American Economy: R.I.P.

By Paul Craig Roberts

12 September, 2007
Countercurrents.org

The US economy continues its slow death before our eyes, but economists, policymakers, and most of the public are blind to the tottering fabled land of opportunity.

In August jobs in goods-producing industries declined by 64,000. The US economy lost 4,000 jobs overall. The private sector created a mere 24,000 jobs, all of which could be attributed to the 24,100 new jobs for waitresses and bartenders. The government sector lost 28,000 jobs.

In the 21st century the US economy has ceased to create jobs in export industries and in industries that compete with imports. US job growth has been confined to domestic services, principally to food services and drinking places (waitresses and bartenders), private education and health services (ambulatory health care and hospital orderlies), and construction (which now has tanked). The lack of job growth in higher productivity, higher paid occupations associated with the American middle and upper middle classes will eventually kill the US consumer market.

The unemployment rate held steady, but that is because 340,000 Americans unable to find jobs dropped out of the labor force in August. The US measures unemployment only among the active work force, which includes those seeking jobs. Those who are discouraged and have given up are not counted as unemployed.

With goods producing industries in long term decline as more and more production of US firms is moved offshore, the engineering professions are in decline. Managerial jobs are primarily confined to retail trade and financial services.

Franchises and chains have curtailed opportunities for independent family businesses, and the US government’s open borders policy denies unskilled jobs to the displaced members of the middle class.

When US companies offshore their production for US markets, the consequences for the US economy are highly detrimental. One consequence is that foreign labor is substituted for US labor, resulting in a shriveling of career opportunities and income growth in the US. Another is that US Gross Domestic Product is turned into imports. By turning US brand names into imports, offshoring has a double whammy on the US trade deficit. Simultaneously, imports rise by the amount of offshored production, and the supply of exportable manufactured goods declines by the same amount.
The US now has a trade deficit with every part of the world. In 2006 (the latest annual data), the US had a trade deficit totaling $838,271,000,000.

The US trade deficit with Europe was $142,538,000,000. With Canada the deficit was $75,085,000,000. With Latin America it was $112,579,000,000 (of which $67,303,000,000 was with Mexico). The deficit with Asia and Pacific was $409,765,000,000 (of which $233,087,000,000 was with China and $90,966,000,000 was with Japan). With the Middle East the deficit was $36,112,000,000, and with Africa the US trade deficit was $62,192,000,000.

Public worry for three decades about the US oil deficit has created a false impression among Americans that a self-sufficient America is impaired only by dependence on Middle East oil. The fact of the matter is that the total US deficit with OPEC, an organization that includes as many countries outside the Middle East as within it, is $106,260,000,000, or about one-eighth of the annual US trade deficit.
Moreover, the US gets most of its oil from outside the Middle East, and the US trade deficit reflects this fact. The US deficit with Nigeria, Mexico, and Venezuela is 3.3 times larger than the US trade deficit with the Middle East despite the fact that the US sells more to Venezuela and 18 times more to Mexico than it does to Saudi Arabia.
What is striking about US dependency on imports is that it is practically across the board. Americans are dependent on imports of foreign foods, feeds, and beverages in the amount of $8,975,000,000.

Americans are dependent on imports of foreign Industrial supplies and materials in the amount of $326,459,000,000--more than three times US dependency on OPEC.
Americans can no longer provide their own transportation. They are dependent on imports of automotive vehicles, parts, and engines in the amount of $149,499,000,000, or 1.5 times greater than the US dependency on OPEC.

In addition to the automobile dependency, Americans are 3.4 times more dependent on imports of manufactured consumer durable and nondurable goods than they are on OPEC. Americans no longer can produce their own clothes, shoes, or household appliances and have a trade deficit in consumer manufactured goods in the amount of $336,118,000,000.

The US “superpower” even has a deficit in capital goods, including machinery, electric generating machinery, machine tools, computers, and telecommunications equipment.
What does it mean that the US has a $800 billion trade deficit?
It means that Americans are consuming $800 billion more than they are producing.

How do Americans pay for it?

They pay for it by giving up ownership of existing assets--stocks, bonds, companies, real estate, commodities. America used to be a creditor nation. Now America is a debtor nation. Foreigners own $2.5 trillion more of American assets than Americans own of foreign assets. When foreigners acquire ownership of US assets, they also acquire ownership of the future income streams that the assets produce. More income shifts away from Americans.

How long can Americans consume more than they can produce?
American over-consumption can continue for as long as Americans can find ways to go deeper in personal debt in order to finance their consumption and for as long as the US dollar can remain the world reserve currency.

The 21st century has brought Americans (with the exception of CEOs, hedge fund managers and investment bankers) no growth in real median household income. Americans have increased their consumption by dropping their saving rate to the depression level of 1933 when there was massive unemployment and by spending their home equity and running up credit card bills. The ability of a population, severely impacted by the loss of good jobs to foreigners as a result of offshoring and H-1B work visas and by the bursting of the housing bubble, to continue to accumulate more personal debt is limited to say the least.

Foreigners accept US dollars in exchange for their real goods and services, because dollars can be used to settle every country’s international accounts. By running a trade deficit, the US insures the financing of its government budget deficit as the surplus dollars in foreign hands are invested in US Treasuries and other dollar-denominated assets.

The ability of the US dollar to retain its reserve currency status is eroding due to the continuous increases in US budget and trade deficits. Today the world is literally flooded with dollars. In attempts to reduce the rate at which they are accumulating dollars, foreign governments and investors are diversifying into other traded currencies. As a result, the dollar prices of the Euro, UK pound, Canadian dollar, Thai baht, and other currencies have been bid up. In the 21st century, the US dollar has declined about 33 percent against other currencies. The US dollar remains the reserve currency primarily due to habit and the lack of a clear alternative.
The data used in this article is freely available. It can be found at two official US government sites: http://www.bea.gov/international/
bp_web/simple.cfm?anon=71&table_id=20&area_id=3 and http://www.bls.gov/news.release/empsit.t14.htm

The jobs data and the absence of growth in real income for most of the population are inconsistent with reports of US GDP and productivity growth. Economists take for granted that the work force is paid in keeping with its productivity. A rise in productivity thus translates into a rise in real incomes of workers. Yet, we have had years of reported strong productivity growth but stagnant or declining household incomes. And somehow the GDP is rising, but not the incomes of the work force.

Something is wrong here. Either the data indicating productivity and GDP growth are wrong or Karl Marx was right that capitalism works to concentrate income in the hands of the few capitalists. A case can be made for both explanations.
Recently an economist, Susan Houseman, discovered that the reliability of some US economics statistics has been impaired by offshoring. Houseman found that cost reductions achieved by US firms shifting production offshore are being miscounted as GDP growth in the US and that productivity gains achieved by US firms when they move design, research, and development offshore are showing up as increases in US productivity. Obviously, production and productivity that occur abroad are not part of the US domestic economy.

Houseman’s discovery rated a Business Week cover story last June 18, but her important discovery seems already to have gone down the memory hole. The economics profession has over-committed itself to the “benefits” of offshoring, globalism, and the non-existent “New Economy.” Houseman’s discovery is too much of a threat to economists’ human capital, corporate research grants, and free market ideology.

The media have likewise let the story go, because in the 1990s the Clinton administration and Congress permitted a few mega-corporations to concentrate in their hands the ownership of the US media, which reports in keeping with corporate and government interests.

The case for Marx is that offshoring has boosted corporate earnings by lowering labor costs, thereby concentrating income growth in the hands of the owners and managers of capital. According to Forbes magazine, the top 20 earners among private equity and hedge fund managers are earning average yearly compensation of $657,500,000, with four actually earning more than $1 billion annually. The otherwise excessive $36,400,000 average annual pay of the 20 top earners among CEOs of publicly-held companies looks paltry by comparison. The careers and financial prospects of many Americans were destroyed to achieve these lofty earnings for the few.
Hubris prevents realization that Americans are losing their economic future along with their civil liberties and are on the verge of enserfment.

Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good

The Conservative morality

God: God is all good and all powerful, at the top of a natural hierarchy in which morality is linked with power. God wants good people to be in charge. Virtue is rewarded with power. God wants a hierarchical society in which there are moral authorities who should be obeyed.

Morality:

A Notch Below The White Man, A Touch Above The Black

By Jawed Naqvi

09 September, 2007
The Dawn

I am not surprised at all by the revelations in The Guardian last week that British military scientists sent hundreds of Indian soldiers, their colonial cannon fodder of many a foreign campaign, into gas chambers and exposed them to mustard gas during World War II.

For the record we are talking of a chemical warfare agent first used by the German army during World War I. It causes skin disorders, blindness, cancer and finally death. President Saddam Hussein, who used it, was hanged under the watch of Iraq's Anglo-Saxon victors. Saddam's cousin was nicknamed Chemical Ali for using it in the 1988 Anfar campaign, killing thousands of Kurds. He got death for "genocide" this year. (Did we hear of anyone getting punished, much less executed, for using Agent Orange in Vietnam?)

Documents uncovered by The Guardian indicate that the British military did not check up on the Indian soldiers after the experiments to see if they developed any illnesses. Many of the soldiers suffered severe burns on their skin, including their genitals. Some had to be treated
in hospital.

According to the report, the controversial trials were thrown into the spotlight by newly discovered documents at the British National Archives, which have shown for the first time the full scale of the experiments. The Indian troops were serving under the command of the British military at a time when India was under colonial rule. The experiments took place over more than 10 years before and during World War II in a military installation at Rawalpindi, now in Pakistan.

Scientists from the Porton Down chemical warfare establishment in Wiltshire who had been posted to the subcontinent to develop poison gases to use against the Japanese had carried out the tests. The experiments are a little-known part of Porton's huge programme of chemical warfare testing on humans. More than 20,000 British soldiers were subjected to chemical warfare trials involving poison gases, such as nerve gas and mustard gas, at Porton between 1916 and 1989.

Many of these British soldiers have alleged that they were swindled into taking part in the tests, which damaged their health for years to come after the trials. The reports record that in some cases Indian soldiers were exposed to mustard gas protected only by a respirator. On one occasion the gas mask of an Indian sepoy slipped, leaving him with severe burns on his eyes and face. The tests were used to determine how much gas was needed to produce a casualty on the battlefield. In 1942, the Porton scientists reported that there had been a "large number" of burns from the gas among Indian and British test subjects.

The Guardian report doesn't surprise because we have always known that there was no major difference in the worldview, or the methods of sustaining it, between 15 years of Nazi rule in Europe and over 200 years of British colonialism across the world. Lest we forget, their
common approaches included entrenched anti-Semitism which both practised in different forms throughout their respective histories. But I am not sure that India's current ruling elite would share the comparison. Britain gave us vital civil values after all and good governance to boot, proclaimed Prime Minister Manmohan Singh at Oxford University a couple of years back. The comments of course reflected the arrival of the neo-con NRI-dominated middle class at the helms of affairs in India.

There are cultural accoutrements to go with this nouveau riche worldview. Here, the anti-colonial saga is easily mixed up with the country's communal fault lines. One school believes that fighting British rule was a heroic feat. The other takes its history further back to the resistance against India's Turko-Afghan rulers, followed by the uprisings against the Mughals. Thus rightwing zealots deride fellow Muslims as offspring of Mughal emperor Babar. The Dravid movement in the south and the Dalit movement in Maharashtra pushed the history of their "occupation" to the Vedic period. To the rational middle ground all three strands have their validity. Why should anyone defend megalomaniac rulers, be they Hindu, Muslim or of any other faith? But the current flavour is reflected in the recent unveiling of the statue at India's parliament house of the mediaeval warrior Rana Pratap. It comes across as an officially patronised Hindu-Muslim paradigm as much as it is a scrupulously calculated shift away from critiquing the former colonial masters, who happen to be today's neo-con allies. If patriotism can be defined by opposing Emperor Akbar, otherwise tomtomed as a secular icon, why needle Warren Hastings?

Sometimes inconvenient facts are masked; sometimes they are refurbished with a new spin on history. When New Delhi's India Gate was designed and built by Edward Lutyens, it was originally called the All India War Memorial in memory of the 90,000 Indian soldiers who died in the campaigns of World War I, the northwest frontier operations of the period, including the 1919 Afghan fiasco. On the walls of the structure are inscribed the names of all the Indian soldiers in the British army who perished. In other words, the memorial stands as a towering reminder of our erstwhile slavery. And though it got converted into a more contemporary version of war memorial, honouring the Indian soldiers who fought in the Bangladesh war, the walls of the India Gate memorial still bear the names of the fallen victims of colonial wars, not those who fell in 1971.

When we refer to the NRI-dominated middle class being today's dominant ideological force the allusion really is to those non-resident Indians (as well as the ones who stayed home) who have traditionally connived with colonialism for the crumbs they were rewarded with. The old-fashioned school of sociologists called them the comprador class. This lot shares the cultural manifestations, including racism, of their masters. In the opposition were those Indian expatriates who fought colonialism and its racist features wherever there was on occasion to stand their ground.

History has shown that for India's ruling elite, the most comfortable place on earth has been a notch below the white man and a touch above the black, so to speak. I always cite the example of South Africa's notorious tricameral parliament, which was specially created during the Botha regime to accommodate Indian immigrants as a buffer between the white rulers and the majority Africans. Therefore, when many of the Indian migrants in South Africa were fighting shoulder to shoulder with Nelson Mandela's ANC, the other half chose to join the Apartheid rulers in a system in which the Black majority remained disenfranchised.

This is of a piece with India's current stance on the nuclear issue. The argument is not too different. India can have the bomb but no other third world country is fit enough to deserve one.

This coming form a nation that spoke out against nuclear apartheid is nothing if not hypocritical. The same desperation is reflected in our vain quest for seat at the UN Security Council as a permanent member, no less, of the elite club, never mind that we were ready to be assigned a humiliating non-veto status in it. A little below the global ruling elite, and a little above fellow third world nations, an NRI-inspired worldview, always looking for that awkwardly added seat at the table, as those who have seen Peter Sellers in The Party would understand.

That's precisely why there will not be a statue of Bhagat Singh in the Indian parliament, the very place from where the rebel signalled his revolt against British rule. For that's where he dropped a small bomb from the visitors' gallery at the colonial assembly. That's why there will not be a statue of Bahadur Shah Zafar in the parliament, the last Mughal emperor who fought the British. That's why India, the self-proclaimed champion of human rights will not add its powerful voice against the daily outrages in Abu Ghraib or Guantanamo Bay. That's why there will be more conspiratorial silence than outrage over The Guardian story.

Immigration

Its immigration say the Tories
The cause of all our worries
So lets shut the door
Keep the peril from our shore
And the BNP can make our curries

The fault may lie with the bankers
Managers, footballers and rich wankers
Yet its the always the brownman
yellowman and other bogeyman
Who will be showered with hard conkers

So lets shut the door
Keep the peril from our shore
And the BNP can make our curries

Market Failure

Market failure is a condition
Created by the private business situation
Inability to produce public goods
Inadequate merit and surplus demerit goods
And hence requiring government intervention

Copyright - Girish Menon

Prices, Profits and Markets

Price and Profit is the free market mantra
Greed and selfishness the result on the contra
Decisions only have a value economic
Cost Benefit Analysis is often comic
And Love and Equity will all cost extra

Copyright - Girish Menon

What is a market?

What is a market? asked a Russian
It is a form of coordination
Where many producers
Meet demands of consumers
Using profit as a consideration

Copyright - Girish Menon