That, as far as I can tell, is the argument he makes in this article.
Two difficulties I’m having discussing this article: I’m not 100% sure what he’s saying, and the blurb at the top about drug companies and psychiatrists makes me think of Scientology, which makes me immediately and perhaps unreasonably suspicious of this website.
Can anyone help by explicating what Roberts’ argument is, and whether it’s worthwhile?
It’s a little bit apocalyptic, a little exaggerated, but he makes some good points. There’s a long way to go before the US gets in a debt compound problem but it is hard to see where we get real economic growth via the wide and large availability of well-paid middle-class jobs again. Interestingly, this guy used to edit the Wall Street Journal and was a Reagan-era supply-side true believer. I’m surprised to see him writing for a lefty website. I wonder how he feels about supply side economics these days.
Roberts is making two distinct arguments (I think he thinks he’s making one, but he’s not very coherent.)
His first argument is essentially that the USA doesn’t make anything anymore, and therefore such economy as there is is merely a shell game.
It would be a good point if it were true, but it plainly is not; the USA is the world’s largest manufacturing country. While it’s true that manufacturing is a smaller part of the economy than it used to me, and much of it is done in other countries, that is not equivalent to NO manufacturing taking place in the USA. Furthermore, Roberts is implicitly making the same assumption made by all people who make terrible predictions; that current trends will continue forever.
His second argument seems to be that Goldman Sachs is stealing all the money, bubble economy, blah blah blah. It smells of conspiracy theory but the underlying concern about the US debt is indisputably true; the federal government (and state governments) simply cannot keep spending like this without going broke, and playing with monetary policy to put the inevitable off will just, well, put off the inevitable.
He is mostly referring to Matt Taibbi’s idiotic article in Rolling Stone magazine. Like all conspiracy theorists, Taibbi ascribes to Goldman an almost omniscient and omnipotent ability to control events.
Paul Craig Roberts FWIW is a 9/11 conspiracist.
If there is no economy, what are 150 million people in the US working on?
Manufacturing has been offshored. Not all of it yet, but a substantial chunk. More is getting moved all the time. The higher paid jobs are disappearing with them. What does a jettisoned programmer do? Get a job at a fast food restaurant?
The companies that offshore are still at it. One of the real driving forces America had was the buying power of its’ citizens. It is clear that is being diminished. At some point, we will not have that economic hammer to use. Other countries will replace us in purchasing power. Then we will be become a faded empire. But short term, some companies will make a fortune.
http://rawstory.com/08/news/2009/08/08/the-secret-history-of-tarp/ Taibbi is not the only one who sees the preference that Goldman got. Is is not a conspiracy. it is reporting with a hell of a lot of evidence to back it up.
As RickJay mentions, one major problem with the article is that manufacturing in the United States is not disappearing. gonzomax, I’ve shown you the proof before, but here it is again:
Industrial Production and Capacity Utilization in the US, compiled by the Federal Reserve. Look, especially, at Chart 1, which shows the manufacturing output out the United States over the past 40 years. If you look at the chart*, even after accounting for the damage done by the current recession, we’re still manufacturing roughly twice as much as was manufactured in 1970. The population in 1970 was about 200 million, which means the US is now manufacturing roughly 33% more per US citizen than it did it 1970.
The graphs are constructed from source data measuring physical output of each industry, then combined in a weighted average. The weights are “derived from their proportion in the total value-added output of all industries” (from the explanatory notes). Notice that neither the physical output, nor the weights are affected by inflation, and thus the graph itself automatically corrects for inflation.
What is true is that manufacturing employment is dropping. Part of this is probabily because other countries are increasing their manufacturing employment, but it is also because the manufacturing workers that remain are becoming increasingly more productive. Basically, we don’t need as many manufacturing workers because the ones we have are so damn good at what they do.
*The Federal Reserve should update the report to include data from July in about five days, so what I say will be a bit out of date soon…
I didn’t say they were the United Way either. But fact of the matter they are just one company in a $14 trillion economy.
Borrowed time, presumably.
Our resumes?
http://www.agi.it/english-version/business/elenco-notizie/200907151804- .eco-ren0045-usa_industrial_production_drops_0_4_less_than_expected
This shows we have reached 1967 levels. We have shed 3 million jobs in the sector.
Link doesn’t work for me. Here is maybe another version of the story, which says “Capacity utilization, which measures the proportion of plants in use, decreased to 68 percent, the lowest level since records began in 1967.” Look at the Federal Reserve website again, which shows that capacity has also been steadily increasing for the last 40 years. The 68% number also agrees with Chart 1 that I linked to above. Because of the recession, we have more slack in the manufacturing sector than we have ever before, but the amount we’re producing is still greater.
So when you go into the grocery store, are there groceries there?
If you need your car fixed, can you find a mechanic?
Are you able to find a doctor to treat you when you are sick?
gonzomax, the imporant metric is the volume of production, not the number of jobs. The simple fact is that because of technological advances over the past 42 years, we can produce 33% more per citizen using roughly the same number of plants we had in 1967. Those 3 million workers have long since moved onto jobs in other sectors.
I believe we don’t need as many manufacturing workers because of increased automation. Whether these workers are employed in the manufacturing sector or elsewhere, however, has no bearing on the fact that we are manufacturing more than we used to which seems to shoot down the shell game argument listed above.
I think this all goes to show that we have a *demand side *problem after years of *supply side *policies.
The bolded part is not technically correct. It may be true (I doubt it), but you can’t conclude that from the data given. Take another look at the bottom graph in Chart 1. The capacity utilization for all industrial production (manufacturing plus mining and electrical and gas utilities) reached an all time low of 68%. That means, if we really went balls-to-the-wall, the nation could produce ~50% more than it currently is. Compare this to the typical non-recession state, where capacity utilization typically sits in the lower 80% range (i.e., when we could produce ~25% more if we were pushed). Capacity utilization is not, however, a measure of how many factories we have operational.
The FR has this to say about capacity utilization (from Industrial Production and Capacity Utilization):
Side note: does anyone know where to get data on the number of manufacturing workers over time in the US? I’ve looked before, but never been able to find anything. I noted that we’re producing 33% more per US citizen, but I’d also like to know how much more we’re producing per manufacturing worker.
And you’ve gotten rid of all the switchboard operators and chimney sweeps too, but somehow life went on.
Except that we are still consuming manufactures like crazy.
I find this some kind of crazy game played by free trade fanatics.
Given the current wage levels, productivity levels and regulatory schemes (worker safety, environmental concerns) virtually everything can be more cheaply produced in China than in the US. So except for services that must be delivered on site (home construction, haircuts, surgery etc) everything else can be imported either by tranport or by electronic transmission. But the Chinese of course are buying their services from the Chinese too.
Don’t worry, we were told in the 1990s. We will all get retrained as high tech workers and we will export high tech and financial services to India and China. Well guess what, we are on our way to becoming net importers of those.
So now it is going to be green energy that we are all going to be working on. Except that we can’t export it because China has already closed that market, not only to imports, but even to multinationals who want to produce in China for consumption in China.
In the old gold standard days, you would be able to see this reflected as us exporting all our gold as we lived beyond our means. And then having a huge real loss in income as wages adjusted downward.
Fiat currency has allowed us to delay this day of reckoning, because in effect we can pretend to print our own gold and other countries have been happy to take it.
The manufacturing jobs we gleefully jettisoned the last few years were higher paying jobs. They all had a multiplier effect too. When you clean out a manufacturing plant you get rid of satellite providers ,equipment sellers , office people and bars and restaurants in the vicinity. These are the last jobs you want to ship abroad.
One of our bargaining chips has been our purchasing power as a nation. We have to be catered to a bit because we can kill someone when we quit buying from them. That power is being lessened . Soon we will not be dictating much economically. We chose to give China and other some 3rd world countries incredible power to get cheap labor and escape environmental regulation. There will be a price to be paid.
