The True State of the Union

From http://prisonplanet.com/articles/february2006/020206true_state.htm




The True State of the Union
PAUL CRAIG ROBERTS Feb 2 2006

Gentle reader, if you prefer comforting lies to harsh truths, don't read this column.
The state of the union is disastrous. By its naked aggression, bullying, illegal spying on Americans, and illegal torture and detentions, the Bush administration has demonstrated American contempt for the Geneva Convention, for human life and dignity, and for the civil liberties of its own citizens. Increasingly, the US is isolated in the world, having to resort to bribery and threats to impose its diktats. No country any longer looks to America for moral leadership. The US has become a rogue nation.
Least of all did President Bush tell any truth about the economy. He talked about economic growth rates without acknowledging that they result from eating the seed corn and do not produce jobs with a living wage for Americans. He touted a low rate of unemployment and did not admit that the figure is false because it does not count millions of discouraged workers who have dropped out of the work force.

Americans did not hear from Bush that a new Wal-Mart just opened on Chicago's city boundary and 25,000 people applied for 325 jobs (Chicago Sun-Times, Jan. 26), or that 11,000 people applied for a few Wal-Mart jobs in Oakland, California. Obviously, employment is far from full.
Neither did Bush tell Americans any of the dire facts reported
by economist Charles McMillion in the January 19 issue of Manufacturing & Technology News:
During Bush's presidency the US has experienced the slowest job creation on record (going back to 1939). During the past five years private business has added only 958,000 net new jobs to the economy, while the government sector has added 1.1 million jobs. Moreover, as many of the jobs are not for a full work week, "the country ended 2005 with fewer private sector hours worked than it had in January 2001."

McMillion reports that the largest sources of private sector jobs have been health care and waitresses and bartenders. Other areas of the private sector lost so many jobs, including supervisory/managerial jobs, that had health care not added 1.4 million new jobs, the private sector would have experienced a net loss of 467,000 jobs between January 2001 and December 2005 despite an "economic recovery." Without the new jobs waiting tables and serving drinks, the US economy in the past five years would have eked out a measly 64,000 jobs. In other words, there is a job depression in the US.

McMillion reports that during the past five years of Bush's presidency the US has lost 16.5% of its manufacturing jobs. The hardest hit are clothes manufacturers, textile mills, communications equipment, and semiconductors. Workforces in these industries shrunk by 37 to 46 percent. These are amazing job losses. Major industries have shriveled to insignificance in half a decade.
Free trade, offshore production for US markets, and the outsourcing of US jobs are the culprits. McMillion writes that "every industry that faces foreign outsourcing or import competition is losing jobs," including both Ford and General Motors, both of which recently announced new job losses of 30,000 each. The parts supplier, Delphi, is on the ropes and cutting thousands of jobs, wages, benefits, and pensions.

If the free trade/outsourcing propaganda were true, would not at least some US export industries be experiencing a growth in employment? If free trade and outsourcing benefit the US economy, how did America run up $2.85 trillion in trade deficits over the last five years? This means Americans consumed almost $3 trillion dollars more in goods and services than they produced and turned over $3 trillion of their existing assets to foreigners to pay for their consumption. Consuming accumulated wealth makes a country poorer, not richer.
Americans are constantly reassured that America is the leader in advanced technology and intellectual property and doesn't need jobs making clothes or even semiconductors. McMillion puts the lie to this reassurance. During Bush's presidency, the US has lost its trade surplus in manufactured Advanced Technology Products (ATP). The US trade deficit in ATP now exceeds the US surplus in Intellectual Property licenses and fees. The US no longer earns enough from high tech to cover any part of its import bill for oil, autos, or clothing.

This is an astonishing development. The US "superpower" is dependent on China for advanced technology products and is dependent on Asia to finance its massive deficits and foreign wars. In view of the rapid collapse of US economic potential, my prediction in January 2004 that the US would be a third world economy in 20 years was optimistic. Another five years like the last, and little will be left. America's capacity to export manufactured goods has been so reduced that some economists say that there is no exchange rate at which the US can balance its trade.
McMillion reports that median household income has fallen for a record fifth year in succession. Growth in consumer spending has resulted from households spending their savings and equity in their homes. In 2005 for the first time since the Great Depression in the 1930s, American consumers spent more than they earned, and the government budget deficit was larger than all business savings combined. American households are paying a record share of their disposable income to service their debts.

With America hemorrhaging red ink in every direction, how much longer can the dollar hold on to its role as world reserve currency?
The World Economic Forum in Davos, Switzerland, is the cradle of the propaganda that globalization is win-win for all concerned. Free trader Stephen Roach of Morgan Stanley reports that the mood at the recently concluded Davos meeting was different, because the predicted "wins" for the industrialized world have not made an appearance.

Roach writes that "job creation and real wages in the mature, industrialized economies have seriously lagged historical norms. It is now commonplace for recoveries in the developed world to be either jobless or wageless--or both."

Roach is the first free trade economist to admit that the disruptive technology of the Internet has dashed the globalization hopes. It was supposed to work like this: The first world would lose market share in tradable manufactured goods and make up the job and economic loss with highly-educated knowledge workers. The "win-win" was supposed to be cheaper manufactured goods for the first world and more and better jobs for the third world.
It did not work out this way, Roach writes, because the Internet allowed job outsourcing to quickly migrate from call centers and data processing to the upper end of the value chain, displacing first world employees in "software programming, engineering, design, and the medical profession, as well as a broad array of professionals in the legal, accounting, actuarial, consulting, and financial services industries."

This is what I have been writing for years, while the economics profession adopted a position of total denial. The first world gainers from globalization are the corporate executives, who gain millions of dollars in bonuses by arbitraging labor and substituting cheaper foreign labor for first world labor. For the past decade free market economists have served as apologists for corporate interests that are dismantling the ladders of upward mobility in the US and creating what McMillion writes is the worst income inequality on record.
Globalization is wiping out the American middle class and terminating jobs for university graduates, who now serve as temps, waitresses and bartenders. But the whores among economists and the evil men and women in the Bush administration still sing globalization's praises.

The state of the nation has never been worse. The Great Depression was an accident caused by the incompetence of the Federal Reserve, which was still new at its job. The new American job depression is the result of free trade ideology. The new job depression is creating a reserve army of the unemployed to serve as desperate recruits for neoconservative military adventures. Perhaps that explains the Bush administration's enthusiasm for globalization.