| August
2, 2007
A
CounterPunch Special Report on the Economy
In Richistan: Fantastic Wealth
for a Few; Steady Decline for Many
The
Return of the Robber Barons
By PAUL
CRAIG ROBERTS
The
US economy continues its 21st century decline, even as the Bush
Regime outfits B-2 stealth bombers with 30,000 pound monster “bunker
buster” bombs for its coming attack on Iran. 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.
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
per cent 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 per cent 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 Vuitton 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 per cent
compared to 2.3 per cent 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.
Paul
Craig Roberts was Assistant Secretary of the Treasury in
the Reagan administration. He was Associate Editor of the Wall Street
Journal editorial page and Contributing Editor of National Review.
He is coauthor of The Tyranny of Good Intentions.He can be reached
at: paulcraigroberts@yahoo.com
|