Third World America: How Our Politicians Are Abandoning the Ordinary Citizen. Arianna Huffington
href="#litres_trial_promo">56 that would have prohibited banks from making risky proprietary trades—a version of the Volcker Rule. It also never even made it to a vote. This wasn’t because it wouldn’t have passed. On the contrary, anger from those mired in the real economy had reached enough lawmakers that the amendment had a real shot. Which is why, as Simon Johnson put it, “the big banks were forced into over-drive to stop it.”
We’ve been told time and time again over the last two years that right after Washington deals with what’s on its plate, “jobs is next.” Well, it’s been “next” for quite some time now, but it never seems to come to the floor. I often have a nightmare—a common sort—in which I’m stuck in a forest and I can’t find my way out. I have a friend whose version is that her feet are stuck to the ground and she can’t move. Not a bad description of our leaders’ approach to the massive suffering that’s going on across America.
A recent study by Duha Tore Altindag and Naci H. Mocan57 for the National Bureau of Economic Research found that the effects of unemployment can have troubling implications for a political system. The authors studied data from 130,000 people in 69 countries. Their conclusion: “We find that personal joblessness experience translates into negative opinions about the effectiveness of democracy.”
No shock there. But it should frighten anyone genuinely concerned about our stability, financial and otherwise—especially since one out of every six58 blue-collar workers has lost his or her job in the latest recession, a number commensurate with what happened during the Great Depression. Andrew Sum, director of the59 Center for Labor Market Studies at Northeastern University in Boston, says, “Our ability to maintain a healthy middle class is very dependent on being able to get a lot of these individuals back into the workplace and back into jobs to keep the rest of the economy going. . . . There are very high multiplier effects from many manufacturing activities. So the loss of jobs spills over into the rest of the economy.”
But isn’t wringing our hands over the loss of manufacturing jobs the twenty-first-century equivalent to nineteenth-century concerns about America turning from an agrarian society into an industrial one? Isn’t America’s future to be found in newer, better, more modern ser vice industry jobs?
Economist Jeff Madrick doesn’t think so60—for a number of reasons.
For starters, it turns out that manufacturing jobs aren’t just more productive and valuable than jobs in the Wall Street casino—they’re also more valuable than ser vice jobs: “Making goods is on balance—with exceptions—more productive than providing ser vices, and rising productivity is the fundamental source of prosperity,” says Madrick. “A major nation must be able to maintain a balanced current account (and trade balance) over time, and goods are far more tradable than ser vices. Without something to export, a nation will either become over-indebted or forced to reduce its standard of living.”
In other words, in the absence of manufacturing, the only way to compete with Third World nations is to become a Third World nation, which is exactly what will happen if we allow our middle class to disappear.
What’s more, it’s not just manufacturing and lower skilled ser vice jobs that are disappearing. According to the Hackett Group61, a business and technology consultancy, companies with revenues of $5 billion and over are expected to take an estimated 350,000 jobs offshore in the next two years alone—nearly half in information technology, and the rest in finance, procurement, and human resources.
Linda Levine of the Congressional Research Ser vice62 says that some see “perhaps a total of 3.4 million ser vice sector jobs moving overseas by 2015 in a range of fairly well paid white-collar occupations.” And in a 2006 study63, consulting firm Booz Allen Hamilton found that white-collar outsourcing is no longer just about call center and credit card transactions. Now “companies are offshoring high-end work that has traditionally been considered ‘core’ to the business, including chip design, financial and legal research, clinical trials management, and book editing.”
Do you hear that? It’s Ross Perot’s giant sucking sound being cranked up to a deafening roar—and it’s about a lot more than NAFTA. Accenture now employs64 more people in India than in America. IBM is headed in the same direction. And the horizon looks even darker. A June 2008 Harvard Business School study65 found that up to 42 percent of U.S. jobs—more than fifty million of them—are vulnerable to being sent offshore.
Even more troubling66 is the reason so many of these jobs are being sent overseas. It’s not just about cost control. “What used to be a tactical labor cost-saving exercise,” the Booz Allen Hamilton study says, “is now a strategic imperative of competing for talent globally.” In other words, America’s talent pool—especially when it comes to professions such as engineers and computer scientists—is drying up. At the same time the demand for these highly skilled workers is growing, the number of Americans earning master’s degrees and PhDs in engineering has fallen.
We are continuing to feel the sting of our lack of investment in our people—particularly when it comes to education, the other primary pillar (along with a good job) of a healthy middle class.
This is what happens when a country is willing to spend trillions of dollars fighting unnecessary wars while allowing college tuition to rise out of the reach of so many of its citizens. And it’s what happens when a country turns its economy over to the casino of Wall Street.
It’s not too late to change course. The financialization of our economy didn’t just happen. Decisions were made that made it possible—and decisions can be unmade. But first we need to decide, as a country, what kind of economy we want to have: one that’s good for middle-class families or one that’s built to enrich Wall Street.
“The financial sector,” wrote Martin Wolf67 of the Financial Times, “seems to be a machine to transfer income and wealth from outsiders to insiders, while increasing the fragility of the economy as a whole.” When the chief economics commentator at the Financial Times is sounding like the second coming of Karl Marx, you know things have gotten way out of hand.
THE ECONOMIC CORONARY AROUND THE CORNER
Another potentially catastrophic problem headed our way is our mounting debt. And no, I’m not joining forces with those who use the debt explosion as a backdoor way of cutting or killing Social Security or Medicare. But ceding this issue to such retro-thinkers makes it that much harder to seriously tackle the problem.
America is like a patient in danger of suffering a massive heart attack. We may be able to postpone things with a bit of outpatient surgery, but we won’t be able to avoid it without some serious lifestyle changes. The economic coronary isn’t quite here yet, but it’s on the way. Here are just a couple of the symptoms of big-time trouble ahead:
By 2020, interest alone68 on the total U.S. debt will reach $900 billion per year.
That same year, five segments69 of government spending—Medicare, Medicaid, Social Security, net interest, and defense spending—will account for an estimated 77 percent of all government expenditures. All other federal spending will have to come out of the remaining 23 percent.
A recent report70 by the Bank for International Settlements (BIS) shows that this is a worldwide phenomenon. Financial