Monday, September 20, 2010

Part Three - "Cold Turkey" Trade Policy - Facing Facts

The third of a three part posting concerning the current dilemma in the U.S. economy - "cheap labor."

Where did it come from?  What can we do about it now?

 (For Part One, link here)
 (For Part Two, link here )
Part Two of this MeanMesa series provided a glimpse at the causes and conditions which led to the development of the current dilemma.  Hopefully, the postings so far have firmly introduced the reality of the situation.  There are no quick fixes.

California Dreamin' -- Two Unlikely Dreams

The first of the two dreams is that the "free marketeers," seeing the damage they are perpetrating on the domestic economy would suddenly find a bit of an impulse to cease their greedy, wicked ways.  However, when the soulful reaffirmation of such a change of heart is weighed against the incredible profits they are enjoying, MeanMesa has to, unhappily, place the prospect of this new nationalism in the scrap heap with all the previous idealism the same folks have already gleefully discarded.

The second unlikely dream runs along the same lines except with different players.  In it, American consumers become, well, consumed with the idea of "buying American."  Although, at first, American products competed from a position of quality with their Chinese counterparts, domestic manufacturing has descended to such a state that a.) there are no domestically produced alternatives to the import market for many products, and, b.) the cash strapped family trying to complete their weekly WalMart shopping list without enough wage dollars will walk by the higher priced, higher quality American products in favor of import items they can actually afford.

Clearly, expecting either of these schemes to re-establish the American economy  would amount to little more than the dreamy folly of a financial Pollyanna.

A Quick Visit to "Terms" and "Talking Points"

Now, an average voter could reasonably be expected to see through this mess to a way forward.  However, the national media fraud keeps relentlessly injecting just enough semantic confusion into the mix to keep such traditional common sense off balance.

The phrase -- and concept -- of "The Global Economy" is an excellent example.

In the relentlessly cited, yet suspiciously immaterial "Global Economy," the descent of American wages to the level of various third world countries is proposed as an unavoidable necessity if the domestic economy is to survive the onslaught of foreign competition's low labor costs.  "Bargain Basement" prices on imported products are often touted as proof of this scheme.  The fallacious premise, of course, is that wage starved American families can sustain some sort of equivalent "standard of living" ("purchasing power") so long as their closets remain packed with broken, worn out imports from low wage countries -- including China, of course.

Amazingly, the already vaporizing concept of the "Global Economy" has been reinvigorated by the international economic collapse.  The pitch is simple enough -- "See, it really is a global economy!  When our economy collapsed, it happened all around the world.  That proves it!"

The part of this story that the media fraud neglects to mention is that a good number of countries -- particularly those EU members with a more mature national economic policy -- are already having a robust recovery from this "global economic disaster."  However, once again the corporate media fraud, still inebriated with the stark dualism of the Cold War, steps into the fray.  "Those countries are socialist.  They have suffocating regulations, and their businesses cannot prosper under the crushing yoke of their domestic spending."

The point which is conveniently missed in this criminal over simplification is two fold.  First, the businesses in those "socialist" countries are thriving.  Second, the citizens of those countries receive social services -- paid for with their taxes -- which they generally accept as a good deal for the money.

In the United States, however, government expenditures per capita are far greater, but when it comes to the corresponding benefits, it seems that those are reserved for the "corporate owners of the Senate."  It is precisely these "corresponding benefits" -- health care, a rational energy policy, industrial development, infrastructure stability and improvement, a rational trade policy, educational outcomes, labor conditions and so forth which can no longer be set aside to the detriment of living conditions for US citizens. Doing so thus far has unmistakably revealed itself as a well lubricated path to becoming utterly non-competitive.

The most notable product of the American culture is little more than a clutch of unaccountably rich billionaires.

Is there a solution to this dismal mess?  Perhaps.

MeanMesa always tries to include some sort of a plan for the path forward.

Thom Hartmann's Tariffs

Hartmann's explanation of the history of the tariff idea in the United States has been simplified to produce suitable fodder for his rather interesting , inspiring, and highly educational radio show  (The Thom Hartmann Show, AM 1359, KABQ, 10 AM - 1 PM weekdays, Albuquerque).   Just here we can simplify it even further.

The United States government operated primarily on the revenue from tariffs for the entire time between the Revolutionary War and the timely addition of the income tax during World War Two.  In the earliest days, tariffs were enacted for two important reasons.

First, domestic manufacturing in the infancy of the country could not compete with the industrialized import power of Europe.  Tariffs on European goods were imposed to make the prices of those products high enough to stabilize competition with the less efficient manufacturing which was only beginning to take place in the US.  The US government was committed to the development of domestic manufacturing, and the tariffs served to protect those "start up" businesses.

Second, the tariffs represented a "consumption tax," and, as such, distributed the burden of the higher prices as a sort of automatically compensating, progressive scheme aimed at Americans who consumed lots of imported goods.

Naturally, as tariff regulations passed through the soiled halls of the Congress, every possible mischief came forward front and center.  No matter how tariffs were structured to the advantage of the backers of the current power elite, the complaints were essentially in a "solid state" of frenzy.  It was the beginning of the ever widening division between the middle class and the new, oligarchic, American aristocracy.

The point here is simple enough, however.  A similar competitive conflict now exists between products produced domestically and cheap labor imports.  If continued to its logical conclusion, American workers will see a continuation of the decline in their average wages until an "equilibrated state" is reached where wages are constant in both the rural areas of the Peoples Republic of China and Southern California.

What had once been the promise of the American middle class will have been exchanged for a nation of poverty level wage slaves and a handful of incredibly rich "free market" types.  (The incredibly rich "free market" types have apparently not considered that such a horde of poorly paid American workers will only be able to purchase an ever diminishing amount of their "stuff.")

The degrading standard of living in the US which has been caused by a.) lower and lower wages, and b.) fewer and fewer job opportunities will ultimately target all aspects of the domestic quality of life.  The first to be "hit" have been clearly visible already.

There is no government revenue which can be directed at infrastructure maintenance and development.  Today, the infrastructure back load in our country is already greater than $4 Trillion dollars.  Likewise, other social services which should have been foundational considering the amount of taxes we pay, have also slipped "out of reach."  Consequently, the bridges are collapsing, the roads are filled with pot holes and public schools have perpetually leaky roofs.

National health care has been savagely harnessed as a profit center for the corporate elite.  Education costs condemn many Americans to a simple high school diploma, and overall educational outcomes are even more dismal.  Innovation and invention seem to have begun an immense migration to countries where the education systems -- and the students -- can support them.

The central issue to all of this is that it is unfolding in a resource rich country which cannot solve its own problems.  The influence of the oligarchs has become so pervasive in the government that any redirection of revenue toward a solution is seen as little more than grabbing profits the rich have already purchased from the Republicans.  This lament could continue, but MeanMesa visitors can already grasp the general direction.

Hartmann's solution, also simplified, strikes directly to the core of the problem -- not surprisingly -- by reintroducing a new tariff structure.  This time around, however, the tariffs must be imposed directly on the respective values of imports of labor.  Further, since there is presently a troubling shortage of manufacturing activity in the US, there are few domestic industries to protect.  MeanMesa sees this as a potentially disastrous opportunity for the oligarchs and their Senatorial servants to simply loot tariff revenues in the same manner they loot everything else.

Tariff revenues must be directed exclusively to all the public areas which have been neglected  as a result of the collapsing economy and employment model.  The revitalization of the country's fundamental equity -- again, roads, bridges, school buildings, health care and a functional educational system -- will consist of labor intensive spending which cannot be exported.  In the short term, the tariffs may serve to keep the country afloat until material economic recovery becomes a possibility.

In the longer term, cheap imports will continue to present sub-standard quality, but they will no longer hold the narcotic appeal of lower prices.  American domestic production might revive to a point where most Americans are actually using goods produced domestically.  Other areas of domestic innovation and investment would naturally follow.

It may be important to realize that the economic malaise we are now experiencing really is due to a policy which has degraded the fundamentals of the US industrial engine.  The troubles we face are absolutely not difficulties arising from minor or temporary policy -- the essential fabric of the economy has been seriously wounded.

The Corporate Senate Greet the "Tariff Idea"

Anyone who even briefly thought that the health care reform "debate" with the oligarchy's puppets in the Senate was a new, all time high in the flow of inflammatory "buzz words and talking points" should hang on to his hat!  Once the initial shock of directing tariff revenues to domestic national needs has passed, the professional looters and other low life among us will launch into a campaign of vicious petulance indeed.

The corporate media fraud will present endless interviews "representing both sides" of the issue.  "Tonight for a deeper analysis, we are pleased to have Adolf Hitler and Joseph Stalin with us.  Joe, you first.  Isn't the tariff proposal the foundation of a Stalinist nightmare of the old Soviet Union style?"

Anyone who follows the propaganda cycles can take it from there.

However, even emboldened with the "new opportunities" emerging from the Citizens United decision, the ossified criminal elements in the Senate would find that the tariff proposal would have an unsettling degree of public support.  If it were to be implemented with the same attention to detail, that is, denying massive corruption, as the Recovery Act, the proposal's popularity would increase quickly.

Our "trading partners" in the Peoples Republic must learn that "most favored nation status" is a concept which flows both ways. Our petty ideologues in the Congress must learn that a rational, modern form of "good old fashioned" protectionism" holds the prospect of keeping us out of war for a few years and keeping the country afloat long enough for better times to come.

A thousand details remain to be forged for such a drastic legislative departure from our current "anything goes" style of cancer stage capitalism, but the promise of recovery may be held somewhere in this frothy mix!  MeanMesa encourages you, faithful visitor, to consider this proposal.

A "Post-Posting-Post-Script"

MeanMesa apologizes for the screwed up graphics in the original post.  

Thankfully, our IT Guy, Dave, (Who, for the sake of any interested women  among our visitors, happens to be a kind, brilliant and fun fellow and who cares for the elderly and -- is AVAILABLE!) fixed everything.

Thanks Dave!

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