The Political Junkies
archived: 3 - 9 Sep, 2006 Back Next
REPUBLICAN ECONOMICS
TPJ has published a plethora of articles on the effects of Republican economics, usually from the perspective of American economists. We recently discovered this article, written by a Brazilian economist. His view of what is happening in America under the Bush administration is a chilling analysis of the decline of America:
Never in the history of the world have we had an economic revolution similar to the one that it is under way today. The global reallocation of economic power from the current superpower - the United States - to the new emerging powers of the future such as China, Brazil, India, Russia and the Arab Gulf countries is mind-boggling. . . .
In contrast, the United States (where billions of petrodollars have been parked temporarily waiting for better long-term investment opportunities) has an old and aging economy - with a very mature and declining manufacturing base that is struggling to carry the heavy load of its legacy costs, such as pension and health care obligations; these costs are related to a large number of retirees from the old American economy.
The agricultural portion of the US economy depends heavily on US government subsidies to be able to survive. And today its service industry and the remaining manufacturing are being outsourced out of the United States at the speed of light to countries such as India and China among many other countries around the world.
We can say that today the United States economy is comparable to a very large company that is fast becoming obsolete and many of its viable and surviving parts are leaving the United States through outsourcing for better opportunities around the world including Brazil.
On a daily basis, the lifeline of the American economy is being exported overseas - including its R&D, American "know how" and with it the potential of future innovations. Everybody knows that this is going on, but still there is a major disconnect between the perception of what people think is happening and the actual speed of this process and economic revolution. . . .
Since the collapse of the Soviet Union, in theory the U.S. has a lot more competition from other countries than in the past for this pool of money available for investments on the international financial markets. But the people from countries around the world are still operating under their old mindset and they have been financing the US government's humongous budget deficits. Global insecurity regarding terrorism created an unique situation in the last five years in which the United States has been allowed the hogging of almost 90 percent of total global savings - year after year.
This unique situation can't continue much longer and an investor's mindset has finally started to change. There is a real possibility that in future years the competition will become very tough, and a large portion of this pool of global investment money will go to other countries instead of the United States.
It takes time for people to change their old mindset and old theories and start adapting to the new circumstances and realities of the new global economic environment - mainly today when we have a new and unique global economic structure as never seen before. . . .
Because of this technological revolution, only in the last year or so did it start making economic sense to outsource everything in sight. With the current technology, we can outsource probably 50 percent or more of all American jobs to a cheaper country such as India, China, Brazil and a zillion other places around the globe.
Today the United States is not outsourcing only jobs that Americans don't want to do. The US corporations today are exporting millions of hi-tech jobs as fast as they can. At the same time, China and India are moving very fast into the future. They are investing heavily in R&D and they are developing the new state-of-art software, and the future in electronics. Today, there is something revolutionary and new regarding outsourcing; and it moves at the speed of light.
In the meantime American workers should get used to getting jobs at the new Wal-Mart wages with almost no benefits - instead of working for the "American Dream," as in the past, in the future these workers will be working for the new American economic equivalent of the "Titanic."
It is a very hard task for any government to create strategies for creating new jobs all the time in the economy, and no country can afford to lose the jobs that they already have. Any job is worth saving, because not everyone in the country will become a rocket scientist, or a software engineer. The country needs to create millions of new jobs every year including jobs for the semi-literate population. And job creation is a very important function and a responsibility that most governments from around the world have to fight for all the time.
On December 18, 2005 The New York Times published an article "Want to Know a 'Dirty Little Secret'?" by Steve Lohr, and the article said: "...Last Monday, at a dinner at the Waldorf-Astoria in New York, Mark R. Anderson, editor of The Strategic News Service, a technology newsletter, sounded like a traitor to his class. He was speaking to a group of technology executives and venture capitalists, fans of Mr. Anderson but also champions of outsourcing.
"The current research on outsourcing, Mr. Anderson said, tends to be static and understates the trend. "The actual outflow of jobs is huge and growing," Mr. Anderson said. "I call this the CEO's dirty little secret. When people really find out what's happening," he added, "our view of India will change dramatically.""
In recent years IBM went from being a major technology company to becoming what we can call "IBM the Outsourcing Company on Steroids" - IBM is in the position to outsource, and at a very fast rate, a large number of good paying jobs out of the United States into India and other lower cost countries around the world. . . .
"...In the last few years, even as the company has laid off thousands of workers in the United States and Europe, the growth in IBM's work force in India has been remarkable. From 9,000 employees in early 2004, the number has grown to 43,000 making IBM the country's largest multinational employer.
...IBM is growing not only in size by adding new hires, but also in revenue. The company's business in India grew 61 percent in the first quarter of this year, 55 percent in 2005 and 45 percent the year before."
Today we know that the reality is multinational corporations don't have national loyalties, they are in business to make money, and the bottom line is what matters most. . . .
Some people in the United States believe that corporations have to be patriotic and have to act as good "US citizens." But that way of thinking is rapidly changing and a growing number of major American companies are planning to reincorporate in Bermuda, or in other tax heaven; a move that would save them millions of dollars in taxes. Among these companies is Connecticut-based tool manufacturer Stanley Works for example. A few years ago, they estimated that the move from Connecticut to Bermuda would have shaved about US$ 30 million off Stanley Works' annual tax bill.
Americans went nuts about Stanley Works' move to Bermuda. But for how long will Americans be able to stop Stanley Works' from reincorporating in Bermuda to save US$ 30 million dollars in taxes per year? Do you know how many tools Stanley Works' has to sell around the world to get that extra profit for the shareholders of that corporation?
In five years, we are talking about at least US$ 150 million dollars in extra profits for their shareholders. It is a lot of money, and that story applies to most US multinational corporations. With the profit cannibalization that is going on all around because of the Wal-Martization of the American businesses, it is just a matter of time for us to see an exodus of these corporations from the United States to major tax heavens. . . .
The job market in the United States is under attack in three major ways: First, the United States is exporting good paying jobs to other countries via outsourcing. Second, by the permanent replacement of jobs by new technologies; in this case jobs disappear forever.
Third, is eliminating jobs by mergers and acquisitions where the major goal to achieve a profit on these deals is by the elimination of thousands of jobs in the merged companies.
One result of all these trends is a net reduction of salaries and benefits for US workers at almost all levels, (except for a few people on top of the management pyramid) which in turn will result in lower taxes paid by these people to the state and federal government.
Today, American companies don't have another choice other than help the self-destruction of the current American capitalist economic system. This self-destruction is happening on a daily basis and a lot faster than most people realized in the United States.
Anyone can see the evidence of this self-destruction on a daily basis on the news; all kinds of American corporations are repudiating on the promises that they made to their employees regarding pensions, and health care costs and so on. These trends will have a major negative impact on an increasing number of people in the American population: you worked your entire life and thought that you had a pension and other benefits to support you in your old age, then the American corporations changed the rules of the game and decided to say, "sorry, but you are out of luck, we can't afford paying you your pension just find another way to pay your bills." Today, there are 40 million retirees in the United States, and there are another 77 million baby boomers coming very fast down the pipeline.
This change of policy by the American companies in the United States will have a major negative impact in the lifeline of its capitalist system, since this pension money is very important in the creation of the pool of money available for investment in the American capitalist system. . . .
To make things even worse, today, bankruptcy has become an important part of an acceptable business strategy in the United States; this new tool being used by corporations it is an easy way to eliminate liabilities and all kinds of costs, and people should not be surprised when companies such as General Motors, and Ford finally file for bankruptcy in the near future.
What is happening to the US economy today is best illustrated by the fact that some 20 years ago the largest US employer was General Motors. And workers at General Motors earned, and still earn today, a good living wage. Today, the US largest private employer is Wal-Mart. And that is what has happened to the American economy. We have gone from a General Motors economy where workers earned decent wages and benefits to a Wal-Mart economy where people earn low wages and very poor benefits. . . .
The question for Americans is, “Had enough?”
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UPDATED: September 5, 2006
REPUBLICAN FAMILY VALUES
Republicans tout their commitment to “family” values. This NYT article demonstrates the hypocrisy behind the rhetoric:
This Labor Day, the 45 million young people in the nation’s work force face a choppy job market in which entry-level wages have often trailed inflation, making it hard for many to cope with high housing costs and rising college debt loads.
“A few people I work with are living at home with their parents; some are even on food stamps. I was hoping to buy a house this year, but there’s just no way I can swing it.” JOHN ARNOLD, 28-year-old Caterpillar factory worker
Entry-level wages for college and high school graduates fell by more than 4 percent from 2001 to 2005, after factoring in inflation, according to an analysis of Labor Department data by the Economic Policy Institute. In addition, the percentage of college graduates receiving health and pension benefits in their entry-level jobs has dropped sharply.
Some labor experts say wage stagnation and the sharp increase in housing costs over the past decade have delayed workers ages 20 to 35 from buying their first homes.
“People are getting married later, they’re having children later, and they’re buying houses later,” said Cecilia E. Rouse, an economist at Princeton University and a co-editor of a forthcoming book on the economics of early adulthood. “There’s been a lengthening of the transition to adulthood, and it is very possible that what has happened in the economy is leading to some of these changes.”
Census Bureau data released last week underlined the difficulties for young workers, showing that median income for families with at least one parent age 25 to 34 fell $3,009 from 2000 to 2005, sliding to $48,405, a 5.9 percent drop, after having jumped 12 percent in the late 1990’s.
Worsening the financial crunch, far more college graduates are borrowing to pay for their education, and the amount borrowed has jumped by more than 50 percent in recent years, largely because of soaring tuition.
In 2004, 50 percent of graduating seniors borrowed some money for college, with their debt load averaging $19,000, Dr. Rouse said. That was a sharp increase from 1993, when 35 percent of seniors borrowed for college and their debt averaged $12,500, in today’s dollars.
Even though the economy has grown strongly in recent years, wages for young workers, especially college graduates, have been depressed by several factors, including the end of the high-tech boom and the trend of sending jobs overseas. From 2001 to 2005, entry-level wages for male college graduates fell by 7.3 percent, to $19.72 an hour, while wages for female graduates declined 3.5 percent, to $17.08, according to the Economic Policy Institute, a liberal research group. . . .
The percentage of young adults who are working has dropped since 2000 largely because many have grown discouraged and stopped looking for work. This has happened even though the unemployment rate, which counts only people looking for work, has fallen to 4.4 percent for those ages 25 to 34. It is 8.2 percent for workers ages 20 to 24. . . .
In a steep drop over a short time, 64 percent of college graduates received health coverage in entry-level jobs in 2005, down from 71 percent five years earlier. As employers grapple with fast-rising health costs, many companies have reduced health coverage, with those cutbacks sharpest among young workers.
Partly because of the decline in manufacturing jobs that were a ticket to middle-class life, just one-third of workers with high school diplomas receive health coverage in entry-level jobs, down from two-thirds in 1979. . . .
Mark Zandi, chief economist at Moody’s Economy.com, said it was surprising how deeply young workers were going into debt to maintain the living standards they want.
Simple question for young Americans – Had enough?
Last Update: 09/09/2006