@The_Idler If you read the articles referenced in the question it will lay out a great deal in terms of the economic principles, and some of the history of what is going on.
Basically, the problem with keeping a consumer society going is, as your fellow countryman, the economist John Maynard Keynes first pointed out, keeping aggregate demand up. In other words, for people to be able to buy things, they have to have money in their pockets. We used to do this by making things that other countries wanted to buy. We invented pretty much every technology from basic appliances to high-tech gadgets and the world beat a path to our door.
But then our financial and corporate elites got greedy. They began to attack unions. During the late 1980s and 1990s they engaged in wave after wave of corporate raiding. That is, they would engineer a hostile take-over of a heavily unionized company, and dismember it, firing the workers and selling off the most profitable pieces and taking the remainder into bankruptcy. Since the company had very few employees, they were allowed to keep the billions of dollars set aside for employee pension funds (screwing tens of thousands of loyal employees out of their retirements in the process). They would use these funds to take over another company, over and over, decimating whole industries. The was accompanied by a junk bond casino on Wall Street which fleeced ordinary investors while making insiders obscenely rich.
The Wall Street financiers who call the shots in our economy decided that they could make more money quicker by moving paper than making things, so they agitated to have NAFTA (the North American Free Trade Agreement) passed. The idea was to ship production to Mexico, where labor was cheaper, environmental regulation was nonexistent, and a culture of corruption made it possible to keep unions from forming. Only, they found that they could do things even cheaper by outsourcing manufacturing to China and certain technical services to India. Whole factories were packed up and shipped off to China, the rest were left to rust.
Meanwhile, Mexican farmers were thrown into direct competition with cheap subsidized American corn, causing many subsistence farmers to go bankrupt, and to move to the US, where they were easy pickings companies who used them as a way of making jobs so low-paying that they were unattractive to native born Americans. Americans continued to design each other’s web pages, and manage each other’s hedge funds, financing their consumption through a combination of speculation and borrowing. Essentially, Americans were borrowing against the value of their portfolios and their homes. They rode the crest of the computer boom from 1994 to about 2001, when the dot com bubble burst, sending the high tech sector into a recession.
From 2001 till around 2005 Americans borrowed against their steeply appreciating houses. Then the market started to slow and people started to refinance. And the mortgage lending industry had all sorts of products with hidden traps that would spring on the debtor whenever he got into economic difficulty. Then the lender would swoop in, rush to foreclosure, and capture a tidy profit in the form of the home-owner’s equity. This, unfortunately, began to depress the whole real estate market, causing even solid customers to end up owing more than their property was worth. This caused more economic instability, more rushed foreclosures, and the cycle fed on itself until late 2008, when it unraveled the mortgage backed securities markets, and then the derivatives markets, the insurance markets and, finally, the banks.
Meanwhile, China made a deal with Wal-Mart, a militantly anti-union retailer that pays so little that its employees qualify for welfare. Wal-Mart bought dirt cheap Chinese goods, produced in non-union sweat shops, using child and prisoner labor and sold them directly to the American consumer, throwing American mom and pop businesses into direct competition with third-world labor. Wal-Mart, of course, got extremely rich and was able to buy protection from the Bush Administration to engage in predatory practices. When they moved into a new area, they would sell below even their own low cost until the local competition was completely wiped out, and then they would jack up the prices and make it all back many times over. (@BoBo1946 this direct competition with China exerted such a drain on US businesses that the usual cash flow problems that so plague small businesses were minor by comparison.)
This has been going on now for about 20 years, and America truly doesn’t make much of anything anymore. (We still make top of the line military goods, and we run a good protection racket, but that’s about it.) Our educational system is slipping, we are resting on our past glory, sliding deeper and deeper into self-delusion, fantasy, and debt, most of which is held by the Chinese. We now owe them between $800 billion and $1.3 trillion, and we are entirely dependent on them to buy our bonds to float our national budgets. So, any talk of tariffs or trade sanctions, or “forcing” China to float its yuan would be stupidly shortsighted, since it will invite tit-for-tat retaliation. Even putting provisions in the U.S. stimulus bill that they should be spent on U.S. made goods has to be done with discretion and care. We are still good for it, since we produce $13.6 trillion per year in GDP. But we also have a similar bill with the Saudis, thanks to two wars we haven’t paid for, thanks to our oil companies who gouged the American public ruthlessly, tipping the economy even further into recession.
Ideally, we should invent and manufacture some new product, like the hydrogen car, or cold fusion, or holographic televisions and sell these things to the rest of the world. We sell a great deal of intellectual property (Michael Jackson CDs), but that isn’t enough.
About ⅓ of the the first round of government stimulus spending went to unproductive tax cuts to mollify the Republicans, none of whom voted for the package. Another ⅓ was for infrastructure spending, like windmills, and home weatherizing, both of which have energy dividends, and cash for clunkers, which was a great success in selling automobiles, although not necessarily American-made ones. Similar programs could be directed to things like refrigerators and other appliances still made in America, but something more comprehensive is going to have to be worked out.
It is also very difficult for America to do anything constructive, since our politics is so destructively partisan. The Republicans still want to go back to the failed “free market” economics of the Bush era. Now the U.S. Supreme Court has unleashed unlimited corporate funding for political campaigns, which, if not undone, will ensure that we go back to the Republican formula of less government regulation and oversight, lower taxes, and fewer social safety net benefits (and a government by the corporations for the corporations).
The “fatal flaw” in limiting corporate power is summoning the political will to do it. Our populace is so ignorant of economics that they are easy prey to every sort of neo-liberal propaganda. And, consequently, large segments of the American population consistently vote against their own interests. There is nothing more we can do without going back to our unilateral brute force solutions, and even then, these past solutions don’t seem to be working out so well for us (e.g. Iraq and Afghanistan). We would have to become another Roman Empire, and we are just not up to it.
Composing members:
0
