Wednesday, August 01, 2007

Appearing Now in a Neighborhood Near You: The Budget Deficit that Ate America or How Walmart Robbed 200,000 Americans of their Jobs

Wal-Mart makes a killing putting people out of work, depressing local economies, and lowering wages but it is globalization --an unholy alliance with GOP "trickle down" policies --that spawned Wal-Mart and sounded a death knell for the futures of American workers. Most recently, Wal-Mart's Chinese imports have displaced nearly 200,000 US jobs
China’s entry into the World Trade Organization (WTO) was supposed to improve the US trade deficit with China and create good jobs in the United States. But those promises have gone unfulfilled: the total US trade deficit with China reached $235 billion in 2006. Between 2001 and 2006, this growing deficit eliminated 1.8 million US jobs (Scott 2007). The world’s biggest retailer, US-based Wal-Mart was responsible for $27 billion in US imports from China in 2006 and 11% of the growth of the total US trade deficit with China between 2001 and 2006. Wal-Mart’s trade deficit with China alone eliminated nearly 200,000 US jobs in this period.

Robert E. Scott, The Wal-Mart effect
The Wal-Mart effect on US workers and manufacturing is typified by the effects seen in clothing --low-cost goods with a hidden higher price: lower wages, lost jobs. Underlying every sector, however, are unsupportable US trade deficits which benefit American consumers but only so long as they have jobs themselves.

As has been the trend at least since the regime of Ronald Reagan, manufacturing suffers most as Wal-Mart grows more intrusive, exploiting the trade deficit with its own undervalued currency. In effect, American consumers have financed China's economic boom.

Of some 133,000 manufacturing jobs lost in the US, sixty-eight percent were the direct result of Wal-Mart's "partnership" with China. The effect is devastating to US workers and the US economy overall. Manufacturing jobs, after all, have generally paid higher wages and provided better benefits.

The US-China trade deficits amount to more than $1 trillion in US Treasury bills and growing. It is fair to say that China has done this deliberately to rehabilitate its own economy on US backs. It has had the effect of lowering the cost of its exports to the United States and other countries.
The relationship between the dollar and the yen has been affected primarily by the adverse trade balance that we have with Japan. At the last summit meeting in London, for instance, we discussed the very high positive trade balance that Japan enjoyed then. The goal established by your own leaders was that this trade balance would be reduced. Instead, it's continued to go up.

I think, as the economic market leaders have recognized, the high export of Japanese goods and the relatively low imports into Japan of other goods, the yen has strengthened in comparison to other currencies, including, of course, the American dollar.

- President Jimmy Carter, Interview with Western European and Japanese Reporters, July 11th, 1978

My good friend, Matthew Stevenson, contributing editor of Harper's Magazine, wrote both an explanation and a history of our "indebted prosperity" in his review of a new book [The Money Men: Capitalism, Democracy, and the Hundred Years' War over the American Dollar] for the Texas Observer. As few have, Stevenson makes the connection between Alexander Hamilton's vision for America and our current Asian debt.
At almost every level, what is sustaining the US economic miracle is Hamilton’s beloved debt. The federal government balances its books with paper laid off to Asian bondholders under the Faustian bargain that they buy our securities and
we buy their exports. Domestically, the lender of last resort is not the Fed, but the US consumer, sadly as innocent about speculators as Abraham Lincoln.

-- Matthew Stevenson, The Best Government Money Can Buy, The Texas Observer

As I have often pointed out, the origins of current economic woes --exploding budget deficits amid the declining dollar --may be traced to what is called the "parlous economic stewardship of Ronald Reagan". Reagan cut the marginal tax rate for the very wealthy from 70% to 38% amid raised expectations that wealth would "trickle down". It didn't. The many presentations by Dr. Daniel Weinberger at the Census Bureau make the convincing case that the reverse occurred. Wealth did not trickle down. It flowed up!

Reagan's own Budget Director, David Stockman, later recanted. [See: Atlantic Monthly, The Education of David Stockman] Certainly, “supply side economics” produced the longest and deepest recession since the Great Depression. Stockman saved his most ascerbic comments for a "noisy faction" of Republicans who had promised an "orgy of investments" that would propel the US economy to new heights. I have no idea what Reagan, the GOP and Stockman had been smoking. Only prices and unemployment got high. Wages and living standards remained firmly tethered to terra firma if not the hole that had been dug for them. Many joined the growing ranks of the newly poor. A pernicious trend continues to this day. That is, the rich get exceedingly rich and the poor get even poorer. That has been the case since 1982 but for a brief interlude in Bill Clinton's second term.

Bush, hoping to bask in Reagan's fading stardom and Hollywood mystique, pushed through Congress a trillion dollars worth of tax cuts. Like Ronald Reagan, Bush has waged a "war on terrorism" during which acts of terrorism increased. The final numbers have not yet been tallied for Bush --but, again, like Reagan, the results are pedestrian but tragic, a war of mass distraction in Afghanistan, a quagmire in Iraq, and the budget deficit that ate America.

The phrase "debtors death spiral" is used to denote what happens when consumers borrow to cover only the interest on previous loans. New debt compounds old ones and bankruptcy may be around the corner. Many writers speculate that the US --under Bush --has already entered such a spiral. What keeps us afloat? A "Carvellian" quick response is simply: the rest of the world which cannot afford an American black hole. The US is kept afloat not because our economy is strong but because it is not. The US may be thought of as an empire but only because the rest of the world cannot afford not to keep us afloat.
Between 1989 and 2003, the ever-increasing US trade deficit with China has led to about 1.5 million jobs that either moved overseas or never were created in this country as production shifted to China, according to a report released Jan. 11, 2005, by the US–China Economic and Security Review Commission (USCC), a congressionally appointed panel. The pace of job losses has picked up since China joined the World Trade Organization in 2001, with about one-third of the total, or 500,000, occurring in the past three years.
Lower Wages for US Workers
By supporting foreign-made goods on such a massive scale, the company that trumpets its All-American image is creating incentives for corporations to destroy good jobs in the United States.

By purchasing such a large amount of goods produced in China, Wal-Mart indirectly supports continued workers’ rights abuses by Chinese authorities.

--Wal-Mart's Imports Lead to US Jobs Exports

Meanwhile, don't miss a Washington Post report that shows how Wal-Mart pits suppliers against one another and squeezes them for the lowest price. The result is that factories respond with longer hours and/or lower pay. Wealth, as we have learned the hard way, trickles UP --not down. The robber baron will always make up his losses out of your ass. In China, the workers have no choice: China forbids independent trade unions. That is a policy not unlike that of the US GOP and Ronald Reagan, specifically, who is not fondly remembered for his effective War on Labor and his ineffective war on terrorism and drugs. [See also: The Peace Tree]

    Frontline: Is Wal-Mart Good For America

    Do you get that? Through the Port of Long Beach alone, China exports some 36 billion dollars worth of manufactured goods for the American consumer market. But surely, the US now sells exports to the world's biggest market of some 1.3 billion folk, a promise held out when Bill Clinton signed the China trade agreement of 2000. Sadly, it just didn't happen. US exports through the port of Long Beach about 3 billion dollars worth of raw materials --not US "high tech". Largely because of China's undervalued Yuan, the "consuming world", the US primarily, is reduced to Third World status and losing ground. The US has no leverage on foreign money markets.

    Under Bush, we could not fight back if we wanted to. The dollar is vulnerable as long as Bush runs up the highest American budget deficits in history. The Iraq war alone might have bankrupted the US if China and Japan had not propped us up for the sole purpose of dumping cheap crap on our shores. Wal-Mart is the primary gateway into an economic black hole from which there may be no escape --lower prices, chasing lower wages, chasing still lower prices. Everyone but the GOP's ever shrinking elite are impoverished. There must be a word for this skullduggery, this betrayal of the working men and women of the US who want merely to have a good job and educate the rug rats.

    Until Michael Moore decides to take on Wal-Mart, we have Robert Greenwald who does a great job exposing Wal-Mart on this video.

    And Jon Stewart has his take.

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