Spengler at PJM:

Mullah Ron Paul
December 29, 2011 - 6:16 am - by David P. Goldman

Rep. Ron Paul’s defense of Iran’s nuclear weapons program should surprise no one. The same resentment motivates Ron Paul and the Iranian leadership — a paranoid hostility toward a world that is swiftly changing and has little mercy, and a Millenarian desire to return to a mythical, untroubled past. Get rid of the Federal Reserve, scourge the bankers, return to a gold standard and erect a wall around the United States — and we will return to when? To 1957, when the Russians launched the first space satellite, alerting the United States to the danger that it might lose the Cold War? Then, as always, we prevailed, but by the skin of our teeth. Ron Paul’s program is an American version of the Iranian desire to return to a world of Islamic purity that never existed, any more than did a golden age of American isolationism.

America is not the embodiment of hope, but the abandonment of one kind of hope in return for another. America embodies the spirit of creative destruction, selecting immigrants willing to turn their back on the tragedy of their own failing culture in return for a new start. Its creative success is so enormous that its global influence hastens the decline of other cultures. For those on the destruction side of the trade, America is a monster. Now China has become an agent of creative destruction as well, the consequence of its partial adoption of the American model. China indirectly brought about the so-called Arab Spring, by driving up world grain prices and pricing the Arab poor out of the world market for food. Chinese pigs will eat before Arab peasants; food insecurity (if not actual starvation) undermined the Arab dictatorships.

Iranian resentment is understandable. They recall the Brontosaurus in an old Far Side cartoon, standing at the dais addressing an auditorium full of dinosaurs: “The climate is changing, our food supply is dwindling, and we have a brain the size of a peanut. I’d say we’re in trouble.” Islam is a religion of traditional society, of iron constraints and unquestioned hierarchies. By teaching Iranian girls to read, the late Shah set off a cultural chain-reaction: fertility has fallen from 7 children per female a generation ago to just 1.5 today, a catastrophic decline unparalleled in demographic history. And mosque attendance is down to only 2% by some estimates. Creative destruction has burst in upon Iran and turned its society inside-out. The mullahs still have all the money in Iran’s hydrocarbon monoculture, and almost all the guns, and they will do anything necessary to turn the clock back. Their world is disappearing in front of their eyes. They have nothing to lose.

Of course, the mullahs would have nothing without the global economy; after oil, Iran exports nothing but pistachios and carpets. Without foreign oil companies, the mullahs could not drill, pump, or ship their hydrocarbons. The whole apparatus of Iranian Islam is a theme park, an Shi’ite Disneyland funded by oil revenues, perpetuating a barbaric society that could not feed itself without global demand for the natural resources that, by unlucky accident, happen to be located in Iranian territory.

Mullah Paul voices the same fear and resentment in its milder American form. He has in common with the Iranians a desire to make the world go away, and a fixed idea that an evil conspiracy brought about all the problems. Ron Paul isn’t an Iranian, to be sure; he’s just the closest an American can come to thinking like an Iranian without actually moving there.

Creative destruction felt good in the United States as long as the rest of the world parked its savings in our real estate market — a total of $6 trillion flowed in from overseas between 1998 and 2007, the equivalent of a whole year’s output of the U.S. economy. And as long as America was swimming on foreign savings, and home prices were rising, Americans saw no need to save. Our good fortune, to be sure, did not derive from an economic accident, but rather from the fact that America’s political system and free markets made us the world’s best venue for investments. Now we have competition. We’re no longer the only game in town.

Americans stopped saving as long as home prices rose. And the smart kids quit engineering and physics and got an MBA instead. It was a lot easier and paid a lot better.

Household real estate assets vs personal savings rate

China’s boom gave us cheap goods at Wal-Mart, and whoever lost a job in manufacturing found a job on the periphery of the home price bubble — not always at the same pay, but everyone was working. And Americans got the idea that we ought to be paid just for being Americans. The quarter-century Reagan economic boom, the longest and most consistent in American history, turned into a bubble in last few years.

Americans have the mother of all hangovers. Only five years ago, a community college dropout could get a real estate or mortgage broker’s license and make reasonably good money, and buy a McMansion with a liar’s loan. Now the Boomers are facing retirement on a fraction of the home equity that used to form their nest eggs. Ron Paul speaks not to the highways and the hedges, but to the subdivisions and shopping malls, the spawn of Chinese savings and cheap Chinese consumer goods, monuments to America’s dependence on the world economy — and he preaches isolationism.

America has the capacity to come back, and the proof is that the sector of the American economy that is most engaged with the world — the S&P 500 corporations — is showing strong gains in employment, sales, productivity and profits. Cutting taxes and rolling back regulation will restore economic growth, although the benefits may not be as broadly felt as during past recoveries. Meanwhile the rate of innovation redoubles, and brings us into uncharted territory. A friend called my attention to this video prepared by Sony for its 2009 shareholders’ meeting, which is worth viewing as a reminder.

We have to roll up our sleeves and compete in the world economy. If we try to wall the world off, we will be poor, miserable, and ultimately insecure, as nuclear weapons work their way into terrorist hands. And we will deserve what we get.