Charlatans, Dirty Little Secrets
and the
Engineered Decline of America
 

I first began this odyssey when I found out about the large corporations exporting high tech knowledge jobs to India.  Just on the face of it, how does the United States benefit from allowing the export of high tech knowledge jobs?  That led to an investigation of trade policies where I found that 'free trade' in Services - with Services being defined as people and jobs - was included in the Uruguay Round of WTO trade talks.  Simply, a job in economic terms has a value.  A $60,000 programmer job is worth about $80,000 as a "commodity for trade".   A corresponding "worker body" from India as a "commodity for trade" has about a $30,000 net value when imported to the U.S.  So there is a $30,000 trade surplus generated on the exchange of a programmer job and an imported "worker body".  From an economists point of view, that's a good trade.  For the United States and the American citizen who lost the job, it's a net loss no matter which way the trade works - exporting jobs or importing foreign "worker bodies". 

"We are grateful to the Washington Post, The New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected their promises of discretion for almost forty years."

"It would have been impossible for us to develop our plan for the world if we had been subjected to the lights of publicity during those years. But, the world is now more sophisticated and prepared to march towards a world government. The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the national auto-determination practiced in past centuries."   David Rockefeller

On the right hand side of this page are excerpts from a Carnegie Endowment event in which Congressman Jim McDermott talks about globalization and the impact on the American worker.  In elite circles, they tell the truth about the impact of globalization on the American people.  Notice that the "solutions" offered by McDermitt don't address the source of the problem which is trade policies in conformance with supply-side economics.  Rather, his solutions are to move to a socialist system - easing the slide of the American working class into slave status.  The republicans don't even want to do that much.  They are content to allow you to freeze and starve in the dark by yourself while all you've worked for in your life slips away from you - into the pockets of the multinational corporations. 

Supply-Side Charlatans

One of the dirty little secrets that has been kept from the American people is that the base concepts for supply-side economics was the result of work done by a  COMMUNIST named Wassily Leontief who did his dirty deeds - spreading the cancer at Harvard.  (Note: the fact that he presented as an anti-communist is irrelevant since the nature of his work exposes his political philosophy as an economic central planner).  

Leontief was born in Leningrad in 1906 and got his degree in ec0nomics from the University of Leningrad in 1925.  Leontief's father was a Russian economist.  Leontief immigrated to Germany to attend the University of Berlin and ultimately ended up in the U.S. in 1931.  

"Having come to the conclusion that so-called partial analysis cannot provide a sufficiently broad basis for fundamental understanding of the structure and operation of economic systems, I set out in 1931 to formulate a general equilibrium theory capable of empirical implementation. Received a research grant for compilation of the first input-output tables of the American economy (for the years 1919 and 1929) in 1932. Began to make use of a large scale mechanical computing machine in 1935 and Mark I (the first large-scale electronic computer) in 1943."

Equilibrium - A State of Balance   How do you achieve balance?   Redistribution which requires central planning and control. 

The Marshall Plan  -  BLS Contributions

...

Lubin had authorized BLS to create a small research unit at Harvard University in 1941; the unit, under the direction of Wassili Leontief, constructed the first official input-output table.23 Leontief’s new technique employed a system of double entry bookkeeping that tabulated the transactions of any one transactor group industry with all other groups. It included the flow of intermediate as well as final output.

The technique had proved useful to the Office of Strategic Services during the war, helping to pinpoint bombing targets of those German industries crucial to the war effort. Its earliest domestic application had been an estimate made in 1944 for the Planning Division of the War Production Board.24 "  

Announcement of the Marshall Plan

"On June 5, 1947, speaking to the graduating class at Harvard University, Secretary of State George C. Marshall laid the foundation, in the aftermath of World War II, for a U.S. program of assistance to the countries of Europe. At a time when great cities lay in ruins and national economies were devastated, Marshall called on America to "do whatever it is able to do to assist in the return of normal economic health in the world, without which there can be no political stability and no assured peace."

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Workers and Globalization:
The Need for a New Deal

Carnegie Endowment for International Peace event, April 24, 2007

As I think we all now know it will be increasingly difficult this year and in future years for the U.S. to remain a leader for global trade liberalization if we do not do more than we have done to help workers who have been hurt by technology and trade.
 
As Congressman McDermott put it so well,
 
“In the mid-1990s, globalization accelerated to 100 miles per hour.  Unfortunately, nobody was standing around and thinking about what was happening to American workers…While some level of dislocation is inevitable in an era of globalization, a comprehensive vision of promoting employment calls for supporting workers through these periods of transition. Unfortunately, our present safety net for dislocated workers has more holes than net...”
 
I also like this formulation of the issue from a Republican source, the chief economist of Wachovia Bank [John Silvia] who previously worked in Congress for two then Republican-controlled committees.  He said, “There’s a clear social contract between capital and labor. When a corporation reallocates its resources, we cannot just leave these people flat and dead.”
 
Congressman McDermott has proposed replacing half of the difference between a worker’s old and new salary for up to $10,000 for two years to (a) reduce the level of hardship and (b) to give the worker time to gain experience, on the job training and some job seniority.
 
He says, “To those who say we should never concede that a worker may have to take a lower paying job, I say, ‘I am not a very good ostrich.’”

...  McDermitt

This path we are on - globalization – isn’t accidental.  Our nation’s founders chose to pursue capitalism and democracy as a means by which American workers would be limited only by their ambition.  By the mid-1930s economic bust, we recognized as a nation that some regulation and an economic safety net were vital for America to succeed.  Enactment of the Social Security Act in 1935, which gave dignity for the elderly and income insurance for the unemployed, ensured that all Americans continued to have a stake in the economy and in the future.  Now we need to make some adjustments to reflect the economic realities of our times.

Everyone here knows how globalization is changing our economy.  Some of these changes result from decisions by Congress to allow capital and goods and services to move more freely.  Other changes result from the technology we embrace.  By and large, the bottom line is a boon to economic growth and the value of U.S. corporations, but we can’t say the same for the American worker.  Wages for workers have stayed flat while anxiety over job security keeps rising.

....

First, it’s not enough to say that there are going to be winners and losers from trade, then tell the losers we’re going to give them an unemployment check and a little retraining.  When a worker loses his or her job because of trade or outsourcing, government intervention is already too late.  Case in point: the Trade Adjustment Assistance program provides benefits that are too little and too late. 

Second, it’s not enough to simply say that if trade agreements included enforceable international labor standards that there would be a level playing field.  It’s just not true.  An American job can be among the most expensive in the world compared to its counterpart overseas. 

I think we really need to understand two things.  First, the nature of job dislocation has changed.  In the past, people would lose their jobs when the business cycle slowed, but those jobs would return when the economy rebounded: cyclical unemployment.  Today, people lose jobs that will never return, even during good economic times: structural unemployment.

Blue collar and white collar workers are increasingly equally vulnerable to job loss because of international competition.  And that’s not going to change.  Today’s workers will change jobs frequently.  Tomorrow’s workers will change jobs even more.

Second, we need to understand what the employment picture means when we continue to tie health insurance and pensions to employment?  How can employers meet the challenges and opportunities of international competition when they provide employees what foreign firms often do not?  So what do we do - what does a New Deal look like?

[Note:   This is the good part... the solutions offered by politicians]

[National Health Care]

First, we have to do away with employer-provided health insurance.  Globalization means more unpredictable employment; it should not mean more unpredictable health care.  Single payer health care, guaranteed by the government, would be tremendously helpful to every American family.  And done the right way, it would make American firms better able to compete. It would cost less and cover everyone.

[Education for What?  Both Blue and White Collar jobs are being EXPORTED!]

Second, we need to ensure that each and every American has access to affordable continuing education.  We no longer live in a world where a worker can stop learning and training.  We need to provide education and training to workers before they are uncompetitive, not just afterwards.  We can’t approach the 21st century by financing education like we did in the 20th century.  Federal grants, loans, and tax incentives are designed for the traditional student that leaves high school directly for college.  These schemes don’t work for the non-traditional, working student, which is the fastest growing segment of college enrollees.

[Wage Insurance?   To help you downsize your lifestyle - great idea :) ] 

Third, we have to recognize that structural unemployment is here to stay, just as a global economy is here to stay.  Therefore, I believe we need to improve our policies that help workers when they transition from job to job.  We need to reform the Unemployment Insurance program to meet the needs of a modern workforce.  And, I believe the nation would benefit with from a program to insure wages, for those instances when a worker is laid off and decides to take a job with lower pay.... Many of you know that I’ve drafted legislation that would implement a national wage insurance program.  Under my bill, if a worker is laid off and ultimately accepts a new job with lower pay, the worker would receive a wage insurance supplement equal to half of the lost wages.
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Games with statistics

1953 Leontief Paradox

"Russian-born economist Wassily Leontief devised this contradiction of the Heckscher-Ohlin trade theory.

"Trade is determined by the relative abundance of factors of production in each economy.  Leontief discovered that despite the USA being endowed with an abundance of capital, its exports were labor intensive and imports capital intensive."  

So what would be the solution?   Export capital ( foreign direct investment)  and import labor intensive products - thereby destroying America's industrial base in an attempt to reach equilibrium that can never be reached in a global economy.)

The obvious problem with that is found in a simple statement of the problem that they were trying to solve with the Marshall Plan to begin with.

The Marshall Plan at 60: The General’s Successful War On Poverty

"Apart from its historical importance, the Marshall Plan experience offers valuable lessons that have relevance today. It represented a complete reversal of the preceding Morgenthau Plan, named after Treasury Secretary Henry Morgenthau Jr. In his 1945 book, Germany is Our Problem, Morgenthau promoted a de-industrialization plan, “converting Germany into a country principally agricultural and pastoral” to make sure it could never again go to war.

By late 1946, however, economic hardship and unemployment in Germany were worrying the United States, and former President Herbert Hoover was sent there on a fact-finding mission. Hoover’s third report of 18 March 1947 noted: “There is the illusion that the New Germany left after the annexations can be reduced to a ‘pastoral state’. It cannot be done unless we exterminate or move 25,000,000 people out of it.” Hoover well understood that an agricultural economy would be able to sustain a much smaller population than an industrialized nation.

Hence, the only option was to re-industrialize. Less than three months later, Marshall’s landmark speech reversed policy. Germany and the rest of Europe were to be re-industrialized with policies that included heavy-handed economic interventions, such as high duties, quotas and import prohibitions. Free trade would be possible only after reconstruction and international competitiveness had been achieved."

"FREE TRADE"   (best read from the website because of the hyperlinks)

"Input-output was partly inspired by the Marxian and Walrasian analysis of general equilibrium via interindustry flows - which in turn were inspired by Quesnay's Tableau Economique, and was the outgrowth of the "multi-sectoral" approach followed by the Kiel School.

It was also of crucial theoretical importance. Input-output inspired the analysis of linear production systems, which were instrumental in the development of modern Neo-Walrasian theory.  Unusual for most economic contributions, Leontief's system was also crucial for the revival of  Classical Ricardian theory. The structure of input-output (albeit with some critical differences) was employed by Piero Sraffa and the Neo-Ricardians in the 1960s to resurrect the theories of Ricardo and Marx.

Leontief's contributions to economics were not limited to input-output. His 1936 article on "composite commodities" made him, together with Hicks, the father of that famous microeconomic theorem. His early reviews of Keynes's General Theory (1936, 1937, 1947, 1948) were important stepping stones to the Neo-Keynesian synthesis's stress on fixed nominal wages in interpreting Keynes's theory. His 1933 article on the analysis of international trade is still learnt today and his 1946 contribution on the wage contract outlined what is now a classical application of the principal-agent model before that term was invented.  One of his more stirring contributions has been his 1953 finding that Americans were exporting labor-intensive rather than capital- intensive goods - the "Leontief Paradox" - which brought into question the validity of the conventional factor-proportions theory of international trade.

After having presided, together with Schumpeter, as a teacher over the Harvard generation of the 1930s which was to develop much of post-war economics, Leontief moved to the C.V. Starr Center at New York University. As a critic, Leontief's repeated admonishment of economics for its misuse of mathematics and quantitative methods and the lack of relevance and realism in its theorizing (e.g. 1938, 1954, 1959, 1971) are both lucid, sharp and still pertinent. It was for his development of input-output that Wassily Leontief won the Nobel memorial prize in 1973.

So Bye, Bye Miss American Pie...

Vicky Davis
8/19/2008