Brezhnev Comes to Washington

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I have repeatedly drawn parallels in this column between President George W. Bush's United States and the Soviet Union during the rule of Leonid Brezhnev. The similarities between the two regimes are uncanny, ranging from the messianic drive to spread ideology abroad -- at the point of a bayonet if need be -- to tight surveillance at home. Now comes the U.S. financial debacle to complete the list.

It is ironic that the first U.S. president with an MBA presided over the disintegration of the nation's financial system and the demise of Bear Stearns, Lehman Brothers and Merrill Lynch -- names that are synonymous with modern capitalism.

Speaking of capitalism, after having spent eight years lecturing about the virtues of an unbridled free market and the private sector, and even outsourcing his wars to private contractors, Bush has reached for a "socialist" straw of public money to bolster the banking system. This comes straight from Lenin's dialectic playbook. The founder of the Soviet state also taught his Bolsheviks to shift tactics shamelessly whenever expediency required.

But the main similarity with the Soviet Union is not the nationalization of bad banking debt via the $700 billion rescue package signed by Bush on Friday. Rather, it is the nexus between an unnecessary war abroad and economic collapse at home.

The foray into Afghanistan proved to be the Soviet Union's undoing. The old fools in the Kremlin decided in 1979 that their small neighbor was ripe for communism -- or at least could be pacified by a limited contingent of Soviet troops. The engagement lasted nearly a decade, cost 15,000 Soviet lives, spread disgust with the government and contributed to the fall of Soviet communism.

Bush's neoconservatives similarly believed that Iraq was ripe for Western-style democracy and that Americans would be met with flowers on the streets of Baghdad. The war's supporters thought it would be a short victorious campaign -- a cakewalk. Now, 5 1/2 years on, open-ended occupation has created cynicism and hypocrisy among Americans who shrug off evidence of torture of "enemy combatants," ignore massive pilfering and war profiteering going on in Iraq and pay sanctimonious lip service to the wanton deaths of U.S. soldiers.

Whether moral turpitude or the economic impact of the war will be more damaging in the long run is for historians to decide. In many ways, the current economic crisis is the result of the Iraq war. Iraq -- and more broadly, the misguided war on terror -- has cost the United States trillions of dollars in direct and indirect costs. It is the money the country didn't have and had to borrow from foreign investors.

In the aftermath of the Sept. 11 terrorist attacks, Bush invited the country to go out and shop. He didn't want his countrymen to analyze the causes of the terrorist attacks or to take a hard look at Washington's response. He wanted U.S. citizens to keep on living beyond their means and to wander in a daze in the interminable aisles of Wal-Mart and Home Depot. To ease the shopping spree, his administration kept financial oversight lax and taxes low in the face of widening budget deficits. Wall Street then helped Americans squeeze every last dollar of credit from their leverageable assets.

Uncle Sam faces the financial crisis bereft of resources and heavily in debt. The congressional debate about the $700 billion bailout package ignored the fact that the country simply doesn't have this money. The Kremlin faced severe challenges in the 1980s -- when oil revenues declined and Ronald Reagan unleashed a costly arms race -- with an economy badly weakened by the Afghan misadventure.

If Americans emerge from this crisis much poorer and far less secure, they could ask the Russians what it felt like living in the Soviet Union circa 1990.

Alexei Bayer, a native Muscovite, is a New York-based economist.