Wednesday, July 20, 2005

America has more than a trade deficit; it has a truth deficit. So says William Greider, writing in The New York Times.
You can't keep spending more than you earn. It's as true for nations as it is for any household, and other advanced nations DON'T. The U.S., though, not only spends more than it earns, it has refused to talk about the problem. When Warren Buffett warned that the United States is on its way to being, not "an ownership society" but "a sharecropper society", Washington elites ignored him. But the truth has a way of insisting on being noticed. "Now that [our debt] is too large to deny," Greider says, "they concede that the trend is 'unsustainable'. That's an economist's euphemism which means: things cannot go on like this, not without ugly consequences for American living standards."
In one sense, only Americans are suffering from this trade (and truth) deficit.
Western Europe, whatever its problems, manages economic policy to maintain modest trade surpluses. Japan manages to insure far larger surpluses in recessions (its export income subsidizes inefficient domestic employers). China strives to acquire a larger, more advanced industrial base at the expense of worker incomes and bank profits. Germany and Japan, despite vast differences, both manage to keep advanced manufacturing sectors anchored at home and to defend domestic wage levels and social guarantees. When they do disperse production and jobs overseas, as they must, they do so strategically.

By contrast, Washington gives our multinationals a free hand, so they are raking in the profits. Wages here suffer as jobs are outsourced to the poorest countries without regard for the consequences on our economy.
American producers are generally free - and even encouraged by Washington - to shift production to low-wage locations. Companies regularly use this cost-cutting technique as a competitive weapon without regard to the domestic consequences. The practice works for companies and investors, but not so well for a nation.

Our country is like others worldwide, though, in one important respect: wages are depressed across the globe even as more and more capital accumulates in the hands of a few. As John Kenneth Galbraith once noted: "Intellectual myopia, often called stupidity, is no doubt a reason." It is myopic not to pay workers enough so that they can afford to purchase your goods. It's stupid to let your greed destroy your market. Greider feels that "governments must together shift the balance of power so labor incomes can rise in step with rising productivity and profits." In order to prevent global recessions and financial crises, the United States needs to lead in giving workers the world over a bigger share of the pie; and for its own good, the U.S. needs to rein in the damage our multinationals are doing to our citizenry.
Unfortunately, since our government is controlled by myopic corporations, such reform is unlikely.


At 7:33 PM, Blogger Da Rat Bastid said...

Good piece, Jo Etta. What I'd also like to point out is that when the government of this or any country ignores the needs of its citizens over the greed of these corporations is a symptom of fascism. This has always been the flaw of the free market-lasseiz faire economies; it centralized money and political power to the detriment of the people.
Then you're told to shut up and get in line. The company knows what's best for you.

At 9:22 AM, Blogger Jo Etta said...

Yeah, Joe, and besides, the corporate damage goes beyond the harm they do to our country. Much of the world depends on the U.S. to buy, buy, buy, and if our corporations keep turning us toward banana republic status, other economies may find themselves losing their best customer. The world economy could get ugly.

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