Return of the Robber
By Paul Craig Roberts
-- -- As the Bush Regime outfits B-2 stealth bombers
with 30,000 pound monster “bunker buster” bombs for its
coming attack on Iran, the US economy continues its 21st
century decline. While profits soar for the armaments
industry, the American people continue to take it on the
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
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. [See, for example,
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% 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
The category, “Education and
health services,” accounts for 35% 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
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 Vitton handbags of wives
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% compared to 2.3% 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
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
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
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
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.