Say Dubai to the American Economy Print E-mail
By Jon Rynn   

Bush works against the interests of his base even as he relies on them to help carry out his destructive policies, while bin Laden works against the spirit and letter of Islam even as he depends on zealots to carry out his own imperialistic pipe dreams. The Bush Qaeda now has a very stark problem to confront: Dubya has made clear that he is more interested in encouraging globalization and the outsourcing of jobs than in protecting the country from disaster and terrorism. The Dubai ports debacle was not just a two-week-long political game. It was a potential lesson, calling attention to the importance of the infrastructure, the declining state of the U.S. economy, and the mercurial and troublesome nature of the American subconscious. If Americans don’t wake up pretty soon, they will find out what it’s like being the economic colony of people who can make things.

“The United Arab Emirates are threatening to not buy any of our products…oooooh!...We got them there too, we don’t MAKE any products in America anymore!” – Jay Leno’s monologue, The Tonight Show

The Republicans, swords drawn like a modern-day army of Don Quixotes, have emerged victorious from a battle with phantom windmills of their own construction. They have brought down the threat of Dubai Ports World, complete with displays of 21st century machismo. One wonders whether or not their theatrics will once again distract the American people from looking closely at the underlying systemic causes of a rather small symptom.

Bush’s Qaeda

Perhaps the depth of the reaction to the Dubai deal was partly the result of the administration of George Walker Bush and its demonization of the Middle East. Apparently Bush’s base did not notice when Bush held hands with the now King of Saudi Arabia and kissed him goodbye. Bush’s base did follow the implications of Bush’s linking of Saddam Hussein with Osama bin Laden by blaming all Arabs for September 11. Lord knows, yours truly did not make the connection, burdened as he is by an avid reading of world history. But then, the Republicans have been making their living by giving subtle hints like “states rights” and “crime” to indicate to their base, wink-wink nudge-nudge style, that they don’t like African-Americans either. The politics of subliminal racism seem to have caught up to the Republican elite, getting in the way of their real goal, a globalization for, by, and of the elites.

Apparently the Bush supporters thought that they could depend on the Gulf States, such as Dubai, in order to prop up the dollar by making oil an exclusively dollar-denominated commodity, even as the Bush base could be made to foam at the mouth about A-rabs when it served Bush/Cheney/Rumsfeld to develop war hysteria. The reason for this contradiction may lie in the striking similarity between the English word base, to which Bush talks exclusively, and the Arabic word Qaeda (قاعده), which also means base, which never varies as Osama bin Laden’s focus. In both cases, a certain cognitive dissonance is necessary; Bush works against the interests of his base even as he relies on them to help carry out his destructive policies, while bin Laden works against the spirit and letter of Islam even as he depends on zealots to carry out his own imperialistic pipe dreams. The Bush Qaeda now has a very stark problem to confront: Dubya has made clear that he is more interested in encouraging globalization and the outsourcing of jobs than in protecting the country from disaster and terrorism.

Not only did Bush claim that he would veto what would have been a veto-proof vote in Congress to upend the Dubai deal, in India he declared that the loss of jobs through outsourcing is OK [1] . Apparently he has picked up whatever intellectual disease Thomas Friedman also contracted in India. Bush, like Friedman, seems to think that the entire Middle East can be transformed by war and that terrorism can be wiped out, but there is nothing that can be done to stop globalization. Perhaps all of those aircraft carriers and stealth bombers are no match for containerized cargo ships. How far the American public is willing to go may be another question, because apparently they are more upset about losing ownership of the country that they live in through globalization than they are about losing their jobs through globalization.

Losing the Mandate of Heaven

At a profound level, they may be, surprisingly, correct. As Friedrich List wrote almost two centuries ago, if one is rich, but can’t produce more wealth, one becomes poor, while if one is poor, but can produce more wealth, one becomes rich. “The power of producing wealth is therefore infinitely more important than wealth itself”.[2] The normal way of comparing the health of national economies, the Gross Domestic Product, or GDP, can be misleading, because that GDP is generated by the capital assets of country, which have been, in the American case, approximately three times as large as the GDP that it generates. In a sense, not having a job but having the factories and infrastructure that generates jobs is better than having a job with nothing to back it up. The U.S. is fast approaching the latter condition.

The physical infrastructure of a country can be thought of as its most basic component. After all, civilization was created in order to coordinate the efforts of large numbers of people for the purpose of building irrigation projects, canals, roads and even pyramids. There may be a “collective subconscious” understanding among civilized peoples that there are certain components to the structure of society that are fundamental, even if those components are not publicly acknowledged. For instance, it has taken thousands of years to refine the techniques necessary to convince young men that they should do what is the exact opposite of what they would naturally do, risk death, in order to serve the purposes of the state in war. The history of working out these techniques has been obscured by time, but whatever techniques are used, by Bush’s Pentagon or Bin Laden’s suicide bombers, these techniques seem to work at a subconscious level. When the Republicans make the Democrats go into their “eyes-in-the-headlights” routine every time the Republicans mention terror or September 11, the Republicans are probably operating at this level.

Perhaps the same process has occurred in the subconscious of most people in terms of their understanding of the infrastructure: they intuitively sense that a compromised infrastructure is extremely dangerous. Like floods in dynastic China, it may be that the catastrophe of Katrina and New Orleans has signaled that the mandate of heaven has been lost by the Bush family. According to a poll by the Pew Research Center, the most common word people now use to describe President Bush is “incompetent”[3] . Dukakis losing to George Senior by arguing that he was more competent is one thing; letting critical levees break is another. Allowing ports, which have served as the lifeline of civilizations for centuries, to fall into the “wrong” hands, apparently stimulates the same part of the brain as images of September 11. It is an unacceptable threat. But since this author would prefer to operate at the level of consciousness, I will attempt to develop a rational framework for understanding the infrastructure.

The State, front and center

Civil engineering professors teach their students that there are four main components to the infrastructure: water, transportation, energy, and communications systems. Guaranteeing the integrity of these systems is so crucial that I will make explicit what most economists grudgingly admit: the state is responsible for these infrastructure systems. In other words, the state has always had a very large role to play in the economy and always will. “Getting the government off our backs” by disengaging from the infrastructure, as we saw in the case of Katrina, quite literally leads to disaster and the end of civilization.

As we can see from this list —

  • water,
  • energy,
  • ransportation and
  • communication

— the role of infrastructure is not trivial, in fact, it is at the foundation of civilization. These systems are necessary for political activity to exist, much less economic processes. To admit that the government must be intimately involved in the very center of the economic system is to admit that the government is an indispensable part of an economy. Let us look at these four systems a little more carefully.


Water systems are so necessary that the modern city is not possible without them. Probably the most important invention of the industrial revolution was not textile machinery but the water systems of London, built in the early nineteenth century. Before that time, all cities depended on the constant inflow of people from the country, because there was so much disease as the result of the unsanitary conditions of the city that the cities had higher death rates than birth rates. The sewer system of London, along with the provision of clean water into the city, changed all that. Now cities could expand, which was crucial for the industrial revolution, because the cities were the focus of most manufacturing activity and most technological innovation. Small cities could never have been the catalysts for the industrial revolution. The world’s great cities filled that role, cities such as London, New York City, Berlin, Paris, Tokyo, or the Italian cities.

The Italians had a head start on this process, as Rome was built to a great extent on its spectacular system of aqueducts and urban water systems. Once the barbarians destroyed that system, the population of Rome decreased from over one million residents to 12,000. The historian Wittfogel famously described ancient civilizations as “hydraulic”, because of their dependence on large infrastructure projects to irrigate crops, control floods, and create canals for commerce. The U.S., too, passed a tipping point when it created the Erie Canal, connecting New York City with what is now referred to as the Midwest. New Orleans, that other great city of American commerce, as we now know, was completely dependent on water projects. Moving further West, and skipping a city that is the complete creation of water projects, Las Vegas, we find that the early history of Los Angeles was the story of the theft of Northern California’s water, as shown in the movie Chinatown. As global warming raises the oceans, the coasts of all continents will be the scene of vast gate-building in order to save their great cities.


If water is the first and most basic of infrastructure systems, transportation is perhaps the most visible. The Romans again showed the importance of this infrastructure system for the political construction of a society. Transportation binds together an economic area, without which the market cannot exist. The market square is used as a metaphor for “the market”, but there is no use in having a market if there is no way to get the merchandise to the market. Production, too, depends on transportation; the assembly line in a factory is a transportation system, and the wider production transportation system is the network of air, rail, and trucks that move parts through the production process. It is the governments’ responsibility to construct the transportation network. It is even possible for the state to control the vehicles that use the transportation network, such as in the case of buses and public rail. When private companies build cars and planes, they don’t have to build roads and airports. When people buy goods from abroad or make them to sell abroad, they don’t have to build or maintain the ports. And they seem to want the government to control the transportation infrastructure, as we saw in the case of Dubai Ports World.


Energy and communication might seem to be less involved with the state, but their movement occurs on the territory of a state and though its airwaves, and so the state must step in to guarantee their safe use. Particularly in the era of electricity, furthermore, the generation of energy onto electrical grids becomes a monopoly, and thus is privatized only because of an ideological fundamentalism, not because it is more efficient. Most electrical utilities are still public-owned, as they all should be. Not only is the utility a monopoly, but the grid encompasses the whole system, and a failure in one part can bring down the rest. Such a situation means that one institution needs to be able to manage the system as a whole with no margin for error, and that agent can only be the state.

The energy system and transportation system obviously intersect, as in the case of automobiles and gasoline. America is not addicted to oil, as the President declares, it is addicted to the automobiles that need oil. Nobody wants a barrel of oil in their living room, but most people want a car or two in the garage. This creation of an automobile/petroleum system was quite intentional and was aided and abetted by the state. Its continued existence requires the massive intervention of the state, including a huge U.S. military apparatus whose mission, more and more, is to make the world safe for automobiles.

There may come a time, which we have probably already reached, when this system is no longer practical. Whether because of the dwindling supply of petroleum, the cost of wars over its control, or the horrors of global warming, a transformation will need to occur, and only the state will be up to the task. One possibility is to convert all coal-powered plants to clean coal technologies that do not generate greenhouse gases, and use this network to power a huge expansion of electrified rail, buses, and small private automobiles. Only the state has the financial and political power to channel what will become, one hopes, a social consensus to move from petroleum to clean electricity for the energy infrastructure, and from large cars to small electric cars,[4] and mass transit, for transportation. Such a transition will be spoken of in hushed tones as “epochal” and “history-turning”, because fundamental changes in the infrastructure create fundamental changes in national and global civilization.

Indeed, the ports which Dubai is so interested in owning have been part of this global civilizational turning point, in the form of globalization. Globalization would simply not be possible without huge containerized cargo ships and highly computerized container port systems. The Sopranos might be northern New Jersey’s most famous residents, as fictional as they are, but the most important resident of “North Joisey” of the past 50 years was the trucking company owner who first developed the idea of a standardized container in the 1950s.[5] In turn, these continental and global transportation systems would not be possible without their attendant communications systems.


When the U.S. Federal government made continent-spanning railroads possible by granting rights-of-way, they also made the great communications revolutions possible by giving part of the same rights-of-way to telegraph companies. Without the telegraph, railroads would have been much slower, because the telegraph was necessary in order to let stations know the whereabouts of the various trains on the various lines. Before the telegraph, trains would often run into each other. The modern extreme version of this problem is the overworked air traffic controller trying to keep dozens of planes from crashing into each other over an airport. The telegraph, phone, and now internet have served to make commerce possible in ever widening circles. Much of the growth of the last twenty years has been a result of expanding this communications web into the household. U.S. News and World Report breathlessly informs us that the South Korean government is providing broadband communications to every household there, while the magazine complains that the U.S. is behind the curve in cellular technology and internet use.[6] The difference is that east Asian nations look to their government to provide a world-class infrastructure, while the U.S. is dominated by a free-market ideology and an Administration that is more interested in the short-term profits of major multinational corporations than in the long-term state of the infrastructure. Cities in the U.S. may be ahead of the Feds: Philadelphia is setting up a city-owned WiFi (wireless internet) system that all its citizens can use.[7]

Youse guys owe us, pay up

Large chunks of American infrastructure systems are up for sale to foreigners, a state of affairs that eventually hit a collective nerve with the ports deal. Like a tooth that has been rotting for so long that the nerve is affected, the U.S. economy has been rotting away for a very long time, and the rot touched a nerve. The mechanism for this rot is the following: the U.S. manufacturing base is disintegrating,

  • leading to huge trade deficits,
  • leading to foreigners holding huge piles of dollars,
  • leading to foreigners only able to buy the United States as a way to dispose of those dollars.

The U.S. elite have been having a party, and the creditors have to take away the furniture to pay for it. The natives didn’t seem to notice when the Brits took the sofa, but they got upset when Arabs went for the sink. Dubai might have thought they were doing the U.S. a favor by recycling dollars, but most Americans still do not understand how the U.S. fits into the global economy.

As reported in the book, Confessions of an Economic Hit Man,[8] the industrial countries have been luring poor countries into their financial web by selling the poor countries huge infrastructure projects that they can’t afford, allowing for the cold embrace of the International Monetary Fund, which sucks the remaining life juices out of the country. A similar dynamic may begin in the center of the industrial core, the United States, since the U.S. has gotten into worse debt than the victims of the economic hit men.

The U.S. is getting to the point where most of the goods that are consumed are coming from abroad, and the U.S. isn’t exchanging nearly enough goods and services to pay for them. If we look at the data for 2004, we find that 60% of the value of manufactured goods used in the U.S. came from imports.

Within manufacturing, the most important sectors are often referred to as “engineering industries”, because they involve the most engineering, their construction is very complex, and they are used to create virtually everything else in the economy.[9] If the U.S. loses these industries it will be dependent on people who do make “engineering” products.

For the most crucial sector, industrial machinery, 47% of the value of consumed goods in the U.S. comes from foreign sources. For electrical equipment, appliances, and components, the figure is up to 60%; for transportation equipment, including cars, 58%, and for computers and electronic equipment, those great saviors of the American economy, 40% of the consumed value of goods came from foreign countries.[10]

The figures given above do not consider exports as part of the total consumed in the country, because exports are consumed in another country. Some might object that by not considering exports, the relative health of the U.S. economy is being unfairly judged, as exports are produced in the U.S. and thus would indicate that the U.S. can make more goods. Thus, it might be better to look at the trade deficit as a percentage of U.S. consumption, as opposed to just imports. Except for industrial machinery, this different look does not much change the general picture: the percentage for manufacturing as a whole goes down from 60% to 48% when we use the trade deficit as our measure; for computers, from 60% to 45%; and for electrical equipment and vehicles the figures are virtually unchanged. Since exports of industrial machinery are still relatively healthy, the machinery trade deficit is fairly small. But even here, the problem is that industrial machinery firms are increasingly foreign-owned.

Nurse, call the doctor

Worse, the trends are all down, as the following graphs show:

The Dubai ports debacle was not just a two-week-long political game. It was a potential lesson, calling attention to the importance of the infrastructure, the declining state of the U.S. economy, and the mercurial and troublesome nature of the American subconscious. If Americans don’t wake up pretty soon, they will find out what it’s like being the economic colony of people who can make things.

[1] Reuters, 3/3/2006, “Bush defends India job outsourcing”.

[2] Chapter 12, Friedrich List, The National System of Political Economy.

[3] “Bush approval falls to 33%, Congress earns rare praise”, March 15, 2006,

[4] Such as Daimler’s GEM,

[5] For a short history, see

[6] U.S. News and World Report, 3/27/2006, “Can America Keep Up?”


[8] See “Economic Hit Man John Perkins: ‘We have created the world’s first truly global empire’", at

[9] See “Before the Economy Hits the Fan” at for more details, or “Why manufacturing and the infrastructure are central to the economy”, at ).

[10] The data for this discussion is taken from the interactive summary tables on the website of the Bureau of Economic Analysis, the Industry title, click on Annual Industry Accounts, then under Input-Output (I-O) accounts, click on Interactive Tables, then click on the Continue button of the guest account. Alternatively, to get to the same page, go to Then ,click on "The Use of Commodities by Industries after Redefinitions" (1987, 1992, 1997 to 2004). If you have gotten this far, you will see a button for “select level of aggregation”. “Sector” gives a more aggregate view, including manufacturing; “Summary” shows the level of detail below, showing, for instance, the engineering industries.

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