February 1, 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.
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 Intentions.He can be reached at: paulcraigroberts@yahoo.com