Reprinted from Paul Craig Roberts Website
The question is often asked: "What can we do?" Here is a prescription for peace and prosperity.
We will begin with prosperity, because prosperity can contribute to peace. Sometimes governments begin wars in order to distract from unpromising economic prospects, and internal political stability can also be dependent on prosperity.
The Road to Prosperity
For the United States to return to a prosperous road, the middle class must be restored and the ladders of upward mobility put back in place. The middle class served domestic political stability by being a buffer between rich and poor. Ladders of upward mobility are a relief valve that permit determined folk to rise from poverty to success. Rising incomes throughout society provide the consumer demand that drives an economy. This is the way the US economy worked in the post-WWII period.
To reestablish the middle class the offshored jobs have to be brought home, monopolies broken up, regulation restored, and the central bank put under accountable control or abolished.
Jobs offshoring enriched owners and managers of capital at the expense of the middle class. Well-paid manufacturing and industrial workers lost their livelihoods as did university graduates trained for tradable professional service jobs such as software engineering and information technology. No comparable wages and salaries could be found in the economy where the remaining jobs consist of domestic service employment, such as retail clerks, hospital orderlies, waitresses and bartenders. The current income loss is compounded by the loss of medical benefits and private pensions that supplemented Social Security retirement. Thus, jobs offshoring reduced both current and future consumer income.
America's middle-class jobs can be brought home by changing the way corporations are taxed. Corporate income could be taxed on the basis of whether corporations add value to their product sold in US markets domestically or offshore. Domestic production would have a lower tax rate. Offshored production would be taxed at a higher rate. The tax rate could be set to cancel out the cost savings of producing offshore.
Under long-term attack by free market economists, the Sherman Antitrust Act has become a dead-letter law. Free market economists argue that markets are self-correcting and that anti-monopoly legislation is unnecessary and serves mainly to protect inefficiency. A large array of traditionally small business activities have been monopolized by franchises and "big box" stores. Family owned auto parts stores, hardware stores, restaurants, men's clothing stores, and dress shops, have been crowded out. Walmart's destructive impact on Main Street businesses is legendary. National corporations have pushed local businesses into the trash bin.
Monopoly has more than economic effect. When six mega-media companies have control of 90 percent of the American media, a dispersed and independent press no longer exists. Yet, democracy itself relies on media helping to hold government to account. The purpose of the First Amendment is to control the government, but today media serves as a propaganda ministry for government.
Americans received better and less expensive communication services when AT&T was a regulated monopoly. Free trade in communications has resulted in the creation of many unregulated local monopolies with poor service and high charges. AT&T's stability made the stock a "blue-chip" ideal for "widow and orphan" trust funds, pensions, and wealth preservation. No such risk-free stock exists today.
Monopoly was given a huge boost by financial deregulation. Federal Reserve chairman Alan Greenspan's claim that "markets are self-regulating" and that government regulation is harmful was blown to pieces by the financial crisis of 2007-2008. Deregulation not only allowed banks to escape from prudent behavior but also allowed such concentration that America now has "banks too big to fail." One of capitalism's virtues and justifications is that inefficient enterprises fail and go out of business. Instead, we have banks that must be kept afloat with public or Federal Reserve subsidies. Clearly, one result of financial deregulation has been to protect the large banks from the operation of capitalism. The irony that freeing banks from regulation resulted in the destruction of capitalism is lost on free market economists.
The cost of the Federal Reserve's support for the banks too big to fail with zero and negative real interest rates has been devastating for savers and retirees. Americans have received no interest on their savings for seven years. To make ends meet, they have had to consume their savings. Moreover, the Federal Reserve's policy has artificially driven up the stock market with the liquidity that the Federal Reserve has created and also caused a similar bubble in the bond market. The high prices of bonds are inconsistent with the buildup in debt and the money printed in order to keep the debt afloat. The dollar's value itself depends on quantitative easing in Japan and the EU.
In order to restore financial stability, an obvious precondition for prosperity, the large banks must be broken up and the distinction between investment and commercial banks restored.
Since the Clinton regime, the majority of the Treasury secretaries have been top executives of the troubled large banks, and they have used their public position to benefit their banks and not the US economy. Additionally, executives of the large banks comprise the board of the New York Fed, the principal operating arm of the Federal Reserve. Consequently, a few large banks control US financial policy. This conspiracy must be broken up and the Federal Reserve made accountable or abolished.
This requires getting money out of politics. The ability of a few powerful private interest groups to control election outcomes with their campaign contributions is anathema to democracy. A year ago the Republican Supreme Court ruled that the rich have a constitutional right to purchase the government with political campaign contributions in order to serve their selfish interests.