So far, the present election seems to be about Hillary's health, unsupported accusations about Benghazi, efforts to blame Obama for the VA debacle, and fear-mongering about Obamacare.
While the electorate is distracted with these subjects, the position of the middle class continues to deteriorate. Voters are no longer in the habit of thinking long and hard about bread and butter issues.
Progressives should use this election to begin to redirect attention to economic questions. At the heart of the American workers' problems is the long standing policy of encouraging corporations to move jobs abroad.
Today 48 million Americans are in low- paying jobs, and participation in the labor pool is at a 30 year low. These are largely the result of more than three decades of exporting good American jobs. At the heart of rightist propaganda was a very successful effort to generated support for the continued exporting of American jobs. People were promised that the exported jobs would be more than replaced by better paying and more plentiful jobs processing information and offering international banking and insurance services. Even when it was clear that deindustrialization was not being counterbalanced by these good, middle class jobs, pundits and politicians continued to make these claims. They insisted that these were “new” ideas, and that defending unionized, industrial jobs was old-fashioned and passé.
The policy of providing tax incentives for shipping jobs abroad began after World War II. It was part of a strategy to promote recovery in Europe and it was a valuable tool in our Cold War strategies. By the late 1960s and 1970s, there were other reasons to incentivize the exporting of jobs. It was a time when corporations were finding it more difficult to compete with foreign producers. Corporations had wasted energy and resources in the 1960s trying to generate large profits through the creation of conglomerates rather than focusing on their core businesses. Now they blamed their lack of success on the unions, claiming that they could not pay workers good wages and benefits and compete successfully with foreign producers. They resorted to outsourcing, which meant hiring foreign companies to do one or a few tasks, and the outright exporting of jobs. Sometimes the jobs went to places like Bangladesh or Burma. In the former country, workers earn between eight and nineteen cents an hour, and work conditions are deplorable. In Burma, American companies often benefited from forced labor. In China, they sometimes used sub-contractors owned by the Red Army, which paid workers little and imposed terrible working conditions.
After the recession of 1974-1975, the U.S. economic growth rates never returned to the old levels. That phenomenon encouraged following neo-liberal or conservative policies to maximize profits. Jobs were exported, industries were globalized with the emergence of global monopolies and oligopolies, and global financial powers stood at the vortex of all of this. Today, neo-liberal economics is expressed as economic globalization. It is an all-encompassing ideology that seeks “to displace all other forms in an epistemic rearrangement of human self-understanding.” It is in the process of turning “the human into a product, a consumer product.” The problem is that so few people grasp what is taking place, and many, frustrated by declining status and real income, are actually neo-liberal globalism as the force that will liberate them. By the 1990s, conservatives were successfully disguising what was happening by proclaiming some sort of “politics of virtue”—which had to do with bedroom issues, and liberals seemed unable to accurately draw attention to the arrival of a two-tier society, though they sought unsuccessfully to improve the material well-being of the masses.
The exporting of jobs and the globalization of jobs accelerated the growth of monopolies and oligopolies. Monopolization piled up profits, making it less necessary to expand or improve productive facilities in the United States. That in turn lessened demand in controlled markets where jobs were not being created and workers were beginning to earn less in real terms. Another consequence is that financial service firms are drawing some of the best and brightest employees away from productive industry.
Sending factories abroad meant also sending abroad vital equipment and technology. There was substantial legislation on the books to encourage and reward doing this. There is data on outsourcing but it is probably inadequate because companies attempt to mask this activity. In the years, 2000-2012, the big US multinationals cut their American work force by 2.9 million through outsourcing and exporting jobs. In 1979, there were 19.5 million manufacturing jobs in the United States; that number fell to 11.5 in 2012. Most of these were good paying jobs and had historically been the engine behind American economic growth in part because these people tended to consume.
While jobs and work was being overseas, the financial equity firms were making it clear that they preferred to lend money for the construction of industrial facilities abroad where labor was cheap. As time passed, the gap in labor costs abroad and in the United States has narrowed. By 2013, the gap had shrunk to 13%. To corporations, however, sending jobs abroad still was advantageous because of work and safety rules in the US.
Foreign competitors discourage American imports via the value added tax, a mechanism that raises the price of imports and subsidizes exports. One hundred and forty nations have that tax. Other nations also have devices that maximize the benefit to them of having Americans transfer industries to their soil. Many like China, require that the most advanced machinery and technology be transferred to their soil. It is true tat the Chinese have purchased train engines, heavy equipment, and airplanes from the United States. In the case of the train engines and heavy equipment, the providers have had to build factories in China and transfer their technologies to the Chinese. Soon, there will be very few new train engines, front-end loaders, and the like being sent from the United States to China. If a company only wants to enter the Chinese market, there is a minimum amount of parts and labor that must come from China. American executives bow to these rules because they want to maximize short-term profits, which result in large rewards for them. Similar technology transfers occur in South Korea. Of course, all of this contributes greatly with America’s industrial decline.
The preferred American solution to the China trade problem is short-sighted—demanding the revaluation of the yuan. That will not occur, it part because because of problems in the Chinese central banking system. Taking more dramatic steps to remedy the problem is difficult because the United States has borrowed so much from the Chinese. In addition, our banks need the Chinese and other Asian banks to invest their reserves here.
While American corporations were outsourcing work abroad and moving manufacturing facilities to low wage nations, they were also successfully encouraging authorities in Washington to lower trade barriers and enter free trade agreements. For a time, many Democrats---even so-called liberals—joined Republicans in these efforts. It was argued that the agreements would open foreign markets to American goods and services and create more jobs than were lost. This was part of a broader theoretical argument, that encompassed the exporting of jobs, that globalization in all its aspects would create a specialization of work that would benefit the United Sates. Rarely, were the trade agreements written in a way that benefited the United States equally, and, what is worse, they were rarely enforced fairly.
One selling point was that globalization would drive down prices and this would benefit everyone. It is true that foreign-made goods at Target and Walmart are less expensive than American-made goods. One question is how much of the labor savings in being passed on to the consumer. It does not appear that the low-paid workers abroad are deriving substantial benefits.
It was argued that some low skill jobs would be lost, but the United States would add many more high-skill jobs in many sectors. There would be an information age or “knowledge society,” and Americans would dominate it. The theory did not quite work out this way. Many jobs were created for Americans with computer skills and thousands flocked to colleges to acquire them. In time, employers learned that they could replace an American computer programmer earning $80,000 a year with an equally capable programmer in India or China who earns $10,000. The United States once had an overwhelming lead in semiconductors and telecommunications, but Asian nations have gradually narrowed that lead. There were great gains in the financial sector and some in the service sector. But eventually, people started exporting service jobs. On the other hand, the United States often found itself with numerous high-skill job openings and not enough people to fill them. There developed a large pool of very low skill workers who were simply displaced. Not a few of them could not read road maps, balance check books, handle in writing disputes about credit card error, etc. These people could have handled simple industrial jobs. Now they and their families are sinking into a culture of poverty.
The corporations that exported jobs seek to bring their profits back to the United States at very low tax rates, and Congress occasionally passes tax holiday legislation to make that possible. Tax legislation in 2004 made it possible for US corporations to safely leave even larger amounts of cash abroad. Now, in 2014, some corporations are using their foreign profits to purchase foreign competitors, and this is being used as an argument to permit them to repatriate their profits without paying U.S. taxes on them.
Twenty years ago, NAFTA was passed, and President Bill Clinton announced that it, along with the General Agreement on Tariffs and Trade (GATT) would spearhead the nation’s economic recovery and revitalization. Instead, they resulted in moving millions of good wage jobs out of the country. They had a leading role in creating a low wage, service sector economy in which economic inequality continues to grow. Those who refuse to abandon rosy theories insist the time will come when lucrative markets will develop in places now benefiting from liberalized trade rules.
The most important trade agreement is the Generally Accepted Agreement on Trade and Tariffs ( 1947). It was negotiated at a time when the economy of Europe and Japan needed all sorts of help in recovering from World War II. Perhaps the United States conceded too much in an agreement that apparently cannot be abandoned by a signatory.
Beginning in 1974 and running to 1998, presidents have had “fast track” power over trade negotiations. It means Congress has no imput in negotiations; it can accept or reject what is negotiated, but it cannot amend them in any way. In 2014, there is a drive to fast track a sweeping free trade agreement with Pacific rim nations.
The most discussed agreement was the North American Free Trade Agreement ( NAFTA) , implemented in 1994. It involved the United States, Mexico, and Canada. It was supposed to raise wages in Mexico, but they fell 13.5% from 1994 to 2000, and it gave workers there no additional rights. It did create 1.3 million jobs there by 2000, but thereafter 230,000 of the new Mexican jobs were moved from there to China by 2003. Canada found it necessary to lower unemployment benefits, and the U.S. developed retraining programs.
It was predicted that it would bring 170,000 new jobs to the United States; instead the US racked up massive trade deficits with Mexico and Canada. One estimate places the number of US jobs lost to NAFTA at 2.7 million. A lower estimate is 500,000, the number of people that were retrained due to NAFTA. Of course, the Heritage Foundation has claimed that NAFTA created 2,000,000 jobs. That would be very hard to prove, but it is true that American farmers have been able to send a great deal more grain to Mexico. Even some engineering jobs were moved to Mexico, but some of the engineers were retained long enough to brief and train their Mexican replacements. Over ten years, half a million Americans lost their jobs due to NAFTA. A Cornell University study showed that threats to move jobs to Mexico or other countries were frequently used to halt union organizing drives and dampens demands for better wages.
Under NAFTA, austerity has been imposed in many countries to assure that the debts to US bankers are paid, and their public utilities, even water systems, have often been placed in private hands controlled by Westerners. The result has been growing inequality in both the developed and undeveloped world. The theorist Immanuel Wallerstein thought that a “Black Period” would begin in 1989 and last up to 40 years. While the masses in the United States and the West will be safely controlled, the dangerous classes elsewhere are likely to create problems. Frederick Jameson claims that the global capitalism of this postmodern period is actually the late capitalism or capitalist imperialism that V.I. Lenin described in 1920. Lenin’s prediction was reasonable accurate, but he did not realize that when late capitalism arrived it would come in a period when most people found little in common in their everyday experiences and concerns. This would keep working people divided and incapable of dealing with the problems they would face.
Despite the past unfortunate history with NAFTA and other trade agreements, people are now finding hope in the neo-conservative promises of multiple jobs and great prosperity if only Congress fast-tracks the proposed Trans Pacific Trade Partnership ( TPP for Trans Pacific Partnership). This agreement would bind the United States and eleven other nations, including Japan, Singapore, Australia, New Zealand, Canada, Mexico, Peru, and Chile. There is an effort to fast-track this treaty, which means it cannot be examined piece by piece. Fast- tracking means Congress cannot amend an agreement once it is negotiated, and it cannot be filibustered ; it is accepted or rejected as is. Fortunately Senate Majority Leader Harry Reid has moved to block fast-tracking. Congressmen have had a very difficult time learning what the treaty contains, but a few details have leaked. This agreement has being negotiated for 4 years, with representatives of hundreds of corporations playing key roles. The proceedings are secret, and labor unions, consumers, and indigenous peoples have no roles. Traditionally, such agreements were designed mainly to open markets and lower tariffs. This has changed. Today, these agreements are designed to essentially roll aside all sorts of environmental and safety regulations. TPP will limit people’s abilities to sue corporations, and they will sometimes have the ability to trump local law. The agreement will also make it even easier to off-shore jobs. Corporate lawyers will be able to sue member governments when their regulations and policies produce less than expected profits. The cases would go to three person arbitration panels of international trade lawyers for resolution. Their decisions would override those of all domestic courts. These panels are becoming a common feature in trade agreements. Their very presence intimidates governments because they represent the threat of enormous litigation costs.
One can understand how a Mexican corporation could sue the United States government, claiming the Clean Air and Clean Water Acts deprived it of expected profits. What is difficult to grasp is that an American corporation could use TPP to sue the U.S. government on the same grounds and demand compensation. The reason for this in American law is that the provisions of a treaty supercede ordinary Congressional and state legislation. The treaty will enable corporations to push aside safety, environmental, health, and minimum wage legislation in different countries. It is likely that US corporations would bring these suites against their own government by using foreign subsidiaries to front the litigation.
The national press has reported very little of the down side of this treaty, yet activist groups have been able of the educate enough of the public to move Senator Reed to block fast tracking. It is hoped that over time, determined activists can succeed in raising red flags about other aspects of the conservative drive to restructure the American economy. The opponents of fast-tracking even involved a few Tea Party people, which raises hopes that some of them might someday partially get out from under the influence of Dick Armey and his and their corporate backers.
The Center for Economic Policy found that if passed TPP would do almost nothing to increase the Gross Domestic Product. However whatever benefit there might be would go to the top 5 or 10%, and the rest of Americans would lose more ground. Not long after, Senator Reed blocked fast-tracking the treaty, Republicans blocked legislation that would have stripped away tax rewards for American firms that ship jobs overseas.
A Transatlantic Trade and Investment Treaty (TTIP) is also being negotiated now. Europeans, whose regulatory structures are far more formidable that those in the United States, are strongly objecting to the inclusion of arbitration panels that could set aside laws in Europe.
The off-shoring of American jobs was part of the broader globalization of the world economy, that is marked by a globalized version of capitalism that created intergrated international markets and has made developing countries debtors to the world’s large banks. It was predicted that by breaking down barriers to trade in manufactured goods, raw materials, financial instruments, insurance, and many other sorts of things that everyone would benefit. Increasingly transnational corporations dominate the world economy. They have facilities in many places, especially where wages are low and governments are unwilling to regulate them. It has resulted in destroyed environments , corrupted political processes, and social instability in many parts of the developing world. Workers have seen their safety nets shredded and their unions broken. Increasingly, the international economy is subjected to booms, busts, and crises. Good scholars like Joseph Stiglitz argue that globalization could have brought much better results had it been managed wisely. As it has been implemented, it has widened the gap between the rich and poor throughout the world, and in the United States, as well.
The exporting of millions of manufacturing and other jobs has proven to be the most important tactic in breaking unions, taming the labor force, and selling the idea that high wages hurt the economy. Fear of factory closings has led people to abandon their unions and accept lower wages. Over time, many came to blame unions for forcing management to send jobs abroad to places where wages are low.
Yet the fact is that productivity has risen 80% from 1973 to 2011, but median wages have only gone up 4%. By the early 1980s,, the share of the Gross National Product that went to wages was down to 65%; in 2012 it was 58%, and three is every reason to expect that figure to continue to fall. Before neo-liberal economics became dominant, it was believed that the workers would get most of the benefit from productivity increases.
Over the course of serial recessions, managers have learned that they must use technological innovations to increase, output per worker. Because there has been so much downward pressure on wages, employers have been able to pocket the money gained from productivity increases. Technological gains, especially in robotics, have enabled firms to economize greatly on production costs and to get along with far fewer workers. Because those who own the technology reap the lion’s share of these gains, there has emerged a winner-take-all society. This has hastened the decline of the middle class, the move toward a two-tier society, and it is a drag on economic growth. That is because most of these gains went into savings.
Had workers gotten the lion’s share of the benefit of productivity gains, the money would have gone to the consumption of goods and services. The problem is that this tendency is slowly reducing aggregate spending. The maldistribution of the benefits of technology gains is only one of several engines in the economy that contribute to a problem of growing underconsumption. The Great Depression of 1929 was largely caused by underconsumption, and it constitutes a great drag on economic growth today.
The exporting of jobs is at the heart of the problems faced by American workers and the middle class. By focusing on this matter, progressives can also address a number of other economic problems that must be addressed in the near future. It will take time to get the voters to focus on bread and butter issues that effect them. In the long term, progressive must lead the Democratic Party back to focusing on the economic problems faced by the middle class. This educational process must result in reducing centrist Democratic support for neo-liberal economics and in convincing male middle class voters that Republican economics is not good for them and their families.