Yesterday I suggested that the economic problems we are now experiencing are in large part the result of the shifting of decent paying manufacturing jobs overseas. As more and more of those jobs were lost the number of customers declined.
At some point we were going to reach the point where there were not enough people who could afford to purchase the low quality and often dangerous products “US” companies were making in China.
While this trend started with the administration of Ronald Reagan it picked up speed during the Clinton administration. Obama’s attempts to repair the economy will fail because he refuses to address the real problem – US trade policy.
If this disaster were preventable and we knew how to get out of it, why didn’t our leaders try to stop it before it happened? Why don’t they take the steps necessary now to get the economy moving again?
The answer to both these questions is simple: The politicians work for someone else. On Election Day, the politicians might need our votes, but they won’t get to be serious contenders unless they’ve gotten the campaign contributions of the big money crew. And the moneyed elite has been using its control of the political process to ensure that an ever larger share of the economy’s output is redistributed upward in their direction.
The reason that there was little interest in cracking down on the housing bubble is that Goldman Sachs, Citigroup and the rest were making a fortune from the financial shenanigans that fueled the bubble. Former Treasury Secretary Robert Rubin personally pocketed over $100 million from this fun. Why would they want the government to rein it in?
Of course, when the bubble did finally blow and threaten their banks with bankruptcy, the Wall Street crew just ran to the government for help. And they got trillions of dollars in loans and loan guarantees to ensure that they would not be victims of the crisis they had created. Now that they are back on their feet, with Wall Street profits and bonuses both again at near record levels, they see little reason to concern themselves with the measures that might set the economy right for the rest of us.
(emphasis mine)
And about that trade policy:
For example, they wrote trade rules that were designed to put downward pressure on the wages of the bulk of the U.S. workforce by placing manufacturing workers in direct competition with low-paid workers in China and other developing countries. This had nothing to do with a belief in “free trade.” They did not try to subject lawyers, doctors or other highly paid workers to the same sort of international competition. They only wanted international competition to put downward pressure on the wages of workers in the middle and bottom, not those at the top.
Of course as I said yesterday this was not sustainable in the long run. Greenspan flooded the economy with lots of cheap and easy credit that kept the unsustainable economy above water long enough for GWB to get reelected in 2004. That of course resulted in the housing bubble and the credit crisis.
For the last 30 years the rich have been getting richer and everyone else has been getting poorer. This is not only economically unsustainable it is politically unsustainable. As wealth distribution increasingly favors fewer and fewer a breaking point will be reached and we will see a Castro or a Chavez come to power. That rarely works out well either.