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August 25, 2013

Those disappearing jobs

Reuel S. Amdur

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Paul Craig Roberts calls them "banksters"-rhymes with "gangsters".

He is referring to the bankers’ collapse of whose mortgage-based house of cards precipitated the major recession.  It was the in the Clinton presidency that the Glass-Steagall Act, legislation that forbade banks from carrying out business both of a commercial and an investment nature, was repealed.  Now the major banks are “too big to fail” and are rescued on the backs of ordinary taxpayers.  The bankers return to their outrageous paychecks and bonuses.

Roberts was a Reagan Assistant Secretary of the Treasury, where he promoted supply-side economic policies.  The theory holds that a lowering of tax rates will encourage more spending and hence improve the country’s economy during a down time. 

This theory, which he still supports, is popular in right-wing circles.  Its impact would benefit the wealthy, while leading to a curtailment of social programs starved by inadequate tax revenues.  However, with his new book The Failure of Laissez Faire Capitalism (Atlanta: Clarity Press, 2013), we need to forgive him that sin.

In his hard-hitting book, this self-described “one-time libertarian” casts a jaundiced eye on the economy, with incidental observations on the illegal foreign and domestic behavior of George W. Bush and Barack Obama, but mostly he tackles economic issues.

He points to the annual US deficit of more than a trillion dollars, covered in part by the issuing of bonds. 

The ability of the US to continue on that path is due to the fact that the dollar is the world’s reserve currency, but at some point national debt will grow to such an extent that the international community will abandon it. 

He does not believe that the US is “too big to fail.”  The result will be a crash, he says.  In order to reduce this deficit and the national debt, he points to the massive spending on the military madness and interventionism of the United States.

Roberts’ discussion of David Ricardo’s justification of free trade refutes the conventional economic wisdom.  Ricardo argued that both countries involved in two-way trade would end up better off if each produced the product that it was most profitable in producing, even if one of the countries had the advantage in both the products.  However, Roberts points out that today international competition is frequently on the same goods.  One thinks for example of cars.

Perhaps the most important point he makes is that the export of jobs, to take advantage of cheaper labor costs, is hollowing out domestic opportunity, eroding the middle class, and severely limiting job prospects for those graduating from universities. 

While outsourcing of jobs began with the likes of the Bangladeshi women in the clothing factory that recently collapsed, it now extends to white collar workers.  The people taking your calls to your local bank branch are working in India.  The Royal Bank attempted to bring workers in from India to learn the ropes so that they could return home and replace the Royal Bank staffs that were to train them here.  Engineers abroad replace engineers in Canada and the US. 

The miracle of the internet, skype, the fax—these mean that many functions can be performed any place in the world while the centre of command is in Canada or the US.  As a result, the problem of unemployment in the US and Canada becomes insoluble. 

The jobs in North America will more and more limited to fields where employment is for domestic consumption and where it cannot be traded overseas—retail, health, and social services, for example.  According to Roberts, “’Free trade’ and ‘globalization’ are the guises behind which class war is being conducted by both political parties.”

While this shift will create jobs for people abroad, there is a dark side.  It ties the economic development of these countries to North American needs and skews their priorities.

Roberts attacks the way that economic benefits are measured, focusing on what economists call externalities—turning waterways into sewers and the atmosphere into a garbage dump. 

These things do not turn up on the company’s balance sheet.  He sees a need for us to curtail our destructive life style to avoid depleting nature.  Specifically, he takes aim at genetically modified crops to make use of Monsanto’s Roundup, which kills weeds when sprayed on a crop.  He cites a researcher who found that Roundup keeps plants from absorbing essential minerals and destroys important microorganisms in the soil. 

Finally, he turns his attention to the European monetary crisis.  His solution for Greece is that it should withdraw from the European Union and default on the debt.  The banks would suffer, but the fate of the Greek population would be far less dire.  He sees the imposition of the Eurocrats’ austerity as a benefit to the bankers at the expense of the people. 

Roberts sees the bureaucrats of the EU as wanting to impose a single centralized economic regimen on all countries in the union, depriving them of their individuality. 

However, one might look at the issue from another perspective.  A common currency makes little sense without a common economy and economic policy and program.  The common currency should come after the governmental structure, not before.  Otherwise you get just what has happened: the various countries pull in very different directions, with the result we are seeing.

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