Overview

The Fading American Economy—According to the Bureau of Labor Statistics, the US economy lost 98,000 private sector jobs in March, half of which were in manufacturing. Today 13,643,000 Americans are employed in manufacturing, of which 9,849,000 are production workers. Government employs 22,387,000 Americans, 8,744,000 more than manufacturing. Even the category leisure and hospitality employs 13,682,000 Americans, slightly more than manufacturing. There are as many waitresses and bartenders as production workers. Wholesale and retail trade employ 21,467,000 Americans. Professional and business services employ 18,036,000 Americans of which 8,368,000 are in administrative and waste services. Education and health services employ 18,699,000 Americans. Financial activities employ 8,228,000 Americans. The information sector employs 3,010,000. Transportation and warehousing employ 4,532,000. Construction employs 7,338,000, and natural resources, mining and logging employ 751,000. Other services such as repair, laundry, and membership associations employ 5,516,000 Americans. This is the portrait of the US economy according to the Bureau of Labor Statistics. It is an economy in which government is the largest employer. Manufacturing employment comprises just under 10% of total employment and about 12% of private sector employment. Everything else is services, and not particularly high level services.

Is this a portrait of a super economy? . . . The US unemployment rate is creeping up, and according to John Williams, the official unemployment rate greatly understates the real rate of unemployment. Williams has followed the changes that government has made to the official indices over the years in order to spin a more politically palatable picture. Williams uses the original methodology prior to the decades of spin. The original way of measuring unemployment indicates the current rate of unemployment in the US to be 13%, much higher than the 5.1% official number. CounterPunch

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Free-Trade Era May Be Nearing End Amid Food, Growth Concerns—New Barriers—The 60 percent increase in the price of rice, wheat, corn ,and other food commodities since the beginning of 2007 has led some nations to erect new barriers to exports to make sure they have adequate supplies at home.

India, the world's second-biggest producer of rice and wheat, has banned shipments of the food grains. Egypt, Vietnam and Indonesia have also banned certain food exports. And Philippines President Gloria Macapagal-Arroyo said her country wants to become self-sufficient in food production by 2010.

``For a long time, it made sense to buy food from the international market,'' Arthur Yap, the Philippines agriculture minister, said in an interview. ``The situation has changed.''

Doug Irwin, an economic historian at Dartmouth College in Hanover, New Hampshire, and author of ``Free Trade Under Fire,'' said much of the current opposition to trade may subside when commodity prices fall and the U.S. economy recovers. Bloomberg News

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Paul Craig Roberts [Why Oil Prices Are So High] former asst. Secy of Treasury and a WSJ editor (i.e. conservative) attributes the economic condition to "A Weak Dollar, Bad Fed Policies and Hedge Fund Speculators," and says "In an effort to forestall a serious recession and further crises in derivative instruments, the Federal Reserve is pouring out liquidity that is financing speculation in oil futures contracts.

Hedge funds and investment banks are restoring their impaired capital structures with profits made by speculating in highly leveraged oil future contracts, just as real estate speculators flipping contracts pushed up home prices. The oil futures bubble, too, will pop, hopefully before new derivatives are created on the basis of high oil prices."

This is my analysis exactly!  I am glad to see the professional economists are catching up with me!  Real estate is still too highly leveraged, and so too are oil futures speculations. 

Slavery before the Civil War was overcapitalized.   College educated working people who take out interest-only, adjustable rate sub-prime loans, and who piggy-back mortgages are the ones who create over-capitalized markets.  

This includes artists and intellectuals, who are also borrowing too much and pretending that their cases are special or justifiable.  Barney Frank is a supporter of a good bill, which Bush will veto if it ever gets out of Congress.Barney Frank is the only politician honest enough to point out that some people simply cannot afford to own a home. In my opinion many of the victims are eminently blameworthy. Wilson

The Face of a Prophet—At the age of 77, Mr. [George] Soros, one the world’s most successful investors and richest men, leapt out of retirement last summer to safeguard his fortune and legacy. Alarmed by the unfolding crisis in the financial markets, he once again began trading for his giant hedge fund—and won big while so many others lost. . . .Mr. Soros, whose daring, controversial trades came to symbolize global capitalism in the 1990s, is now busy promoting his book, The New Paradigm for Financial Markets, which goes on sale mid-May. An electronic version is already available online. . . . And yet this is not the first time that Mr. Soros has prophesied doom. In 1998, he published a book predicting a global economic collapse that never came. Mr. Soros . . . he yearns to be remembered not only as a great trader but also as a great thinker. The market theory he has promoted for two decades and espoused most of his life — something he calls “reflexivity” — is still dismissed by many economists. The idea is that people’s biases and actions can affect the direction of the underlying economy, undermining the conventional theory that markets tend toward some sort of equilibrium. Mr. Soros said all aspects of his life — finance, philanthropy, even politics—are driven by reflexivity, which has to do with the feedback loop between people’s understanding of reality and their own actions. Society as a whole could learn from his theory, he said. “To make a contribution to our understanding of reality would be my greatest accomplishment,” he said. . . . The more Mr. Soros learned about the crisis, the more certain he became that he should rebroadcast his theories. In the book, Mr. Soros, a fierce critic of the Bush administration, faults regulators for allowing the buildup of the housing and mortgage bubbles. He envisions a time, not so distant, when the dollar is no longer the world’s main currency and people will have a harder time borrowing money. NYTimes

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Black Freedom Fighters—Thousands of African Americans poured into northwest Indiana in the 1920s dreaming of decent-paying jobs and a life without Klansmen, chain gangs, and cotton. Black Freedom Fighters in Steel: The Struggle for Democratic Unionism by Ruth Needleman adds a new dimension to the literature on race and labor. It tells the story of five men born in the South who migrated north for a chance to work the dirtiest and most dangerous jobs in the steel mills. Individually they fought for equality and justice; collectively they helped construct economic and union democracy in postwar America.

George Kimbley, the oldest, grew up in Kentucky across the street from the family who had owned his parents. He fought with a French regiment in World War I and then settled in Gary, Indiana, in 1920 to work in steel.  He joined the Steelworkers Organizing Committee and became the first African American member of its full-time staff in 1938. The youngest, Jonathan Comer, picked cotton on his father's land in Alabama, stood up to racism in the military during World War II, and became the first African American to be president of a basic steel local union.  Reviews

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Labor's Opening to China—The policy shift by the ITUC, the AFL-CIO, and other global unions is long overdue. Three decades of rapid economic growth have transformed China from an economic backwater into the world’s workshop.  Workers, trade unions, communities, and countries throughout the world are confronting the challenges posed by China’s growing role in the world. Today, about 25% of all the workers employed in the global economy are Chinese.  The “China price” sets the global norm for wages and working standards up and down the value chain, from inexpensive garments to sophisticated electronics.  As a result the hard-won gains of workers in the global North are being rapidly undermined, while the aspirations of workers in the developing world are being dashed, as China becomes the wage setting country in industry after industry. China’s export oriented development model has had a particular impact on trade unions everywhere. Multinational corporations—the very firms that employ millions of union members around the world—have flocked to China seeking to take advantage of its low wage workers and business friendly policies, reducing labor’s bargaining leverage and the number of union jobs. These firms have been central to China’s development. Roughly 66% of the increase in Chinese exports in the past 12 years can be attributed to foreign owned global companies and their joint ventures. (Stephen Roach, Business Times, Singapore, 8/8/06) These companies account for 60% of Chinese exports to the US. Despite all of the talk in the current presidential campaign, the “Chinese threat” is less about trade with China than it is about “trade” with US based companies like Wal-Mart, GE, or any of the other of the hundreds of Fortune 500 companies that have set up shop in China to cut labor costs and avoid environmental regulations. Ways, however imperfect, must be found to reach out to Chinese workers to find mutually acceptable ways to halt a global race to the bottom, which in end, hurts all workers.Labor Strategies

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Defining Free Trade—Trade is a war of the wits, in which the stronger witted are as sure to succeed as the stronger armed in a war with swords. Strength of wit has this great advantage over strength of arm, that it never tires, for it gathers new strength by appropriating to itself. the spoils of the vanquished. And thus, whether between nations or individuals, the war of free trade is constantly widening the relative abilities of the weak and the strong. It has been justly observed that under this system the rich are continually growing richer and the poor poorer. The remark is true as well between nations as between individuals. Free trade, when the American gives a bottle of whiskey to the Indian for valuable furs, or the Englishman exchanges with the African blue-beads for diamonds, gold and slaves, is a fair specimen of all free trade when unequals meet." —George Fitzhhugh, Sociology for the South (1854) Second Line Santa by Chuck Siler >>>>>>>>>>>>>>>

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Vulture Capitalism—In the African country of Zambia, over 70 percent of people live in poverty. The average wage is just over a dollar a day, one in five people are infected with HIV/AIDS and life expectancy is merely 37.7 years. Yet, in the midst of qualifying for debt cancellation by G-8 nations, the Donegal Corporation, owned by American businessman Michael Sheehan, bought Zambian debt from Romania. In April, British courts awarded Donegal 15 million dollars, almost five times the value Donegal paid for the debt.The morally bankrupt actions of vulture funds render the commitments to debt relief made by the U.S. and other wealthy nations meaningless. U.S. taxpayer money, pledged to provided relief and assistance through debt relief, will fall into the hands of these greedy corporations. At the upcoming G-8 Summit President Bush should call for a commitment by world leaders to address debt relief and vulture funds. The U.S. Treasury should follow the lead of U.K. Chancellor Gordon Brown and limit the awards vulture funds can claim for these debts. Congress must examine this practice and its impact on our overall foreign policy interests. The international community must employ effective means to protect countries like Zambia who have fallen prey to these vulture funds, including implementing fair and transparent international mechanisms to resolve these matters. Danny Glover and Nicole Lee. Poverty Scavengers

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Black American males inhabit a universe in which joblessness is frequently the norm: 'Seventy-two percent jobless!' said Senator Charles Schumer, chairman of Congress's Joint Economic Committee, which held a hearing last week on joblessness among black men. 'This compares to 29 percent of white and 19 percent of Hispanic dropouts.' Senator Schumer described the problem of black male unemployment as 'profound, persistent and perplexing.' Jobless rates at such sky-high levels don't just destroy lives, they destroy entire communities. They breed all manner of antisocial behavior, including violent crime. One of the main reasons there are so few black marriages is that there are so many black men who are financially incapable of supporting a family. 'These numbers should generate a sense of national alarm,' said Senator Schumer. . . . Robert Carmona, president of Strive, an organization that helps build job skills, told Senator Schumer's committee, 'What we've seen over the last several years is a deliberate disinvestment in programs that do work.'  Bob Herbert. The Danger Zone March 15, 2007

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Wages Continue to Fall

Rise of the Have-Nots—It's no great achievement for a people to recognize that their nation's economy has tanked, but recognizing that their nation's class structure has slowly but fundamentally altered is a more challenging task. It's harder still for a people who are conditioned, as Americans are, not to see their nation in terms of class. Which is why a poll released this month by the Pew Research Center reveals a transformation of Americans' sense of their country and themselves that is startling. Pew asked Americans if their country was divided between haves and have-nots. In 1988, when Gallup asked that question, 26 percent of respondents said yes, while 71 percent said no. In 2001, when Pew asked it, 44 percent said yes and 53 percent said no. But when Pew asked it again this summer, the number of Americans who agreed that we live in a nation divided into haves and have-nots had risen to 48 percent -- exactly the same as the number of Americans who disagreed. Americans' assessment of their own place in the economy has altered, too. In 1988, fully 59 percent identified themselves as haves and just 17 percent as have-nots. By 2001, the haves had dwindled to 52 percent and the have-nots had risen to 32 percent. This summer, just 45 percent of Americans called themselves haves, while 34 percent called themselves have-nots. Harold Meyerson (WP, 27September 2007

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Ten Days That Changed Capitalism—Officials Improvised To Rescue Markets; Will It Be Enough?—The past 10 days will be remembered as the time the U.S. government discarded a half-century of rules to save American financial capitalism from collapse. On the Richter scale of government activism, the government's recent actions don't (yet) register at FDR levels. They are shrouded in technicalities and buried in a pile of new acronyms. But something big just happened. It happened without an explicit vote by Congress. And, though the Treasury hasn't cut any checks for housing or Wall Street rescues, billions of dollars of taxpayer money were put at risk. A Republican administration, not eager to be viewed as the second coming of the Hoover administration, showed it no longer believes the market can sort out the mess. "The Government of Last Resort is working with the Lender of Last Resort to shore up the housing and credit markets to avoid Great Depression II," economist Ed Yardeni wrote to clients. First, over St. Patrick's Day weekend, the Fed (aka the Lender of Last Resort) and the Treasury forced the sale of Bear Stearns, the fifth-largest U.S. investment bank, to J.P. Morgan Chase at a price so low that a shareholder rebellion prompted J.P. Morgan to raise the price. Wall Street Journal

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Make Oil a Public Utility—A public utility regulated by the state or federal government, or the two working together, is entitled to charge reasonable rates for its products and services. It also is entitled to earn a reasonable profit. . . . Public utilities are corporations that distribute dividends to their shareholders amounting to perhaps 5 percent a year of the stock’s value. Oil energy fits squarely into the criteria for a public utility. How can it be distinguished from electricity and natural gas? It can’t be. But right now, it’s a political “untouchable.” The oil industry recently posted record earnings for 2007, as it had for the previous two years. Exxon Mobil, known as the industry gold standard, had a net income of $40.6 billion, attributed to surging oil prices. For every blink of a second in 2007, that amounted to $1,287. Exxon Mobil’s sales exceeded $404 billion, which was more than the gross domestic revenue of 120 countries. Chevron and other big oil companies also announced the largest profits in history. . . . And while our government wrings its hands, what is it really doing, geopolitically, to bring down prices? Given the political implications and the strength of the oil industry’s influence, the chances of regulating it are presently nonexistent. However, the inordinate profits in the past several years, regardless of the explanations, cry out for demanding that oil be treated as a public utility. It is an indispensable commodity, and the opportunity for abuse at the public’s expense is undeniable. The industry has demonstrated that it will not regiment or control itself. If the industry were confronted with even the mere possibility of becoming a government-regulated utility, gasoline and heating oil prices would come tumbling down in a hurry. Common Dreams

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A Bankrupt Superpower—The Collapse of American Power— In his famous book, The Collapse of British Power (1972), Correlli Barnett reports that in the opening days of World War II Great Britain only had enough gold and foreign exchange to finance war expenditures for a few months. The British turned to the Americans to finance their ability to wage war. Barnett writes that this dependency signaled the end of British power. From their inception, America’s 21st century wars against Afghanistan and Iraq have been red ink wars financed by foreigners, principally the Chinese and Japanese, who purchase the US Treasury bonds that the US government issues to finance its red ink budgets. The Bush administration forecasts a $410 billion federal budget deficit for this year, an indication that, as the US saving rate is approximately zero, the US is not only dependent on foreigners to finance its wars but also dependent on foreigners to finance part of the US government’s domestic expenditures. Foreign borrowing is paying US government salaries—perhaps that of the President himself—or funding the expenditures of the various cabinet departments. Financially, the US is not an independent country. The Bush administration’s $410 billion deficit forecast is based on the unrealistic assumption of 2.7% GDP growth in 2008, whereas in actual fact the US economy has fallen into a recession that could be severe. There will be no 2.7% growth, and the actual deficit will be substantially larger than $410 billion. Just as the government’s budget is in disarray, so is the US dollar which continues to decline in value in relation to other currencies. The dollar is under pressure not only from budget deficits, but also from very large trade deficits and from inflation expectations resulting from the Federal Reserve’s effort to stabilize the very troubled financial system with large injections of liquidity. . . . The US has squandered $500 billion dollars on a war that serves no American purpose. Moreover, the $500 billion is only the out-of-pocket costs. It does not include the replacement cost of the destroyed equipment, the future costs of care for veterans, the cost of the interests on the loans that have financed the war, or the lost US GDP from diverting scarce resources to war. Experts who are not part of the government’s spin machine estimate the cost of the Iraq war to be as much as $3 trillion. The Republican candidate for President said he would be content to continue the war for 100 years. With what resources? When America’s creditors consider our behavior they see total fiscal irresponsibility. They see a deluded country that acts as if it is a privilege for foreigners to lend to it, and a deluded country that believes that foreigners will continue to accumulate US debt until the end of time. Counterpunch

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Fed up with Wall Street—The politicians will try to do their best to obscure the first point. They say "we aren't giving them money - we're lending money and we're getting interest, so the government can make a profit."  . . . . No private bank would have lent money to JP Morgan Chase or Bear Stearns at the same interest rate and under the same terms as the Fed. . . . When the government makes a loan at below market interest rates, it is giving away money. . . . If they can't get away with the "no bailout" nonsense, the Wall Street welfare boys will then try the route of claiming that we have to bail them out in order to prevent the whole financial system from collapsing. Such a collapse could turn the recession into a depression, leaving millions unemployed for years. This is also nonsense. We know how to keep banks operating even as they go into bankruptcy. The UK just did this with Northern Rock, a major bank that managed to get itself into huge trouble because of its holding of bad mortgage debt. After it was clear that the bank was insolvent, the Bank of England stepped in and essentially took over the bank. It replaced the incompetent managers who had ruined the bank and brought in a new team to straighten out the books. The plan is to resell the bank to the private sector once the books are in order. In the mean time, the bank keeps operating. The depositors can continue to make deposits and withdrawals just as before. This prevents any chain reaction from bringing down the financial system. The difference between the Northern Rock route and what happened with Bears Stearns last week is that in the Northern Rock, the highly paid managers that ruined the bank are sent packing. Guardian.

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More than one in 10 people in the United States go hungry—according to new official figures that suggest government food programs are falling short in the world's wealthiest country. More than 35 million people in a country of some 294 million went hungry last year, 390,000 more than in 2005, according to the U.S. Department of Agriculture's latest Household Food Security report. Of the total, 12.63 million were children. Put another way, nearly one in five U.S. children either went without enough food during the course of the year or had food but could never take future meals for granted. The report, released Wednesday, comes as Congress debates the 2007 Farm Bill, a five-year piece of legislation affecting everything from agricultural subsidies to nutritional programmes for the poor. . . . The elderly accounted for much of last year's improvement and, as a group, were better off than they were in 2001. By contrast, poverty rates for children and for adults of working age remained statistically unchanged from 2005 and higher than in 2001, when the last recession bottomed out. Overall, some 36.5 million people were deemed poor in 2006, about as many as in 2005, the census bureau said. AlterNet

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posted 12 April 2008