For much of my life I’ve worked outside of the US, far from my native New York. Over years of longer and shorter work stints abroad I became hyper-aware of two irreversible (and unrelated) trends: The premature graying of my hair and the continuous decline of the US dollar. To some extent the ongoing fall of the dollar is as natural a phenomenon as my hair turning gray. At the close of World War II the US economy comprised well over 3/4 of the world’s economy. In the half century since, European and Asian economies have recovered and expanded and new economic giants have emerged, thus ending the dollar’s one-time hegemony and bringing its worth back into proportion to that of other currencies.
A Self-Destructive Economy
In recent decades, however, the US has compounded this change. The country appears to have gone out of its way to sabotage its own economy and debase its currency in the process. From the social ethos of the New Deal and the Great Society, and even the business ethos of the Eisenhower years, the US slipped into a culture of short-term gain and long-term disinvestment. Corporate looting ala Enron and Worldcom and obscenely astronomical “CEO” compensation, the near-incomprehensible waste and corruption of the four-year-long debt-financed war in Iraq, and the public and private sector’s cavalier attitudes towards investment in the human and physical infrastructure requisite to productivity and social stability (cf. the pathetic state of US health care and the headline-grabbing failures of levies in Louisiana and bridges in Minnesota) undermine confidence in the US and its currency and prompt international investors to shift capital elsewhere.
When the dollar first dipped below the Euro, I smiled at the irony. The very same US that now shuns investing in its own physical and human infrastructure by passing the buck to the whims of the so-called “market” had, long ago, under the Marshall Plan (see this current New Yorker article), provided the long-term loans and investment capital that helped rebuild Western Europe’s war-shattered physical plant, kick-start its post-war economic recovery, and give it the confidence to proceed on its own. In the fifty years that followed, Europe built slowly and steadily on this foundation and today surpasses the US in many measures of productivity and quality of life. But I can barely raise a smile as I watch the dollar continue to fall, heading high speed towards parity with … the Bulgarian Lev!
Parity with Bulgaria?
A few weeks ago, in the Bulgarian capitol city, Sofia, I sold dollars to buy Lev (BGN). The rate: US$1.00 = BGN 1.40. Twenty years ago, in the final years of the Communist period, one dollar bought three to four Lev at the official rate and twenty to sixty on the black market. During the political crises and hyperinflation that wracked Bulgaria during the mid-1990s, one dollar bought more than 3,000 Lev. Ten years ago, the Bulgarian Lev was placed under the supervision of the IMF and linked to the German Mark (at BGN 2.00 to DM 1.00) and subsequently to the Euro. The IMF currency board required that Bulgaria curtail its borrowings and honor its debts. The Lev has remained constant at BGN 1.95 to the Euro ever since and by riding the Euro’s coattails has risen steadily against the dollar.
It is an odd state of affairs when the US dollar is closer in value to the currency of a small and corrupt Balkan republic than it is to the common currency of its major economic rival, the European Union. Bulgaria is a country of fewer that 8 million inhabitants with an economy based largely on agriculture and food processing as well as on — to share an open secret — the laundering of monies from the drugs and weapons trades and from fortunes looted from the treasuries and industrial infrastructure of Communist-era Bulgaria and the former Soviet Union and still siphoned away from the immense black economy of present-day Russia.
Robber Barons and Infrastructure
A memorable feature of the years leading up to Bulgaria’s accession to membership in the European Union, i.e. to its becoming subject to European laws and fiscal regulations, was the regular headlines in the Bulgarian press of the gangland-style broad-daylight murders of flamboyantly wealthy local banking, insurance and holding company directors, many of them one-time athletes with ties to the seamier sides of the security services of Bulgaria’s past regime. Conveniently, these short-lived moguls took with them to their graves the secrets of the identities of their institutions’ initial investors and depositors.
A decade ago, an American ambassador to Bulgaria confided in me that US government was quite pleased with Bulgaria’s new gangster capitalists, adding, quite approvingly no less, that “… they are really no different from our own robber barons.” I disagree. Some of America’s 19th century robber baron industrialists left behind not only the social and physical scars of their depredations but also the full infrastructure on which late-19th and early-20th century economies were based on — railroads, steel mills, oil refineries, etc. They also established concert halls and universities and bequeathed their art collections to public museums. What the Bulgarian moguls have left behind, other than an undeniable multiplier effect engendered by their personal spending, is an immense real estate bubble, the outcome of black money being poured into land buy-ups, up-market housing, and the development of overcrowded, jerry-built seaside and mountain resorts. The Bulgarian robber barons have also left behind hundreds of so-called “credit millionaires,” cronies awarded with large bank loans destined for default.
Infrastructural development in Bulgaria — roads, airports, harbors, human resources, education etc. — was abrogated by Bulgaria’s new robber barons and the country’s recent neo-liberal governments both. Indeed, Bulgaria’s new rich do as little for their country as America’s under-taxed top earners do for theirs. Fortunately for Bulgaria, the EU stepped into the fray, spending and continuing to spend billions of Euros in an attempt to bring Bulgaria up to snuff for integration into the European economy and into European society and also to rectify the tremendous inequalities of income and opportunity that arose in Bulgaria following the end of the Communist period — such inequality due in part to the restitution of real property to the descendants of pre-Communist-era title holders and to the exclusion from the mainstream economy of the country’s large Roma (Gypsy) population. Some EU programs are inefficient and naive and others are boondoggles for western contractors and consultants and their well-connected Bulgarian partners, but the overall positive results are visible to anyone who has visited or worked in Bulgaria over the years. The longer-term historical ironies are equally striking as Europe takes over the mantle of prescient investment and aid that the Americans wore during the Marshall Plan years, and as the US continues to fail on all fronts in the reconstruction of Iraq (the US has been mired in Iraq for longer than it took to help defeat Germany and Japan in World War II and commence their post-war regeneration).
Lessons or Ironies?
As the dollar sinks closer to the Bulgarian Lev, the US might consider learning from Bulgaria’s recent experiences. One could almost think the unthinkable: Might the US benefit from having the IMF set up a board to oversee its currency? Might the US benefit from membership candidacy in the EU and the consequent eligibility for proper inspection and maintenance of its physical infrastructure and for bringing its social welfare, income distribution, medical care, and quality of life up to European standards, standards that owe much to the size and spirit of America’s Marshall Plan? More on this …