Return of the Robber Barons
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 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. [See, for example,
BofA: Train your replacement, or no severance pay for
you By David Lazarus, San Francisco
Chronicle, 2006 ]
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 &
Grigsby, [send him
mail] explained in the law firm`s
marketing video, "our goal is clearly, not to
find a qualified and interested US worker."
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
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 and recreation.
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
"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
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 Vitton 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% 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 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
Real Cost Of Offshoring, by Michael Mandel]
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 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
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.
CREATORS SYNDICATE, INC.
Paul Craig Roberts
him] was Assistant
Secretary of the Treasury in the Reagan Administration.
He is the author of
Supply-Side Revolution : An Insider`s Account of
Policymaking in Washington;
and the Soviet Economy and
Meltdown: Inside the Soviet Economy,
and is the co-author with Lawrence M. Stratton of
The Tyranny of Good Intentions : How Prosecutors and
Bureaucrats Are Trampling the Constitution in the Name
of Justice. Click
here for Peter
Brimelow`s Forbes Magazine interview with Roberts
about the recent epidemic of prosecutorial misconduct.