Labor’s Demise As A Countervailing Power
Dr. Paul Craig Roberts Infowars.com
Sunday, September 4, 2011
It is Labor Day weekend, 2011, but labor has nothing to celebrate.
The jobs that once gave American workers a stake in capitalism have left
and gone away. Corporations in pursuit of near-term profits have moved
labor’s jobs to China, India, Indonesia, Taiwan, South Korea and Eastern
Europe.
Labor arbitrage, that is, the substitution of foreign labor that is
paid less than its productivity for American labor, has enriched Wall
Street, shareholders and corporate CEOs, but it has devastated American
employment, household incomes, tax base, and the outlook for the US
economy.
This Labor Day week-end’s job report, announced by the Bureau of
Labor Statistics (BLS) on Friday, September 2, says zero net new jobs
were created in August, a number 250,000 less than the amount of monthly
job creation necessary to make progress in reducing America’s high rate
of unemployment.
The zero figure is actually an optimistic number. As John Williams
(shadowstats.com) has made clear, problems with the BLS’s seasonal
adjustments and “birth-death” model during the prolonged downturn that
began in December 2007 result in the BLS over-estimating new jobs and
underestimating lost jobs.
Seasonal adjustments and the “birth-death” model were designed with a
growing economy in mind and result in miscounts during downturns. For
example, the “birth-death” model estimates new jobs that are created
from new start-up companies that are not yet reporting, and it estimates
the job losses from companies that have gone out of business. In a
growing economy, start-ups exceed jobs losses, but the situation
reverses during downturns or during periods of sub-normal job growth.
For the past forty-four months, the “birth-death” model has
overestimated the number of new jobs created. When the annual revisions
are made to the job reports, the excess jobs are taken out, but it is
seldom headline news.
The reason that nearly four years of economic stimulus, consisting of
large federal budget deficits and near zero interest rates, hasn’t
revived the economy is that the jobs that Americans once had have been
moved offshore. Stimulus cannot put Americans back to work in jobs that
have been given to foreign countries.
Post-World War II Keynesian economists, such as Paul Krugman and
Robert Reich, think that if the federal government would add more
stimulus by enlarging the already massive federal deficit, new jobs
would somehow be created to take the place of those that have left. This
is a delusion. Not only have the supply chains necessary to support US
economic activity been disrupted and broken by offshoring, but also the
same incentive–excess supplies of foreign labor that produces more value
than it is paid–that sent jobs abroad is still operative.
In a word, the US economy has been de-industrializing, moving from a
developed to an underdeveloped economy, for the past two decades. It has
been the case for many years that when the US economy manages to eke
out new jobs, they are in non-tradable domestic services, such as health
care and social assistance, waitresses and bar tenders, retail clerks.
Non-tradable employment consists of jobs that do not produce goods and
services that could be exported to reduce the large US trade deficit.
The long-term deterioration in the US economy has been covered up by
“reforming” the official measures of unemployment and inflation. The U3
measure of unemployment, the current 9.1% unemployment rate, only
measures unemployment among those who are actively seeking a job. Those
who have become discouraged by the inability to find a job and have
ceased looking are not counted as being among the unemployed, and the U3
measure makes no adjustment for those who are forced into part-time
jobs because there is no full-time employment.
The government knows that the U3 “headline” unemployment rate is
seriously understated and provides a broader measure known as U6. This
measure, which is seldom reported by the financial media, includes
short-term discouraged workers (those who have not looked for jobs for
six months or less) and an adjustment for those who wish full time
employment but can only find part time work. Currently, this measure of
unemployment stands at 16.2%.
In 1994 the Clinton “progressive” administration defined long-term
discouraged workers out of existence. Consequently, no official
unemployment rate includes long-term (more than six months) discouraged
workers as unemployed.
John Williams estimates this number
and adds it to the U6 measure to produce a current rate of US
unemployment of 22.7%, an unemployment rate 2.5 times higher than the
official rate.
Similar understatement exists in the measure of inflation known as
the Consumer Price Index. In order to reduce cost-of-living adjustments
to Social Security checks and to hold down other inflation adjustments,
the “progressive” Clinton administration accepted the Boskin
Commission’s recommendation to introduce substitution into what had been
a fixed, weighted, basket of goods used to measure the cost of a
constant standard of living. In the new “reformed” measure, if the price
of an item increases, say New York strip steak, the index assumes that
consumers switch to a less expensive cut, such as round steak. Thus, the
price increase doesn’t show up in the CPI.
Consumers, or a number of them, do tend to behave in this way.
However, since the basket of goods comprising the CPI is no longer
constant, but changes with price changes, the CPI has become a variable
measure of the cost of living that reduces the inflation rate by
measuring a lower standard of living.
John Williams estimates the CPI according to the previous official
methodology that used a fixed basket of goods. He finds the rate of
inflation to be much higher than is reported by the substitution-based
methodology.
http://www.shadowstats.com/alternate_data/inflation-charts
The understatement of inflation serves to boost real Gross Domestic
Product growth. In order to compare how much larger (or smaller) the
economy is this year compared to last year, the GDP figure has to be
adjusted for inflation. If the economy grew 5% in nominal terms and
inflation was 3%, then GDP grew 2% in real terms, that is, real goods
and services, as opposed to mere price rises, increased 2% over the
year.
When John Williams
adjusts US GDP with the former or traditional measure of inflation,
he finds that there has been no growth in real GDP for several years.
In other words, during the period of “economic recovery” the economy has
actually been declining.
American economic decline began with offshoring during the Clinton
administration. Instead of addressing this threat, the Clinton
administration launched the neoconservative program of American Empire
with American and NATO naked aggression against Serbia, sending the
Serbian leader off to be tried as a war criminal for resisting the
dissolution of his country.
The Bush/Cheney regime elevated the pursuit of American Empire under
cover of “the war on terror.” Based entirely on lies and falsified
intelligence, Bush/Cheney launched wars against the Taliban, who were
unifying Afghanistan, and against Saddam Hussein in Iraq.
In the 1980s Hussein was used by Washington to launch a war against
the revolutionary government in Iran that had overthrown the American
puppet government, headed by the Shah of Iran. Ever since Washington
lost its puppet rule over the Iranians, Washington has refused
diplomatic relations with Iran. In the place of diplomatic relations,
Washington demonizes Iran in order to set the country up for another
attack a la Serbia, Afghanistan, Iraq, Libya, Somalia, Pakistan, and
Yemen. Syria is next.
Saddam Hussein’s service to Washington was overlooked when it became
more important to eliminate support for Hamas and Hezbollah, two
barriers to Israel’s expansion in the Middle East, than to maintain
Washington’s gratitude to an Iraqi pawn.
Despite unequivocal reports from arms inspectors that Iraq had no
weapons of mass destruction and most certainly had nothing whatsoever to
do with 9/11, top Bush/Cheney regime officials demonized Iraq as the
greatest threat to America. The imagery of mushroom clouds from nuclear
weapons was evoked, A war was launched entirely on false pretexts that
destroyed a country and left over one million Iraqis dead and four
million displaced. What Washington did to Iraq is what the Nazis were
tried and executed for at the Nuremberg Trials.
Obama was elected in order to stop the illegal and senseless wars.
Instead, Obama both continued the wars in Iraq and Afghanistan and
expanded the wars into Libya, Pakistan, and Yemen. Since the
deregulation of the financial system under the Bush/Cheney regime and
the “war on terror,” the entire economy of the US has been sacrificed
for the benefit of the financial sector and the military/security
complex.
Labor Day is an anachronism. It should be renamed Corporation Day or
War Day to celebrate the success of Bush/Obama in eliminating labor
unions as a countervailing power to corporate power and the elevation of
War as the highest goal of the American state.
Dr. Paul Craig Roberts is the father of Reaganomics and the former head of policy at the Department of Treasury. He is a columnist and was previously an editor for the Wall Street Journal. His latest book, “How the Economy Was Lost: The War of the Worlds,” details why America is disintegrating.
