (note the year; for more on President Nixon’s role in this, see my provocative entry The Last American President, coming soon) Jackson-Vanik Amendment to the American-Soviet Trade Agreement, effectively tying the trade to Jewish emigration from the USSR and to a number of other, relatively minor and largely declarative human rights issues, did not much hurt Soviet economic interests, but causing a quick political retaliation by Moscow now openly discriminating against the American companies, and awarding their “in-the-bag” contracts to their less deserving foreign competitors, did hurt the American economic interests, although not on a very large, mostly symbolic scale. (Ironically, today, two decades after the collapse of the Soviet Union, the Jackson-Vanik still stands, senselessly, except to demonstrate the US Congress’s ill will toward Russia regardless of her political orientation, and in the process continues to hurt American business rather than offending the Russians, who will never take offense, except to take a practical advantage of the insult.

One of the American companies that could never be hurt by a Soviet political retaliation was the legendary Caterpillar…

(End of Part One. Part Two will be posted tomorrow.)