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OpEdNews Op Eds    H3'ed 8/26/19

Can the American Economy Be Resurrected?

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From Paul Craig Roberts Website

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I was surprised to be given credit by readers for Trump ordering American corporations out of China and to bring the jobs back to the American workers that the corporations had abandoned. American economists, financial media, and Washington policymakers had never paid any attention to my analysis of US economic decline in terms of globalism and the offshoring of US jobs and technology, and I thought readers hadn't either. Many readers tell me that economics is over their heads. My economic articles are the least read on my website.

I was again surprised when foreign media, including Press TV in far distant Iran, immediately contacted me requesting an interview about my influence on the White House. What does it all mean?

First, I will say that it is possible that someone showed Trump my latest column, and that the light switched on. But it is also possible that Trump ordering the corporations home is just an escalation in his threats and reflects not his understanding but the impotence of tariffs to correct the lack of good jobs for Americans and the decline in their real incomes.

However, in the event a light went on in the White House, and that Trump might be shown how to proceed in bringing the off-shored jobs back to America where they belong, I will address the issue. If nothing else, perhaps at some distant time historians of economic thought will write that only Paul Craig Roberts and Michael Hudson had a clue about the collapse of US economic power.

To recap before we move forward. When the Soviet Union unexpectedly and suddenly collapsed, China and India gave up on socialism and opened their economies to Western capital. The Soviet Union did not collapse because Reagan won the cold war, a goal that Reagan disavowed, but because hard-line elements in the Communist Party leadership were concerned that Gorbachev was careless in trusting the Americans and was retreating from the Soviet Empire too cavalierly. To halt the dissolution of the empire that protected Russia from land invasion, the hard-line Communists placed President Gorbachev under house arrest. It was this that initiated the collapse that left Yeltsin, a Washington puppet, in charge as Washington dismantled the Soviet Union and proceeded to steal, together with Israel, Russia's resources.

The conclusion reached by India and China, the countries with the largest populations, was that socialism leads to collapse, but capitalism leads to riches. For the first time the vast under-employed labor resources of the world's two most populous countries were available for foreign exploitation. The labor could be exploited, that is, paid less than its contribution to output, because an immense over-supply of labor existed in the labor market. The excess supply of labor meant that that a work force could be hired for far less than it contributed to the corporation's earnings.

Corporate CEOs and directors -- and Wall Street -- noticed this opportunity to increase profits. The first corporations that rushed into China were disappointed, and the word went out that the opportunity wasn't as good as it looked. But China worked to make off-shored production a lucrative adventure, and manufacturing jobs left the US by the droves. The consequence was that the US Middle Class shrunk, and with it the tax base of states and cities. America ceased to prosper, but the economic hurt was covered up with fake inflation, employment, and GDP growth reports, and Federal Reserve printing of massive amounts of money that propped up the prices of financial assets and real estate.

When the hurt became harder to hide, China was blamed for hurting American workers by exporting too much to America. The people blaming China did not bother to look at the percentage of imports from China that consisted of Apple computers and iPhones, Nike shoes, Levi Strauss jeans, etc. The off-shored production of US firms constitutes a large percentage of imports. Goods and services produced by US firms offshore count as imports when they are brought back to the US to sell.

In other words the "Chinese import problem" was in fact the off-shored production of US firms brought back to sell to Americans who no longer were involved in the production of the goods and services and, therefore, did not have any income from the production of what they purchased. In contrast, the offshoring corporate shareholders were rolling in money.

India benefited from receiving US IT and software engineering jobs, which could be performed anywhere and the work product sent over the Internet. Indian education and English language skills made it easy for US tech firms to use work visas to bypass US university graduates.

What resulted over the last quarter century was the dismantling of the supply chains and labor force that supported American manufacturing and industry. The once booming factories and industrial sites are closed and run down or converted into condos or apartments. If Trump can bring the US corporations home, where do they go?

The offshoring era wasn't a six-month economic recession. It was years when skilled and experienced labor aged and died, and no new entrants learned the skills and work discipline. Today China is a fully developed manufacturing and industrial economy. The United States is not.

For the US corporations to come back home, they have to leave a developed economy in China for a semi-developed or undeveloped one in the US. If they are compelled to do this all at once, they will lose their production in China before they can recreate the plant and equipment, work force, supply chains, and transportation systems essential to renew the US as a manufacturing and industrial power. If you look at the payroll jobs reports, it has been many years since the US created manufacturing and industrial jobs.

A quarter century of capitalist flight from the American work force has left the United States similar to India a half century ago, a country whose jobs consist mainly of lowly paid domestic service jobs. The absence of livable jobs is why so many Americans aged 24-34 cannot live an independent existence and live at home with parents or grandparents. It is why university graduates cannot repay their student loans and have been turned into debt slaves.

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Dr. Roberts was Assistant Secretary of the US Treasury for Economic Policy in the Reagan Administration. He was associate editor and columnist with the Wall Street Journal, columnist for Business Week and the Scripps Howard News Service. He is a contributing editor to Gerald Celente's Trends Journal. He has had numerous university appointments. His books, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is available (more...)
 

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