That is the heretical possibility suggested by the encouraging jobs news this morning; 243,000 new jobs and a further fall in the unemployment rate.

Other heretical thoughts: just possibly, the US economic model still works. In every recession there is talk of the failure of the “Anglo-Saxon” model and “cowboy capitalism.” In every serious recession, the world’s chattering classes amuse themselves by talking about the “challenge of state capitalism.”

Just possibly, recessions don’t last forever any more than booms do.

Many obstacles remain and the recovery is still vulnerable.  The world situation is grim.  There are long term problems and shifts still to be made.  But the US economy wants to grow again; that is this morning’s good news.

None of this should come as a surprise. Americans’ deep and abiding attraction to newness, change, and innovation have long been one of this country’s strong suits. The drive to improvise, adapt, and overcome, to borrow a favorite slogan from the U.S. Marine Corps, has allowed America to weather centuries of global strife, emerging stronger and more prosperous after the winds cease to blow. These qualities haven’t gone anywhere, and the world itself isn’t slowing down any to let the laggards catch up. Good.

America’s pains are growing pains, not the pangs of dissolution and decay.

Younger readers may not appreciate this, but we at Via Meadia remember the days when trillions were numbers only discussed in astronomy class. This changed in the 1980s, when the word made its way into discussions of Japanese GDP — in yen and not long after that the total US national debt shocked us all by hitting a trillion.

Now President Obama will be remembered as the man who brought trillions into America’s deficit discussions. It’s no comfort to be reminded that a trillion dollars today is only about $100 billion in 1950s dollars; that a dollar today is only as much as a dime was back then only goes to show just how destructive of value national profligacy can be.

President Obama’s defenders can and do point out that much of our deficit results from policy decisions made by George W. Bush and the Republicans in Congress.  Fair enough, though if the current President has proposed a balanced budget in the past four years,  or even a plan to balance the budget anytime in the foreseeable future, Via Meadia somehow missed the announcement.

It was back in the days of the second President Harrison (1889-1893) that Congress shocked the country with the first billion dollar peacetime budget — and in those days a Congressional budget still covered two years.  House Speaker Thomas Reed defended the billion dollar budget by saying, “This is a billion dollar country.”

At the rate we are going, we will soon be a quadrillion dollar country — but don’t worry.  The money will be worth so little that a gazillion dollar deficit will be no problem at all.

The frustration and bitterness that fills American politics these days reflects the failure of our current social, political and economic institutions and practices to deliver the results that Americans want and expect. It’s comparable to the frustration and fear that swept through the country in the late 19th and early 20th century as the first American dream – that every family could prosper on its own farm – gradually died.

From the era of the first European settlements in North America up through World War I, the family farm was the key social, economic and even political institution in the country.  Until the 1920 census, a majority of Americans lived in rural areas and, unlike the oppressed peasants of Europe most owned and worked their own land.

The individual family farm was, in mythology and often enough in reality, prosperous and independent.  For Thomas Jefferson and a long line of ideological descendants, the family farm was the cornerstone of American democracy.  For generations, government policy sought to ease the path to cheap and — after the Homestead Act — free western land for American families.

The limits of this approach did not begin to appear until after the Civil War. As the best land was taken, the remaining land available for homesteading was increasingly marginal.  It was too cold, too dry or too remote.  The dependence of farmers on politically powerful railroad companies to ship their crops to market and the power of banks and speculators in the commodity markets put family farms at a disadvantage. The global commodity glut that developed as new techniques opened up new land not only in the American west, but also in Russia, Canada, Argentina and Australia depressed the prices farmers could get.

The last great burst of traditional American farm policy came with the Oklahoma land rush of 1889.  The federal government opened former tribal lands for homesteading, and thousands of families rushed to stake their claims on new land. Many of these families would be among the dispossessed “Okies” who fled the Dust Bowl a generation later.

The family farm and the social and political model that rested on it didn’t die easy and it didn’t die quick.  (Even today huge agribusinesses shelter their vast subsidy payments behind the public affection for the family farm.) Waves of populist protest against the decline of the original American social model roiled politics for decades. William Jennings Bryan built his political career on the economic and political frustration of millions of small farmers caught up in an inexorable and, to many, incomprehensible set of economic changes.

I’ve written in earlier posts about the shift from the first American Dream to the second: from the family farm to the suburban “homestead.” It was a profound change in American life and culture that has not yet been fully explored.  The family farm integrated production and consumption, work and leisure, family and business.  The family wasn’t just a union of sentiment: it was an element of production.  Mom and Dad worked as a team to feed, house and clothe the family, and as the kids grew up they took on greater and greater responsibilities in the common effort.  Their lives at home prepared them for the new lives they would lead on their own: the kids would grow up, marry, and start farms.

The 20th century suburban homestead was a very different place.  In the early, “pure” form, Mom and Dad were still a team, but their roles were more differentiated than on the farm.  Dad worked in the office or the factory and brought home the money; Mom organized the home and raised the kids.  The kids might do chores around the house (girls more than boys), but their lives were increasingly outside of the family circle.  They went to school full time from the age of six on, and instead of learning basic work and social skills in the family with their parents, they were taught skills and patterns of living in school to prepare them, in turn, for lives in which working life and home life were divided.

After the 1960s, Mom started working in a factory, an office or a store, and for girls as well as boys the center of gravity of their educational and social life moved away from the family circle.

Both the family farm and the “crabgrass frontier” (as Kenneth Jackson calls 20th century suburban America in a remarkable book) had their advantages and their drawbacks, and both allowed for broad prosperity and reasonable dignity and economic security for tens of millions of Americans. Generation after generation embraced both social ideals while millions of people from all over the world came to the United States, hoping to share in the American Dream.

Today the 20th century model of the American dream faces the same kind of crisis the 19th century version experienced 100 years ago.  International competition and technological advances mean that the American factory worker’s earnings and opportunities are depressed in the way farmers were going to the wall 100 years ago.  In the last twenty years, well-intentioned government efforts to put more people in owner-occupied housing led to a housing bubble and mass bankruptcies in the face of a financial panic and the ensuing recession, the worst in eighty years.

Our political battles today reflect the same kinds of frustrations we saw in the old populist era.  Many cannot fathom another and “higher” form of the American Dream beyond the old crabgrass utopia. They want to turn back the clock and restore the old system because they don’t know of anything else that will work.  The explicit political demand for this kind of restoration is usually found on the left, where it is often coupled with demands for the protection of American industries from foreign competition.  But nostalgia for the old days isn’t just a left wing emotion; a free floating anger stemming from the breakdown of a broadly accepted social model helps power political currents on both ends of the spectrum.

In the 1890s, the “restorationists” were the agrarian populists.  They wanted to protect family farmers from the forces that were undermining this hallowed way of life and they genuinely could not imagine that the end result of the shift out of agriculture could lead to richer and better lives for most Americans.  This was perfectly understandable and rational: few people in 1890 could have predicted or imagined the new social system that would emerge on the basis of mass production and mass consumption in the 20th century.

But understandable and rational is not the same thing as right; the agrarian populists were defeated as much by their inability to develop workable policies as by the arguments of their opponents. The farmers were angry at the railroads and the banks, but although these big corporations often did abuse and even cheat small interests, and although they certainly used their economic strength to get state legislators to write favorable legislation — the railroads and banks weren’t the farmers’ most formidable and destructive enemies.  Their most dangerous and implacable enemies were the laws of economics and the larger historical forces driving agriculture worldwide toward a new, large-scale, capital intensive model with which the small family farm could no longer compete.

It is, of course, a very similar situation today. The forces ripping up our old social model are too powerful to beat.  That is not because the rich bankers or global multinationals are engaged in a conscious conspiracy of rip-offs and oppression (though, frankly speaking, big business does sometimes engage in exactly that). It is because the forces ripping up the social model are deeply implanted in the nature of the economic system — and that system is a reflection of the propensities in human nature which we cannot and perhaps should not overcome.

There is another important similarity, one often overlooked in the pessimism, anger and anxiety provoked by the inexorable decline of the “blue social model” that shaped America in the 20th century — just as it was overlooked 100 years ago.

The similarity is this: the changes in the world economy may be destructive in terms of the old social model, but they are profoundly liberating and benign in and of themselves.  The family farm wasn’t dying because capitalism had failed or a Malthusian crisis was driving the world to starvation.  The family farm died of abundance; it died of the rapidly rising productivity that meant that fewer and fewer people had to work to produce the food on which humanity depended. The industrial and scientific revolutions of the 19th century made agriculture so much more productive, and brought so many of the world’s hitherto remote and inaccessible lands into productive contact with world centers of population, that old and outmoded methods of production could no longer be sustained.

The family farm didn’t die of thirst in a desert; it drowned in a sea of abundance. 125 years ago, Americans didn’t have to organize themselves to cope with poverty and the erosion of living standards; they had to organize themselves to capture and enjoy the vastly increased prosperity and freedom which new technology made possible.

This is exactly what is happening today. Revolutions in manufacturing and, above all, in communications and information technology create the potential for unprecedented abundance and a further liberation of humanity from meaningless and repetitive work. Our problem isn’t that the sources of prosperity have dried up in a long drought; our problem is that we don’t know how to swim.  It is raining soup, and we are stuck holding a fork.

As we figure this out, and reorganize ourselves to exploit the unprecedented opportunities before us, America is most likely headed for another era of rapidly rising standards of living.

In the past, the United States prospered partly because of our (still uniquely favorable) geography and natural resource base, and partly because our culture and our institutions made us a dynamic and innovative people who somehow got to the future before anybody else. All of those advantages are still ours today; just as the United States was the first country to achieve mass prosperity based on “Fordist” mass production and consumption, we are well placed to be the first country to enjoy the full prosperity that the new technological revolutions make possible.

The challenge for America today is similar to the challenge we faced more than a century ago, even though our responses will have to be different.  Progressive society was reasonably well adapted to the conditions of its time and was able to transform a nation of family farmers into a nation of suburban homesteaders; post-progressive society will have to achieve a similar transformation in our time.

Doing this won’t be easy.  It’s going to take the political and cultural creativity of more than one generation to reformulate and rebuild the next version of the American Dream, but it can, will and must be done.  Nobody can predict where all this creativity and energy will take us, but it’s already possible to see some of the major lines along which we can advance — and to identify some of the roadblocks holding us back that will have to be cleared out of the way.

In future posts I will do my best to scout out the road ahead.  At this point, let’s just conclude by remembering the words that Arthur Hugh Clough wrote and that Winston Churchill quoted in the darkest days of World War Two, “But westward, look, the land is bright.”

An agreement with Manila would come close on the heels of two other upcoming moves: American Marines soon to be stationed in Australia and several U.S. warships moving to Changi Naval Base in Singapore.

Asian nations are learning that the United States is prepared to offer a real balance against China’s new assertiveness in the region. In the Philippine case, this dovetails nicely with the country’s interests—especially with respect to the disputed Spratly and Paracel islands, geographically closer to the Philippines than China. Manila has occasionally stationed troops on the islands, and it operates a number of offshore oil fields in waters claimed by China. Having American ships docked in its ports, if not also American boots on Philippine soil, will no doubt be a confidence booster for Manila in these and other disputes.

Europe may be trying to get on the Asian bandwagon too. Der Spiegel fantasized about a post-American world in which China formed an alliance with the European Union based on “green” technologies; given the track record for green dreams becoming reality, we won’t be holding our breath. After all, when Europe came to China looking for bailout, hat in hand, it got nothing more than a disappointing snub.

Over the past year, however, the European Union’s own problems had as much to do with Europe’s decline as the rise of Asia. The financial crises in the PIIGS worsened as France and Germany, the pushmi-pullyu leading Europe’s train, took the continent precisely nowhere. 

Europe’s sovereign debt crisis was all over the news back in 2010, but 2011 was the year we learned just how deep and intractable the core problems were. The real crisis in Europe was not financial but cultural. Whatever the future holds, Club Med is as likely to join the Fourth Reich as Germany is to get a Club Med Membership Card.

European policy makers and opinion leaders spent the last decade discussing the decline of the United States, only to realize with a shock that Europe’s own problems threatened to relegate Europe to the world’s second division. A continent that began the new century discussing the post-American world spent 2011 nervously wondering if the US and China were about to set up a G-2.

Europe is not yet a cipher; even with its economic and political problems it remains the world’s largest market and, potentially, a powerful force. Its wealth, its technological skill, its rich cultural heritage and its institutional foundations remain the envy of much of the world. In the Mediterranean, as the Great Loon of Libya discovered too late, Europe still counts for something — when the Americans give their OK. But in Africa, Asia and Latin America, Europe’s economic and political imprint continues to fade.

Technically, it’s still possible to see how Europe could turn itself around.  If it accepted the need for sweeping economic reforms, split the euro into two currency zones, doubled its defense spending, figured out how to assimilate immigrants, brought Turkey into the EU and started making more babies, the world would soon start talking about Europe’s revival.

Sadly, none of this is likely to happen, and our ninth global trend for the decade is likely to be with us for some time to come.

But a funny thing happened on the way to the funeral.  Europe imploded. Chinese and Indian growth revealed serious structural weaknesses. Russia remained a commodity pit. Brazil failed to industrialize, and began to drift back toward the stagnant, rentier state capitalism of its unhappy past.

And the US, somehow, staggered on.

This morning the Bloomberg organization released a new poll of global investors, and it may do something to puncture the latest hype about the magical powers of state capitalism.  From Bloomberg:

Investors are turning increasingly bullish on U.S. markets as they declare its economy in better health than major rivals from Europe to Asia, according to the Bloomberg Global Poll.

Twice as many investors thought the US was the best place to be as favored the runners up China and Brazil.

For eight long years we had to listen to the pessimists and the whiners talk about how George W. Bush had wrecked the United States beyond repair.  And for three more years we’ve heard more or less the same about President Obama.

Fortunately, the sources of American strength and prosperity run deep. They are not infinite and over time we could fritter away the power and wealth we inherit, but for now at least, the state of our union remains fundamentally sound.

Barclays analyst Andrew Lawrence theorizes that a skyscraper boom is very often followed closely by economic turmoil. He gives several examples: the construction in the US of the Chrysler building (1930) and Empire State building (1931) in the early years of the Great Depression; the 1973 opening of the World Trade Center in New York and the Sears Tower in Chicago came during the financial crisis of the 70s; in 1997, Kuala Lumpur’s Petronas Tower became the world’s tallest building and heralded the Asian financial crisis of the late 90s; and the Burj Khalifa in Dubai, now the world’s tallest building, was completed in 2010 during a banking and real estate crisis in the UAE and a global recession.

Barclays’ annual Skyscraper Index is a flawed model but poses a few interesting questions. The construction of especially tall or numerous skyscrapers are signs of economic bubbles, according to Mr. Lawrence, and this model can be applied to today. China will almost double its number of skyscrapers taller than 787 feet by 2017. Meanwhile, over the next five years, India will complete 14 new skyscrapers. Meanwhile, there are signs of a real estate crisis in China and slowing growth in India.

Pyongyang's Ryugyeong Hotel is by far the tallest structure in North Korea

There might be something to this; Pyongyang’s tallest building, the 105 story Ryugyang Hotel, is nearing completion, and nobody is predicting anything but tough times for the DPRK.

Of course she puts it more politely than that.  As the Washington Post reports on her remarks to the German Council of Foreign Relations (no relationship to the American CFR):

“There are three imperatives — one is stronger growth, two is larger firewalls; three, deeper integration. Resorting to across-the-board, across-the continent, without differentiation, budgetary cuts will only add to recessionary pressures.”

For good measure, Lagarde added that what Europe really needs is a bigger bailout fund (the Germans are on record as opposing this) and more support by the European Central Bank for the continent’s troubled governments and banks (something Germany also doesn’t want). In particular, she thinks Eurobonds (anathema in Germany) would be a great idea, so that German credit would stand behind Greek, Spanish and Italian debt.

The Germans are in a tight spot.  French President Sarkozy and Italian Prime Minister Monti are both easier for the Germans to deal with than their political opponents back home. That reality forces Germany to be polite when Sarkozy comes up with what, to Teutonic eyes, look like hare-brained schemes; they also know they can’t push either Sarkozy or Monti too hard, or things will get worse.

The fiscal austerity pact the Germans want to push through the European treaty process is turning to mush as negotiators tweak at it clause by clause; the urgent need for more liquidity to prevent a European financial meltdown led Germany to acquiesce in a massive easing of ECB policy — and it seems clear that any future emergencies will lead to more support.

So far, the French-led Operation Gulliver is having a lot of success.  (The tiny Lilliputions tied Gulliver down with a thousand threads while he slept; when he woke up he couldn’t break free. That is more or less what the Latin countries hope to do to the German giant in their midst.) Germany can’t let the European financial system collapse, it can’t let Italy go the way of Greece and it can’t fight every amendment to its proposed fiscal pact.  As a result, it keeps making lots of little concessions that, bit by bit, are shaping a new European order that is not at all like the one the Germans say they want.

Presumably some of the German establishment understands this, and is going along with the process for the sake of European unity.  These folks think that Germany’s destiny lies in a united Europe and they fear that German populist and nationalist resentment would wreck the union rather than see their money turned into a softer, more Latin instrument. From their point of view Operation Gulliver is a kind of necessary deceit for the sake of Europe, and they aren’t about to wake the sleeping giant of German public opinion until they are sure the ropes are in place. Others may underestimate the importance of the small concessions being extracted one by one by one, and may not realize just how slippery the slope on which they stand has become.

Be all that as it may, world financial markets seem to be thinking that Germany is slowly giving up the fight and that its threats and demands are a bluff. The ECB will print as much as it must to keep the financial system afloat, and at the end of the day, Germany will not push Italy and Spain over the cliff for the sake of austerity.

At the moment then, France seems to be winning the latest round in the Franco-German rivalry. Madame Lagarde’s message to the GCFR, that Germany’s role is to pay and to pray for the new Europe, is a blast of the trumpet from a victorious France.  If Gulliver sleeps through it — and it looks as if he will — then the tying and restraining process will continue.

Drezner nails it here:

Since the Second World War, the pattern in the global political economy has been for the United States to adjust to systemic shocks better than any potential challenger country.  A lot of very smart people have predicted that this time was different — the United States wouldn’t be able to do it again.  These trends suggest that maybe, just maybe, that might be wrong.

Read the whole thing.