Eco Echo
IT’S THE ECONOMY STUPID!
Posted February 29, 2004 thepeoplesvoice.org

By: Ted Lang

Although the Bush administration has made itself unbelievably vulnerable via the exposed falsehoods and/or bumbling intelligence and foreign policy disasters, the faltering economy will be the death knell of this president and his forked-tongued advisors.  Not since the economic upheaval typified by the Hoover presidency has an economic downturn been so significant during an election year.  And this “it’s-the-economy-stupid!” environment far surpasses the “gray science” ramifications attributable to Bush I.

The current economic downturn is more than just a cyclical quirk; it is an unusual anomaly because the financial markets do not reflect the dire straits now faced by America’s labor force.  This time around, “it’s the unemployment stupid!”  And if one thing in particular could be negatively ascribed to Bush I, it most certainly was the prevarication involved with his saying, “read my lips – no new taxes!”  President G.W. Bush’s tax cuts to revitalize the economy may have worked for Wall Street, but Main Street America is getting very nervous.

The reason is simple: jobs are leaving our country.  Those who offer that this is no big deal because new jobs will take the place of the ones lost don’t quite grasp the problem yet.  What precisely is the problem, why is it so unique this time around, and why is America so at risk?  Before we try to clarify the problem, perhaps we should identify the opposing economic camps.  First, there’s a group that can be identified as anarcho-capitalist economists.  These theorists believe in little or no government, and put full confidence in Adam Smith’s invisible hand driven by individual capitalistic greed that unintentionally works for the betterment of all via the “free market.”

The other camp sees the free market through the auspices of clearly identified national interests, viewing the functions of our economy as a strong tie-in to our national and state governments.  They do not view economic activity as viable unless it is closely tied in with the operation of government.  The malevolent role of government is increasingly seen as such either because we now enjoy more open, honest news or opinion services as presented by the Internet, or because the consolidation of big business and big government has never been greater than is now the case.  Perhaps it is a little bit of both.

Summing up, we have an economic debate brewing between libertarian-type economists, and more traditional conservative economists relying on the intervention of the state in the free market.  And when we speak of the free market, we should extend that to include overseas producers and consumers, as do the anarcho-capitalist economists, who point out that a free market must be founded upon universal free trade.

Generally, libertarian-type economists offer that there should be little concern over the loss of jobs overseas, primarily production and heavy manufacturing work.  But lately, services have been slipping out of the country as well, typified mostly by computer support, data evaluation and statistical/scientific analysis work.  Please reflect upon this phenomenon keeping in mind the economic non-concerns voiced earlier by global economists that have pointed out our progress from an agrarian, to a manufacturing, and now to a service economy, the latter characterized mostly by “information age” services.  But now, it is these very same services that are leaving the country as well!

As has been pointed out by Patrick J. Buchanan, our primary exports out of country are agricultural products, led by soybean exports.  Citing his depressing but revealing article again, “An index of American decline” written for WorldNetDaily.com February 23^rd, Buchanan writes: “With the markets soaring, the Bush recovery is being called the jobless recovery.  Not so.  We are creating millions of jobs overseas – even as we are destroying manufacturing jobs at a rate of 77,000 per month in the United States.”

Buchanan states, “Last year, we bought $958 billion worth of foreign manufactures and our trade deficit in manufactures alone was over $400 billion, more than $1 billion a day.  Millions of foreign workers now labor in plants that manufacture for America, doing jobs that used to be done by American workers….  Our largest trade deficit with any country is with China.  It has rocketed from $22 billion in Clinton’s first year to $124 billion last year.  ‘The World’s Most Unequal Trade Relationship’ is how [Charles] McMillion describes it.”

Buchanan sums up the causative factors he discerns: “To neoconservatives of the Wall Street Journal school, these trade numbers are yardsticks of their success at creating a Global Economy and measures of their triumph in championing NAFTA, the WTO and MFN for Beijing.  To the Old Right, however, manufacturing was a critical component of American power, indispensable to our sovereignty and independence, and the access road for working Americans into the middle class.”

Conservative Dr. Paul Craig Roberts and liberal Democrat Senator Chuck Schumer have teamed up to bolster the conservative “economics begins at home” argument.  On the other side, we have anarcho-capitalists Lew Rockwell and Butler Shaffer defending the minimum government globalist view.  Shaffer, a professor at Southwestern University School of Law, sheds light on a society devoid of government supervision in his January 13^th piece for Lew Rockwell.com entitled, “What is Anarchy?”

Shaffer writes, “One philosophical abstraction that seems to befuddle most people is ‘anarchy.’  To those challenged by complexity – such as radio talk show hosts and cable-TV ‘newscasters’ who are convinced that all political opinions can be confined to the categories of ‘liberal’ and ‘conservative’ – the word anarchy evokes an unfocused fear of uncertain forces.  Images of bomb-throwing thugs who smash and burn the property of others are routinely conjured up by politicians and the media to frighten people into an extension of police authority over their lives.”

Shaffer goes on: “As long as a president continues to rationalize war against the Iraqi people as ‘operation freedom’; as long as the Strategic Air Command insists that ‘peace is our profession’; and as long as police departments advertise that they are there to ‘protect and serve,’ intelligent minds must be prepared to look behind the superficiality and imagery of words to discover their deeper meaning.  Such is the case with the word ‘anarchy.’”

In his article of January 21^st, Lew Rockwell in his commentary entitled “A World Recreated,” offers: “The market economy – globalized, enormously powerful, breathtaking in scope and breadth – is remaking the world in ways that far surpass any existing political development in the US, from the crafted blather of the State of the Union to the mad rush to grab the Democratic nomination.”  He goes on, “These developments are going to bring about surprising political shifts, profound upsets in rooted cultural assumptions, and an eventual and merciful end to the US imperium.  These changes will touch everyone in ways that will be both stunning and glorious for average Americans, and deeply disturbing for the American regime that aspires to unchallenged global hegemony.”

Rockwell continues, “What is the underlying cause?  The unleashing of human energies in nations that have been isolated, regimented, and closed for centuries.  China, Malaysia, India, the countries of Latin America, and the new economies of Eastern Europe, among many others, are expanding at as much as twice the rate of American and European markets.  This is not only remaking their nations, but the way we perceive the geographical distribution of wealth and power.  Over time, and extended far into the future, this trend is going to mean dramatic upheavals in the way Americans perceive their role in the world.”

Rockwell points out that cheaper labor available in this Third World sector will drive down the biggest ticket expense item on corporate profit and loss statements; namely, wages and salaries.  Lower labor costs bring down consumer prices and will ratchet up quality.  This frees up consumer spending for other things, such as investing.  And the cheaper labor overseas will attract more US investment.  “The nation-state as such plays no part in its calculus, and this has proven to be the winning ticket,” says Rockwell.

Admitting that there will be a price for this transition, Rockwell points out: “People who have noted these trends say that we should panic that there won’t be any jobs left for Americans to do.  What this forgets is the reality of scarcity in the world, which implies that there are always and everywhere jobs to do because there are always and everywhere unmet needs.  Specialization and the division of labor permits Americans to produce most efficiently in a way that is integral to world demand and not waste time and resources in jobs that can be done more cheaply elsewhere.”

But then Rockwell concludes that happy worldview with a caveat: “This does mean a change in world patterns of production, but the market will manage the change with minimum disruption, as it has for the last several hundred years.”  Rockwell addresses this period of transition as “over time” and as “minimum disruption,” but what does that mean precisely to today’s growing unemployable American labor force?  How long will the transition take, and how will it actually manifest itself to working people saddled with mortgages, college tuition, credit card debt and car payments?

Rockwell then provides another dimension: “A world dominated by a single superpower is a gravely dangerous place, especially when that power is irresponsibly managed (and, some would say, is managed by maniacs).  A decline in the power, might, and influence of the US is not the same thing as a decline in America; quite the opposite.  The only real downside is the transition: the US government may increasingly behave like a dying rabid animal, posing danger to its random victims.  But once you hear the ‘thud’ of the final fall, the world will be more peaceful and prosperous than ever before.”  That sums up the anarcho-capitalist economic view of the growing global economy that is costing America jobs.

Offering another view, one that relies more on either government intervention or a drastic change in existing government policy, is Dr. Paul Craig Roberts’ arguments in his January 10^th “Clarifications on the Case for Free Trade,” posted on Rockwell’s Ludwig von Mises Institute’s website.  Roberts bases his position on classic economist David Ricardo’s principle of comparative advantage, which argues that trading nations should concentrate labor and capital within their borders on products that they are most efficient at producing to facilitate a free international market.  But Robert’s argues that as regards the current booming global economy, both labor and investment for exchangeable products between nations is all being transferred to the Third World markets, thereby creating an absolute advantage for these countries.  Considering our transition from an agrarian economy, to a manufacturing one, and now supposedly, a service economy, where does this leave the American worker?

Roberts attacks the investment argument as well.  US investments in the Third World are being utilized to create new plants and equipment.  Our trade deficit is funding an infusion of foreign investment to the US, but these investments are buying up existing assets comprised of plant and equipment, and not creating new product-generating assets.

It would seem that Roberts and Rockwell are in opposite camps, but are they?  Here’s Roberts’ take on the future: “We do not dispute that global gains might exceed first world [United States] losses.  Nevertheless, the flow of factors of production to absolute advantage in place of comparative advantage vitiates the case for free trade--that it produces mutual gains to the countries involved.  What we may be witnessing is global capitalism destroying national sovereignties, leading to a global government, much as Marx described capitalism’s role in the overthrow of feudalism and the rise of the nation-state.”  Roberts also feels that “…the loss of incomes outweighs the lower prices” that unemployed consumers can enjoy.

What is clear is that there is a coming economic trauma, and basically, it will affect US all and might turn out for the worse as regards individual freedom.  Roberts again: “So many people forget that the reason that highly paid US workers could compete against lowly paid Asian workers is that the US workers were much more productive due to the immobility of capital and technology.  The international mobility of factors of production has stripped away the productivity advantage of first world labor.  Try to imagine the political instability in store for the US as the ladders of upward mobility collapse. The reality toward which we head is not a libertarian paradise.”

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© Copyright THEODORE E. LANG 2/27/04 All rights reserved. Ted Lang is a political analyst and a freelance writer.