Customer Reviews

How the Economy Was Lost: The War of the Worlds

5 star:		(17)
4 star:		(5)
3 star:		(0)
2 star:		(1)
1 star:		(1)

 

 

This compact little book is densely packed with the missing explanation of why the
American economy is in such a mess. I use the term missing to indicate the almost non-existence of mention in the Main Stream Media.

First it is important to understand who Dr. Paul Craig Roberts is. He received his PhD in economics from the University of Virginia and was Assistant Secretary of the Treasury under Ronald Reagan. He was formally an editor and columnist for the Wall Street Journal, Business Week, etc. and has written several books on a wide range of topics.

Given his conservative background, his harsh criticism of corporate greed and outright lies pushed by Big Business (and it's shills and apologists in academia and government) lends added credibility to his words.

This book is an organized collection of his columns (Part 1) that deal with the American Economic Crisis we find ourselves in and how we got there. While some of his earlier columns (going back about 5 years) may appear slightly dated, it's interesting to watch his predictions (particularly those about Unregulated Derivatives as a disaster just waiting to happen) come true.

And by the way Derivatives are STILL unregulated! Talk about corruption and malfeasances in high places. I don't think they have even re-instituted the uptick rule on short sellers (this was a rule passed after the crash of 1929 to force traders to wait for the stock to go up a little before they could short it again)

Like many of the other post 1929 laws and regulations, quietly tossed aside as "antiquated and unnecessary".

Later in the book, Part 2 is devoted to an explanation in ordinary language of why free trade doesn't actually always create the win-win scenario that it's boosters insist on. Also a very important explanation of why Outsourcing is not really free trade at all. And insourcing (replacing American workers with cheaper foreign workers) is not free trade by any stretch of the imagination.

Overall, Dr. Roberts has chosen several themes that cluster around the failure of this nation's government to protect it's citizens.

- The outsourcing of manufacturing and good blue-collar jobs, among its other nasty effects, threatens to destroy the middle class. One chapter deals extensively with the soaring income disparity that is developing in America (one of the classic hallmarks of a Third World Nation)

- The death of American manufacturing and the outsourcing of Research & Development jobs to India and China and the insourcing of professional jobs here in America, are destroying the career opportunities in engineering and technical fields for our own children. Even before the current economic collapse many American engineering graduates could not find work.

As he says in one chapter - "the United States is the first country in history to destroy the prospects and living standards of its own working people"

On American firms openly advertising for foreign engineers on H-1b visas (or using slippery tricks to get around the few laws that protect American workers) he says;

- "What kind of country gives preference to foreigners over its own engineering graduates?....How much longer will parents shell out $100,000 for a college education for a son or a daughter who ends up employed as a bartender, waitress or temp?"

This erosion of America's future has gone so far that American venture capital firms - which are the usual source for funds for start-ups, are pressuring American entrepreneurs to do their starting up in Asia! You can hire a university graduate in India for $240 a month.

When a proponent of Free Trade tells you that it actually benefits America, ask them "Show me the numbers. Where exactly are those wonderful jobs that Americans are going to do in a de-industrialized country? Show me in the governments own Labor Statistics."

In an October column he adds that the good jobs that Americans usually come back to after a slump is over are no longer there. American corporations are taking advantage of this downturn to permanently lay off even more American and then quietly transfer those exact jobs overseas. Hard times are ahead for America.

We (as a nation) are about to drive off a cliff. Our political, business and academic leadership is either in denial or urging us to go along this road even faster. A major course change is clearly needed and the American people are waking up to it at last.

Here is a book that can give them some of the intellectual ammunition needed to fight off the entrenched special interests.

Roberts' "How The Economy Was Lost" is a collection of short, sensible columns on the American economy - most previously posted on '[...].' The material is well-written, free of jargon, and backed by credible data. It's only shortcoming is that material written as long as five years ago, in this case, quickly becomes vulnerable to charges of 'dated.' Thus, readers impressed with the author's logic have to laboriously update and re-document Roberts' data. Nonetheless, the newly-released book is well worth reading - his conclusions are probably still valid, and his documentation of errors in others' analyses helps readers see how economic data are often misinterpreted.

Roberts' overall thesis is that free market zealots have already hollowed-out America's former middle-class manufacturing sector, and have begun doing the same with our service sector. Results include rising personal credit-card and home-equity loan debt, a federal deficit and unfunded liabilities totaling nearly $60 trillion, and trillions more in accumulative trade deficits. Manufacturing job losses total (when written) about 4 million, a University of California study estimates 14 million service jobs will follow, and Alan Blinder (former Federal Reserve Vice-Chairman) estimates that 40-50 million jobs are vulnerable. McDonald's drive-thru order-taking as already occurred. Obviously, none of this bodes well for tax revenues, long-term trends in real-incomes or home values.

America's cherished 'upward mobility' is also fast fading. Roberts points out by outsourcing manufacturing jobs, we unwittingly largely eliminated the rationale for associated high-paying management, engineering, and R&D jobs.'The Boston Globe' reports that Indian PhD chemists work for one-fifth the pay of Americans, and are closer to the subject their work. 'Chemical and Engineering News' reported in its 11/6/06 issue that 8.7% of its U.S. members lacked a full-time job. (I know one - working part-time for H&R Block.)

Where did these attractive white-collar jobs go? Bangalore, in 2005 had over 150,000 software engineers - serving H-P, Boeing, Rolls-Royce, G.E., Google, Cisco, Intel, Sun, Motorola, Microsoft - all told, about 780 multinationals. Think these are all small potato operations - in 2009 G.E. opened a new in Bangalore to accommodate 2,000 new researchers; it now has 2,800 worldwide, including 1,900 in the U.S. Then there's Shanghai - new R&D centers for Motorola, G.E., Google, L'Oreal, Novartis, GlaxoSmithKline (will rank as one of its largest), Microsoft (6,000 staffers, added to its already 1,200), DuPont and Dow Chemical, Honeywell, and about 1,100 others. I could continue with Beijing, etc., but you already get the picture.

Good jobs that remain in the U.S. are increasingly filled with foreign workers brought in on work visas (463,000, as of 2002), while their employers claim a shortage of qualified U.S. workers. That claim, however, is belied by the frequent practice of having existing American employees train the lower-paid foreigners who take their jobs. (Why do the exiting Americans do it - not doing so results in no severance pay.) Roberts even cites examples where U.S. job advertisements explicitly ask for an H-1B or TN work visas. Meanwhile, starting salaries, adjusted for inflation, are declining in these same areas. Studies also show that those here on work visas are often illegally paid less than comparable Americans, and produce fewer patents.

American economists all 'know' that this is all for our own good, telling us that better jobs are on the way- yet, mostly can't identify what they'll be. (Some have identified biotech as the new source of jobs - ridiculous, given the numbers of new jobs required, and the fact that even that work is subject to outsourcing.) The top ten sources of new jobs in America, per the Bureau of Labor Statistics, include home health aides, customer-service representatives, food preparation and serving workers (including fast food), personal and home care aides, retail sales-persons, office clerks, and nursing aides and orderlies - none of which require a college education, and all vulnerable to filling by the 12 million or so low-cost illegal aliens already here. The #1 projected source for new jobs, RNs, only requires two years of college. Guess what the next 'crash' will be - college educations, and the colleges and educations that provide them.

Another 'benefit' of all this off-shoring, per American economists, is attracting foreign direct investment. Unfortunately, Roberts tells us that when you look behind the numbers, 90% is for the acquisition of existing U.S. assets, not building anew. As for claims like 'we've added two jobs for every one outsourced,' Roberts points out that this is mostly miscounting due to existing U.S. firms expanding payrolls overseas.

At least inflation has been tamed. Not so, says Roberts - instead we revised how inflation is calculated and assume that eg. when apple prices go up, we buy something else and thus are unaffected.

So how do those economists get it so wrong? Roberts says its from their confusing 'absolute advantage' (China's low-cost advantage across the board) with 'comparative advantage' (eg. Italy making wine because its climate is more conducive to doing so than eg. Iceland). Roberts says David Ricardo and Adam Smith endorsed 'Free Trade' based on comparative advantage.

Bottom-Line: Roberts believes 'the end is near,' and will occur when China et al get tired of assuming the risk of holding U.S. dollars and T-bills. At that point the dollar will no longer be accepted as the reserve currency (some already are trying to change to the Euro), and current holders will either rush to buy up U.S. hard assets, or convert their dollar-denominated assets into the new reserve currency - making the dollar worth . . . ?

I like to read Paul Craig Roberts's columns, because he is a true conservative, not a "Republican." Since the Republican party has been taken over by certain notions that have led us astray in recent decades, there is nothing better than being able to stay on course with Roberts' informed opinions. I put Pat Buchanan and Kevin Phillips and maybe Ron Paul into the same category.

The fact that this book is mainly a collection of columns published elsewhere by Roberts in recent years, is both the strength and the weakness of this volume. Roberts' columns are so full of information that the average person would not have access to otherwise, that it is great they have been preserved between the covers of a book. On the other hand, since the author follows certain themes in his work, the reader is faced with a lot of repetition, rather than an argument where one chapter builds upon the last. However, this could be a good thing, as it reinforces in the reader's mind the view he holds about the global economy, so-called "free trade," the prospects of the middle class under these politicians and bureaucrats who have hi-jacked our economy, and related matters that affect our lives every day.

Roberts also has well-defended dissenting views on the foreign policy of our nation, similar to those held by Buchanan, Phillips, and Ron Paul. I have learned to regard the mainstream news through the lens of these writers' opinions, and I think this volume of Paul Craig Roberts' collected columns is well worth buying. It is great for showing to friends to clarify where we stand, and why. It is also great for quick reference purposes. Definitely a good title to own.

a compilation of short essays, well done, insightful and informative. my problem is the author leaves out important documentation, especially when he claims to have the data that can refute his critics. there are several well worn themes, repeated at sseveral intervals throughout the book. i guess that was the authors intent but the promo on the book doesn't lead one to believe that is what is to be experienced. The Fall by Joe Stiglitz is a better constructed book in almost every area but you must give credit to Robert's blistering critic of Ricardian "free trade" and currency valuation. this book is still a hell of a wake-up call.

This book should be read by all U.S. Citizens. A look on how companies only care about cheap labor at the expensive of the working people.Not caring how many jobs are lost for U.S. citizens,and giving those jobs to overseas workers.A wake up call for all the people of U.S.wake up, or your job may be next.And how the rich keep getting rich,while the working people get screw.

Good reading.

In so many words, Free Trade has been a big lie and a Con game at the expense of the American Middle Class. It has taken away many opportunities for us and the next generation.

Free Trade is a misnomer for Offshoring. One of the biggest scams of the century.
It's amazing how American workers have been screwed.

Recommend the book highly.

This book bundles the CounterPunch columns of the author, with a lot of repetitions.
However, the columns launch some very hard uppercuts on those in power in the US during the first decade of the 21st century. He lifts the veil on economic rhetoric (free trade and globalization) and the real formidable interests behind it, and discusses such crucial issues as the status of the US dollar, US governmental policies, the US media and the US society in general. He also defends his supply-side economics and explains why they misfired (a collapse of inflation and of the money supply). He stresses the fundamental impact of `external costs' on the value of businesses and projects and the necessity of planning.

Free trade, globalization, offshoring
Free trade and globalization are thick smoke screens (economists defending those issues are bought by outsourcers) for `labor arbitrage'. National labor is replaced by cheap foreign labor. The good national wages are traded for multi-dollar bonuses of CEOs of private corporations. Up to 50 million US jobs could be outsourced (A. Blinder).
Education is in no way the culprit: US companies cannot find engineers who will work for Chinese or Indian wages.

US policies
Special private interests are in control of the US government.
Internationally, the US is waging very expensive wars for world hegemony, filling the wallets of defense contractors.
Nationally, financial deregulation permitted sky-high debt leverage, which imploded. Not the Wall Street crooks, but the taxpayers and the homeowners were punished!
Budget (50 % in the red) and trade deficits are soaring, making the US dependent on foreign lenders.

US dollar
The US dollar is the cornerstone of US power. As the only reserve currency in the world, it allows the US government `to escape trade and budget discipline'. But, if foreign investors don't want to invest in US debt anymore, the only solution is letting the printing machines spew out more dollars and hyper-inflation. The US dollar will fall as well as the hegemon.

US media, US society
The US media form a quasi-monopoly, spewing out disinformation and propaganda for special interest groups. Censorship is rampant.
Through offshoring, the US middle class is vanishing, leaving a feudal society of the super-rich few and the many serfs fighting for naked survival. The real unemployment rate is as high as 21.4 % ((a depression level), while 1 out of 9 citizens live on food stamps.
The US population is undergoing a coup against its civil liberties through the Homeland Security and the Patriot Act.

Remedies (extremely difficult issues)
To stop the budget bleeding, all wars should be ended and all soldiers in foreign countries called back home.
To diminish the trade deficits, the offshore production should be returned home through discriminatory taxation of corporations.

While his bashing of Keynesianism is not always deserved (Keynesianism, with its fake Phillips-curves, was heavily wounded by spikes in the oil price. Of course, redistribution taxes of 98 % are absurd), Paul Craig Roberts' comments are a huge warning for the powerful few in charge of the US government. The future of the Union as a whole is at stake.
This book is a must read for all those who want to understand the world we live in.

A total affirmation of what I , as a small businesss owner, thought I had been witnessing for the past decade plus. Very enlightening as to where we are as a nation. Very candid.

... and consider the possibility that this was not done stupidly or accidentally. Consider the possibility that what has happened to America has been done with malice aforethought. Consider also what the world will be like in the absence of America's leadership. Who will take our place? And when America is gone, who will take the helm in nuclear disarmament, in human rights, in the peaceful use of space? What of Taiwan, and South Korea, and other small nations who've depended upon our shield? What we have taken for granted for so long will become startlingly apparent when the "big bully", the "great satan" is no longer around.

Simply put, this book is a must read for those who are concerned about the future of our country. It is clearly written, engaging, and illuminating. It is also largely free of economic jargon and high-brow academic nonsense, so most will be able to pick this up and easily digest its arguments. Specifically, his attack on "free trade" economists is particularly damning in light of current events and refreshing considering the fact that he is a conservative. A drawback for some may be that Roberts still shows unflinching faith in capitalism as an economic system, despite the fact that the evidence provided in the books seems to contradict having such a belief. That being said, this is a minor observation by the reviewer and does not take away from the immense value of the book. If you are interested in understanding the ills of our economy, do yourself a favor and buy this.