The Biggest Threat to America

The American crisis, now serious in the extreme, will probably bring about a radical restructuring. Indeed the restructuring has begun already. After all, we can always rely on the markets’ remarkable ability to adapt to the necessary changes and their cold, cruel logic. Everything has its price, and the wreckage left by the crisis will most certainly find buyers willing and able to take financial risks in the hope that prices will rise again. Those buyers will mainly be oil companies and Asian businesses, along with a few foreign banks which will have managed to escape the carnage – and to pick up some bargains when failed business groups are broken up. This huge “clearance sale” will change the face of New York’s financial district, and investors will become more varied, colourful and, in a certain sense, extraterritorial in nature. America has pursued to the limit its strategy of systematic debt, and the country will be reduced to selling off many of the family jewels to pay for it.

But beyond the world of finance, the crisis has begun to unsettle the public mood. Congress’s rejection of the first version of the Paulson plan is evidence of this, as is both presidential candidates’ obvious discomfort over the plan, against which people from all walks of life feel violent resentment. The credit crisis is leading to a crisis in confidence, which in turn suggests that people may be wary of debt in the future. And since debt has always been symbolic of the underlying energy of American society, it is impossible to predict the potential consequences of such a dramatic change in attitudes.

The impenetrable technicalities of the rescue plan – the only comprehensible part of which was its all-too-obvious cost to the taxpayer – have only exacerbated distrust of the federal authorities. Such distrust is traditional among Republicans, and is all the stronger because this “socialist” solution is being proposed by someone on their own side. Democrats have usually been less distrustful, because they retain the memory of Roosevelt’s interventionism; now their doubts about the Paulson plan threaten to undermine some of their own principles.

The result is a sort of loss of political faith which has thrown the positions of both parties into confusion, and which might well aggravate other hidden conflicts – of class, region or race – at the grassroots level. Most importantly of all, a wave of anger against “elites” threatens to undermine the most important driving force of the American model, in which the success of others inspires not jealousy, but the determination to equal their success. That would be the most damaging consequence of the financial crisis. The world of high finance would not just have destroyed its own credibility. It would also have damaged the cult of success which has always been the heart of the nation.