Insecure By Design

Question: What has been a defining feature of American socio-economic life for nearly all of its history, faded substantially for roughly two generations, and now has come back with a vengeance in the last two or three decades?

An insecure and vulnerable workforce. One that is compliant, scared, and with few workplace rights.

It is no accident that employee insecurity, those subject to dismissal without cause, has coincided with flat wage growth, a decline in union membership, the gradual disappearance of pensions, and the rise of the cynically-named "right-to-work" legislation.

Some will tell you that it is the inevitable result of globalization; it's a tough, competitive world out there, and hey, China. OECD data on worker protections in member countries belies this assertion. According to recent OECD publications, the United States has become unusually hostile to workers. As Les Leopold reports:

The Organization for Economic Cooperation and Development (OECD) ranks 43 nations by the degree of employee protection provided by government. The 21 indicators used include such items as laws and regulations governing unfair dismissals, notifications and protections during mass layoffs, the use and abuse of temporary workers, and the provision of severance based on seniority. Countries are ranked on a scale of 0 to 6 with 6 going to those who provide the most legal protections for employees and 0 for those with the least. We're ranked #42 out of 43, meaning that we have among the fewest regulations to protect employees -- union, non-union, management, full-time and temporary workers alike.

The low level of worker security has always been the objective of most of those on the Right, whether they espouse neo-liberalism, laissez faire policies, or free trade. Enthusiastic support from the corporate world for cheap, compliant labor has varied over the generations, but has been especially strong in recent decades.

Through it all are those who may not be rich themselves, or may not run a corporation, or have well-developed views on economic doctrine, but still show a remarkable hostility to the "other": those not in the same tribe, religion, or race; those who are unacceptably different in thought, world view, and sexuality. A hostility that is directed against those who do not know their place and thus threaten the hierarchy.

This has been with us since colonial days. Both David Hackett Fischer, in Albion's Seed, and Colin Woodard, in American Nations, vividly reveal the brutal treatment that for centuries was meted out to the powerless; slaves, immigrants, indigenous Americans, indentured servants, sharecroppers, women, political subversives, the lower class in general.

The nature of employment, and of insecurity, have changed over the generations, though the working class remains the object of contempt. Workers are increasingly compelled to pursue jobs that not only offer low pay and no benefits, but are further away from home, are at odd hours, or, and this is the big one, are seasonal, temporary, or part-time. The result is a dystopian nightmare for millions of workers, some of them highly educated, who spend an inordinate amount of time, money and gas, to get to one part-time job, then must hustle off to another one. And you better not complain, because the boss does not need a good reason to fire you.

For a modern analysis of how the wealthy are currently reshaping the lives of the working poor and, increasingly, the middle class, read Jeff Faux's The Servant Economy, or Robert Reich's analysis of "the sharing economy," Faux focuses on how so many of the jobs now appearing are designed to serve the wealthy; day care--for the very young and the very old--dog walking, auto detailing, pool and lawn care, and many more. The pay is low, the benefits mostly non-existent.  No unions, no protection; you serve at the pleasure of the rich. Reich describes an economy where "human beings do the work that’s unpredictable – odd jobs, on-call projects, fetching and fixing, driving and delivering, tiny tasks needed at any and all hours – and patch together barely enough to live on."

No slavery, not technically, but highly constrained conditions, along with wages that are no longer coupled with productivity, mean that America, a country that once had high social mobility compared to other industrialized economies, now has among the worst. We are returning to the rigid, stultifying hierarchy of class, low wages, and pervasive, and often aggressive, religiosity that has long characterized the American South.

We are becoming Dixie.

Innovation is Secondary

Ever notice how little time politicians spend debating the core issues that concern the politically literate? And how easily our media chases after, or creates, secondary issues? It was painful enough to watch the tepid and interminable process known as the presidential election campaigns. And now with mid-terms approaching, we are reminded just how shallow American elections, and the media that feeds off them, have become. What really is killing us is the abject inability or unwillingness to understand and confront our rigged and dysfunctional system. Our overclass has no intention of letting public discourse ever become constructive and insightful. Our corporate media is only too happy to fixate on the trivial, or otherwise shine its investigative spotlight on important but secondary issues, including education, the federal debt, and other seemingly constructive topics such as innovation.

As America continues to struggle, many continue to tout the value of innovation-- in technology and commerce, mostly-- but also in education and government. President Obama himself has often stressed the importance of innovation; how we once had it in abundance, how it now is eroding, and what we must do to get it back. The value of innovation would seem to be something that progressives and conservatives could mostly agree on, and that helps explain why the President talks about it. It seems, on its face, to be non-partisan.

However, when President Obama talks about the importance of innovation, he has often, inadvertently or not, folded it in with other conservative talking points. We need to "work harder," "stay in school," --or go back to school-- and get that degree or those credentials. It's a competitive world out there; if you can't get the job you want, it's because you are not properly trained and credentialed. And, of course, you cannot blame corporate America if you don't have the proper skills. We must not let down them down; work harder and prove your value to the job creators. This is the central tenant of individualism.

It's all quite clever, really, for the constant adulation of individualism tends to shut down debate and analysis of US political economy. It is all up to you. The rich earned all they have, and if you don't like your lot in life, it is your fault and only you can change it. This mantra allows the overclass to largely avoid honest media examination or a concerted pushback from a mostly insouciant population that is chockablock with low-information voters, has a short attention span, allows itself to be constantly distracted by inanity, and takes solace in religion. Corporate media operates within this milieu, invariably giving voice to conservative operatives who lecture and berate as class warfare any attempt to lay bare our breath-taking inequality. The ideology of individualism allows our overclass to pin society's ills on our growing underclass.

Obviously, there is much to be said for staying is school, seeking additional training, or more broadly, the role of innovation. American commerce still provides sundry example of where hard work and innovation can take you; they are the twin edges we must sharpen if we are to meet future challenges.

However, every speech devoted to either of these takes the focus away from the underlying causes of US difficulty; jobs, to be sure, but also wage levels for the jobs we still have. Most people are in fact employed, and most jobs have not been outsourced or lost to foreign competition. What is not being acknowledged is that a disproportionate number of the jobs Americans now have face little foreign competition. That's the good part; the bad part is modest wages, benefits, and skill requirements for so many of these jobs. You don't need a degree to work fast food, retailing, and the like. And what about that other more technical job you went to back to school for, got a degree in, and now are heavily in debt for? Sorry, that job has been filled.

The problem of our sluggish economic growth is not a lack of innovation. We have bought into an economic doctrine that sanctifies free trade, financial deregulation, including unfettered flow of capital, and an obsession with credit and debt. It is a system designed by and for banks and the investor class, with little regard for main street or the middle class. The result is an indifference to massive trade deficits, dangerously leveraged banks, and an increasingly ability of the wealthy to avoid taxation and accountability. Employees are seen as a mere input in this profit model. Low wages are good since they improve the bottom line. If workers are recalcitrant and actually want a living wage, management should be free to outsource production to low wage countries. To hear some tell it, management is virtually obligated to fire its American workers and seek cheap unregulated workers abroad for improving the bottom line is management's only real responsibility. It's what the investors want, you know.

And the people who work for the company? That's labor, an input. Lower input costs mean higher profits. Why pay more? Any manager who does not seek to maximize profits is doing a disservice to investors, just like they were all taught in American business schools. It's all very rational and efficient, don't you see?

Innovation does not directly address any of this. We have innovated like crazy and what are the results? Entire industries have been shipped overseas. Because we have allowed our industrial base and concomitant skills to erode, seeking out overseas producers has become the default position. A generation has grown up assuming that American reliance on foreign manufacturers is the natural order of things.

Nor do the calls for greater innovation say who will benefit from the results. Asia is a huge beneficiary of US economic policy. For generations our tax dollars have poured into basic R&D, much of it going to public universities. It has been a great success story, and it has played a key role in America's development. As with the recent rounds of stimulus spending, many of those tax dollars end up in Asia. Working harder, as both Republicans and Obama have exhorted, does nothing to change the imbalances. US corporations already have what they always want; cheap labor, huge profits, and a compliant, cheer-leader government. The investor class took a hit in 2008, but they have recovered nicely, and have fat dividends and lightly-taxed capital gains to show for it.

So the middle class needs to work harder? Because corporate America's profits are not high enough? Because the job creators need help? Americans are already working harder than elsewhere in the OECD; we also have, in recent decades, relatively little to show for it. Wages have been suppressed, union membership has plummeted, and pensions and benefits have become even more rarefied, not because of foreign competition, or globalization, but by design. It is the direct result of illegitimate policies made in response to legitimate economic challenges.

Innovation will help; it always has. But the role of innovation has been undermined for the same reason our middle class and techno-industrial base have. A little history shows that nations that support each of these have thrived. Those that let their financial sector dominate have crumbled. America will not be an exception.

Trade Gets No Respect

I posted earlier this summer about international trade and why the US media has little to say about it. I contended that the investor class does not want to talk much about international trade because an informed electorate would threaten the continuance of free trade's role in an inherently unequal economic system on which the privileged and powerful depend.

For some, mostly wealthy, mostly Republican, and mostly on the Right,  there is not much to discuss regarding free trade; for them it is the default position that rarely needs defending, except to marginalize and shame heretics who might be tempted to explore the vast chasm between the orthodox gospel theory of free trade and the brutal empiricism of what the rest of us call the real world. They are rather oblivious to distinctions between global trade, which has many benefits, and unfettered free trade, which doesn't.

There is, of course, the cynical proponent, the paid operative, side by side with the ideologically-committed true believer. The former are less interested in the vagaries of free trade as an economic doctrine, but are determined to crack the whip of orthodoxy because they are, like the true believers, pleased to see global trade increase, but also because ever-increasing global trade contributes to what they view as the proper hierarchy of power, the one that puts corporations, the powerful men who run them, and that ever-astute risk-taking investor on top, and workers and other less morally-deserving hoi polloi on the bottom. Their incessant message is that robust and unfettered trade represents efficiency, choice, and competition, all of which we are told to crave and admire. You can't compete? Don't be weak, it's your fault anyway, so suck it up.

Having said this, it is also true that many on the Left do not have much to say about international trade, as it is currently playing out, despite bountiful data and a well-developed but under-utilized theoretical framework that vividly describes reality: unfettered, global trade impoverishes the working class and enriches (most) corporations and the managerial and investor classes.

Of course, there has been some protest against globalization. There is currently a push-back, one that may be growing, against the Trans-Pacific Partnership, just as there was against NAFTA. Nevertheless, the TPP remains a second-tier concern for the Left.

The Left finds itself once again ideologically divided, its modest resources spread thin. Protesting the ravages of aggressive trade means the Left, to some extent, aligns itself with Corporate America. If you protest, say, Chinese or Korean steel dumping in the US, you not only are taking the ostensible view of the US Chamber of Commerce (e.g., imports are fine, but only at market prices), but you are uniting with the America's economic aristocracy, largely white, Republican, and reactionary.

And this is something the Left cannot abide. It is easier to view the US as economic aggressor. With that as their default position, few are willing to rally against Chinese trade aggression or systemic Korean disregard for American patents, copyrights, or intellectual property. We see occasional outbursts against China's export quality control, such as with food additives, but that is because our health as individuals is threatened. But cheap Chinese products as a growing threat to America's economic interests? Yeah, maybe, but I have a save-a-bug rally to attend, so later, dude.

What the US does in international commerce is considered an existential threat. To report critically about what China does is effortlessly labeled as fear-mongering and bigotry. The Left will do anything to avoid such charges, so any viewpoint that might equate the two countries is embraced very reluctantly. Accordingly, we rarely see any on the Left protesting the systematic circle jerk to which China subjects American companies.

The Left wants to see other nations, at least the non-white ones, as valiantly defending their economic sovereignty. American corporations are the modern exemplars of economic imperialism. The Left too often is content to view avarice as uniquely American (or western); nations whose citizens have brown or black skin are perpetually the designated victim.

To be sure, the American Left opposes oppression of civil rights abroad, be it China, Iran, or Zimbabwe. But when they care to look at the massive, chronic trade deficits the US has with Asia and elsewhere, or when they read how corrupt officials stonewall foreign companies in China, steal technology, or hack our government's computers, the protests are muted. Instead a blame-America-first mentality kicks in. Those on the Right complain about this all the time, and they have a point.

To fairly examine East Asia's neo-mercantilist complicity in America's de-industrialization requires a willingness to confront uncomfortable realities, so most on the Left move on to something less ambiguous, like minimum wage increases, or social security. Others, of course, focus on social issues, such as gay marriage or abortion rights. The dismantling of American industry remains a low priority with purveyors of identity politics.

Cheap Labor Only, Please

Manufacturing and trade news do not get much coverage in our mainstream press. Japanese obsess over trade data, as do the Chinese, Koreans, and most others who take manufacturing seriously. This is obvious from reading any of the mainstream and  business-oriented newspapers overseas.

Ours? The focus is more on Wall Street, corporate profits, and finance. Our corporate media does not want to spend much time on the implications of large, chronic, and structural trade deficits, except for the predictable paeans to free trade, how much we benefit, and how boorishly stupid you are if you are not a committed free trader. Honest analyses of how we arrived at our current condition are rare; most commentary is ideologically driven tripe that contends workers are overpaid and investors need more profits. 

To be sure, we have all read of the decline of American manufacturing. And for those who are determined to know, many websites and blogs, especially those hosted by academics, cover these subjects very well. But while complaints about Chinese currency manipulation and the hazards of doing business in China do get coverage, little is said in the mainstream media about the role of American corporations and how they turned over technology and manufacturing to China and other trade competitors, all in an effort to tap cheap labor, ignore the challenges and capital requirements of advanced manufacturing, boost short-term profits, and please the investor class.

As Chinese wages continue to climb, we are now seeing some evidence of a pick-up in US manufacturing. But a central conundrum remains: Should it be a matter of policy to promote the return of manufacturing to the US? Or is the market going to resolve domestic manufacturing, and perhaps give a boost to exports, without policy intervention?

It is hard to get enthusiastic about an improving manufacturing sector, especially in the face of new data. I once would have welcomed it more openly, but it is becoming increasingly clear that a global economy or neo-mercantilist trading partners are only secondary reasons. In other words, less blame should be attributed to cheap labor in China and more to the desire for cheap labor in the US. The current condition of the US, complete with massive trade and current account deficits, is the direct result of wealthy and well-connected purveyors of neo-liberal free markets. It is they who have hobbled government's essential regulatory role (derivatives anyone?) and facilitated the dominance of finance and the rentier class.

So there is little reason to think that newly created manufacturing jobs are going to pay very well. Neo-liberal policy wonks, along with right-wing politicians, have had a 30+ year run promoting ideas, policies, and legislation that has weakened labor unions, kept minimum wages low, undermined workers' rights and put into place an elaborate tax code that ensures that corporations will largely avoid taxes. All of that in addition to the glories of free and unfettered international trade.

All of which was always the goal. To the extent that corporations locate or relocate manufacturing in the US, it will only be in response to low wages, obscene tax giveaways from states, the absence of unions, and elaborate agreements with government officials that ensure corporations will continue to privatize the benefits and socialize that costs. If manufacturing does meaningfully increase in the US, it will only be because wages have been driven down. If wages go up, even in accordance with productivity gains, corporations will threaten to off-shore production once again.

Presidential Limits

It is difficult to overstate the steaming shit pile that was handed to Barack Obama on his first day of office. Those who choose to ridicule the President for pointing this out have forgotten the "yeah, that's right," chorus line that Republicans sang so heartily when Reagan took office and how he would fix all the terrible things Carter had done. They, and Reagan, knew what they were doing; every positive snippet of news was to accrue to Ronnie; any bad news was obviously the legacy of his Democratic predecessor.

Don't let your brain take the lazy way out on this. Don't say both parties do it and leave it at that. Both parties throw blame at their opponents, to be sure. but it is an insipid and unhelpful observation. Let's not forget that the federal budget deficit, the national debt, and the trade imbalance were all relatively modest when Reagan took office. Our infrastructure at that time was viewed around the world as excellent, and manufacturing played a proportionately far larger role. We had the world's largest current account surplus when Carter left office. When Reagan left, we had the world's largest deficit.

The point here is not to claim that Carter did such a wonderful job. But we must remind ourselves how much this country, and this economy, have changed in recent decades. When President Obama took the oath of office in a ceremony that Chief Justice Roberts screwed up, he faced the worst financial crisis since the Great Depression. He also inherited two long and costly wars that served little purpose except to get men killed and enrich defense contractors, as war always does.

But even if you support(ed) the war(s), and choose to not blame Bush (or Cheney), the point remains that the US fought those wars without paying for them. That much is indisputable. Instead, the horrendous costs, separate and addition to the Defense Department's already mammoth budget, were added to our federal debt. That was George Bush's decision, not Obama's.

And need I remind anyone that those wars came after Bush passed his huge tax cuts for the wealthy, thereby giving back the budget surplus carefully built up during the Clinton era when tax rates and economic growth were both higher.

The real point here is the severe constraints Barack Obama faced when he took office, many of which John McCain would have also faced had he won. Taxes, primarily for the rich, had been reduced so much early in Bush's tenure that it has become arithmetically impossible to meet our relatively modest social spending needs, our huge military appetite, our substantial and neglected national infrastructure, and also balance the budget. And this is on top of a massive trade deficit, a declining manufacturing base, and most jarringly, the fallout from Wall Street's casino capitalism.

I have posted before on the overwhelming challenges Obama faced on inauguration day, challenges that would be huge even if Congress decided to, you know, work together and solve some problems. Unfortunately, President Obama has had to face an additional challenge that a President McCain would surely not have--unprecedented obstructionism. Along the way, Americans have come to learn, to their disgust or delight, the surprising flaws of our federal government and how determined ideologues can lay bare the constitutional limitations of the executive branch.

Republicans control only the House; Democrats control the Senate, despite all appearances, and, of course, the White House. And yet Dems in the House are helpless to stop the unending stream of bills that Tea Party reactionaries promote.  Well, you might say, Republicans control the House, so it figures they would dominate legislation. In the Senate, however, Democrats are in a clear majority, but it usually makes little difference because of the Senate's self-imposed 60 vote supermajority "requirement."

Thus, even flaccid and feeble legislation, mere tweaking, has little chance of being enacted. Anything that does pass is so watered down as to be useless. And that is not because most members of Congress, or even all Republicans always want to oppose the President; it is sufficient that only a determined minority, the Tea Partiers of the House and Senate, choose to obstruct, as they so often have. Let me put it this way: the seemingly intractable John Boehner would not be making those asinine, vapid, and breathtakingly stupid comments on economic policy if teabaggers in his party did not have such a tight grip on his nuts.

Historians are at pains to find a period when the flaws of the federal government were so transparent. Parliamentary governments around the world are taken back by the inability of America's two-party presidential system of government to tackle the most basic tasks, such as properly regulated banks, appropriate tax revenues, a modern infrastructure, and demographic well-being, such as on health care, child mortality, and housing. All of these are becoming a national embarrassment, instead of world-leading, as they once were.

We are now seeing with increasing frequency that even legislation large majorities of Americans want, such as background checks on gun purchases, cannot get passed. There are just enough Republican reactionaries in the House, sometimes helped out by pandering Democrats in the Senate (I'm looking at you, Max Baucus), to derail even the most popular legislation. This can happen, mind you, even when a majority of both houses of Congress and the president favor such legislation. This is not majority rule, it is not even checks and balances as the founding fathers envisioned. It is the tyranny of an ideologically-driven minority.

This is new territory for America.

The Road to Plutocracy

The United States once generally adhered to economic policies that were pretty common sense on their face: We believed in economic democracy, not oligarchy, we believed that severe maldistribution of wealth was not just fundamentally unfair, but unsustainable and dangerous. For generations we properly regulated banks and we had few banking issues as a result.

When the US fought wars, we paid for them in part with steeply progressive--and temporary--tax rates. It was obvious to us and to our trading partners that manufacturing and a modern infrastructure were the bases of economic strength; banks should only play a supportive role. Moreover the US generously supported public universities, which returned the favor by providing us with scientific and technological preeminence. Economic doctrine and history both informed mainstream policies.

We once understood that a strong middle class was essential to overall prosperity as well as the foundation of democracy and free elections. As part of the social contract, industry generally worked with labor, offering wages that were in line with ever-rising productivity. There was little vilification of labor unions at a time when membership was far higher. Corporate dividends and government interest were paid overwhelmingly to Americans and not to neo-mercantilists in Asia and shadowy investors in the Cayman Islands. While the wealthy have always benefited the most, dividends and interest payments in the past were mostly pumped back into local communities. In other words, debt and equities were held almost entirely by Americans. Recipients spent this unearned income within the US, largely in their own communities. That which they saved went into a local banks and credit unions, not Wall Street. This whole process helped grow the economy and stabilize neighborhoods.

We would have been aghast at the idea that massive, intractable trade deficits would arrive and be accepted with surprisingly alacrity. That banks would be allowed to once again trade in securities, take wild, highly-leveraged bets with other people's money, dominate the political process, and virtually insulate themselves from legal accountability. Because of compliant politicians who now have all the money they need to stay in office, the big banks and other stars of Wall Street have been able to maximize gains to themselves, and spread losses onto others, primarily tax payers. This includes companies that have been propped up by taxpayers. It's a sweet deal for the investor class; get the middle class to foot the bill, while dividends and capital gains go overwhelmingly to the investor class. It is, at its simplest, a rigged financial system that has privatized the gains and socialized the costs.

It is all coming undone, though not by the middle class, not by local banks, not by unions, and certainly not by gays, secularists, feminists, immigrants, or Democrats trying to rein in a bloated defense budget. But we have been assured repeatedly that minimal regulations are good because unfettered financial markets will make the best decisions, that they allocate capital most efficiently. Neo-liberalism fetishizes minimal regulations, free and unmonitored movement of capital, low taxes, and free trade.That same neo-liberalism has been a cheerleader for policies that have hollowed out our industrial base, turned the economy over to a rapacious financial system, have put us into deep debt to Japan, China, and elsewhere. In the process, dividends and interest payments that used to stimulate the American economy now stimulate theirs.

Now we are told to spend freely, with few admonishments to save more. Our economic system is now deeply dependent on middle class consumers willing to endlessly consume, a process that is far less beneficial than in decades past because so much of what we buy is imported. Part of the massive earnings enjoyed by our trading partners is now used to finance US debt. The Reagan administration set us on this course of indebtedness because it knew foreign governments had piles of US dollars, and because conservatives in our own government refused to allow a level of taxation that would pay the bills. The 1% are now able to avoid taxation on income that would have been taxed in the past; taxes that would have helped to pay for the Iraq war, which has gone unpaid, and such things as maintaining a modern infrastructure.

Most of the middle class is in serious debt. Families will not and should not spend freely if their job security is in question. Many have experienced wage reductions as they move from one employer to another. An ever-growing proportion of American families realize they cannot simultaneously save enough for retirement, pay for basics, including health care, rising food and energy prices--especially in the face of no commensurate wage increases-- and also set aside for their children's needs, including college tuition. This is not a sudden condition; it has been building for decades.

The right wing and other intellectual thugs want you to believe that it started with President Obama. They hope you don't notice the policies they are espousing are the same ones that have been largely in place for most of the last 30 plus years.

It is, in any event, a laughably ignorant concept to argue that Obama is even in a position to have anything more than a modest effect, for good or bad. The conditions that most people and the government are now in are far larger and intractable for any president to handle. It has taken America 30+ years to get here, it cannot be turned around in four years, not when Bush handed Obama a shit storm and two unpaid wars, not when Republicans oppose him on every substantive point, and not when those same Republicans are able to exploit what we now see are serious shortcomings in the structure of our system of government.

It has taken the US decades to drift into the present condition. During this time the wealthy have garnered ever more of the wealth, paid ever decreasing taxes for it, run corporations that have earned more, paid lower wages, have been taxed less, and have more freedom to move capital around the world, and fewer obligations to middle class families. This is as the wealthy have always wanted it, and it is what today's Republican Party wants. Their biggest concern is that President Obama would do something to stop this inexorable trend towards plutocracy.

Avoiding the Real Issues

As America continues to struggle, many have reminded us of the value of innovation-- in technology and commerce, mostly, --but also in education and government. President Obama himself has often stressed the importance of innovation; how we once had it in abundance, how it now is eroding, and what we must do to get it back. The value of innovation would seem to be something that progressives and conservatives could mostly agree on, and that helps explain why the President talks about it. There is, of course, less agreement on just how innovation should be enhanced, and what the proper role of government should be.

When President Obama talks about the importance of innovation, he has often, inadvertently or not, draped it in conservative talking points. We need to "work harder", "stay in school", --or go back to school-- and get that degree or those credentials. It's a competitive world out there; if you can't get the job you want, it's because you are not properly trained and credentialed. And, of course, you cannot blame corporate America if you don't have the proper skills. We must not let down them down; work harder and prove your value to the job creators.

This storyline is not so wrong as it is incomplete. Obviously, there is much to be said for staying is school, seeking additional training, or more broadly, the role of innovation. American commerce still provides sundry example of where hard work and innovation can take you; they are the twin edges we must sharpen if we are to meet future challenges.

Every speech devoted to either of these takes the focus away from the underlying causes of US difficulty; jobs, to be sure, but also wage levels for the jobs we still have. Most people are in fact employed, and most jobs have not been outsourced or lost to foreign competition. What is not being acknowledged is that a disproportionate number of the jobs Americans now have face little foreign competition. That's the good part; the bad part is modest wages, benefits, and skill requirements for so many of these jobs. You don't need a degree to work fast food, retailing, and the like. And what about that other more technical job you went to back to school for, got a degree in, and now are heavily in debt for? Sorry, that job has been filled.

The problem of our sluggish economic growth is not a lack of innovation. We have bought into an economic doctrine that sanctifies free trade, financial deregulation, including unfettered flow of capital, and an obsession with credit and debt. It is a system designed by and for banks and the investor class, with little regard for main street or the middle class. The result is an indifference to massive trade deficits, dangerously leveraged banks, and an increasingly ability of the wealthy to avoid taxation and accountability.

Employees are seen as a mere input in this profit model. Low wages are good since they improve the bottom line. If workers are recalcitrant and actually want a living wage, management should be free to outsource production to low wage countries. To hear some tell it, management is virtually obligated to fire its American workers and seek cheap unregulated workers abroad, for improving the bottom line is management's only real responsibility. It's what the investors want, you know.

And the people who work for the company? That's labor, an input. Lower input costs mean higher profits. Why pay more? Any manager who does not seek to maximize profits is doing a disservice to investors, just like they were all taught in American business schools. It's all very rational and efficient, don't you see?

Innovation does not directly address any of this. We have innovated like crazy and what are the results? Entire industries have been shipped overseas. Because we have allowed our industrial base and concomitant skills to erode, seeking out overseas producers has become a default position. A generation has grown up assuming that American reliance on foreign manufacturers is the natural order of things.

Nor do the calls for greater innovation say who will benefit from the results. Asia is a huge beneficiary of US economic policy. For generations our tax dollars have poured into basic R&D, much of it going to public universities. It has been a great success story, and it has played a key role in America's development. And like the recent round of stimulus spending, much of those tax dollars ends up in Asia. Working harder, as even Obama has exhorted, does nothing to change the imbalances. US corporations already have what they always want; cheap labor, huge profits. The investor class took a hit in 2008, but they have recovered nicely, and have fat dividends and lightly-taxed capital gains to show for it.

So the middle class needs to work harder? For them? Because the job creators need help? Americans are already working harder than elsewhere in the OECD; we also have, in recent decades, relatively little to show for it. Wages have been suppressed, union membership has plummeted, and pensions and benefits have become even more rarefied. All of this is the direct result of flawed policies made in response to legitimate economic challenges.

Innovation will help; it always has. But the role of innovation has been undermined for the same reason our techno-industrial base has. Economic history is very clear on this: Nations that vigorously promote and defend their industrial and technical base have thrived. Those that didn't, and let their financial sector dominate, have crumbled.

America will not be an exception.

Obama's Burden

A recent cover story of The Week magazine relates the difficult choices President Obama faces in Afghanistan. These choices are part of the larger set of problems he has faced since his first day in office. The two endless (and thankless) wars in the Middle East were only his biggest foreign challenge for a president who also had to overcome the biggest economic recession since the 1930's, the spectacular fallout from Wall Street's recklessly irresponsible activity; activity, it should be added, that was condoned and even applauded by free market ideologues, including Alan Greenspan.

All of this in addition to a massive trade deficit, one caused by policies that have allowed widespread offshoring of jobs and a corporate culture that does not take manufacturing seriously--these are the prime reason industries have been hollowed out.  This bears repeating: It is our own incoherent industrial policies that have contributed the most to our weakened industrial base and the mammoth trade deficit that it engendered, not China, not Japan, not foreign oil.

Obama faced two hugely expensive wars, neither of which was going well. He was forced to choose from several poor choices. The wars have added enormously to the national debt, an issue that did not seem to bother Republicans while Bush was in office.

The US has generally paid for its wars by raising taxes. We certainly did so in WWII, the Korean War, and Viet Nam. Many voters have forgotten how unusual and as we now know, reckless it was for George W. Bush, who inherited a huge budget surplus, to first squander the surplus by passing costly tax cuts for those already wealthy.  He too was faced with a large national debt as well as a seriously eroding infrastructure. He opted for tax cuts, the budget deficits returned, and then he went to war. Bush and the Republican-controlled congress refused to pay for it and the federal government has been growing its deficit ever since.

Obama tried to do what many economists said he must do; stimulate the economy, and keep the budget deficit from becoming too large, not an easy task, but then he did not create the conditions and policies in place when he took office. Others created them; Obama is getting blamed for them.

The irony is that Obama's fiscal stimulus was conventional, mainstream, and conservative. Keynes himself made it clear that government stimulus spending was very much a conservative alternative to the much greater pain of allowing massive unemployment and the resultant upheaval and unrest.

Obama gets blamed for continuing unemployment too, of course. The realty is that we have a much smaller industrial base that will call back workers when conditions improve. This is a big reason the recession lasted as long as it did, and why the recovery is so slow: there are far fewer good-paying jobs. Instead, millions of people have been forced to settle for poorer paying jobs than the ones they once held, and often with fewer benefits. Lower wages exacerbates economic recovery.

The final kicker is one left out of most analyses that focus on the mortgage crisis. The middle class carried the economy all the way until near the end of Bush the Lesser's second term. They did so by running up massive personal debts on their credit cards. That was unsustainable, of course, so once the Wall Street bankers crashed the economy, and unemployment started to rise, middle class consumers cut back on expenses. The cutbacks were prudent for the individual, but they hurt spending, tax receipts, and other peoples' jobs that depended on spending.

This is the mess the President faced on inauguration date. None of it started with him. And the process, the wars, the deindustrialization, the irresponsible tax cuts, the eroding infrastructure, the mortgage bubble, the suppression of wages, the dominance of unaccountable banks, all of it, was well under way long before most of us had even heard of Barack Obama.

Now bear in mind that most of the same people who got us in this mess, including essentially every Republican in congress, are completely opposed to Obama's every effort to extricate us, as if we can actually dig ourselves out of the hole, the one the middle class did not dig, without some pain and sacrifice. So if Obama tries to raise taxes to where they were in the Clinton boom years, he is a big government socialist. Never mind that taxes were higher under Reagan. If he tries to cut subsidies to Big Oil, as if they they needed it, he is undermining business. If he tries to rein in our out of control defense spending, he is endangering America's security. Never mind that the level of spending he proposes would still be higher than it was in Bush's first term. And every effort to get Wall Street under greater control, before it ruins it again for the rest of us, is opposed. Republicans insisted in 2010 that the Bush tax cuts be extended, and they were willing to shut down Washington to get them.  And now, of course, Obama gets blamed for the inevitably larger budget deficit.

Republicans have left the President with few options: Republicans will continue to support looser regulations and lower taxes (for the rich). Never mind that these are what created the financial mess in the first place. Only now are Republicans insisting on lower spending, not coincidentally on the programs that help the bottom half of society. Any honest appraisal of the federal budget will show that even significantly lower spending will do little to close the budget gap, not when tax revenues-from individuals and corporations alike-are the lowest they have been in decades.

Here is a short video that covers much of the above. It offers up in graphic form the impact on the federal deficit and debt of the wars, the bank bailouts, the recession, and most of all the Bush tax cuts.



One more thing; Obama even got Osama bin Ladin, after the trail had gone cold, so no, Bush, you don't get credit. 

Little Sally's Epiphany

On Dec. 22 I posted an article about the doctrine of maximizing shareholder value, what former GE CEO Jack Welch called "the dumbest idea in the world." I shared the views of Steve Denning at Forbes who discussed the contradictions, to use a Marxist term, of management's blind allegiance to improving the net worth of shareholders. Denning, in turn, featured a new book by Roger Martin.

Martin has another article on this called "Little Sally Learns About the Toxicity of Shareholder Value Maximization." In it, Martin makes the case that corporations committed to maximizing shareholder value have perverse expectations of employees. Why would management expect, Martin says, employees to be motivated by a corporate culture that cares most about making mostly rich people richer, people the employees do not even know?

Martin's recognition of the basic psychology of employee motivation should sound familiar to the longstanding view, often held by progressives, that American corporate culture is short-sighted and less committed to improving its products than their bottom line. Recall that General Motors' management of yesteryear boasted that GM was not in the business of making cars, but of making money. GM's subtle indifference to product quality and innovation weighed heavily on it for a generation and nearly destroyed it. Its future remains uncertain.

There are, in fact, two separate arguments at play here; One is the Denning-Roger idea that management is inappropriately concentrating on short-term profits and boosting share price, practices which are systematically distorting management decisions. The other is that focusing on the interests of the investor class, the one percent, creates a bias against workers, community, and ultimately the corporation itself. It is a model best suited to maximizing wealth for a few; it does that very well.

The result is that US corporate culture has the deeply held tendency to treat employees as a mere input, an irritating expense that must be reduced, the abstract L for Labor in the cold computations of economists. It is this second argument which explains why, in the US more than, say, Germany or Sweden, the middle class is squeezed, why jobs are scare, but the investor class is richer than ever. It is the triumph of corporate profits as the centerpiece of American political economy, economics as if people didn't matter.

These are two different lines of argument, from different sources, politics, and traditions, that have dovetailed into a single unavoidable conclusion. I can only hope that we finally see a few inchoate signs that free market economists, free traders, and other purveyors of casino capitalism are beginning to realize the intellectual poverty of their ideology and the aching unsustainability of the American corporate model they have created and upon which they feed.

I leave you with an illustrative dialogue Roger Martin shared about Little Sally.

Sally: Daddy, my teacher asks me to listen carefully in class and do my homework every night. What does your boss ask you to do?

Daddy: He wants me to help him maximize shareholder value?

Sally: Huh? What does that mean?

Daddy: It means increasing our stock price to the highest we can make it go.

Sally: Why?

Daddy: Because that will make the shareholders happy.

Sally: Well who are these shareholders anyway?

Daddy: They are people who buy shares in our company.

Sally: What are they like? Do you know them?

Daddy: Actually we don't really know who they are. Every three months, we get a list of them but they buy and sell so often, the list changes routinely. And even the list we get is for organizations like mutual fund companies and pension funds that invest money on behalf of shareholders and aren't the actual shareholders.

Sally: This is getting a bit confusing. Are they at least nice people; these mutual funds and pension funds?

Daddy: It would be hard to describe them as terribly nice. They are really demanding and if we don't increase the stock price for them, they get pretty upset and sell our stock.

Sally: That isn't very nice. When they do that, do they sell to nicer people?

Daddy: No, typically they sell to people about like them - pretty impatient.

Sally: This sounds pretty weird. If you do get the share price to rise and the shareholders are happy rather than upset, do they do nice things for the company?

Daddy: Not really, Sally. What happens is that they then insist on us getting the share price to rise some more still. Or sometimes they sell their shares because the price has risen enough for them.

Sally: Whew. I must have this wrong but let me check. You go to work every day trying to increase your company's share price for people that you don't know, who don't act nicely at all, and if they are unhappy just sell their shares to some other people who you don't know either and are also not very nice. And if you succeed, they don't do anything for you other than put more pressure on you or sell because they are happy. They seem to sell whether they are happy or upset. That can't be much fun. Why do you do it Daddy? Why don't you try to do something a bit more fun?

Daddy: Well Sally, I know that it sounds kind of weird, but that is our capitalist system. It is our duty to maximize shareholder value, even if it is pretty unfulfilling and unpleasant. And I try to do the best job I can to help our CEO do that. And Sally, if I do a really good job helping my CEO, when he retires, he might appoint me CEO.

Sally: I love you Daddy and because of that I kind of hope that he doesn't make you CEO!

How They Really Feel

This man's comments speaks volumes on the attitudes of the wealthy. His disdain for those with less money is palpable. He clearly is equating people's value with the size of their portfolio. Rich people are better.



And it is not just an arrogant attitude; he is also egregiously wrong,his intellectual honesty clearly compromised by his ideology. Notice that he claims to be subsidizing the 99% because he is making big bucks. It is especially ridiculous in light of the massive amounts of money our government has directed at the 1%, and especially the 0.1%, who operate under a self-serving delusion that everything they have is because of skill and hard work. Overlooked by this dickhead are the endless flows of government contracts and concessions to big Pharma, defense contractors and the like. Overlooked are the multi-million dollar giveaways by state and municipal governments as they compete to entice corporations to locate in their areas.

Richie Rich also ignores huge sums given to banks as part of their bailout, money bank executives then used to pay outsized bonuses. And just this week we read that those banks earned roughly $13 billion in interest directly the result of the sweetheart deal they received for tanking the US economy. Here is the gist of it, as related by AllGov:

Thanks to the Federal Reserve’s generous lending during the 2007-2009 financial crisis, banks that were teetering and at risk of collapsing wound up making billions of dollars in profits, according to Bloomberg Markets magazine.

After combing through 29,000 pages of Fed documents released to Bloomberg by court order, the publication determined that banks earned about $13 billion in income by taking advantage of the Fed’s below-market rates. These loans were made without informing the public or Congress of which institutions were borrowing heavily to stave off disaster.

Finally, have a look at the chart below. The corporations in these sectors are generally run by individuals who espouse rugged individualism, a can-do attitude, and the glories of a free market. They also almost always bitch about high taxes and government regulation. As you can see, they rarely pay their share of taxes, but they sure know how to pull in those tax subsidies- nearly $223 billion from 2008-2010.

Source: Citizens for Tax Justice

That's some serious corporate welfare. And from their government-subsidized profits, they pay outsized compensation to people like the guy in the video. If corporate boards claim that their executives deserve their often huge compensation, then those corporations don't need and don't deserve government support.  If you cannot live without taxpayers like me subsidizing your bottom line, then your insistence on fat bonuses is even more morally obscene than it already is.

Or is this a problem only when the recipients are the 99%?

The implicit message: It's just good business, complete with tax write-offs, when rich guys are in on it, and it's socialism only when the poor receive it.

Why Occupy Wall Street is Angry

This country once had a stable financial system. It was the direct result of the New Deal. The crash of '29 had been created by greed, lax rules, and government institutions unequipped and ideologically unprepared to tame capitalism's most rapacious players.

Enter FDR and the New Deal. With it Americans enjoyed roughly 50 years of prosperity and a largely stable banking system. The good 'ol days, as conservatives seem to pine. And there was good reason why we look fondly at what seems to have been our economic heyday. What conservatives forget is that we had far less income inequality, higher taxes, greater union membership, lower consumer, state and federal debt. We had a trade surplus, a much larger manufacturing base, and little outsourcing. And we did not have job-killing free trade agreements, such as NAFTA!

Underlying all of this was a rigid set of banking rules that, among other things, kept commercial banks out of the stock market and enforced prudent capitalization requirements. Upon assuming office, President Reagan immediately worked to overturn regulations and help Wall Street's rise to dominance, a rise that continues today despite Obama's half-hearted and ineffectual efforts to reprioritize Main Street.

Banks quickly capitalized on the changes Reagan set in motion; systemic banking failure began within a few years. Those failures have been with us in regular intervals ever since, all the while wealth continues to concentrate in the hands of those who created the economic chaos in the first place.

Here is Elizabeth Warren explaining the process.

US as Third World

On August 25 I had a post on Wall Street and how it bought and captured the institutions originally meant to ensure the public was served. I wrote then, and I say here again, the outsized role of the financial sector and the obscene, short-sighted, and shameless priorities of a reckless investor class, complete with unprecedented lack of accountability and legal liability, are at the heart of America's economic difficulties.

Corporate America's dominance of media and public discourse gloss over the fact that said financial dominance was what conservatives wanted; it was they that pushed through legislation favorable to the wealthy, investors (wealthy or not), and corporations. Conservatives, especially the wealthy variety, have gotten most of what they have wanted; lower taxes, fewer regulations, free movement of capital, lucrative defense contracts, and more.

Crap about how progressive agendas have hurt America are the imaginary domain of the ignorant. Union membership is now at negligible levels, far below similar countries. Labor unions have been weak for the last 30-odd years and getting weaker, just what  conservatives wanted.

New Deal legislation had made banking relatively safe and stable for generations. It was conservatives who said barriers between banking and finance were dated and holding us back. So Republicans in Congress overturned Glass-Steagall. Conservatives got what they wanted. Casino capitalism almost immediately ensued; financial meltdown soon followed. They wanted taxpayers to bail out the banks, and without any meaningful reform to prevent further catastrophes or undeserved enrichment. They got that too.

Wages for most workers have been flat for decades, precisely what conservatives have wanted. The US was a wage leader before Reagan; since then, wages for most have been flat. Conservative policy has been to suppress wages however possible. Conservatives got what they wanted.

The list goes on and on; our nation's richest and most powerful get what they want; favorable legislation, weak regulation, accommodating regulators, court rulings, and a compliant press. This should all be obvious to anyone who pays attention and doesn't walk on their knuckles. But reality struggles for attention in the face of a conservative noise machine that continually distracts voters.

Conservatives have also favored free trade, the mantra, the religion, the chiseled-in-stone gospel of laissez faire economics. It is front and center in the pantheon of conservative political economy, right up there with free markets. And here again, conservatives get what they want.

Conservatives, including Republican party operatives, rarely miss a chance to pimp free trade doctrine. American media usually goes along with Republican talking points. Even if one does find articles that dutifully report massive deficits, and even outsourcing, there are few coherent and visible efforts that explain the ramifications in detail and dare to analyze free trade as class warfare or why a lack of industrial policy is destroying us.

To get just an inkling of how international trade is playing out for the US, have a look at the figures below (Data are from Alan Tonelson's America's Increasingly Third World Trade Profile).

Below are the top ten US trade SURPLUS manufacturing categories for Jan.-June, 2011
(billions of current U.S. dollars)

Waste & scrap materials:  +$15.53
Spacial classification provisions:  +$11.44
Plastics & resins:  +$10.19
Soybeans:  +$8.81
Non-anthracite coal and petroleum gases:  +$7.18
Corn:  +$6.67
Wheat:  +$6.45
Cotton:  +$6.39
Misc. basic organic chemicals:  +$3.87
Non-poultry meat:  +$3.85

Next are the top ten US trade DEFICIT manufacturing categories for Jan.-June, 2011
(billions of current U.S. dollars)

Crude oil & gas:  --$121.13
Autos & light trucks:  --$37.82
Petroleum refinery products:  --$27.62
Computers:  --$22.50
Broadcast & wireless communication. equip.:  --$22.35
Goods returned to Canada & reimported:  --$21.47
Audio & video equipment:  --$15.80
Pharmaceuticals:  --$13.38
Telecommunications hardware:  --$12.72
Computer parts:  --$12.67

Notice a pattern? The US has become a big supplier of scrap and raw materials. Although the data do not show it, this is a substantial reversal of a few decades ago, when the US had a trade surplus in a variety of manufactures, especially high-end, high-tech goods.

Now look at the sectors with the biggest trade deficits. Except for oil, they are all manufactured goods that not long ago were among America's biggest contributors to what we once had, a trade surplus.

There is much to address here. My intention in future posts is to further explore issues in international trade and to demonstrate that America's free-trade ideology and the policies and practices that have resulted, are primarily in the interests of the overclass, have shaped corporate America to serve the interests of that overclass, but are damaging for the country as a whole.

Don't let conservatives tell you the US has a trade deficit because our taxes are too high, wages are too high, unions are too powerful, or regulations are too onerous.

They are wrong on every point.

US Corporate Model is Dysfunctional

Below is a video interview of political columnist Harold Meyerson. He addresses a topic that should be front page news everywhere, but isn't. He talks of America's dysfunctional corporate model and its negative impact on the economy.

In my view, and it is a subject I want to discuss more later, Meyerson correctly describes the US economic model as an obsession about the microeconomic needs and interests of corporations and shareholders, and not to the needs of communities, workers, or the broader interests of the nation.

Note Meyerson's references to Germany, which has a huge trade surplus, based on manufactures, and substantially higher wages and benefits than in America. Though he did not say it, Germany's per capita exports are about four times higher than America's. This in an a country where union membership is much higher and manufacturers are not given free rein to offshore production to cheap labor havens. This is a recipe for disaster, according to the Neo-Cons, Neo-Liberals, Wall Street, the right wing, virtually all Republicans, ideologues, and the endless stream of bloviating media shills.

I give them credit; they know how to protect their interests and get voters to care more about somebody's home makeover, scary brown people, or Wiener's wiener.  



It's a shame, really. Our politicians fight fiercely to protect US corporate interests, the corporate model, and the overclass that feeds off it. They talk to us of liberty, freedom to choose, and the horrors of industrial policy and government interference, even as they bail out Wall Street and subsidize Big Oil.

In return, their pockets are filled with cash to buy the next election.

Djou Flunks

The nonpartisan Coalition for a Prosperous America has released a congressional scorecard on how members of the House of Representatives vote on international trade. The CPA gives its results and an explanation of the methodology. You can see how your representative did here.

The CPA does not favor ideologically-laden free trade, so it certainly is not the must-have-cheap-labor Chamber of Commerce. Rather, the CPA supports trade that works for Americans, meaning the US must endeavor to develop a more coherent foreign trade policy.

Two results stand out for me. The first is that Democrats, as a group, score better than Republicans. The latter show a strong preference to give corporations what they want, such as freedom to outsource production. Dems are starting to recognize what our trading partners have always known; work for policies that promote our industrial base, and to hell with the free-trade gospel.  Unfortunately, the institutional barriers to meaningful change are enormous.

I also see that my Representative, Republican Charles Djou, received not only an F on the CPA scorecard, but a complete zero. Way to go, Charles. Looks like you are still Boehner's Hawaiian BFF.

Hawaii's other Representative, Mazie Hirono, scored an A. Thanks, Mazie. Come November Hawaii will have a chance to vote for two Representatives that take working families seriously. Mazie Hirono, and Colleen Hanabusa. A vote for Colleen will help send Djou packing.

Don't get too comfortable, Chuck.

Our Looming Lost Decade

Readers will note my byline that says "things are not going to get better." And by "things" I mean the economy specifically, or more generally, the vitality of our nation, its institutions, and its citzens. Yes, it is pessimistic. Here is another bundle of reasons for that pessimism, from Professor William Black, a man who has received some attention in the news because of his testimony before Congress, but not nearly enough (watch the video here. And thanks to Badabing at DailyKos).

Follow the link and take the time to watch the 14 minute video. I will only add here that, among other things, Professor Black refers to Japan's lost decade and how it would not aggressively deal with the debt of the big national banks. He argues the US is setting itself up for its own lost decade.

If we could only get off so light.  There are some crucial differences between the two countries, and they do not auger well for us. We are the ones with massive consumer debt, not Japan. We, not Japan, have by far and away the world's largest trade deficit, which many now recognize as deeply structural. We have allowed our trading partners to erode our industrial base; Japan's remains largely intact.

Even our daily government operations are being financed by our economic competitors, including Japan and now most certainly China. The interest on that debt pours into the economies of these other nations. The Japanese government is also deeply in the red. However, the difference is that it does not owe money to foreigners. Interest payments go to Japanese institutions and citizens. Most of it stays in Japan to the benefit of the local economy.

Lastly, we have been completely unable to rein in our hugely expensive warrior class. Our appetite for empire combined with an unwillingness to pay for it will seal our fate.

 But hey, you have a good day. A tax cut is what we need, don'tcha know?

Those Jobs Aren't Coming Back

Numerous reports in the media have spilled ink and electrons alike detailing the difficulty the US and other countries are having getting back on economic track. Mainstream sources are especially prone to argue that debt and the banking system are the twin towers of our economic malaise.

These are undoubtedly major factors: A sick banking system, especially one so dominant as what we have allowed to develop in the US, is a risk to us all. Debt? Yeah, well that is pretty bad too, but it is much harder to quantify and accurately characterize. What is demonstrably false is to insist that federal debt is unwaveringly bad and must be avoided. We'll wait until another day to review the lack of regulation that brought on our banking fiasco. But however one apportions blame, it was not America's underclass, or the middle class, that put the economy in the ditch.

But I digress. A recent article in the Wall Street Journal captures the angst so many feel about the sluggish economy. It notes that countries with relatively strong banking systems, such as Brazil and Chile, have experienced relatively strong job growth.

In the US, huge increases in consumer debt have been steadily climbing to unsustainable levels. As the Wall Street Journal notes, “As of March, U.S. household debt stood at 122% of disposable income, down from a peak of 131% in early 2008 but still well above the 100% economists tend to see as sustainable.” The Journal doesn't say it, but the huge increases in consumer debt were fueled by Wall Street's credit card frenzy, action that was implicitly approved by the federal government. It has taken a recession to get that debt figure down.

In any event, an under-regulated banking system, and the mountain of debt it fostered, are only part of the analysis.  There is much missing from mainstream sources, including the WSJ and other cheerleaders for the financial elites, for they hold back, unwilling to acknowledge the core contradiction in their analyses.

Japan was among the other countries the Journal reviewed (based on data from the OECD and the International Labor Organization) Again, the emphasis was on national debt, and the reluctance to hire workers that is supposedly the direct result. The obvious bromide is that Japan can create jobs if would just cut spending. 

But Japan has a more fundamental problem, and it is a problem that will only spread. The Japan of today is being compared to the Japan of yesteryear; the post-war era from roughly 1960 to 1990. But that gravy train is over. During that time Japan built up huge overcapacity, encouraged by the knowledge that the US was wide open to imports. The US actually took all that free trade talk seriously, as it demonstrated an unprecedented willingness to sacrifice its manufacturing base. Japan took free trade seriously as well, at least the export half. Along the way, Japan became hugely dependent on the American market to maintain growth.

Regardless of how one cares to assess blame on past US-Japan trade tensions, Japan's ability to export to the US has been compromised by unrelenting competition from its Asian neighbors: First the Asian Tigers (Taiwan, Korea, Singapore, and Malaysia) and more recently China. Huge quantities of merchandize that used to come from Japan now come from somewhere else. And it will likely only get worse. Japan's meal ticket in America will never be as lucrative and wide open as it was up until the end of the 1980s. Japan created fantastic over-capacity because it took full advantage of its access to the American market. That market will never be the low hanging fruit for Japan again. Spending, debt, tax burdens? Those are secondary reasons.

Despite the frantic ranting in the US about debt, stimulus spending, and taxes, others seem unwilling to acknowledge the systemic corner into which we have backed ourselves. Policymakers pretend that there is a painless way out. There is not. The mind reels when one sees that many elected officials actually argue that tax cuts are the solution. 

Only two issues remain: how much worse will it get before we turn on our antagonists, and who will feel the pain of adjustment? So far, the answer to the second question clearly are the poor and the middle class; roughly 80-90% of all Americans. Unemployment is high, and it will remain high, because many of the jobs are not coming back. This is the reality that the Obama administration did not create but must face. Much of the stimulus money is being spent on Asian imports, which serves to stimulate their economies, not ours. Corporate America, often with government blessing, has created a massive systemic trade deficit with Asia and much of the world, by abandoning factories, communities, and entire industrial sectors, along with the millions of relatively good paying jobs that went with them.  All of this in the name of free trade.

So people will not return to work in this economy as they did in the past because those factories that called them back after previous layoffs have moved abroad. The impact has been masked by the willingness of consumers to take on massive debt. Consumer debt, along with government's own deficit spending, have sustained the economy, but growth will not continue without a healthy industrial base.

The banking debacle may have put the economy in the ditch, but the decay has been well under way for decades. This is a fraudulent economic system and completely unsustainable.

There are clear signs that many people finally get this. And the signs that we will make the painful decisions, and actually stand up to America's plundering elite?

That's not so clear.