By Paul Craig Roberts and cross posted with permission
People want to know where the economy is headed. What they should be asking is does the US still have an economy? My answer is no, it doesn’t. I will explain why.
For a quarter century I have pointed out the destructive effect of moving American investment and jobs to China and other points abroad. Offshoring served the interests of corporate executives and shareholders. The lower labor costs raised profits and, thereby, executive bonuses and the prices of the stocks, resulting in capital gains for shareholders.
These benefits accrued to a small percentage of the population. For everyone else these closely held benefits imposed huge external costs many times greater than the rise in profits. The American manufacturing workforce was devastated, as was the tax base of cities, states, and the federal government. The middle class shrunk and the populations of St Louis, Detroit, Cleveland, Pittsburgh, South Bend and Gary Indiana, Flint Michigan and other cities declined as much as 20%. The hopes and aspirations of millions of Americans were crushed. Once thriving American cities became blighted. Supply chains and real estate values collapsed. (See Paul Craig Roberts, The Failure of Laissez Faire Capitalism, Clarity Press, 2013. https://www.claritypress.com/book-author/paul-craig-roberts/ )
As incomes fell for the bulk of the American population, incomes rose for the One Percent. Income and wealth gains have been concentrated at the top resulting in the United States today having one of the most unequal distributions of income and wealth in the world.
As the offshoring of high productivity, high value-added manufacturing jobs reduced American incomes, US aggregate domestic demand was impacted and economic growth fell. The Federal Reserve expanded credit and substituted an increase in consumer debt for the missing growth in consumer income. This aggravated the indebtedness that economist Michael Hudson correctly emphasizes is exhausting consumer income to pay debt service—mortgages, car payments, credit card and student loan debts—which leaves little or no discretionary income to drive economic growth.
Hudson, who has been on the job of analyzing America’s eroding economy for a long time, emphasizes that the US economy is no longer a productive or industrial economy but a financialized economy in which bank lending is not used for new plant and equipment but for the financing of takeovers of existing assets in pursuit of interest, fees, and capital gains– what the classical economists called unearned income or “economic rent.” In short, Hudson demonstrates that the American economy is no longer a productive economy. It is a rent-seeking economy.
Hudson points out that as the economy is increasingly financialized, looting shifts to the privatization of public assets. The examples are endless. In the UK the post office was privatized at a fraction of its value, along with public housing, transportation and British Telephone, resulting in huge private gains. The French also privatized public holdings. In Greece the municipal ports and water companies were privatized along with Greek protected islands. In the US, segments of the armed forces are privatized, along with prisons. Chicago sold 75 years of its parking meter fees to a private entity for one lump sum payment. Everywhere public assets, including services, are being sold to private interests. In Florida, for example, the issuance of the annual vehicle license tag is privately provided. When there is nothing left to privatize, what will banks finance?
Hudson notes that the real economists, the classical ones, focused on taxing unearned economic rent, not labor income and productive activity. Today’s neoliberal economists are unable to differentiate between economic rent and productive activity. Consequently, GDP analysis fails to reveal the economy’s transformation from a productive to a rentier economy. Hudson terms neoliberal economists “junk economists,” and I concur. Essentially, they are shills for the financial sector and for the offshoring corporations who paid them to conflate job and investment offshoring with free trade.
I am convinced that if the entirety of neoliberal economics were erased nothing of value would be lost. Economists, particularly academic economists, are in the way of truth. They live in a make-believe world that they created with assumptions and models that do not bear on reality.
I am familiar with universities and academic economics. I graduated from an engineering and scientific institution—Georgia Tech—and then was a graduate student in economics at the University of Virginia, University of California, Berkeley, and Oxford University. I had four Nobel prize-winners as professors. I have a Ph.D. in Economics. I have made contributions to major journals of economics and to others outside the field, 30 published articles altogether before I left academia. I served for years as a reviewer for the Journal of Political Economy with the power to decide publication of submitted research. I have peer-reviewed books from Harvard University Press and Oxford University Press. I have debated Nobel prize winners before professional audiences. I served as a Wall Street Journal editor and as Assistant Secretary of the US Treasury, and have had many university appointments. Michael Hudson also has real world experience in major financial institutions, international organizations, and governments, as well as US and overseas professorships and contributions to academic publications in many languages.
In other words, we know what we are talking about. We have no interest to serve except truth. No one pays us to serve an agenda.
But we are only two voices.
Two decades ago I was presented with the prospect of a large increase in amplification of my voice about the deleterious effects of offshoring. In December 2003 I received a telephone call from US Senator Charles Schumer, Democrat, New York. Senator Schumer had been reading my columns in which I made the case that under the guise of free trade, jobs and investment were being moved offshore at the expense of US economic success. Senator Schumer shared my concern and asked if a Reagan Treasury official would agree to coauthor with a Democrat Senator an article for the New York Times raising the issue whether job offshoring was in America’s interest.
Our article appeared on January 6, 2004. Here it is:
Second Thoughts on Free Trade
By CHARLES SCHUMER and PAUL CRAIG ROBERTS
New York Times, January 6, 2004
“I was brought up, like most Englishmen, to respect free trade not only as an economic doctrine which a rational and instructed person could not doubt but almost as a part of the moral law,” wrote John Maynard Keynes in 1933. And indeed, to this day, nothing gets an economist’s blood boiling more quickly than a challenge to the doctrine of free trade.
“Yet in that essay of 70 years ago, Keynes himself was beginning to question some of the assumptions supporting free trade. The question today is whether the case for free trade made two centuries ago is undermined by the changes now evident in the modern global economy.
“Two recent examples illustrate this concern. Over the next three years, a major New York securities firm plans to replace its team of 800 American software engineers, who each earns about $150,000 per year, with an equally competent team in India earning an average of only $20,000. Second, within five years the number of radiologists in this country is expected to decline significantly because M.R.I. data can be sent over the Internet to Asian radiologists capable of diagnosing the problem at a small fraction of the cost.
“These anecdotes suggest a seismic shift in the world economy brought on by three major developments. First, new political stability is allowing capital and technology to flow far more freely around the world. Second, strong educational systems are producing tens of millions of intelligent, motivated workers in the developing world, particularly in India and China, who are as capable as the most highly educated workers in the developed world but available to work at a tiny fraction of the cost. Last, inexpensive, high-bandwidth communications make it feasible for large work forces to be located and effectively managed anywhere.
“We are concerned that the United States may be entering a new economic era in which American workers will face direct global competition at almost every job level — from the machinist to the software engineer to the Wall Street analyst. Any worker whose job does not require daily face-to-face interaction is now in jeopardy of being replaced by a lower-paid, equally skilled worker thousands of miles away. American jobs are being lost not to competition from foreign companies, but to multinational corporations, often with American roots, that are cutting costs by shifting operations to low-wage countries.
“Most economists want to view these changes through the classic prism of “free trade,” and they label any challenge as protectionism. But these new developments call into question some of the key assumptions supporting the doctrine of free trade.
“The case for free trade is based on the British economist David Ricardo’s principle of “comparative advantage” — the idea that each nation should specialize in what it does best and trade with others for other needs. If each country focused on its comparative advantage, productivity would be highest and every nation would share part of a bigger global economic pie.
“However, when Ricardo said that free trade would produce shared gains for all nations, he assumed that the resources used to produce goods — what he called the “factors of production” — would not be easily moved over international borders. Comparative advantage is undermined if the factors of production can relocate to wherever they are most productive: in today’s case, to a relatively few countries with abundant cheap labor. In this situation, there are no longer shared gains — some countries win and others lose.
“When Ricardo proposed his theory in the early 1800’s, major factors of production — soil, climate, geography and even most workers — could not be moved to other countries. But today’s vital factors of production — capital, technology and ideas — can be moved around the world at the push of a button. They are as easy to export as cars.
“This is a very different world than Ricardo envisioned. When American companies replace domestic employees with lower-cost foreign workers in order to sell more cheaply in home markets, it seems hard to argue that this is the way free trade is supposed to work.
“To call this a “jobless recovery” is inaccurate: lots of new jobs are being created, just not here in the United States.
“In the past, we have supported free trade policies. But if the case for free trade is undermined by changes in the global economy, our policies should reflect the new realities. While some economists and elected officials suggest that all we need is a robust retraining effort for laid-off workers, we do not believe retraining alone is an answer, because almost the entire range of “knowledge jobs” can be done overseas. Likewise, we do not believe that offering tax incentives to companies that keep American jobs at home can compensate for the enormous wage differentials driving jobs offshore.
“America’s trade agreements need to to reflect the new reality. The first step is to begin an honest debate about where our economy really is and where we are headed as a nation. Old-fashioned protectionist measures are not the answer, but the new era will demand new thinking and new solutions. And one thing is certain: real and effective solutions will emerge only when economists and policymakers end the confusion between the free flow of goods and the free flow of factors of production.
“Charles Schumer is the senior senator from New York. Paul Craig Roberts was assistant secretary of the Treasury for economic policy in the Reagan administration.”
Senator Schumer’s staff seemed to think that free trade was the problem because real world conditions had changed. My position was that jobs offshoring was not free trade. But I realized that any opening of the question was promising.
Our article in the New York Times had an extraordinary impact. The Brookings Institution, at that time an important liberal economic policy think tank that was home to former economic policy makers, called a Washington conference to hear us and examine our position. There was a panel with myself, Schumer, a former policymaker and the head of the US manufacturing lobby who could not figure out which side to be on. C-Span gave the conference live coverage and rebroadcast it a number of times.
Here is the video of the conference called in Washington to submit the argument by Schumer and myself to scrutiny: https://www.c-span.org/video/?179821-1/us-trade-policy-global-economy
Schumer and I carried the day. Members of the audience came up afterwards, including World Bank economist Herman Daly, in support of my position that the destruction of the American manufacturing economy could not be reasoned away as a free trade result.
Senator Schumer had a sincere interest in what job offshoring was doing to his constituents. He proposed that we continue our collaboration and write a second article for the New York Times. In those days the Times was still, partly, a newspaper rather than a total propaganda voice for the Establishment, and the Times assumed nevertheless that a Democrat Senator from New York and an Treasury Official who had been confirmed in office by the US Senate were part of the establishment.
The second column began and then suddenly went dead. No response. A telephone call revealed that the staffer with whom I was working was no longer there. After discussing this with old Washington hands, I concluded that Schumer had not realized that he was threatening Wall Street’s interest in higher profits by opening the question of jobs offshoring and had received a good talking to.
Wall Street Killed the Schumer/Roberts truth squad and protected the profits from job and investment offshoring.
This is what happens to elected officials when they attempt to represent the general interest rather than the special interests that finance political campaigns. The public interest is blocked off by a brick wall posted with a sign that says get compliant with the Establishment or get out of politics. Unless money is taken completely out of electoral politics, there will be no democracy.
Globalism serves to destroy sovereign and accountable government. In the US globalism destroyed the manufacturing middle class. Now Covid lockdowns are destroying the remainder of the middle class—family businesses. Businesses have fixed costs. When they cannot operate red ink mounts and the businesses fail. The lockdowns together with jobs offshoring monopolize the economy in few hands. This is not a theory. It is what we are experiencing. Feudalism is being resurrected. A few lords and many serfs. The serfs will be dependent on the lords and will have no independence.
Offshoring of jobs? lol????? An economy????
Here in Canada I have a dear friend of Indian extraction immigrant who owns a house worth 1.2 million dollars? Nothing special really and its not even in a great location and for a house worth that kind of money it doesn’t even have real wood floors. It’s all laminate and the more I learn about the place I’m left thinking too myself yeah I wouldn’t even give 500,000 thousand for the place if it ever went to market. And if it does go to market I bet it will be worth even more?
At work today and I work in the oil and gas sector in a non elite role another friend and I got to talking about the cost of living and how our wages don’t cut it. He even said to me I would work for 10.00 dollars an hour if the blasted price of everything would just come down! The way its going not even after I finish my training and get ticketed will I be able to afford a place at 30 an hour? Yeah, and its cheaper to have a mortgage than to rent at least for some of us!
Our company which is manufacturer oil and gas is always on credit hold with suppliers, we can’t keep up with all of the parts that we need and no bank will extend a line of credit to us. We did however just purchase a new CNC machine guess how? Another company somewhere went bankrupt due to covid and we got it for less than half the price of new and the bank lol gave us the loan? That was the only way to replace our old and wearing out machines?
Affordability is killing us all. Wages are not meeting the inflation of everything? Hell new condo’s are going up all over the place and for a 600 sq. ft. hole in the sky the price begins at 400,000 if your lucky. Strata are a disaster with insurance costs going into the stratosphere?
Barring some kind of divine miracle the West is done or soon will be.
Gerry
“Feudalism is being resurrected. A few lords and many serfs. The serfs will be dependent on the lords and will have no independence”. Things appear to be moving that way, in true globalist fashion. What is remarkable is that this globalist Agenda, intended for the whole world, has seen it’s application in the US, the chief advocate of globalism, weakening the country economically, industrially, financially and socially, as if the US has a death wish. And Europe ? As Pepe Escobar has written in his last article, “Political loyalties will incrementally shift as economic interests turn to the East, and Europe is gradually becoming the western peninsula of Greater Eurasia”. I think the inevitable is happening. And the US ? Will it survive or implode ? We shall see.
@ B.F.
There is a quote I will never forget from the Central banker Paul Warburg:
“The world lives in a fools paradise based upon fictitious wealth, rash promises and mad illusions. We must beware of booms based upon false prosperity which has its roots in inflated credits and prices.”
If feudalism is being resurrected is it maybe because they know and see what is actually going on? This need to be control freaks over it all because the sin nature can’t be controlled within the human heart. Hence the coming social credit system of china?
I believe Paul Warburg after witnessing the roaring 20’s and all the excess was so full of contempt for the political class that he would be the first to spit in disgust at it all? And note I’m in no way supporting such a banker but it seems to me they know what is afoot because they see and pay attention to the actual numbers.
As for me that quote fuels more what is going on around me than what is happening in Ottawa. A house that sells one day for 200,000 and then after a few thousand in renovations go back on market for an added 100,000? It’s the new lottery win way for most of society and people actual pay or buy houses thinking they can do the same? But of course there is more to it all than just this to.
I would love to be a banker for just a few weeks to see the insanity for myself or be a fly on the wall and listen in? and the homelessness now. i really can’t stand it anymore what is occurring outside the doors of my condominium!!!
And everyone is crying to the government for help. Tell me you want to be a feudal lord over all of this bullshit?????!!!!!!!
Europe could become the western peninsula of greater Eurasia, if it wouldn’t push hard against the East (Russia, Belarus).
Anonymous
Europe pushing “hard” against the East (Russia, Belarus) ? Yes, the banker controlled EU is indeed pushing against the East, but these efforts are based on old manuals for color revolutions and regime change, as proven in Belarus with anti-Lukashenko demonstrations and in Russia with pro-Navalny “demonstrations”. However, both efforts saw failures, especially in Russia. It will take the EU some time to accept the reality of changing times.
They are being forced to learn pretty quickly after Borells visit to Moscow over the weekend and Lavrovs public comments and this today, Russia’s representative to United Nations Vasily Nebenzya called Paris and Berlin to their faces:
“Those, who support only one side in the Ukrainian conflict and indulge, contrary to all facts, Ukraine’s sick fantasies about Russian aggression, cannot call themselves intermediaries. You, gentlemen, are rather accomplices of crimes by Kiev against the population of Donbass”
Reality is coming hard and fast and it would appear that finally the gloves come off in the public arena. Russia doesn’t need Europe (as it now is) but Europe sure as hell needs Russia.
Well said, however, what’s weird is that the AP article that cites your quote blames Russia for starting the conflict in Donbass and
“The United States reaffirms its unwavering commitment to Ukraine’s sovereignty and territorial integrity,” he said, accusing Russia of escalating “its oppression of any dissent to its brutal occupation of Crimea.”
How does one negotiate with such people? The US stages a coup in Ukraine and commits to its sovereignty, while ridiculously accusing Russia re Crimea, when anyone who’s visited or lives there abhor the Kiev fascists, who’d commit genocide in Crimea if given the chance.
Too bad that the DNR didn’t finish the job in 2015, which would have resulted in the US plot totally failing…and the result would have been, what? sanctions and accusations against Russia?
Yes, Gerry, lets talk about the economy and the energy sector, but let’s first separate it from the natural resource sector that its lumped in with. . You might be interested to know that 85% of LNG investment is public money, which could have gone a long way to improve health care, education and infrastructure. Out of the $21 billion that the resource sector earned in BC, 3% or .63 billion (six hundred and thirty million) came from the oil, gas and support industries. In 2016 about 200,000 Canadians worked in the Oil and gas sector, 80% of them in Alberta, while 10,600 worked in British Columbia. Jobs are important, but the fact that we ship raw materials produced by 10,600 workers we lose some 222,600 value added jobs which are created in US and elsewhere where the resource is refined into a useable product.
@ BeliVuk
Well isn’t that something!
Oil and gas will never leave us never and if perchance it does leave us though depletion and Peak Oil believe me the last thing anyone of us have to worry about is health care, education and infrastructure.
As for oil and gas leaving us because of climate change and our governments investing ten’s of billions of dollars into electrification and other nonsense windmills and such that is never going to work!
https://www.armstrongeconomics.com/world-news/climate/what-the-gore-gates-schwab-are-too-arrogant-to-admit/
When they learn that climate change and carbon credit is all nonsense and that climate change has got nothing whatsoever to do with industrial pollution maybe we’ll get back to doing what is right. After that is they’ve all cleaned their shorts and their hearts more importantly!
The worst is yet to come. The real inflation will be caused by SHORTAGES, not due to their fake money supply theory. The designed COVID crisis causing an economic shutdown is already causing a deterioration of supply lines and the reduction of production.
https://www.armstrongeconomics.com/markets-by-sector/agriculture/global-food-shortages-beginning/
This will reduce the global population according to Claus Schwab’s economic reset. His World Economic Forum has published a book on this.
Gerry, I read your woes many years ago in an essay published around 1940-1950 by the great French poet Paul Valéry. He said “the West” was committing economic suicide by outsourcing to “the more numerous, more hardworking, more frugal and more socially cohesive half of the globe” . But who listens to poets?
Vote Communist at the next election.
“Woe to the Land, to hastening ills a prey,
Where wealth accumulates and men decay” — Oliver Goldsmith, The Deserted Village
Well if they don’t have an economy now they certainly won’t be having one in a few years time when all the Dr’s and nurses have prion disease and everyone else too of course so yeah, what economy:
https://scivisionpub.com/pdfs/covid19-rna-based-vaccines-and-the-risk-of-prion-disease-1503.pdf
No economy can withstand what is being baked in to the USA by these genocidal mRNA vaccines.
https://www.globalresearch.ca/could-spike-protein-moderna-pfizer-vaccines-cause-blood-clots-brain-inflammation-heart-attacks/5737069
Digital Algorithms, computers into banks, before or about 1960. 1980s, Predatory Bender, a book about the agenda, i.e., usury credit debt. Bill Clinton and speculating investors take over mid 1990s. Until the transparency of real reality exposes, money = energy exchange agreement to support human beings We The People are in a serious earth decline. Unz (it appears) word quotas, but not the history of how USA tried to be Global Master via digital algorithm slavery. Time to honor cui bono.
Saker, you are a professional human being, w/ gene of altruism, Moon of Alabama too. Thank You Both very Much.
This article hits the nail right on the head! What it doesn`t mention is that the factors that made the present situation inevitable existed from the start of the experiment of the American republic, as indeed in the UK: An inadequate check on the power of the vested interests of the money lenders. As soon as they were allowed to take over the establishment, – since the assassination of Lincoln, – it was over! The cancer that are the money lenders, made possible through their influence in the systems of higher learning the birth of neoclassical economics and with it the shift to short-term profit-seeking instead of the old long-term views that sought a development of an economy as a whole.
Within the larger historic theory of Polybius`s anacyclosis, it seems that the fact that moneylenders will always be usurers, if permitted to by the absence of an incorruptible market police, became the engine that drove western democracies over the cliff to crash into what they are today, – as crucially brought to our attention before by the Saker, – ochlocracies!
Lincoln could have been assassinated by Freemasons. There was naturally a cover up which is their SOP. I am not sure what their motive was. John Wilkes Booth was a Freemason. On Mount Rushmore, Lincoln is separated from the other three presidents who were Freemasons. A father and son Freemason team built Mount Rushmore. They are very much into symbolism.
The Anglo-Zionists put Woodrow Wilson in as President, because Taft, a practical man would have never signed the Federal Reserve Act and Income Tax. Wilson signed it in 1913, just in time to finance WW1 and then later the forever wars. As a typical academic, Wilson realized his error too late. They have too much faith in their untested theories, like modern monetary theory.
Hudson is 100% right. I don’t know the future, and am stuck here in Canada. But, have posted in several places that were I young again I’d start an office in Hong Kong. Michael Hudson is now advising China. One wishes that the 1% would have listent to Paul Craig Roberts, and Hudson. Oh well.
When Political Economy became “Economics”, everything went downhill. There’s no economy dissociated from politics, that’s technocracy. Now how can we unite dissident economics professors and universities around the world?
Good point. The Marginalist Revolution – 1870 -turned real living political economy into a dead-hand religious dogma which is taught everywhere in schools, universities, and the media. It was Marx who said that:
”In France and England the bourgeoisie had conquered political power. Thenceforth, the class struggle, practically and theoretically, took on more and more outspoken and threatening forms. It sounded the death knell of bourgeois economy. It was thenceforth no longer a question of whether this theorem or that theorem was true, but whether it was useful to capital or harmful, expedient or inexpedient, politically dangerous or not. In place of disinterested enquirers; there were hired prize-fighters; in place of genuine scientific research, the bad conscience and evil intent of the apologetic.”
Capital, Volume 1, Afterword to the Second German Edition
Great piece. The current economic situation in the US and other major capitalist countries did not arise in a vacuum, but is direct consequence of post-WWII economic development. The US emerged from WWII as the world’s leading military and economic power. Since that time US hegemony has been predicated on: 1) unrivaled military power, 2) control of world’s energy reserves (primarily in the ME), and 3) maintaining the dollar as the world’s reserve currency. This situation began to change in the mid-1970s as US corporate profits stagnated/declined, a direct consequence of increased competition from rebuilt economies in Europe, primarily Germany (Marshall Plan) and Asia- Japan, S Korea (Korean and Vietnam wars) and more recently China. In response, starting in the early 1980s, US policy makers pursued decades of neoliberal economic policies- multiple tax cuts for the wealthy, financial deregulation, attacks on labor and poor, outsourced manufacturing jobs to Mexico, China and other low-wage platforms, and spent $ trillions of taxpayer money on the Pentagon and wars across the ME.
A fundamental axiom of Capitalism is that business enterprises always seek the highest rate of return on their capital investments. Further, US CEO compensation is typically tied to stock price. Given this reality, large US corporations have curtailed domestic business spending (i.e., investing in new plants and equipment) and instead have allocated large amounts of money for stock buybacks. The reason for this behavior is clear- investments in new plants and equipment have payback periods ranging from years-decades, while spending money on share buybacks and stock futures, using de facto free money from the FED, results in near instantaneous increase of equity prices and higher financial compensation for corporate management. No one forced the CEOs of Apple, Nike, Levi’s, GM, etc. to move their RD/production facilities to China or other low-wage platforms. Rather, this was done deliberately to maximize corporate profits. Unfortunately, the proverbial ‘chickens are coming home to roost’. The US is lagging behind China in 5G technology because corporate CEOs have been more interested in boosting their share price and financial compensation, rather than investing in new plants and equipment domestically to compete with China in this technology. No amount of jingoism, nationalism, racism, populist rhetoric or military threats from Politicians or talking heads on corporate media alters this reality. See- US economic decline and global instability The Saker Blog Jan 19, 2021; Link: https://thesaker.is/us-economic-decline-and-global-instability/#comments
PCR makes a very important point in the second to last paragraph…”Unless money is taken completely out of electoral politics, there will be no democracy.”
Too true!…but this is only part of the reason why the US finds itself financially, socially, and politically dysfunctional. Look no further than the latest tragic Warshington debacle for evidence of this profound tragedy.
Of course, he dare not even mention the giant gorilla in the room, because he would be risking his life even mentioning that the private ownership FED model is the fundamental root cause of the demise of the empire.
What PCR puts forward is merely a by-product of the real problem. I can talk about it because I am such small fry…the PCR’s and the Hudsons of this world cannot…they have to skirt around this taboo subject on pain of death
So I will say it for PCR…”Unless money is taken completely out of electoral politics AND THE FED PRIVATE OWNERSHIP MODEL IS COMPLETELY DISBANDED, there will be no democracy.”
The cause of the problem is farcically simple. And the road to remedy and reform?…well sadly, not so much. Dislodging 107 years of rabid and massive entrenchment really does pose quite the challenge!
Cheers
Col
PS Mods…my apologies for the capitals to make my point in expanding PCR’s statement…I would have used bold instead, but I don’t know how…66 years old and technically challenged you know… LOL!
Schumer? That Schumer? “Tell me with whom you walk and I will tell you who you are.”
People need to stop accusing Covid of destroying the economy. Rather it is the inability of the “economy” to cope with Covid or anything like it, i.e. that we as a society cannot handle something as simple as lively virus; something that every “primitive” society readily does from time to time. Basically, the U.S. economy has an inability to assume an emergency footing. Covid is simply a canary on the scene as it is showing us how utterly disfunctional the U.S. economy really is.
Excellent point Robert!
Indeed a tragically small list of countries have been incredibly successful in coping with Covid. If I had to pick a star performer it would have to be Vietnam.
Compare 0.4 deaths per million inhabitants for Vietnam compared to the US at 1463. Put it another way… the US MR is currently 3657 times that of Vietnam!
And to think that this result was achieved in a country of almost 100 million people and placed right on China’s border. What makes their success even more astonishing is that they achieved this with a population density 3.3 times higher than that of the US and a wealth rank of 109th compared to 22nd.
[medium wealth per adult population]
Cheers
Col
Excellent point Robert!
Indeed a tragically small list of countries have been incredibly successful in coping with Covid. If I had to pick a star performer it would have to be Vietnam.
Compare 0.4 deaths per million inhabitants for Vietnam compared to the US at 1463. Put it another way… the US MR is currently 3657 times that of Vietnam!
And to think that this result was achieved in a country of almost 100 million people and placed right on China’s border. What makes their success even more astonishing is that they achieved this with a population density 3.3 times higher than that of the US and a wealth rank of 109th compared to 22nd.
[medium wealth per adult population]
Cheers
Col
You should watch the 2004 c-pan panel discussion with Paul Craig Roberts about the side effects of globalism and the realities of modern free trade not following the model of the classic textbook definition of free trade.
He gives predictions for the future (political instability…):
https://www.c-span.org/video/?179821-1/us-trade-policy-global-economy
They print money out of thin air, then they charge you for borrowing that money they printed out of thin air in the first place.
It is a global phenomenon far beyond our individual control, but be assured that the world is, must and will pay a very heavy price for allowing such a system to take over humanity.
The biggest issue to be discussed is of course the relative ‘cost of living’ in Asia and the USA.
In order to actually own a family home in New York or its environs, a salary of $150,000 is barely adequate. You might like to think about what $150,000 would buy you where the Asian replacement workers are based. If it is a much bigger mansion, then there is not ‘free trade’ going on, because the ‘economic conditions’ in the USA are simply unfair for the US workers. They are forcibly discriminated against through huge cost-of-living discriminators.
The second critical issue is the difference between free movement of capital and free movement of labour.
Capital is capital wherever in the world it is located. It might be US dollars, rupees, yuan, Euros, zlotys, Rubles etc etc, but it is freely transferrable in milliseconds at minimal cost.
Humans can’t simply uproot their entire family and just start again in India, especially not if they have young children. Children can’t learn every language on earth and seamlessly fit in in milliseconds overseas. They can’t and that’s final. It’s why unexpurgated free movement of capital is not appropriate, nor is it fair, nor is it reasonable. It is a tool of the rich to enslave the poor and make the rich richer and the poor poorer.
OK, you can have ‘international schools’ overseas in major cities (and often they exist for the diplomatic and banking elite), where the lingua franca is mostly English. But what about the mothers, the fathers? How do they suddenly live on equal terms. Yes, you might be able to move between UK and Germany, France and Switzerland through language studies at school. But you can’t learn every language on earth and can’t expect a visa to countries which are in the growth phases of their economies, still prioritising jobs for their own workers.
There simply is no ‘free trade’ in human capital. You get the poor leaving areas of destitution to compete for jobs in lands of greater prosperity. They can send money home where the money fetches multiples in ‘purchasing power’ when the local workers must pay the expensive home prices. It’s simply discrimination which no-one will talk about.
There’s nothing wrong with exchanges of workers between nations for mutual benefit.
But when it is millions of migrants destroying several generations of traditional skills and aspirations, it is simply treason committed by the owners of capital, owners of capital who have plugged nationalism for as long as it suited them, including inciting the poor to die in their millions to preserve that very concept.
People need to see the ‘owners of capital’ in much more stark and realistic terms.
It won’t be very friendly.
Furthermore, they need to control whatever levels of capital they themselves own by not ceding control of it to those who would wilfully steal it from them.
That means local, mutually owned savings vehicles investing locally or at best regionally for the benefit of the local capitalist engine.
Ethical capitalism is a thorny subject. There is no simple formula for it.
But most folks can recognise a brutally rigged deck when they see one.
The time for tolerating it is now long gone…
As far as Canada is concerned this mess was created in 1970 when the Federal Government eliminated the Bank of Canada as the lender for infrastructure to Federal, Provincial and Municipal governments and gave it to the private banks. The consequence of this was huge public debt which is socialized and paid for by the wage earner. The other thing that the Federal Government did , they started to tax Capital Gains. This brought speculators into the real estate market. For example a $1 million price for a hotel in an interior town of BC could buy you a similar hotel in Vancouver for the same price. The determining factor what hotel you purchased was the income statement. The interior town had a better income statement, so you bought that hotel. Fifteen years later the hotel in Vancouver sold for $30 million while the hotel in the interior will sell for maybe $2.5 million.
@ Rhys Jaggar
You might like this:
“A world of plenty and a day of peace so near, so possible
…”BUT”….
The truth is our world is a world of plenty. The world’s finest scientists estimate earth’s real riches to be her grain and her gold, her fruit and gems, her timber and treasures almost limitless in minerals and resources. Some suggest that earth’s combined wealth would conservatively total one decillion dollars. Divide this equally among earth’s present population and every man, woman, and child would be a billionaire a billion times over. Divide the 58 million square miles of land equally and every person alive today would have 10 acres each. Many good men today dream and discuss a world that man could live in if he were free from wars and deception and self-destruction.
Dr. Peter Goldmark, who was President and Research Director of CBS Laboratories for 36 years, shows for example how a hundred million Americans could build model communities of 3000, and use only 4Vo of America’s land.
R. Buckminster Fuller, is called by U. Thant, one of the greatest philosopher-scientists of our time.
On April 26th, 1973, when flying from Dallas to Los Angeles, I picked up the airline magazine and read in the
American Way the interview between the architect, Michael Ben Eli and Buckminster Fuller. Mr. Fuller said, Sadly we see enormous numbers of stranded poverty stricken people while potential abundance is being deliberately curtailed by governments subservient to the landlord’s will. Humanity is so accustomed to failure it still assumes failure to be normal, and does not rEalize that it has literally earned -and actually acquired- the capability to take care of everyone on earth at a higher standard of living than ever heretofore experienced by anyone. The really big fact is that we are going to have to go through a complete mental resorting of what it is all about. Then we are going to have to go about taking “care of everybody not as on relief’ but with the same spontaneous- welcome and love accorded a new-born baby.
Landlordism will no longer be able to extract a ransom’ Money too will become obsolete’ with the ability to
produce enough to take care of all’ The fact that we now have the capability to support all life and are not doing so means we have to introduce a new system. One that can make the world work.
The flight time between Dallas and Los Angeles was devoted primarily to the consideration of the words of
Buckminster Fuller. It was not my first introduction to this philosopher-scientist. In past occasions our paths had crossed in American cities where each of us had been speaking under different auspices’ I agreed with his conviction that the world was large enough and sufficiently rich to sustain all men on the highest level’ under ideal condition.. But I could not agree that man alone’ without God’ could ever realize its Potential.’
After reading the “Master Plan for Living” provided by Peter Goldmark, and studying the blueprint for the future drawn by Buckminster Fuller, I had to sigh with Cicero and say . . . “Thou reasonest well”’ but”
Something was missing’ I knew it’ they knew it’ all the leaders of the world knew it’ The Kremlin was confused’
The U.S. Senate was perplexed’ The leaders of Europe were distressed. What was-man’s future’ his ultimate end?
Willard Cantelon pgs 130 -131
“Everywhere public assets, including services, are being sold to private interests”
Including running the elections.
For the past year the Yellow Wests in France have been fighting this battle. Macron is selling off public assets after which tolls are placed by the private sector owner. The assets were built with public taxes so the Yellow Wests policy is if you want to put tolls on the roads they want the government to do it so that the funds flow back to the government.
“Unless money is taken completely out of electoral politics, there will be no democracy.”
Perhaps taking money out of electoral politics is the definition of communism.
Concerning the 20% drop in citys’ population, where did all those people go?
“Concerning the 20% drop in citys’ population, where did all those people go?”
Interesting question, Johnny. From WikiPedia re Shrinking Cities: “Pallagst[1] also suggests that shrinkage is a response to deindustrialization, as jobs move from the city core to cheaper land on the periphery. This case has been observed in Detroit, where employment opportunities in the automobile industry were moved to the suburbs because of room for expansion and cheaper acreage.[8] “
The financial Beast seems to be unstoppable, but it has a serious flaw. Banks pretend that they are loaning valuable, pre-existing bank capital, upon which interest must be paid. However, the banks create the capital they loan simply by monetising customer collateral, using the bank’s licence to create bank credit.
This pawnbroking process then is a little more sophisticated than simply ‘creating money from nothing’, for it involves the transfer of the legal title to the customer’s collateral, to the bank.
However, all loans and debts, created by fraud and deception, by crimes against the laws for fiduciary duty, can be erased with the stroke of a legal pen, with financial cartel penalties imposed. Is this not a simple Shakespearean solution to our debt problems?
Agreed, Ric, but if only it were that simple. Try to find Rivero’s “All Wars Are Bankers’ Wars” if you have not seen it already. History is full of people the banker gangsters have targeted as traitors, dictators, terrorists, etc. for trying to reign in the “financial cartel.”
“Today’s neoliberal economists are unable to differentiate between economic rent and productive activity”.
Unable or, perhaps more likely, unwilling. Well-paid professionals with comfortable jobs and good reputations are always reluctant to rock the boat; and they usually know what their bosses want to hear.
Most modern “economics” consists of unintelligible theories and equations leading always to the conclusion that everything is for the best in this best of all possible worlds. As long as the rich and powerful are allowed free rein to become ever more rich and powerful, all shall be well.
How Voltaire would laugh, and Adam Smith scowl.
There is nothing “free” in free trade. Ricardo’s theory only works when we hold all other factors in production (land, labour and capital) constant. Remember the old Latin term Ceteris paribus that generally means “all other things being equal.” In economics, it acts as a shorthand indication of the effect one economic variable has on another, provided all other variables remain the same. It’s like saying to put one person in hot water and another in cold water on average they will be comfortable.
Let us look at capital. Capital is typically cash or liquid assets held or obtained for expenditures in the economy is influencing economic growth. This is manipulated by governments and is never constant since capital moves at a click of your computer while land and labour not so.
Just look at one element interest rates in money supply and how capital is manipulated For example interest rates affect the growth of money supply in Canada and the Bank of Canada (government) monitors this growth. Bank of Canada (government) and private banks manipulate interest rates to target inflation using the Monetary Policy and setting “i” rates is part of the Monetary Policy so that private banks can make huge profits through speculation and insider knowledge. You know kind of like they want to keep it below a certain level (2%) so people on fixed income can barely put food on the table, and barely pay their bills, at the same time, business owners can expand their assets since low rates are intended to turn people from savers into consumers, also into borrowers.
People on fixed income wage earner, and pensioner are powerless to improve their living standard. Low interest rates are an enemy of pensioners, and friends of business owners. Low “i” rates discourages savings and encourages people to invest in housing, new equipment, vehicles and property.
The interest rates that you and I pay are set by banks. There are too many factors that determine these rates, and Ceteris paribus does not touch on any of them. Money Supply in Canada is not determined by the government it’s your and my action in the economy that plays the main role in how big is the Canadian bag of money that you and I want to get our hands on. If we want too much out of the bag and force the inflation above 2% the government slaps us down using monetary and fiscal policy that Mr. Keynes articulated.
Interest rates are supposedly, or we are told, set by the market, you know the thing the champion of Capitalism Adam Smith called the “invisible hand”– supply and demand. You can plot this very easily on a graph. Plot interest rates (cost of borrowing) on the Y axis and demand for money on the X axis and follow your finger. The higher the “i” rate the lower the demand for “M”. However, the federal government and private banks socialize risk manipulating “i” rates.
Private banks, and financial institutions in cooperation with the federal government manipulate “i” rates and Capitalism to create instability in the economy so essentially continuing a system where profits are privatized and…losses socialized. We have abandoned Keynes, abandoned regulations, attacked wages, attacked unions, and stolen workers productivity which is causing the recent mess in the economy. We had to go back to Keynes’s theory to save us from the “racketeers on Wall Street who caused the mess.”
Dear Dr Robert,
I believe you’re missing the point. Ricardo’s principle, as described, can function harmoniously only amongst free sovereign economies. By denying most sovereignty to 60/80% of the world nations and thereby willfully sabotaging any economic development, the US and EU guaranteed the global imbalances in purchasing power and wages at the root of western deindustrialization. As did the West insistence in imposing the US$ and Euro as the perpetual twin pillards of world trade and CB’s reserves, which structurally necessitates a constant outflow of those currencies (trade deficit). Until these two mistakes that incestuously reinforce one another are recognized and corrected, the present trends will run their courses until those imbalances are resolved organically. Meaning the total destruction of Western purchasing power and wages through hyperinflation of the monetary base. China understands the trap the west has set itself in, and does not intend to repeat the mistakes. That is why they’re dedication to the BRI grows as their wages increases, so as to close the gap between its growing wages and those of lesser developed economies. A choice that the West failed to make in its own time. The predictable result should be wide spread dissemination of production sources in line with Ricardo’s principle. Particularly so if the BRI and associate projects successfully switch to a gold backed monetary system, which is also an underlying assumption for a smooth expression of Ricardo’s principle, but which is absent under present circumstances.
Also I’d like to highlight that Ricardo’s principle is not a matter of policy. It is a real economic phenomenon that always expresses itself independently of any politics or regulation. It cannot be dismissed or abrogated. To do so is tantamount to jumping off a cliff, then as the ground gets nearer, realize that gravity isn’t so cool after all and decide to get rid of it. This is not how it works, even with rockets or propellers, sonner or latter one must make contact with the ground. Best not to jump off a cliff.
The problem with Ricardo. Those who innovate first maintain the comparative advantage while those who outsource remain hewers of wood and drawers of water.
Here are a couple of cliches for all y’all.
“England will expand itself out of existence, Germany will militarize itself out of existence, and the US will spend itself out of existence.” I think Khrushchev said that in 1959, but I could be wrong.
“Give the US enough credit and it will hang itself in debt.” I said that just now and I’m right.
My amateur perspective of the Cold War is that the US gained the illusion of victory by offshoring consumer productivity and retaining military productivity. Thus, there were two sphere’s of influence supporting the US, namely the empire of military allies and NATO, and the economic empire of just about the entire planet except those within the Communist sphere of influence. The old Soviet system could not keep up with the rest of the world and it collapsed. At this point the US needed to implement Trump’s strategy by pulling back militarily and manufactoring at home, i.e. MAGA. This would have been best done starting in 1992, but a Clinton gained the White House and greed took over.
Now we have a situation where the world wide manufacturing empire promoted by big banks, big corporations and big money grabbers has more or less gutted the US. All this while Russia, under sanctions, is learning to manufacture. There is nothing to be done for the US except experience a drastic contraction and rebuild. Whether we retain all fifty states or not depends on the leaders. A true populist in 2024 might be able to pull it off.
Nothing will change unless private banking based on usury is abolished. Debts have accumulated through compound interest that can never be repaid. All three Western religions have always forbidden the collection of interest on loans. Usury is sinful, in other words.
‘Capitalism is Usury. Its defining belief is ‘return on investment’. This is an extension of the ‘time value’ of money, which is the central tenet of modern economics. Capitalism is unthinkable without banking and banking is institutionalized Usury. Usury is Plutocracy. Compound interest makes it unavoidable that the very richest own everything in generations.
And this is indeed what happened: capitalism is one huge global monopoly. All the major banks own each other and most Transnationals plus a huge chunk of land. This juggernaut was built with the plunder of Usury.’
This economic system is now unravelling. Is the current covid hysteria being used as a smokescreen…?
Margrit Kennedy speaks on interest to the banks and interest free money;
https://www.youtube.com/watch?v=QuBy3BzCXwg
How money rules;
https://realcurrencies.wordpress.com/2018/07/29/how-money-rules/
Fair points, James, but a “contraction and rebuild” to what end? The US has survived the banker gangsters’ deindustrialization before, like during the Great Depression. It also faced political upheaval because of it. In regards to the banksters’ “idiotic system” of “the Federal Government borrowing the use of its own money,” US Congressman Wright Patman said, “I believe the time will come when people will demand that this be changed.” About one month later, Japan attacked Pearl Harbor: After that, what happened to the demands to end our idiotic, debt money system? Did the banksters have any problems with rebuilding US industry, not to benefit the public good, but to fuel the war machine?
Japan never would have attacked Pearl Harbor without years of sanctions and military provocations from the US, but now that Russia, China, Iran, etc. are getting hit by the same thing and people are getting fed up with it, doesn’t it look like the banksters are trying the same plan? Trump’s MAGA talk while simultaneously backing pro-war narratives is a good example of this.
Sweden ,did a study about ten to 15 years that traced the ceo’s and the ownership of the 1650 largest companys on the planet. turns out that less than 40 banks own it all. most of these company’s have income’s larger than almost all countrys.
The Capricorn sacrifice: signs of the coming slaughter. The vaccine is your entry to the grave.
https://www.postscripts.org/ps-news-407.html
Ah yes, the golden age of political economy. Adam Smith, David Ricardo, Karl Marx and John Stuart Mill. Then came the leaden age of the marginalist, neo-liberal counter-revolution of Carl Menger, Stanley Jevons and Leon Walras.
It’s strange how much influence these obscure events in the 19th century have on the present day, and how ignorant both the public and orthodox business and academic circles seem totally ignorant of these issues.
Well, I never took an economics course, I didn’t get a PhD, I didn’t write any books, so I obviously don’t know a damned thing. And I have yet to even read Marx. Yet, in my senior year of college as a German literature major, in 1970, the thought occurred to me, “We have a system of Corporate Feudalism. where corporations, like barons before them, tell the Government –or in feudal times, the King–what it can and can’t do.”
It should not take university degrees to see what is obvious and has been obvious since 1970 and earlier. Useless endless wars, ruination of labor and the working class, and the endless sucking out of the real wealth of the economy by financial instruments created by sociopaths.
Regarding Covid. For thousands or tens of thousands of years, humanity has dealt with a virus by exposing it to a healthy immune system. That strategy has now changed. We now try to disable the virus by keeping it as far away from healthy immune systems as possible. We await a vaccine. Dr. Paul A Byrne reports a survival rate of 99.8% for those between the ages of 20 and 49 getting infected with the virus. How much do you think that will increase for people in that age group who are vaccinated?
economy-shmeconomy. Economy is an outdated 20th century concept soon to be relegated to the dust bin of history. US hasn’t had a real functioning economy for decades. It’s all been smoke and mirrors. It only took 20 years for US’s economy to go belly up once Reagan’s people took over.
US’s “economy” is now consisting of creating wealth with stocks which the banks buy with money kindly given to them by the Fed. Wanna get rich, kid? Buy Bitcoin! Forget about creating a business and trying to sell an actual product to “customers”. That’s for suckers. Print the dollars and as long as they are backed by the sweet Treasury that USA mafia forces (actually blackmails using the US military) other countries to buy, things are gonna be fine. The Fed gave trillions to the banks with QE, REPO, Zirp who turned around and bought stocks. Been going for a while now, since the 2008. Obama and Bush together gave 78 trillions to the banks. Google has links.
Economy? BWAHAHAHAHA!
Superb article. It is strange that I feel some hope when I realize that you were so ahead of the pack in understanding the devastation being unleashed by globalization, and yet I feel sadness that your attempt to bring these problems into public discourse was killed at birth. I have no issue with other states becoming competitive in the global economy, but I hate to see a democratic nation like the US, warts and all, having its middle class gutted in order to propel a billionaire class towards unparalleled wealth and power.
And to see those left behind in the de-industrialized West being mocked as the equivalent of Neanderthals who have been made obsolete by (allegedly) natural forces of economic change is tragic, and can only lead to the undermining of U.S. democracy and society as a whole. At the same time the instigators now view the rise of China and the BRICS nations as a threat, and squeal “foul!”, as it becomes apparent that their own greed has created new strategic competitors that can threaten and surpass their own dominance in new technology.
Yet their answer is to deny the problem, and to equate any who criticize them at home with Nazis, even as they support facist groups in Ukraine in an effort to draw Russia government into a new conflict that will bleed their nation and harm their international standing, if only in an increasingly brittle Western civilization.
It reminds me of a line from the Usual Suspects: “The greatest trick the Devil ever pulled was convincing the world he didn’t exist.” But I’ve certainly woken up in the last 12 years or so, thanks in no small part to analysts like yourself, the Saker, Alastair Crooke and Pepe Escobar. I just wish these ideas could reach more people as I am so tired of arguing with educated and well-meaning idiots who don’t have any knowledge of these matters, apart from reading the NYT, WP or the Guardian, or the ability to think critically. Therefore they treat me as though I’m “seeing ghosts”. (An actual quote from an employee of the Danish Foreign Ministry when discussing Syria a few years ago).