The middle class is disappearing. Our economy is "hollowing out" because the money goes to the top and the people fall to the bottom. This is because we allow American companies to close factories here and open them there, shipping the same goods back here to sell in the same stores, costing jobs, companies, industries and our economy. This makes us afraid for our own jobs and afraid to make waves. By helping a few at the top get fabulously rich, China has essentially recruited our own businesses leaders to fight against our own government - and us.
Yesterday's Jobs Emergency Hollowing Out The Middle Class examined the reasons that our economy has shifted in ways that enrich a few at the top while the rest of us fall further and further behind. This is called "hollowing out" because the middle class is disappearing while the money goes to the top and the people fall to the bottom. In it I quoted Dean Baker on the real cause of the hollowing out. I want to repeat this part of the post for emphasis. Baker writes that last decade's manufacturing job loss is because of the trade deficit. From the post:
Dean Baker responds, in Income Is Definitely Being Redistributed Upward, but Why Do We Think It's Technology? at the Center for Economic and Policy Research's Beat the Press, (emphasis added to emphasize):
…the piece refers to the millions of manufacturing jobs that the United States lost over the last decade. The biggest factor behind the job loss was not technology; productivity growth in manufacturing was not markedly faster in the 2000s than in prior decades. The main factor leading to job loss was the growing U.S. trade deficit.
The predicted result of an over-valued dollar is the loss of jobs and lower wages in the sectors of the economy that are exposed to international competition. However, the availability of low-cost imports raises the living standards of those who are protected from international competition.
The latter group would include highly paid professionals, like doctors and lawyers. Note that it is not technology that protects these professionals from seeing their wages depressed by competition from their low-paid counterparts in the developing world, it is deliberate policy. While it has been the explicit goal of trade policy to put manufacturing workers in direct competition with workers in the developing world, the barriers that make it difficult for qualified doctors, dentists, and lawyers in the developing world to work in the United States have been left in place or strengthened.
Once again, for even more emphasis: "The main factor leading to job loss was the growing U.S. trade deficit. The predicted result of an over-valued dollar is the loss of jobs and lower wages in the sectors of the economy that are exposed to international competition. … it is deliberate policy."
And for more emphasis: "The main factor leading to job loss was the growing U.S. trade deficit. The predicted result of an over-valued dollar is the loss of jobs and lower wages in the sectors of the economy that are exposed to international competition. … it is deliberate policy."
When you close factories and ship them out of the country people lose their jobs. And the rest of the people are afraid of losing their jobs, so they "keep their heads down." Companies can make them accept lower wages. They work longer hours. They even stop taking vacations and sick days. They certainly don't ask for raises or better working conditions. This terrible job fear everyone has helps a few at the top get even richer.
This is why corporate profits are the highest ever. From the recent post, Here Is Why Our Elites Are Not Fixing The Economy,
When we had democracy, We, the People made the rules and we ran our country and our economy for our benefit. Now that we are a plutocracy things are different. The reason our elites are not doing anything to fix the economy is because from their viewpoint, things are just fine.
… The reason our leaders are not doing anything to fix the economy is because, from the viewpoint of our real leaders, the economy is working just fine.
Trade Deficit Is The Root
From last month's post, Trade Deficit - One Root Of Many Problems,
You buy things till your wallet is empty. So you raid the savings account to buy more stuff. Then you get a loan, and buy more stuff. Another loan, another, you keep buying stuff… Finally you're selling off the tools you had used to make a living. That's where the country is now because of the huge imbalance in our trade relationships. We buy more from them than they buy from us and we have let this go on and on and on. This is the deficit we should be worried about.
Pick a national problem, and the odds are that our trade imbalance is aggravating it. Our trade deficits literally suck money out of the country. When looking up the numbers I had to double check, our annual trade deficits are so huge. In the chart below that first line under the dates represents $100 billion. Look at what happened in the late 90s, when we opened the China flodgates. (Click to enlarge):
In the 70's the trade balance dipped below zero because of oil, and the country responded with conservation and the beginning of the search for alternatives -- until Reagan. To make matters worse, Reagan preached "free trade" -- as in use cheap foreign labor to break American unions. (But Reagan also enforced rules against "dumping" and other trade violations.) The real break in our balance of trade clearly begins around the time that NAFTA and the World Trade Organization went into effect, and then went absolutely nuts after China was brought in. Between 2001 and 2009 we lost 1/3 of all of our manufacturing jobs, more than 50,000 factories, and entire industries. We drained trillions of dollars out of our economy.
Why Can't We Fix This?
This is so hard to fix because the trade imbalance that drains our country transfers great wealth and tremendous power to a few. The trade deficit results from allowing companies to just pack up American factories and industries and move them to China. This lowers labor costs, which translates to profits for the few at the top. This wealthy few use some of that wealth to buy off our government and shower us with propaganda to let them keep this scheme going. And it creates jobs fear.
Job fear makes people want to "keep their heads down," not make waves, not appear demanding or ungrateful, lest they lose their jobs. It keeps people inside. It keeps people from organizing unions. The organizers are fired, and the threat to just hire cheaper people if you don't stop this is very real. People are afraid.
High unemployment helps the rich get richer. It brings them more power. Every claim to "create jobs" gains power, be it through cutting taxes on big corporations, cutting government oversight of what corporations do, passing laws restricting unions, you name it -- hand the treasury over to big corporation sand they will "create jobs."
So don't count on the "job creators" to be creating very many jobs, as long as high unemployment means the highest profits in history, and a "job fear" public that will vote to support any big-corporate scheme that promises to "create jobs."
In Why Can't Apple Make Your IPhone In America?, presented at Netroots Nation,
When people have a say they say they want better pay, health care, retirement, vacations, sick pay, protections, worker safety, clean environment and taxes to support the country – things like that – the very things China offers to let our businesses escape from.
So what China offers is that China is “business-friendly.” Because people there do not have a say, so they can’t ask for the things people should have.
Corporate conservatives here say we should be more business friendly, we should lower wages, lower taxes, stop taking care of the environment, stop all those pesky health and safety and environmental inspections, stop telling businesses what they can and cannot do, and all the rest. They say we should be more like China.
What they are saying is that we should abandon the benefits that democracy brought to We, the People – the 99%
in order to enrich a few people – the 1%.
When we opened up our borders to goods from China, and let this treatment of workers and the environment offer advantages to our elites,
we made democracy a competitive disadvantage.
… China offers these things to our business leaders for a reason. This is the reason : China sees itself as a country, and we no longer do.
China competes with us as a country. But our businesses see themselves as GLOBALIZED, not as part of a country.
So since we – at least our businesses – no longer see themselves as part of a country we are not responding to this competition. We are not mobilizing to fight back.
In fact, China has essentially recruited our own business leaders to fight against our own government.
By helping a few at the top get rich China has essentially recruited our own businesses leaders to fight against our own government.
Again: By helping a few at the top get rich China has essentially recruited our own businesses leaders to fight against our own government -- and us.