WELCOME TO THE WARFARE STATE
by Dan Denning
"The will of man is not shattered, but softened, bent, and
guided, men are seldom forced to act, but the are
constantly restrained from acting. Such a power does not
destroy, but it prevents existence; it does not tyrannize,
but it compresses, enervates, extinguishes, and stupefies a
people, till each nation is reduced to nothing better than
a flock of timid and industrious animals, of which the
government is the shepherd."
- Alexis de Tocqueville,
Democracy in America
In the Halls of Justice, he likes to be called "General."
No article . Just "General," like a Brazilian soccer player
or an American pop-star. But there's nothing funny about
John Aschcroft's War, or, I should say, the War in which
he's a General on the domestic front.
Ashcroft, whose Department of Justice, came under fire this
week for reporting 775 missing or stolen weapons and 400
missing laptops, is organizing the domestic front in the
War on Terror. Over dinner Sunday with some old friends who
still live and work in D.C, ( which I grudgingly admit to
being a former resident of) we discussed not only
Ashcroft's favorite nickname for himself, but the growing
warlike nature of America, and what it might mean for stock
values and the economy.
The War on Terror is subtly but decisively changing America
into what I call a Warfare State. You can pick it up from
looking at our public dialog on any number of political
issues, the War on Drugs, the War on Poverty, the War on
Tax Evasion, even the new War on "Big Fat." Reasonable
civic dialogue is no longer possible in the New America.
You are either with us, or you ARE the enemy.
The emergence of the Warfare State will have two main
consequences for you. One, as an investor, you must now be
conscious that the main force driving investment values is
not the growth of profitable companies developing better
products at lower prices for American consumers. It turns
out that this model-technology-driven innovation in the
service of better and cheaper consumer goods-was an
historical anomaly. It was the famous "Peace Dividend."
For most of the 20th century, the American economy poured
its resources, via government spending and private R&D,
into developing new technologies to win the space race and
the Cold War. Economic production, at least from a macro-
strategic level, was geared toward winning an ideological
battle. Then our ideological foes collapsed. The Berlin
Wall fell. George Gilder rose up. And for a brief moment in
history, we believed we were in world where perfectly
efficient markets and perfect competition would seamlessly
allocate capital to those companies making the world a
better place for you and me. Lower prices and better DVD
players for all.
Alas, this was more a vision than a reality. And now, as
the percentage of GDP which we spend on defense spending
begins to climb its way back to Cold War levels, we're
again seeing a shift in the focus of our economic policy
makers. Instead of cheap consumer electronics, our national
goals will now be developing more sophisticated tools to
spy on each other in every facet of our lives, from cameras
in public places, to identity cards, to "virtual"
government wiretapping of our on-line communications, our
medical records, and our financial transactions.
What a tragic irony. Technology didn't make government less
powerful. It made it more powerful. And thus Americans are
in danger of becoming less free. The government is doing
what it's always done, using technology to steadily extend
it's reach into the private lives and personal matters of
Americans-all in the name of a War that is permanent. Thus
the Warfare State.
Acknowledging the existence of the Warfare State is the
first key to surviving it as in investor. The United States
spends close to $300 billion a year on defense. That number
figures to climb in the next ten years. At the height of
the Cold War, America spent 6% of GDP on defense. Today
it's 3%. Double that figure and you get an annual defense
budget of nearly $600 billion dollars. To put that in
perspective that's nearly three times the total GDP of the
Russian Federation, equal to Canadian GDP, and half the GDP
of France.
There are only four major U.S defense conglomerates left,
Lockheed Martin, Northrop Grumman, Boeing, and Raytheon.
They are all sure to get a large chunk of new spending. But
there will be thousands of other smaller companies who get
a chunk of defense contracts. Tracking those companies-what
they do and how their niche technologies fit into the
Warfare State-will make some investors incredibly wealthy.
It's a new kind of "Blood in the Streets" investing which
we're already doing at Strategic Investment.
The second major consequence of the warfare state is more
ominous. Getting enormously rich is your only effective
deterrent against a more powerful government. Fighting for
your liberties will be much harder.
No self-respecting lover of liberty could be happy with a
scenario where the government gets more powerful, more
intrusive, and generally enjoys popular support all the
while. The world Orwellian doesn't do justice to a
situation in which millions of allegedly free people
willingly give up their rights to privacy and to great
wealth.
And on the privacy front, I'm sorry to say there's little
you can do to stand in the way of the Warfare State. The
anti-terrorist Act of 1996 gives the Attorney General the
right to use the armed forces against the civilian
population and also selectively allows the government to
suspend the right of habeas corpus, something Lincoln found
useful in jailing Americans during the Civil War. Former
President Clinton probably spoke for a lot of non-thinking
Americans when he said, as he signed the bill into law,
"There is nothing patriotic about pretending that you can
love your country but despise your government."
Ashcroft, no ideological bedfellow of Clinton's, sounded
astonishingly the same when testifying in front of Congress
about the Patriot Act, which Congress passed last October
he said that those "who scare peace-loving people with
phantoms of lost liberty. . . .Your tactics only aid
terrorists, for they erode our national unity and diminish
our resolve. They give ammunition to America's enemies."
The Clinton-Ashcroft-Bush axis seems to be saying this: in
the War against terrorism, you are either with the
government, or you are un-American. No doubt the FBI's
carnivore system will systematically search this very e-
mail for anti-American sentiment. And if you should choose
to forward this to your friends, be warned, you're probably
being watched, too. All in the name of freedom, of course.
What's most dangerous about the emergence of the warfare
state is that in the spirit of being "team players,"
Americans tolerate steady incursions into their own
decision making. Here's just a minor example. I went to see
the new Mel Gibson movie "Signs" the other night. Before
the show, an usher came down in front of the audience and
asked for quiet. He then proceeded to lecture us on cell
phone etiquette, conversational etiquette, and how we
should all scoot to the middle of the row to clear extra
seats.
Don't get me wrong. I'm all for good movie etiquette. But
what astonished me was that he not only suggested these
things, but then threatened to kick anyone out who failed
to comply. This final ultimatum was met with enthusiastic
applause by the sheepish audience.
Self-sufficient people tell their neighbors to shut up.
They don't need a bully to do it for them. We are slowly in
the process of transferring all responsibility for
mediating our civil affairs to the state. We are becoming,
as Michael Ledeen says in his book Tocqueville on American
Character, "meekly subservient to an enlarged bureaucratic
power: the corruption of our character, and the emergence
of a vast welfare state that manages all the details of our
lives,"-including how we behave at the picture show.
We have gone, since Ledeen wrote his book, from the welfare
state to the Warfare State. But his warning, and
Tocqueville's, are more important now than ever before. We
are granting an enormous power to our government, one which
it will not willingly give back. Of that power, Tocqueville
says:
That power is absolute, minute, regular, provident, and
mild. It would be like the authority of a parent if, like
that authority, its object was to prepare men for manhood;
but it seeks, on the contrary, to keep them in perpetual
childhood: it is well content that the people should
rejoice, provided they think of nothing but rejoicing. For
their happiness such a government willingly labors, but it
chooses to be the sole agent and the only arbiter of that
happiness; it provides for their security, foresees and
supplies their necessities, facilitates their pleasures,
manages their principal concerns, directs their industry,
regulates the descent of property, and subdivides their
inheritances: what remains, but to spare them the care of
thinking and all the trouble of living?
Tocqueville wasn't talking about Hitler's Germany or
Stalin's Russia. He was talking about an America where we
forget the value of liberty. Most Americans will embrace
this zombie like existence.
Regards,
Daniel Denning
for The Daily Reckoning |
