America: Past, Present and Future...Part II

July 28, 2009 - 13:30 ET

Dear family and friends,

Yesterday I shared my thoughts on the challenges and threats facing America as I see them.  What I’m going to share today are some examples from history of countries, including our own, which faced similar challenges (to greater or lesser degrees) and how those countries faired while confronting those challenges.

I wanted to look at history because too many people call into the radio show or send an email after watching the television show and tell me “not too worry” about America because we’ve faced worse hardships before and have not only overcome them but have emerged stronger.

I understand the American spirit.  I understand that we are the country that took on the Nazis, Fascist Italy and Imperial Japan and won.  I understand that we stood toe-to-toe with the Soviet Union over 40 years and defeated them in the Cold War.  I know that we are a country of fighters and that Americans are capable of conquering any challenge—but the belief that great things happen to America just because we’re America—that’s just plain wrong.

Thrift, hard-work, sacrifice by our parents, grandparents and their mothers and fathers went hand-in-hand with the thrift, hard-work and sacrifice we collectively made as a country—that’s what produced unparalleled strength and success.  Today, we face difficult times.  We stand at cross-roads as a country.  Where we eventually end up will be determined by the decisions each of us makes today and in the weeks and months ahead.

Great countries don’t collapse, they transform.  The Soviet Union in 1991 didn’t disappear after its political and economic model collapsed, it transformed and is still transforming.  WeimarGermany’s government collapsed as did its economy but Germany continued—at first down the national socialist path—and now as a democracy.

The Soviet Union

For almost 70 years, the Soviet Union was considered one of two world super-powers.  At its military peak the Soviet Army enlisted over 5 million men and women and amassed over 30,000 nuclear weapons.  With a push of a button it could literally have set into motion a series of events that could have ended life around the globe.

It’s amazing to consider that the political and economic foundations of such a country could collapse, literally overnight, following a meeting in the woods of a handful of political leaders.  So what brought down the Soviet Union?  It’s budget deficit and foreign debt soared during the 1990s following the price decline of it’s most lucrative export, oil.  In the early 1980s oil was about $35 a barrel and by the late 1990s was struggling to stay at $13 a barrel.  Inflation was running 20%-25%  a monthas food and other consumer goods began to disappear from store shelves.  The ruble’s international strength declined.  Although the official commercial exchange rate was 6 rubles to the dollar, tourists and foreigners could easily obtain a 30 rubles for a dollar.

Despite their economic challenges, soaring inflation and worthless rubles the Soviet people wanted to remain Soviets.  They believed in and loved their country.   Polls and referendums regularly showed that 76% of the people wanted to remain united as a Soviet Union with some changes taking place, but not a wholesale collapse of their political and economic structure.  But despite these feelings, the vast majority of Soviets did nothing as a relatively small but dedicated group of political extremists pushed their agenda forward. 

The great revolution that ultimately transformed the Soviet Union really began in a lodge in the woods just outside of Brest (Belarus) with a handful of radicals determined to change their government.  Those same radicals permitted only ONE HOUR of debate before calling on a vote to dissolve the Soviet Union and replace it with the short lived Commonwealth of Independent States.

The Soviet Union was transformed into Russia.  Initial hopes that Russia would be an ally on global military and economic issues was lost by the arrogance of our political leaders who insisted on putting NATO’s tanks and soldiers closer and closer to their borders even after we promised that would never happen.  We saw Russia as weak and broken and sought to dictate how they should live their lives.  Joe Biden typifies that arrogance.  He recently said, "I think we vastly underestimate the hand that we hold…Russia has to make some very difficult, calculated decisions, they have a shrinking population base, they have a withering economy, they have a banking sector and structure that is not likely to be able to withstand the next 15 years, they're in a situation where the world is changing before them and they're clinging to something in the past that is not sustainable."  Couldn’t they say the same thing about us?  Isn’t our situation similar to that of the Soviet Union prior to their transformation—certainly not as grave—but similar.  One of our pillars of economic growth—manufacturing represents a mere 12% of our GDP.  America is no longer an export powerhouse and we regularly import tens-of-billions of dollars a month more than we export.  Our dollar is weaker, not only on the official exchange rates—which are always in flux.  But weaker as a symbol of our strength.  Russia, Brazil, India and China are now regularly calling for the dollar to be replaced or at least have a reduced role as the world’s currency.  Our money supply stands at a staggering $8.3 trillion.

Where We Are Today

Russia is now an oligarchy.  It has abandoned communism and socialism as failed doctrines.  Now, a small group of political and business elite run the country while getting rich.  Those who speak out against their shared interests risk joining the ranks of journalists killed there since 1992 in contract-style killings.  Those businesses that don’t play along find themselves losing lucrative government contracts o r have their executives jailed (Yukos founder Mikhail B. Khodorkovsky) or forced to flee (BP CEO Robert Dudley) or publicly attacked and vilified (Igor Zyuzin of Mechel). 

I don’t believe that this is our destiny as a country.  Once the transformation process begins a lot of factors influence the outcome.  I do not believe that the Germans in WeimarGermany knew in advance that the ultimate result of their inflationary policies would create 40% unemployment where a smooth talking and hate-filled Adolph Hitler would find a very receptive audience.

When the Soviet Union was being transformed the vast majority of people there did nothing while it happened. When Hitler wrote Mein Kampf and talked about killing the Jews, the people did nothing.

I am not saying that our political leaders want to take us down these roads.  I don’t believe they do.  But they have been open to their desire to transform and re-make America.  The question we have to answer is will we, like the Soviets and Germans, sit and do nothing while our country is being transformed?  Will we too let a relatively small group of radicals transform and re-make America?  Or will we take a stand and become a watchdog of liberty, freedom and the Constitution?

Tomorrow I am going to tell you about some questions that you need to ask yourself before becoming a ‘watchdog.’  You need to take a measure of why you are and where you stand.

With love,

glenn