Saturday, July 09, 2005

Third World, Here We Come

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Third World, Here We Come

Charlie Reese,
June 13, 2005

Many Americans are living in a state of delusion, fed by the politicians who keep telling us we're the greatest, the strongest, the freest, the wealthiest, etc., etc., and so forth. Actually, we are heading toward becoming a Third World country.

The difference between a First World country and a Third World country is this: First World countries manufacture finished goods and import raw materials; Third World countries export raw materials and import manufactured goods.

Why does this account for a difference in standard of living? It's easy to explain. A skilled machinist adds more value to a product than someone who flips a burger with a spatula. Therefore, the machinist can demand a higher salary. Unfortunately, our manufacturing base is rapidly diminishing, and the villains are none other than our own corporate executives, who are moving production to cheap-labor countries.

The law of supply and demand works this way in regard to labor. Countries that have a surplus of people can bid the price of labor way down. India, China and Central America have a surplus of people. The alternative in those countries to taking a job with stingy wages and no benefits is to face no job and no income.

That was the old way of looking at economics, but there is a new factor that makes the old economic theory break down. That new factor is the multinational corporation. Much of what the U.S. government classifies as "exports" and "imports" are really nothing more than intracorporate transfers.

Under the old theory, if, say, all the bluejeans sold in America were manufactured in El Salvador, then El Salvador would prosper. After all, it would be exporting manufactured goods. Unfortunately for El Salvador, under the new theory all of the bluejean factories would be owned by American corporations. Thus, the multinational corporation screws both the people of El Salvador and the American consumer. The Salvadoran gets a low wage, and the American consumer pays an inflated price for a very cheaply produced garment. The capitalists pocket the profits.

But in the meantime, what happens to the Americans? Well, as their income is reduced by the loss of high-paying manufacturing jobs, they will at first take out second mortgages and max out their credit cards in a vain attempt to maintain their standards of living. This will eventually, however, result in bankruptcies and foreclosures. Interest will eat them alive. Then there will be a shrinking market for the high-priced goods no matter where they are manufactured.

Poverty will also affect the services sector. Poor people can't afford a doctor, a lawyer, an architect, an interior decorator, life or medical insurance, a nursing home or a funeral. The idea once touted by the wet-behind-the-ears gurus in Washington that we could easily replace manufacturing with services is false. A consumer economy only works if the consumers have money to spend, and they can only have money to spend if they can find jobs that pay a decent wage.

You can see the signs of the gradual impoverishment of America if you think about what is happening. First, supermarkets started accepting credit cards; then fast-food joints did. Many car dealers are now reduced to "sign and drive" promotions — nothing down, low monthly payments. What all of that tells you is that more and more Americans are squeezed for income.

All of this damage has been done under the guise of free trade. That is a false label. It's actually managed trade, and it's designed to facilitate the off-shoring of American jobs. The evidence of the failure of this policy is plain, but ignored. It has produced nothing but huge trade deficits and turned us into a debtor nation. The amount of U.S. dollars held by Asian countries is about $1 trillion. We will eventually be tenants in our own country if we don't change course.

President George Bush likes to talk about an "ownership society," but what he and his predecessors are creating is a "sharecropper's society." The only consolation Americans will have when everything goes south is that they will have done it to themselves

© 2005 by King Features Syndicate, Inc.


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