Return
Of The Robber Barons
By Paul Craig Roberts
03 August, 2007
Countercurrents.org
As
the Bush Regime outfits B-2 stealth bombers with 30,000 pound monster
“bunker buster” bombs for its coming attack on Iran, the
US economy continues its 21st century decline. While profits soar for
the armaments industry, the American people continue to take it on the
chin.
The latest report from the
Bureau of Labor Statistics shows that the real wages and salaries of
US civilian workers are below those of 5 years ago. It could not be
otherwise with US corporations offshoring good jobs in order to reduce
labor costs and, thereby, to convert wages once paid to Americans into
multi-million dollar bonuses paid to CEOs and other top management.
Good jobs that still remain
in the US are increasingly filled with foreign workers brought in on
work visas. Corporate public relations departments have successfully
spread the lie that there is a shortage of qualified US workers, necessitating
the importation into the US of foreigners. The truth is that the US
corporations force their American employees to train the lower paid
foreigners who take their jobs. Otherwise, the discharged American gets
no severance pay. [See, for example,
http://www.amren.com/mtnews/archives
/2006/06/bofa_train_your.php ]
Law firms, such as Cohen
& Grigsby, compete in marketing their services to US corporations
on how to evade the law and to replace their American employees with
lower paid foreigners. As Lawrence Lebowitz, vice president at Cohen
& Grisby, explained in the law firm’s marketing video, “our
goal is clearly, not to find a qualified and interested US worker.”
Meanwhile, US colleges and
universities continue to graduate hundreds of thousands of qualified
engineers, IT professionals, and other professionals who will never
have the opportunity to work in the professions for which they have
been trained. America today is like India of yesteryear, with engineers
working as bartenders, taxi cab drivers, waitresses, and employed in
menial work in dog kennels as the offshoring of US jobs dismantles the
ladders of upward mobility for US citizens.
Over the last year (from
June 2006 through June 2007) the US economy created 1.6 million net
private sector jobs. As Charles McMillion of MBG Information Services
reports each month, essentially all of the new jobs are in low-paid
domestic services that do not require a college education.
The category, “Leisure
and hospitality,” accounts for 30% of the new jobs, of which 387,000
are bartenders and waitresses, 38,000 are workers in motels and hotels,
and 50,000 are employed in entertainment and recreation.
The category, “Education
and health services,” accounts for 35% of the gain in employment,
of which 100,000 are in educational services and 456,000 are in health
care and social assistance, principally ambulatory health care services
and hospitals.
“Professional and technical
services” accounts for 268,000 of the new jobs. “Finance
and insurance” added 93,000 new jobs, of which about one quarter
are in real estate and about one half are in insurance. “Transportation
and warehousing” added 65,000 jobs, and wholesale and retail trade
added 185,000.
Over the entire year, the
US economy created merely 51,000 jobs in architectural and engineering
services, less than the 76,000 jobs created in management and technical
consulting (essentially laid-off white collar professionals).
Except for a well-connected
few graduates, who find their way into Wall Street investment banks,
top law firms, and private medical practice, American universities today
consist of detention centers to delay for four or five years the entry
of American youth into unskilled domestic services.
Meanwhile the rich are getting
much richer and luxuriating in the most fantastic conspicuous consumption
since the Gilded Age. Robert Frank has dubbed the new American world
of the super-rich “Richistan.”
In Richistan there is a two-year
waiting list for $50 million 200-foot yachts. In Richistan Rolex watches
are considered Wal-Mart junk. Richistanians sport $736,000 Franck Muller
timepieces, sign their names with $700,000 Mont Blanc jewel-encrusted
pens. Their valets, butlers (with $100,000 salaries), and bodyguards
carry the $42,000 Louis Vitton handbags of wives and mistresses.
Richistanians join clubs
open only to those with $100 million, pay $650,000 for golf club memberships,
eat $50 hamburgers and $1,000 omelettes, drink $90 a bottle Bling mineral
water and down $10,000 “martinis on a rock” (gin or vodka
poured over a diamond) at New York’s Algonquin Hotel.
Who are the Richistanians?
They are CEOs who have moved their companies abroad and converted the
wages they formerly paid Americans into $100 million compensation packages
for themselves. They are investment bankers and hedge fund managers,
who created the subprime mortgage derivatives that currently threaten
to collapse the economy. One of them was paid $1.7 billion last year.
The $575 million that each of 25 other top earners were paid is paltry
by comparison, but unimaginable wealth to everyone else.
Some of the super rich, such
as Warren Buffet and Bill Gates, have benefitted society along with
themselves. Both Buffet and Gates are concerned about the rapidly rising
income inequality in the US. They are aware that America is becoming
a feudal society in which the super-rich compete in conspicuous consumption,
while the serfs struggle merely to survive.
With the real wages and salaries
of American civilian workers lower than 5 years ago, with their debts
at all time highs, with the prices of their main asset--their homes--under
pressure from overbuilding and fraudulent finance, and with scant opportunities
to rise for the children they struggled to educate, Americans face a
dim future.
Indeed, their plight is worse
than the official statistics indicate. During the Clinton administration,
the Boskin Commission rigged the inflation measures in order to hold
down indexed Social Security payments to retirees.
Another deceit is the measure
called “core inflation.” This measure of inflation excludes
food and energy, two large components of the average family’s
budget. Wall Street and corporations and, therefore, the media emphasize
core inflation, because it holds down cost of living increases and interest
rates. In the second quarter of this year, the Consumer Price Index
(CPI), a more complete measure of inflation, increased at an annual
rate of 5.2% compared to 2.3% for core inflation.
An examination of how inflation
is measured quickly reveals the games played to deceive the American
people. Housing prices are not in the index. Instead, the rental rate
of housing is used as a proxy for housing prices.
More games are played with
the goods and services whose prices comprise the weighted market basket
used to estimate inflation. If beef prices rise, for example, the index
shifts toward lower priced chicken. Inflation is thus held down by substituting
lower priced products for those whose prices are rising faster. As the
weights of the goods in the basket change, the inflation measure does
not reflect a constant pattern of expenditures. Some economists compare
the substitution used to minimize the measured rate of inflation to
substituting sweaters for fuel oil.
Other deceptions, not all
intentional, abound in official US statistics. Business Week’s
June 18 cover story used the recent important work by Susan N. Houseman
to explain that much of the hyped gains in US productivity and GDP are
“phantom gains” that are not really there.
Other phantom productivity
gains are produced by corporations that shift business costs to consumers
by, for example, having callers listen to advertisements while they
wait for a customer service representative, and by pricing items in
the inflation basket according to the low prices of stores that offer
customers no service. The longer callers can be made to wait, the fewer
the customer representatives the company needs to employ. The loss of
service is not considered in the inflation measure. It shows up instead
as a gain in productivity.
In American today the greatest
rewards go to investment bankers, who collect fees for creating financing
packages for debt. These packages include the tottering subprime mortgage
derivatives. Recently, a top official of the Bank of France acknowledged
that the real values of repackaged debt instruments are unknown to both
buyers and sellers. Many of the derivatives have never been priced by
the market.
Think of derivatives as a
mutual fund of debt, a combination of good mortgages, subprime mortgages,
credit card debt, auto loans, and who knows what. Not even institutional
buyers know what they are buying or how to evaluate it. Arcane pricing
models are used to produce values, and pay incentives bias the assigned
values upward.
Richistan wealth may prove
artificial and crash, bringing an end to the new Gilded Age. But the
plight of the rich in distress will never compare to the decimation
of America’s middle class. The offshoring of American jobs has
destroyed opportunities for generations of Americans. Never before in
our history has the elite had such control over the government. To run
for national office requires many millions of dollars, the raising of
which puts “our” elected representatives and “our”
president himself at the beck and call of the few moneyed interests
that financed the campaigns.
America as the land of opportunity
has passed into history.
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