America the Third-World Nation in Just 4 Easy Steps
Saturday, 10 November 2012 11:53By Thom Hartmann and Sam Sacks, The Daily Take | Op-Ed
New reports that Taiwanese transnational manufacturing corporation Foxconn may be opening up some plants in the United States indicate that our nation has now entered the terminal fourth stage of "third-worldization" or what may be better referred to simply as "recolonization."
In case you don't know, Foxconn is China's largest private employer and is responsible for making many of those parts that go into your Apple iPhones, iPads, and iPods.
While Steve Jobs may have been a visionary when it came to technological design, he wasn't a fan of labor unions - or American workers in general - so he outsourced most of his corporation's manufacturing to Foxconn, which was notorious for its low-wage labor.
Foxconn workers live in over-crowded dorms that are located on the factory grounds. They work 12-hour shifts, and are routinely exposed to dangerous working conditions. Recently, 137 Foxconn workers fell ill after they were forced to use toxic chemicals to clean iPads. And in the last five years, 17 Foxconn workers have committed suicide on the job. Nets have since been installed around the factory to catch workers jumping out of windows.
So why the heck would Foxconn look beyond their Libertarian paradise of no labor laws to come to the United States and employ a bunch of Americans?
To know the answer to that question, we have to understand the four steps the United States is currently racing through to become a third-world nation.
Step 1: Destroy Manufacturing
From 1791, when our nation's first Treasury Secretary Alexander Hamilton created an 11-point plan for American manufacturers, all the way until just the last few decades, the United States protected its manufacturing base with high tariffs on imports and government support for domestic industries.
This "protectionist" approach to trade transformed the United States into the world's largest exporter of manufactured goods, which built and sustained an enormous middle class of Americans working in factories collecting high wages.
Then the forces of globalization crept in, extolling the virtues of a world economy free from national boundaries and protections for domestic manufacturing.
With Reagan's Revolution in the 1980's, Alexander Hamilton's 11-point plant was scrapped. Tariffs were ditched and then Bill Clinton moved into the White House in the 1990's and continued Reagan's trade policies and committed the United States to so-called Free Trade agreements like GATT, NAFTA, and the WTO, removing all the protections that had kept our domestic manufacturing industries safe from foreign corporate predators for two centuries.
In the 1992 Presidential debate, third-party candidate Ross Perot famously warned about a "giant sucking sound" of American jobs going south of the border to low-wage nations.
Perot was right, but no one in our government listened to him.
In the 1960's, one-in-three Americans worked in manufacturing, producing things of lasting wealth. Today, after jumping head first into one free trade agreement after another, only one-in-ten Americans works in manufacturing.
Over the last decade, 50,000 manufacturing plants in the United States have closed down and five million manufacturing jobs have been lost. They didn't disappear, they just moved away to low-wage factories like Foxconn, in foreign nations.
Before Reagan won the White House, the United States was the world's largest importer of raw goods and exporter of manufactured goods as well as the world's largest creditor. But today, we're the world's largest exporter of raw materials and importer of manufactured good. No surprise, we're also the world's largest debtor.
When manufacturing dies, the economy goes with it.
Step 2: Harvest the Middle Class
America's working class no longer builds TVs or computers or furniture on assembly lines; they now flip burgers at McDonalds and turn down the sheets at Holiday Inns. And those high-skilled workers who used to design the marvels of manufacturing now manufacture credit default swaps and mortgage-backed securities on Wall Street.
In the 1950's when our economy still embraced Hamilton's 11-point plan, manufacturing used to account for a quarter of GDP, but today it accounts for around a tenth, replaced by the low-wage service sector and Wall Street. And this new economy can't support a middle class. A service sector can't create lasting wealth, nor can Wall Street.
Before NAFTA, the average American taxpayer earned an inflation-adjusted income of $33,400 a year. By 2008, that number dropped to just $33,000. Working Americans maxed out their credit cards and took out a second mortgage on their homes just to make ends meet. Eventually, even that wasn't enough to make ends meet.
On top of that, new financialized industries have risen up that specialize in harvesting even more wealth from the middle class. So-called private equity firms like Bain Capital execute a business model that depends on taking over American businesses, loading them with debt, laying off workers, and outsourcing labor to low-wage nations. Mitt Romney himself described Bain's strategy as "harvesting companies for a profit."
Even American factories that were more profitable than ever, like the Sensata plant in Freeport, Illinois, aren't safe from this outsourcing. Thanks to globalization, it's just a cheaper to employ labor in low-wage nations even if that means laying off 170 American workers and devastating an entire local economy.
Today upwards of fifty million Americans are living in poverty and depend on food stamps. The middle class devolved into the working class, which further devolved into the working poor class.
Local economies are collapsing, states are going bankrupt, and workers are being tenderized for colonization in the near future.
Step 3: Export American Wealth
There's a hefty price tag associated with transitioning from the world's largest exporter of manufactured goods to the world's largest importer of manufactured goods. That price comes in the form of trade deficits.
In 2011, the United States had a trade deficit of over a half-trillion dollars with the rest of the world. Essentially, $558 billion U.S. dollars is being pocketed every single year by developing nations that are now manufacturing the goods that used to be manufactured right here in the United States.
With their pockets overflowing with U.S. dollars, foreign investors begin buying up American industries. Every single second, more than $4,000 of American industry is being sold off to foreign investors.
In a virtuous economy like the United States used to run, wealth is recycled within the community. Revenue earned by the local grocery store is invested in the local bank, which then hands out loans to local businesses to hire local workers who collect paychecks to shop at the local grocery store and so on and so forth.
But when foreign investors are injected into the equation, increasingly larger chunks of wealth are not re-invested in the local economy, but are instead invested overseas in the developing world.
This is one reason why President Obama's stimulus package may not have had quite the bang for the buck as anticipated. When Americans use their extra dollars to buy a new LED television, or new clothes, or home improvements, there's a good chance that a lot of the profits are actually going to overseas investors, stimulating their economy instead of ours.
Step 4: Recolonize
With American workers desperate for any kind of opportunity to work, Foxconn and other foreign corporations now have access to a brand new pool of cheap labor.
We've seen other companies before Foxconn take advantage of these new low-wage American workers.
Ikea recently opened up a factory in Virginia, which just so happens to be a right-to-work for less state that's not hospitable to labor unions. In Sweden, where Ikea is based, workers earn at least $19 an hour and enjoy a minimum of 5 weeks paid vacation every year. Those are fairly high labor costs. So executives at Ikea have come to the United States, where they can pay workers just $8 an hour and give away just 12 days of vacation a year.
German auto manufacturer Volkswagen has also found an advantage in moving manufacturing back to the United States. They recently opened up a plant in Chattanooga, Tennessee - another right-to-work for less state. Unlike in Germany, where all the workers at major manufacturing firms are unionized, collect high wages, have good benefits, can go on strike, and sit on the company board and have a say in decisions about the company's future, none of that exists in Chattanooga.
In Chattanooga, workers are not unionized and make just $14.50 an hour. It's pretty clear what's happening, we're becoming the world's latest cheap labor source.
Not only that, it's much cheaper to send goods to American consumers when you don't have to ship the goods from halfway around the world. Plus, with growing attention paid to the fact that nothing is made in America anymore besides bombs and warplanes, foreign corporations would be delighted to be able to stamp "Made in the USA" on the bottom of their products, even if they were made by low-wage Americans.
Which is why Foxconn might be considering coming over here, too. It's hard to imagine American workers having to endure the same working conditions that Chinese workers endure at Foxconn, where nets prevent workers from committing suicide.
But given the agenda of House Republicans, that tragic reality may not be so far-fetched. Generations of labor law that produced a minimum wage, a forty-hour workweek, workplace safety laws, and child labor laws are all under attack by Republicans in Congress. And if they succeed, then there is absolutely nothing protecting American workers from suffering the same fate as sweatshop workers overseas.
The reason why this fourth stage is terminal is because there are few treatment options available anymore. If the United States were to suddenly rethink its trade policies and enact tariffs again, they would have little impact since these foreign corporations have already implanted their manufacturing centers here in the United States. The profits would continue to go overseas rather than being circulated in the local economy.
Yes, in the end, we might get a lot of the jobs that were lost in Step One, but they won't be good-paying jobs at American-owned companies. They'll be low-wage jobs at foreign-owned companies, with all the profit created from those going out of the United States. At its core that's a form of colonization. Look up King Leopold's extractive economy in Congo for a reference.
The United States is rapidly un-developing in a way never before witnessed in the history of the world. And it would be a remarkable spectacle to behold, if it weren't so damn tragic to our fellow citizens.
Let your elected representatives know that Ross Perot was right, and it's time to end this so-called "free trade" insanity.
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