Recovery? Never

Originally published at The Benfell Blog. Please leave any comments there.

It’s easy to see former Intel CEO Andy Grove’s argument that tariffs are needed to protect U.S. jobs. Under globalization, 1) competition in labor conditions means that in order to compete, we must all accept the conditions of Tanzania; and 2) to compete in environmental and other regulation and taxation, we should probably accept a central government with the efficacy of that of say, Somalia, where–oops–pirates are unrestrained in hijacking large commercial freighters and tankers and holding them for huge ransoms.

Little incidents like the present depression–and yes, the time has clearly come to use that term–illustrate that unless you have people with sufficient incomes to purchase our excess production–or government to step in, as Maynard Keynes recommended, to consume where others cannot, there can be no economic recovery.

The trouble is that the jobs are already gone. Scott Sernau, in Worlds Apart: Social Inequalities in a Global Economy, devotes a lot of space to illustrating how well-paying industrial jobs have been replaced–to the extent they have been replaced at all–with low paying service jobs. Among many indictments against Wal-Mart in Robert Greenwald’s film, Wal-Mart: The high cost of low price, is that the mega-chain has profited from the impoverishment of the U.S. University of California Santa Cruz professor G. William Domhoff points out that the top 20 percent of the country now controls 85 percent of net worth and 93 percent of financial wealth, and that it takes in over 60 percent of income. As Sernau writes,

The new international division of labor that comes with globalization can also lead to expanded inequality, particularly within nations. Those who can control global markets and global production can garner a world of profits, benefiting from both the cheapest inputs of labor and resources and the largest markets afforded by the entire planet. In contrast, those whose skills are now replicated by workers around the world find themselves competing for jobs and wages with the entire planet. In this sense, the global capitalism of the twenty-first century has had effects similar to the national and international capitalism of the nineteenth century, but these effects have been greatly magnified. Spanning many different lands with many different laws and practices, they are also much more difficult to control. (p. 46)

In fact, the raison d’être for multinational corporations is to achieve an independence of any single country. Which means that U.S. has a greatly exaggerated sense of its own economic importance. The country is now important for the markets it can still provide, the resources like coal and oil our land still offers, the military protection we can offer corporate interests in places like Iraq for its oil and Afghanistan for its minerals; and our labor is important only for its proximity to those markets and those resources and for the blood it may shed in defending capitalism in foreign lands.

As Andy Grove points out, the illusion that the U.S. is somehow superior in innovation will not hold. He locates innovation with manufacturing facilities–which are now overseas, but other countries have also invested greatly in education; their universities rival our own. Meanwhile, we are disinvesting in education, and in truth, we have been doing so since long before this depression.

It is not just that countries like China and India are successfully competing with the U.S. for factories. But that the U.S., by selling itself to multinational interests, has stolen the opportunities of hundreds of millions of people to further enhance the wealth of a very few who have absolutely no loyalty to this country. I can’t even consider as news a front page story in the New York Times that the U.S. has subsidized the companies involved in the Deepwater Horizon catastrophe even as they located their corporate headquarters and flagged the drilling rig itself in countries where tax and regulation costs would be lower. That’s just the capitalist way and the Deepwater Horizon is exceptional only for the magnitude of the disaster in the Gulf of Mexico.

And after that, as Steven Barkan describes in a chapter of Criminology: A Sociological Understanding, we rarely prosecute white collar criminals even when they repeatedly cause preventable disasters that cost lives. Well before Ronald Reagan and deregulation,

[Edwin] Sutherland (1949) studied the 70 largest U.S. manufacturing, mining and retail corporations and found they had violated antitrust, false advertising, and other laws 980 times, or 14 each on the average. Their crimes, including bribery of public officials, were not just accidental violations but deliberate, repeated, extensive, and harmful. Because Sutherland was forced to rely on the official record, he thought the true extent of corporate lawbreaking was much higher. He added that any common criminal committing even his low estimate of an average 14 offenses would be considered a habitual offender worthy of public and legal condemnation. (Barkan, p. 366)

Barkan discusses at length various forms of financial crimes, both occupational and consumer safety violations, environmental pollution. He concludes,

Many criminologists believe that white-collar crime costs us more in lives and money than street crime (Friedrichs 2004; Rosoff, Pontell, and Tillman 2004). . . . Our figure for street crime is $17.1 billion, the FBI’s estimate of the economic loss from all property crime and robbery. For white-collar crime, we will . . . tak[e] the midpoint of estimates for which a range was given: (1) $389 billion (the U.S. News & World Report estimate in today’s dollars) for the cost of all corporate crime, including price-fixing, false advertising, tax evasion, and various types of fraud; (2) $100 billion in health care fraud; (3) and $33 billion in employee theft. These figures add up to $522 billion annually. (p. 388)

But we call it hyperbole to accuse the rich of stealing from the poor and we continue to assume a possibility of good governance when the record is clear that the government aids and abets the rich–and not just since Ronald Reagan.

Those who hope for a recovery this year or even in ten years need to explain what this recovery will be based upon. The record of my entire life is of industry after industry exporting jobs just as soon as they figure out where to locate the facilities. To assume that “green jobs” will somehow be different places an undue emphasis on construction and contracting trades, which itself assumes that consumers will have money and businesses will be present to spend on “green technology.” While such investments may indeed be worthwhile as the cost of fossil fuels rises, they can only be made if the money is here to spend.

But by the time our politicians show any interest in making sure that money exists to be spent, it too will likely be gone.