America's Choice: Destruction or Construction

From sea to shining sea, America is suffering.

She is, however, afflicted with an avoidable condition she brought on herself, like a hangover. Only this one's interminable and internationally contagious.

She did it by choosing over the past 30 years to establish an economy that worshiped avarice. That decision has destroyed her financial system and taken down with it much of the world's.

Now America must decide whether to be swayed by the greedy urging her to continue basing her economy on the destructive policies of deregulation, de-unionization, globalization and privatization or to construct a new financial system focused on industry and profit shared by the workers who produce it.

Over much of the 20th century, the nation created real wealth by manufacturing -- taking raw materials from the ground, using machines, energy and labor to convert them into products and selling those here and overseas. That process, to make steel or tires or washing machines, was the engine of the economy. In 1947, 32 percent of the workforce engaged in it belonged to unions, which meant workers received good wages and benefits. This enabled them to churn real money throughout the economy by buying homes and cars and television sets and sending their children to college. And it enabled them to save 7.5 percent of their earnings.

Then, in the 1980s, a new narrative for the economy emerged. In this story, greed was good. Self-interest was supposed to lead to the best outcomes for business. To accommodate this concept, Government de-regulated and, in fact, passed laws favoring big corporations and the nation's wealthiest citizens. The idea was that some of the prosperity they created as a result of the abolished protections for workers and the environment would trickle down.

This was the new economy.

This was a scam to move wealth from the middle class to the affluent. And it worked. In 1976, the richest 10 percent in this country possessed 49 percent of the wealth. In 2007, it was 73 percent.

During this time of bowing to corporate demands, the government actually gave multinational corporations tax benefits to offshore their U.S. manufacturing facilities. Sometimes they shut down, throwing hundreds of Americans out of work, then packed the factory pieces into crates, numbered piece by numbered piece, and shipped them to China or Indonesia or whatever country would allow blatant violation of its own labor and environmental regulations. Sometimes they closed American factories and built brand new ones overseas with breaks from foreign governments. As U.S. companies closed, union membership dropped to below 12 percent. And America found herself importing toxic lead-coated toys, paper made from trees illegally harvested in Indonesian national forests and untested pharmaceuticals.

Companies that remained here threatened to leave if workers didn't accept wage and benefit concessions. American workers were vilified for seeking a living wage while CEOs pulled millions out of corporations in annual bonuses.

The American economy began to depend less on manufacturing and more on the "financial sector," where profit was made moving money around, betting on stock trades, and participating in asset bubbles. Remember the tech bubble? That was manufactured value -- not manufactured goods -- and that's why it disappeared when the bubble burst.

The same has now happened with the housing bubble. Those smart guys on Wall Street, among the brilliant ones who sold America on the idea that greed was good, bet on housing prices never falling. A decline in home values never entered their calculations.

Then they fell. And they took down with them a couple of Wall Street banks and the largest insurance company in the world and Fannie Mae and Freddie Mac, credit markets and then the economy of the nation and the world.

Now workers are really in trouble.

They were struggling before the crash as manufacturing jobs disappeared and wages stagnated. Personal savings declined so that the average family now owes $8,000 to credit card companies. Without sufficient wage increases to sustain their lifestyle, families borrowed against their major asset, their homes. Now, because the housing bubble burst, a quarter of mortgage holders owe more than their homes are worth and 2.5 million have lost theirs to foreclosure.

All of this is because America failed to give greed the wide berth warranted by one of the seven deadly sins.

Alan Greenspan, who served as steward over the rise of the culture of avarice for nearly two decades as chairman of the Federal Reserve, admitted to Congress in October that his opposition to federal regulation was a blunder:

"I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms."

In the song "America the Beautiful," from which the lines "from sea to shining sea, come, lyricist Katharine Lee Bates counseled in the second verse, "America! America! God mend thine every flaw."

Clearly, this greed-based economy is a flaw. It was created by covetous humans. It must be mended by Americans of better grace, people Katharine Lee Bates described as those, "Who more than self their country loved."

America's workers must seize back control of their country and wrest back determination of its priorities. They must re-regulate the financial markets and remove the onerous restrictions placed on unions to prevent organization of new workplaces and bargaining of new contracts to raise worker salaries and benefits.

But, most immediately, America's workers must insist Congress immediately pass an economic renewal package that will reinvigorate Main Streets across the nation. This is essential to prevent a prolonged and excessively painful deep recession resulting from the housing bubble collapsing.

This public investment has two purposes. It will stimulate the economy by providing jobs. In addition, it will strengthen America's manufacturing competitiveness in the international marketplace.

The Institute for America's Future has developed a plan called A Main Street Recovery Program calling for investment of $900 billion over two years.

The money would be targeted to areas that would create sustained, long-term, shared economic growth. This includes investing in green technologies to reduce the nation's dependence on foreign oil and the threat of global warming. Another focus is repair and modernization of the country's physical infrastructure, such as roads and bridges, and intellectual infrastructure -- its education system. And finally, the third targeted area is assistance to workers most in need, which would include moves toward universal affordable health insurance, a middle class tax cut and expanded unemployment insurance.

More than 250 organizations and economists have endorsed this program. President-elect Barack Obama's recovery plan outlined last weekend includes many of its aspects. Its passage would signal the beginning of conversion to an economy that values production and workers, something the self-interested greed-mongers will oppose.

But let's work for realization of Katharine Lee Bates' final verses:

"America! America" God shed his grace on thee Till selfish gain no longer stain The banner of the free!"

Comments

[TruelyFedUp]

The Federal Reserve is a private corporation - just like FedEx. Do they pay tax on their profits while we pay them to make our paper money and screw up our economy?. Even Congress cannot get a report of who runs that business and who are its members of the board. They have taken America's gold reserves in lieu of our paying them for the money they print - which Congress was empowered to do for free.

Today in the news they nobly tell us that they are considering forcing the banks to stop charging outrageous interest rates on credit cards, stop charging punitive late and over the limit fees, etc. How does a private company tell banks to do that unless it owns the banks? So now that the Federal Reserve corporate gangsters have sucked American Workers dry they deign to pretend to save us by making their own banks finally have a small measure of ethics. A pretty little PR move to make us adore them again.

They are also nobly buying back at (almost no cost) all the foreclosed real estate called bad debts - so they control even more when the economy begins to turn around. They have obviously (and deliberately in my opinion) brought our economy to its knees while pretending to be our authority and savior. I say get rid of the creeps now so we can get busy fixing it. Then the wages will increase naturally because nobody is suppressing it.

Truly Fed

[flyday611]

I Could not have said it better but have been trying to say for years! Great Article!!!

[Jezreel]

Excellent article and analysis, Mr. Gerard. I can't say there's anything in it that I would take issue with. Great reporting!

[PacificGatePost]

OBAMA WILL DO WHATEVER THE ECONOMISTS TELL HIM TO DO. PERIOD.

We have created unrestrained, and independent leadership in the form of omnipotent economists. They are not what they seem.

http://pacificgatepost.blogspot.com/2008/11/economists-our-new-philosopher-kings.html

Perhaps society has simply overplayed them.

[cylindar]

The third targeted area is the most important. The first two are bullshit. States always get money for roads and bridges and the money does not get spent on people who really need the work. Not everyone is a laborer or road repair or bridge repair person. Some people are waitresses, and desk jockey's etc. The plan sounds good on paper but what is needed is something like the CCC project--c'mon folks let's get real. States waste lots of money.

[RoloTomassi]

A good article, and these days we can't drive these points home too often.

And on a tangentially related topic, I think Naomi Klein should receive an award of the highest magnitude for her book "The Shock Doctrine." Until you've read it, you're unlikely to know just how deep the rabbit hole goes...or to have a sense of just how much damage US economic ideologues have inflicted on the nations of this world, and the people of this country.

[Figerre]

the theory may be correct - but keep in mind - how many people on the side streets of America, working 2-3 jobs, or one full time/one part time, are able to do much about the big ideas - as in banks decided to divy up loans and sell them to each other? let us keep in mind, that Side Street America's wages have not moved for over a decade - costs have gone up - and yes, so we charged it. It would have been so much better to all be eating cat food, right?

The empathy coming from the Haves for the Have Nots, will fit on the head of a pin, along with a dozen dancing angels.

[RudyV]

Cat food is rather pricey, actually. Try living on my diet: jelly sandwiches for "brunch" (not enough dough for cereal and milk), and Ramen noodles slurped down for dinner before dashing off to job number two.

How long until the minimum wage gets bumped up again?