You know, every now and then you come across a story that is so shocking that even though you already know it, you already intuit it, you already, you know, broadly understand that yeah this is what’s going on, that when the details are laid out in black and white it’s, it’s just, you know, shocking, is the best word for it. I found one of those, actually three of them I have to share with you today.
In today’s Financial Times. This is the front page of today’s Financial Times and the headline “Report Highlights Banking Underclass.” Now there’s been a lot of coverage, a lot of discussion and it’s very interesting that this is happening on the day that Ben Bernanke is being considered for re-nomination, for reappointment as chairman of the Federal Reserve Board, the arguably 4th branch of government, unelected, unaccountable, congress is now saying 'hey, you know, it’s only been since 1913 since we’ve audited, actually we’ve never audited them, they were created in 1913. Let’s take a look under the hood'. And Ben Bernanke says 'oh no, you can’t do that'. But he wants to be chairman again. A lot of nice perks, you know, private jets, limousines all kinds of cool stuff, good pay, lots of opportunities afterwards, sell books, whatever. But in any case, Senator Bernie Sanders has said no.
But here’s the thing. While we have been bailing out our banksters, the gangster class that runs the big banks who took trillions of dollars from us and the Fed has been refusing, literally refusing to tell Congress who they’re giving trillions of dollars to. While this is going on, let me just share with you this story from the front page of today’s Financial Times. And this isn’t, it’s not like I’m sharing with you from The Nation or from In These Times, or CommonDreams.org, you know progressive website or a progressive publication. This is the Financial Times, I mean this is the international conservative business newspaper.
The article by Sarah O’Connor in Washington and Francisco Guerrera in New York, the headline, “Report Highlights Banking Underclass.” They’re talking about the United States. “Some 60m,” I’m just reading this straight, “Some 60m adult Americans live without a bank account or use pawn shops and other non-bank operations to handle their finances. ... A consensus survey commissioned by the Federal Deposit Insurance Corporation,” and again this isn’t exactly a left wing think tank, the FDIC? “showed that about 43 million adults in households that rely on non-bank services such as pay day lenders and pawn shops, another 17 million are in households without any bank accounts. This figure dwarfs the estimated 46 million Americans who lack health insurance.” Just consider this for a minute.
About 22%, and by the way, this is not just a problem of poverty in America, it’s also a problem, as so many of our problems of poverty are, of hundreds and hundreds of years of racial discrimination, about, "Almost 22 per cent of black households had no bank account compared with 3.3 per cent of white households.". “The large numbers", this from Matthew Lee of Intercity Press, a watchdog group in the South Bronx. He said, “The large numbers of people who use non-bank services, especially among minorities, are prey for unscrupulous lenders. When people are excluded,” he said, “from mainstream financial services, predators will get them. As a society we should make banks cover these people.” So that’s the starting point.
Then Elizabeth Warren, the woman who is responsible for overseeing the TARP funds, the distribution of the TARP funds. She had been appointed by Congress to be in charge of this, and she’s the chair of the Congressional Oversight Panel that is responsible for making sure that the bailout funds are appropriately used. She wrote this piece, as it were, this article. She says, “Can you imagine an America without a strong middle class? If you can, would it still be America as we know it?"
"Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street.”
She says, “While Wall Street executives and others who owned lots of stock celebrated how good the recovery was for them, middle class families were left empty-handed.” And then she goes on to point out, “TThe crisis facing the middle class started more than a generation ago. Even as productivity rose, the wages of the average fully-employed male have been flat since the 1970s ... Paying for a child's education and setting aside enough for a decent retirement have become distant dreams.".
You know, what’s happened in America is, and to a large extent this is happening in the United Kingdom as well, is that the flat earth pseudo economics, the flat earth free trade corporate economics, the trickle down economics, you know the joke I make about this, trickle down economics produces a nation of peons. Well that’s, that’s what its done. What George Herbert Walker Bush referred to as voodoo economics when he was running against Ronald Reagan in 1980. We’ve had 30 years of this now. And 30 years of Reaganomics, roughly, has taken us from first world status to 3rd world status. From a strong middle class to an impoverished middle class. 1 in 3 homeowners owes more on their mortgage than their home is worth.
Now, it didn’t use to be that way. During the era of, that Reagan undid, starting in 1981 when he officially declared war on working people, busting up PATCO and what not. During the 50 years prior to that, and as an American middle class was built and we had a strong industrial policy, we had trade policy, we had tariffs that averaged 20 to 30% on imported goods that protected our domestic industries, as during that period that of time, my father’s generation, my dad was in the Japanese occupation after World War II, came home on the GI bill, went to college, ended up dropping out because Mom got pregnant with me, got a job in a tool and die shop and for 40 years worked in a good union shop and had a pension that he had until the day he died and my mom had until the day she died, that was able to put, you know raise and put four kids through school. I mean all these things. All of this has been done away with by Thatchernomics in the UK and Reaganomics in the United States.
Now it’s not happening in other countries of the world, and this is where I want to take this next step. This also from today’s Financial Times: “Vietnam to end stimulus scheme.” Vietnam still uses tariffs to protect their domestic industries. They’ll export like crazy but you can’t, you’re gonna have a heck of a time selling things inside Vietnam. "Vietnam plans to stop its interest rate subsidy scheme at the end of the year, becoming the first Asian nation to start unwinding its post-crisis stimulus programme". They expect their GDP to grow 5% this year. The government stimulus program was about 4.3% of GDP and by supporting industry to keep people in work what Vietnam has been doing is very similar to what Germany has been doing, only a little more aggressively actually, which is paying companies, even if they don’t have business, paying them to pay their workers so that their workers will still have money in their pockets, so that they will still buy things, so that there will be demand in the economy because they understand that supply side economics is insanity and that classic demand side economics is how it all works. When people want things they buy things, that creates demand, and then you have an economy that works.
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Absolutely working for the man, I’ll tell ya it is absolutely incredible. Here, this is, two other stories here from the Financial Times that I want to share with you very quickly and then we’ll pick up your phone calls and continue this conversation. But I’m very concerned. I’ve been saying for, well for the 7 years I’ve been doing the radio program here, I have been saying that we have been, in fact, the long time listeners of our radio show know, was it 5 years ago, I was saying get out of the stock market, and people were going, 'you’re crazy!' I think it was at like 10,000. And yeah, I lost out on some of that but uh I said this is not, this is a bubble economy. The all, all of the structural things are breaking down and falling apart because of Reaganomics and Thatchernomics. Because of Thomas Friedman’s flat earth theory, which was drunk like Kool-aid when he published The Lexus and the Olive Tree back a couple of decades ago and people are still drinking this stuff with his, the earth is flat, hot and crowded, or whatever it is and that, you know it should all be stabling.
Today is the 25th, as I recall, anniversary of the Bhopal disaster. Now, you know, that in and of itself is fairly shocking. The number, the thousands of people who died in Bhopal, DOW Chemical had that factory there, you know, etc. But the story that you won’t hear, if this story even gets mentioned on network television, the story that you won’t hear about the Bhopal disaster is that it was a cyanide containing compound, as I recall, methyl something cyanide [methyl isocyanate] was the chemical that got released that killed all these people. It was used to make pesticides.
And when we outsource things to other countries, conventional wisdom in the United States is that when Hewlett Packard decides to make their printers over in China or Taiwan or someplace, China, Malaysia, Vietnam, something like that instead of here, that they’re doing it because the labor here is $15 or $20 an hour and the labor there is $2 an hour. And there’s some small amount of truth to that. But there’s a much larger truth and that is that the cost of labor, the labor differential is only about 20% of the total benefit from outsourcing. And in fact much of that is made up for, or is wiped out rather, by the cost of importing the product back into the country, paying for all the shipping.
So if the labor differential isn’t the reason why we’re shipping all our jobs overseas, why is it? It’s because of this thing called externalities. Externalities are: can you operate a factory in a sloppy fashion that’s handling methyl hydro cyanide? Or Cyanade or whatever it was that, I’m sorry I don’t remember the name right off the top of my head of the chemical, but it’s a variation on that. It was a methylated form of cyanide. You couldn’t operate a factory like that in Queens or in Brooklyn or in New York, Manhattan, you couldn’t do it. Or if you did, it would cost much, much more than it did in Bhopal. The fact of the matter is is that manufacturing overseas, the primary savings are that the externalities that here in the United States because we have developed our, and in Europe as well, we’ve developed ourselves to the point where we’re actually starting to pay attention to things like hey there’s mercury in our fish, our soil is being ruined, our rivers are undrinkable. You know, we’ve come a long way since the 1970s when the Cuyahoga River caught on fire.
We have cleaned up our environment. How did we do that? We did that by saying to corporations, you will no longer dump your external costs onto we the people and force us to pay for your cleanup and force us to cover all those costs and force us to cover your Love Canals. You’re no longer gonna do that. You’re gonna have to pay for that yourself. And so what did those corporations do? They said to us, to we the people of the United States of America, they said to us, 'hey to hell with you guys. We’ll go to a country that will let us do it. We’ll go to Bhopal. We can build a hell of a factory in Bhopal and nobody’s gonna give us a hard time and if a whole bunch of people die because of cyanide poisoning, well, you know, we’ll pay ‘em off'. The average family, most of the families from Bhopal got nothing, because there were all these forms they had to fill out, a lot of them were illiterate, they didn’t know what to do, they didn’t know how to do it. The ones that did get something, the average was $500.
So, if we can export our externalities, we export our manufacturing. Now, the problem with exporting our manufacturing is that it makes a lot of money for transnational corporations, you know the gods and goddesses of the world that Tom Friedman lives in, makes lots and lots of money for them if they can dump their externalities on other countries. But because we’re no longer making things of value in our country, we’re simply consuming things, we no longer are actually generating wealth. Wealth is when you add value, true value to things. In “"Wealth of Nations",” Adam Smith’s 1776 book, he used the example that a stick on the ground has no value. If you pick that stick up and carve it into an axe handle it now has value. By adding labor to a natural resource you’ve created something of value, you’ve increased it’s value. If you do that frequently enough you can sell them, if you sell enough of them you have surplus value, you end up with capital and that surplus value, you can become a capitalist, you can fund the startup of another business, etc.
Which brings me to the other article in the Financial Times today. This is one of the official editorials of the Financial Times, this is from the editorial page, this is not an op ed written by, you know, some professor someplace or whatever. It is one of the official editorials of the Financial Times. “How to make it” is the title. “UK Manufacturing suffered in the boom and the bust.” And this is true in the United States as well because what Maggie Thatcher did to the UK, Ronald Reagan did to the US. “Manufacturing was left behind. The industry, which accounted for 20.3 per cent of UK value-added in 1997, crumbled to 12.4 per cent by 2007. In 1997, as Labour came to power, 16 per cent of all jobs were in this set of trades. By 2007, only 10 per cent were.” See, back before Reagan more than 30% of our GDP and more than 25% of our jobs were in manufacturing. Now it’s 12% of our GDP and 10% of our jobs here in the United States. They point out, “Manufacturing not only missed the boom, but is now being punished by the bust: the industry’s output has fallen by 14 per cent since the crisis broke.” The Financial Times is calling for England, for the United Kingdom to rebuild their manufacturing sector. Well they won’t be able to do it without a national policy that repudiates Thatcherism and Reaganomics.
Transcribed by Suzanne Roberts, Portland Psychology Clinic.
