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

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.

The United States is the only nation in the history of the world to have intentionally destroyed itself via intentional economic and governmental policy.

"How the Economy was Lost" should be much more renown than it is, especially for its noting what is happening now and predicting what certainly will happen in the near future. The book is divided (actually, nuanced) into two parts. The first part focuses on the actual actions of business and government using ample amounts of BLS, government, and independent statistics both on the US and abroad.

From Comparative Advantage to Absolute Advantage:

The second part focuses more on basic economic principles. A common principle (and today it's a myth) regarding outsourcing and offshoring, is the outdated 200 year old Comparative Advantage model by David Ricardo. Ricardo's comparative advantage does not apply today.

Dr. Paul Craig Roberts uses consistent data to back up his claims, and he repeats his points throughout the book to reinforce his assertions - because repeating on this issue must be done - the reason is that most policy makes and citizens are not listening. The few that do listen and understand, do not care.

There are 3 reasons (among many more) for the current and future decline of the US economy and standard of living according to Roberts: 1) Outsourcing & Offshoring which began and continues in manufacturing. 2) Outsourcing & Offshoring profession service jobs such as engineering because of high-speed internet technology. 3) H1-B visas (and other visas) which allow foreign workers to work in the US. Illegal workers are another form in insourcing.

Roberts asserts that in about 20 years the United States will be a 3rd World Econony. The reason, is because a third world economy is characterized by having the majority of its jobs as "non-tradable domestic service industry" jobs: waitresses, bartenders, cashiers, hospital orderlies, hotel room cleaners, supermarket shelf stockers, cab drivers, etc. Regardless of one's skills or education, these are the jobs most of the population will have. It's already happening now. As we know, these jobs pay low wages with little or no benefits. In the last 11 years non-tradable domestic service jobs has increased more than any other industry in the United States. The BLS provides monthly public reports when jobs are "created." Do you even wonder why the industry or types of jobs "created" are *never* mentioned? Because most of these jobs created are domestic service jobs.

THE "NO THINK" ECONOMISTS:

The term 'no think' economists coined by Roberts reiterates the pressure put on American economists to conform to the falsehoods, propaganda and outright lies of "free trade," without even studying the data that refute its alleged benefits. Aspiring economists know that to oppose free trade can greatly damage their career in business, government, and academia.

*There is a common line spouted for years on the news and financial TV channels, that for every job outsourced, 3 or 4 jobs are created inside the US. This, is statistically and factually false. The American media is composed of free trader shills, that are on the payroll of these institutions and "think tanks." (Think tanks are actually Advocacy Organizations.)

We already know manufacturing has been outsourced and off-shoring and it still continues but *After manufacturing and other industries are outsourced and offshored abroad, R & D and innovation follow these industries overseas. They don't stay in the US to be apart of the "new economy" of "innovation."

Roberts notes Marx stating that "religions is the opiate for the masses" and Roberts states that today "the media is opiate of the masses" (p. 190).

*With the advent if high-speed internet, professional service jobs are now being outsourced and offshored overseas. Engineers in the US are now witnessing this phenomenon.

The first section of "How the Economy was Lost" is composed of articles written by Roberts and then benefit of this is that you can read this book from front-to-back or in any order. The oldest article is 6 years old, and shows Dr Roberts has been stunningly prophetic. Most of the articles are dated 2008 to 2010.

H1-B Visas and the H1-B Lobby:

Large corporations such as GE, and business figures such as Bill Gates publicly testify before Congressional Committee advocating *unlimited* H1-B visas that allow foreign workers to legally work in the United States to replace American workers. The H1-B visa is tied to the employer/company. This gives the corporation the advantage in the power-balance in the employer - employee relationship, hence more company control over the foreign worker. It's a statistical fact that these foreign workers in the US on H1-B visas work for lower wages.

The Shortage Myth:

Many pundits and economists - who are paid by these very corporations and "think tanks" claim that there are not enough American workers to fill these position - this again, is a lie. And if it was true, if there was a shortage in certain industries of workers, why are their wages *declining* instead of rising? Roberts refers to this as the "Shortage Myth," and uses ample evidence to back up his claim. How often do you hear about H1-B visa in the mainstream media? Although there is a cap on the H1-B now, will it be raised in the future? This is ample pressure to do so.

One of the questions a reader should be been asking before he/she reads this book, and definitely after reading it is: why is the issue of non-tradable service job growth in the US not mentioned in the mainstream media? I believe that one, many politicians and economists are ignorant of it and two, there are those that know, who do no publicly admit it to the public.

So, where is the USA headed? Again (it's worth repeating), Roberts accurately describes a Third World Economy (for lack of a better word) as an economy that is primarily composted of "non-tradable domestic service jobs." Low wages, little or no benefits, in addition to these jobs not being able to be outsourced abroad. In America, what sector has had the most growth over the last decade? Non-tradable domestic service jobs.

For additional information on this please see 'a prophetic interview by Sir James Goldsmith'

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.