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OpEdNews Op Eds    H4'ed 6/23/19

Forget China -- it's America's own economic system that's broken

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From The Guardian

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US weakness is inbuilt the big 500 companies owe loyalty only to themselves and the public is shut out from prosperity

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Xi Jinping might possibly agree next weekend on further steps to bring down China's trade imbalance with the US, giving Donald Trump a face-saving way of ending his trade war.

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But Xi won't agree to change China's economic system. Why should he?

The American economic system is focused on maximizing shareholder returns. And it's achieving that goal: on Friday, the S&P 500 notched a new all-time high.

But average Americans have seen no significant gains in their incomes for four decades, adjusted for inflation.

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China's economic system, by contrast, is focused on maximizing China. And it's achieving that goal. Forty years ago China was still backward and agrarian. Today it's the world's second-largest economy, home to the world's biggest auto industry and some of the world's most powerful technology companies. Over the last four decades, hundreds of millions of Chinese people have been lifted out of poverty.

The two systems are fundamentally different.

At the core of the American system are 500 giant companies headquartered in the US but making, buying and selling things all over the world. Half of their employees are non-American, located outside the US. A third of their shareholders are non-American.

These giant corporations have no particular allegiance to America. Their only allegiance and responsibility is to their shareholders.

They'll do whatever is necessary to get their share prices as high as possible including keeping wages down, fighting unions, reclassifying employees as independent contractors, outsourcing anywhere around world where parts are cheapest, shifting their profits around the world wherever taxes are lowest, and paying their top CEOs ludicrous sums.

At the core of China's economy, by contrast, are state-owned companies that borrow from state banks at artificially low rates. These state firms balance the ups and downs of the economy, spending more when private companies are reluctant to do so.

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They're also engines of economic growth making the capital-intensive investments China needs to prosper, including investments in leading-edge technologies.

China's core planners and state-owned companies will do whatever is necessary both to improve the well-being of the Chinese people and become the world's largest and most powerful economy.

Since 1978, the Chinese economy has grown by an average of more than 9% per year. Growth has slowed recently, and American tariffs could bring it down to 6% or 7%, but that's still faster than almost any other economy in the world, including the US.

The American system relies on taxes, subsidies and regulations to coax corporations to act in the interest of the American public. But these levers have proven weak relative to the overriding corporate goal of maximizing shareholder returns.

Last week, for example, Walmart, American's largest employer, announced it would lay off 570 employees despite taking home more than $2bn courtesy of Trump and the Republican corporate tax cuts. Last year, the company closed dozens of Sam's Club stores, leaving thousands of Americans out of work.

At the same time, Walmart has plowed more than $20bn into buying back shares of its own stock, which boosts the pay of Walmart executives and enriches wealthy investors but does nothing for the economy.

It should be noted that Walmart is a global company, not adverse to bribing foreign officials to get its way. On Thursday it agreed to pay $282m to settle federal allegations of overseas corruption, including channeling more than $500,000 to an intermediary in Brazil known as a "sorceress" for her ability to make construction permit problems disappear.

Across the American economy, the Trump tax cut did squat for jobs and wages but did nicely for corporate executives and big investors. Instead of reinvesting the savings into their businesses, the International Monetary Fund reports that companies used it to buy back stock.

But wait. America is a democracy and China is a dictatorship, right?

True, but most Americans have little or no influence on public policy which is why the Trump tax cut did so little for them.

That's the conclusion of professors Martin Gilens of Princeton and Benjamin Page of Northwestern, who analyzed 1,799 policy issues before Congress and found that "the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy."

Instead, American lawmakers respond to the demands of wealthy individuals (typically corporate executives and Wall Street moguls) and of big corporations, those with the most lobbying prowess and deepest pockets to bankroll campaigns.

Don't blame American corporations. They're in business to make profits and maximize their share prices, not to serve America.

But because of their dominance in American politics and their commitment to share prices instead of the well-being of Americans, it's folly to count on them to create good American jobs or improve American competitiveness.

 

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Robert Reich, former U.S. Secretary of Labor and Professor of Public Policy at the University of California at Berkeley, has a new film, "Inequality for All," to be released September 27. He blogs at www.robertreich.org.

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Paul Craig Robert's tries to revise history with his glowing reports of the 80's, but It was the unpatriotic, immoral, unethical Ronald Reagan' misguided domestic/foreign policies that laid the foundation for the PRC/CCP to now threaten US economic/military interests and Taiwan. By not following through on the Carter Energy Policy now has China leading the world in fast-train and alternative energy use and research. The firing of the union FAA Air Traffic Controllers encouraged CEO's to off-shore/out-source American manufacturing to China to increase shareholder returns, exploit cheap labor and circumvent EPA laws.


China did not steal jobs from the USA, American companies (like tRump's family products made there and tariff exempt) willingly went over to China for short term profit gain. This whole idea of allowing China WTO and other western trade membership to entice democracy was total BS! With Xi in power he will either be a hero for unifying Taiwan with the mainland, or be responsible for the collapse of the current system.


Where China and Japan will focus on long term business strategy for market share, US/western companies seek short term ROI. Rather than spend money to modernize company infrastructure, US companies use stock buy-backs to increase company short term value.


tRump is the shining example of what business schools, mentor-ship programs and other nefarious conferences promote in this day and age; to lie, cheat and steal your way to success. Live a life a vile debauchery, being unfaithful to your spouse, your "business partners" and others and you too can become president of the USA.


tRumptard's are proof that this country has not progressed from its past transgressions. These scared, mostly white, middle-aged mentally-challenged individuals don't like the change that Fox News threatens their daily lives with. They also hold a very low opinion about their "God" thinking tRump is being used to do the Lord's work.





Submitted on Monday, Jun 24, 2019 at 12:38:20 PM

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