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How the Economy Was Lost: The War of the Worlds Paperback – March 1, 2010
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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' 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 . . . ?
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.
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