Bled White

By Daveparts

In the 1960’s the high water mark of American Industrial might, I remember my sister receiving a Japanese transistor radio as a birthday gift. We family members all marveled at it, not just the technology but it’s foreignness. This was America and we Americans had never seen any foreign goods, of course there was pottery and china and such, cheap paper products but this was high technology coming from a foreign land.

Ford Motor Company was offered national distribution rights to the Volkswagen Beetle and the descendant of Henry Ford announced he wouldn’t allow those ugly cars on his lots. Ironic because the Ford name was built on reliable inexpensive if less than elegant transportation. America’s prosperity had blinded Ford to the ever-present need for basic transportation.

But in this period Americans had the highest standard of living in the world and it seem the cycle of prosperity would increase unabated. American Unionism protected the American workers union and non-union alike from the ravages of predatory capitalism. The US dollar was the unquestioned world currency and America was the number one creditor nation on the planet. But as I look back upon it now that radio was the first raindrop of a coming storm.

American industrial might was built up in the 1940’s and fifties and as America approached the 1970’s those factories were aging and it’s workforce reaching retirement age. Our competitors in Europe and Asia were producing products in new factories rebuilt after the world war. Nationalism and a less contentious labor situation allowed strikes and walk outs to be settled in minutes or hours where in the US the might last for days or weeks.

In 1965 President Johnson signed into law a trade agreement with Canada, the bone of contention centered around American cars made for the Canadian market, which Canada derived no benefit from. The new agreement gave favorable tax treatment to American companies producing up to 20% of the auto’s and automotive products in Canada. On the American side the agreement was considered a milestone in fair-trade on the Canadian side it was an improvement. The Canadians were wise enough to see that all the high paying jobs, engineering, management still stayed south of their border.

Since Americans were the best-paid workers in the world the Canadians perceived that they were being used for cheap labor and strike breaking. Strikes in Detroit meant overtime in Windsor. American auto companies soon realized that this outsourcing had many beneficial aspects besides diluting labors power. In 1964 the "Bracero Program" began to allow Mexican workers to work north of the border on a seasonal basis. After the end of the "Bracero Program" the Mexican government was forced to implement the Maquiladora Program to alleviate the rising unemployment burden along the border. This is a concept whereby the Mexican government allows the duty-free, temporary importation of raw materials, supplies, machinery and equipment, etc. as long as the product assembled or manufactured in Mexico is exported.

The original intent of the program was to aid Mexican unemployment and to control illegal immigration. However when the peso collapsed in the 1980’s the value of the program shifted to the manufactures and the trickle of immigrants attempting to escape poverty escalated. Even today the Maquiladora plants pay an average of 25% of American labor rates so why not cross the border to make three times more money?
American industry of the 1980’s was in flux discovering it was easier to dump a factory rather than retool and run to non union (right to slave) states to avoid union bargaining. But the arbitrage boom of the 80’s was about dismantling profitable corporations and selling its valuable assets and leaving behind the body of the company like a corpse. The brutality of the carnivores was obvious and more telling but less noticed was the war on Wall Street. A titanic struggle like Godzilla verses Gamara, manufacturing verses finance or as America’s Frankenstein called it, "The new economy."

The new economy was a wonderful invention, if you’re lucky enough to be invited to participate. Unfortunately for 90% of Americans we aren’t invited, we only get to hear the sweet music coming over the fence. In a manufacturing economy 70% of each dollar invested goes towards materials and labor to produce a 30% profit in a finance economy it’s the opposite. If you can make running shoes in Mexico for ten dollars go to Mexico but if you can make them for five dollars in Costa Rica go to Costa Rica. But it the Macau it’s three dollars and then main land China two!

The politicians proclaim free trade is the answer! All will be well! These trade agreements will help everyone they insist. The Reagan years did away with financial restrictions imposed by the new deal and they became nuclear weapons in the war of finance verses manufacturing. It would be foolish to invest millions in new American plants, produce the products overseas save on labor, save on taxes move the corporate offices to an overseas mail drop and pay no taxes at all! The money was better spent on lobbying organizations and political contributions.

All was well in this tragically flawed kingdom except as the oversea producers soon developed experience and expertise they no longer need their overseas partners. The down side of the equation for the financial guru’s is the profit dollar is the only profit to the country from the sale. It is a one-dimensional economy unlike the old manufacturing economy where raw materials labor produced and then merchants sold a product the new economy has only the merchant. Corporations buy goods direct from China and retail them directly at nation wide chain stores.

China’s manufacturing economy is growing by 11% per year while the US is lucky to eak our 3% China has amassed dollar reserves of 1.2 trillion dollars transferred directly from the pocket of the American workers to the Chinese communist party.
Wal-Mart alone does $25 billion in transactions and it is estimated 70% of the goods on their shelves are of Chinese origin. China is just number one but they are not alone Japan, the European Union and OPEC countries also hold trillions in dollar reserves.

Oh this is all so very wonderful for the 10 to 15%, for stockbrokers and investment bankers, for all of those whose money works for them rather than those us who work for our money. We have become unnecessary to the system we are nothing more than left over cattle in the corporate corrals and you don’t have to be a cowboy to know what you do with extra cattle.

Twenty-five years of these policies have turned America from the largest creditor nation in to the largest debtor nation in the world. The puppets are now the puppet masters, sales of treasury bills used to finance America’s debts are falling and yields must increase to keep demand up. The Bush administration recently chided the Chinese to buy more American goods but they know the Chinese no longer want anything which we might could sell them.

We have transferred over 50% of our industrial base to make huge profits for the few and in the process we have weakened America and the American worker. The largest creditors nation now own about USD $9.4 trillion of U.S. financial assets, including 13% of all U.S. stocks, 24% of corporate bonds, 43% of Treasury bonds, and 14% of government agency debt.

The wars in Iraq and Afghanistan are attempts to corner the market for energy resources, as the only resource the US has left is its military. Trying to retain our place at the table through force and guile while sending the military on a fool’s errand to try and pacify an occupied population. Ordered by fools on an impossible mission the proverbial elephant against the ants the military bleeds while capital flows out of the country until we are bled white.