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The Vicious Downward Cycle Of The American Economy

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Must read aritcle. What goes for the US goes for the UK. What has it got do do with housing? Well, people need income to afford both rent and mortgage payments and income genreating jobs are being rpaidly trashed as capital is misallocated to housing and the housing boom itself has led to structural imbalances which only further disadvantage local employers and workers.

http://www.opednews.com/articles/opedne_pa...us_downward.htm

The Vicious Downward Cycle of the American Economy

The outsourcing of jobs and the importation of foreigners on work visas are emptying the pipeline of qualified Americans and destroying US technical occupations.

by Paul Craig Roberts

http://www.opednews.com

Libertarians and free trade economists don't realize it, but they are pulling Marx out of his grave.

Free traders are resurrecting class war, not because they are Marxists but because they confuse free trade with global labor arbitrage. Free traders turn cold shoulders to US job losses from offshore outsourcing, because they mistake the losses for the beneficial workings of comparative advantage. Committed to a 200 year old theory that they no longer understand, free traders are cheering on the destruction of middle class jobs and the dismantling of the ladders of upward mobility that make large income disparities politically acceptable.

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Yes, an excellent article. I especially like the way the writer sees through the dogmas and ideology of the current system.

However the article did not put forward an alternative vision. The western economies are all facing the same problems but whatever their thinking despair seems to dominate. The collapse of the middle-classes in the US is rightly seen as a problem. The attempt to protect the middle-classes in Europe is equally seen as problem. One leads to loss of jobs through outsourcing and immigration. The other leads to loss of jobs through high costs and red tape.

Either way the problem exists.

IMO the western economies missed a big opportunity 10-15 years ago in not grasping green, sustainable technologies. This early development of new technology on a big scale would have i) a net against high fuel prices now showing through ii) reduced the general costs of businesses iii) ensured the economies stayed 'ahead of the loop' as China and India etc developed and in turn required the green technologies as their environmental awareness, wealth and need for cost savings grew in turn.

I fear this moment has now passed. But at least this gives a new vision - a green revolution. Any kind of vision is something that is sadly lacking right now.

Edited by Starcrossed

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I don't know what the end of this process is either, or how it can be avoided. It looks like the instantaneous movement of capital and very cheap movement of goods means that labour costs have to "levelise" at some mid point. The workers of India will get richer and those of the West will get poorer and they'll meet somewhere in the middle. Ruling the roost will be those who control the Capital Account, essentially those whose work concerns the right hand side of the balance sheet. They'll enjoy a standard of living like the Edwardian aristocracy of England, and they will be globally mobile so any nation that tries to fight back will be abandoned to "capital starvation" (viz Cuba, Libya until recently, etc etc).

It will be like the return of feudalism. The essential mechanism that enables the control of power is the stock market, because it is here that all industrial interests are ruled by the capitalists through "divide and rule". All companies need to sell their shares in order to grow, so either the company hits its targets - by whatever means of cramming down labour costs - or it dies of capital starvation. This is how all big industries are ruled by those who control capital (typically pension funds, rather than individual capitalists).

Pension funds are made up of money that workers give them in the hope of having something to retire to. In effect, the working classes are providing the rulers the means of control. So that is ironic.

The other irony is the "tragedy of consumerism". Individuals usually buy the cheapest for a given level of quality. So companies have to produce goods that are the cheapest for that level of quality, or they don't sell and they go bust. So companies cram their costs down by combing the planet for the cheapest labour, abandoning high labour-cost western nations. In effect, western consumers write their own death warrant by buying the cheapest, when they'd do better to buy what is local, or at least in their country, unless there is a truly compelling reason not to do so.

Hence the big fat lie that buying foreign goods doesn't export jobs. It does export jobs, but it increases the power of the top dogs, so whoring politicians and economists yap a long with it.

But is there a solution? <shrug> Peak Oil maybe, but that's not a very nice solution. :unsure:

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Yes, an excellent article. I especially like the way the writer sees through the dogmas and ideology of the current system.

However the article did not put forward an alternative vision. The western economies are all facing the same problems but whatever their thinking despair seems to dominate. The collapse of the middle-classes in the US is rightly seen as a problem. The attempt to protect the middle-classes in Europe is equally seen as problem. One leads to loss of jobs through outsourcing and immigration. The other leads to loss of jobs through high costs and red tape.

Either way the problem exists.

IMO the western economies missed a big opportunity 10-15 years ago in not grasping green, sustainable technologies. This early development of new technology on a big scale would have i) a net against high fuel prices now showing through ii) reduced the general costs of businesses iii) ensured the economies stayed 'ahead of the loop' as China and India etc developed and in turn required the green technologies as their environmental awareness, wealth and need for cost savings grew in turn.

I fear this moment has now passed. But at least this gives a new vision - a green revolution. Any kind of vision is something that is sadly lacking right now.

Another good post, Starcrossed - I find it interesting that the relevance of the 'Nation-state' is becoming increasingly obviously diminished; although it is politically necessary for parties/governments' rhetoric (the voters LIKE the idea of national importance), the REAL (economic) superpowers in the world have little truck with such outdated notions, but still the populace adheres to cherished notions of national 'sovereignty' - weird..

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I heard David Willetts on the radio a few days ago saying what a good thing free trade is and we should let in all the goods from China that retailers can sell. He reckons it's immoral not to because poor people in this country are helped by buying cheap clothes, and of course we can do the high-value stuff. Forgetting that the CHinese and Indians aren't going to leave us the high-value stuff - why should they? Does Willetts really think we can survive by selling cashmere jumpers? (Yes, that is what he said.)

The first cycle of globalisation benefitted a lot of people at all levels in this country, because it meant cheap goods. The second cycle is vicious, because the goods stay comparatively cheap but the jobs go; and what was cheap becoems very very expensive. Peak oil may be one answer. The other is to cut the obsession with "value for money" and "efficiency" and realise that things have to be paid for, that there has to be a balance between buyers and sellers. Things are too cheap and the effect of this is corrupting and wasteful. But of course individually we want it cheap...and so it goes on.

The answer is political will, because at bottom politicians are (or at least could be!) more powerful than business. But we have a generation of spineless politicians who won't tell people that cheap is not cheap when it costs the earth, as well as your job.

Sooner or later there will be some sort of political movement, it would just be nice if it comes before peak oil. Boycotting Tesco would be a good start!!

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Yes, an excellent article. I especially like the way the writer sees through the dogmas and ideology of the current system.

However the article did not put forward an alternative vision. The western economies are all facing the same problems but whatever their thinking despair seems to dominate. The collapse of the middle-classes in the US is rightly seen as a problem. The attempt to protect the middle-classes in Europe is equally seen as problem. One leads to loss of jobs through outsourcing and immigration. The other leads to loss of jobs through high costs and red tape.

Either way the problem exists.

IMO the western economies missed a big opportunity 10-15 years ago in not grasping green, sustainable technologies. This early development of new technology on a big scale would have i) a net against high fuel prices now showing through ii) reduced the general costs of businesses iii) ensured the economies stayed 'ahead of the loop' as China and India etc developed and in turn required the green technologies as their environmental awareness, wealth and need for cost savings grew in turn.

I fear this moment has now passed. But at least this gives a new vision - a green revolution. Any kind of vision is something that is sadly lacking right now.

...Have to agree starcrossed,we had a golden opportunity to really get to grips with green technology(in our case TIDAL) energy some years ago.....it would have been perfect for us,we are a small island surrounded by sea,almost boundless energy to be extracted from the channels.......we may re-visit some time in the future.

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I heard David Willetts on the radio a few days ago saying what a good thing free trade is and we should let in all the goods from China that retailers can sell. He reckons it's immoral not to because poor people in this country are helped by buying cheap clothes, and of course we can do the high-value stuff. Forgetting that the CHinese and Indians aren't going to leave us the high-value stuff - why should they? Does Willetts really think we can survive by selling cashmere jumpers? (Yes, that is what he said.)

The first cycle of globalisation benefitted a lot of people at all levels in this country, because it meant cheap goods. The second cycle is vicious, because the goods stay comparatively cheap but the jobs go; and what was cheap becoems very very expensive. Peak oil may be one answer. The other is to cut the obsession with "value for money" and "efficiency" and realise that things have to be paid for, that there has to be a balance between buyers and sellers. Things are too cheap and the effect of this is corrupting and wasteful. But of course individually we want it cheap...and so it goes on.

The answer is political will, because at bottom politicians are (or at least could be!) more powerful than business. But we have a generation of spineless politicians who won't tell people that cheap is not cheap when it costs the earth, as well as your job.

Sooner or later there will be some sort of political movement, it would just be nice if it comes before peak oil. Boycotting Tesco would be a good start!!

I just don't get this. Person A has something to sell at price X. Person B wants to buy that something at price X. Done deal. They both win. Who is to stand in the way of that?

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I just don't get this. Person A has something to sell at price X. Person B wants to buy that something at price X. Done deal. They both win. Who is to stand in the way of that?

The set up of the financial system means that every country is heavily indebted. They are all trying to export more than they import as this is the only way to move towards reducing the deficit.

Obviously there will be winners and losers in this. Trade should be about both parties gaining by transferring assets they have an excess of for those they have a shortage of. Everyone ends up as a winner and we are wealthier. Unfortunately that has been forgotten.

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Agreed with Starcrossed but I don't think it only applies to "green" technology but to technology in general.

I could use anything here but I'll use energy to illustrate the point about technological evolution. (This really didn't look right without the double spacing, sorry if it annoys anyone... And this is about developed countries in general not specifically the UK).

Apart from natural sunlight and early experiments...

First we burnt wood for cooking and heat.

Then along came primative (by today's standards) hydro and wind power.

Then coal largely replaced wood as wood became too valuable to burn. (industrial revolution era).

Then along came oil (on a significant scale since the 1860's).

Then came hydro-electricity as we know it today (1890's).

Then we found a use for natural gas, at first in the USA (1930's).

Then oil began to replace coal just as coal had replaced wood (early 1950's).

Then we harnessed nuclear energy for electricity generation (became a significant energy source in the 1960's but has been around since the 50's).

Then came the large, modern coal-fired power stations equipped with effective pollution controls to overcome the historic smoke and ash fallout problems.

...

Then we had the 1973 oil shock and started to turn away from oil, in practice largely in favour of gas.

Then we became worried about the safety and cost of nuclear and largely stopped developing it.

Then we started to drop hydro development as too expensive and on environmental grounds.

Then we started turning our back on coal due to global warming.

The last four points all lead to vastly increased reliance on natural gas which culminated in the construction of combined cycle gas turbine (CCGT) power plants on a mass scale in the 1990's.

Notice something here? There's a sharp break in the trend from developing new energy sources to abandoning existing ones without a new technology replacement. We just haven't done much since the introduction of massive scale coal-fired plants in the 1960's apart from increasinly putting all our eggs in the gas basket which is, after all, not a new technology.

So we've slowly been abandoning previous technology as problems occurred (the natural cycle of technology) but we haven't been developing much that's new on a large enough scale to have an impact.

Unfortunately this seems to be typical of the developed world in general. We are relying on past successes and doing basically nothing for the future. When gas ceases to be a viable major energy source we are in real trouble because there just isn't anything new to replace it with. All we can do is go back to what we have done before which by definition is not progress.

As I said, I just used energy to illustrate the point. There are plenty of other examples of the same problem. The developed world is living on past success and doing little for the future. In a world where standing still is in reality falling behind the day will come when this can no longer be sustained. We need to push technology if there's to be a bright future for what used to be known as the "developed" world.

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Good post, Smurf1976. Given the points you made about technological (and esp. energy) progress stalling, my opinion is that the current picture is warped by the immense power of vested interests. The lobbying and media influence of corporate energy interests strangle further development of this new technology at birth.

Energy developments that are most likely to take place will in all likelihood be smaller-scale and varied by definition. The most likely and appropriate development is a disparate pattern of various energy sources depending on local and geographical factors.

Because of this there does not appear to be a 'new energy paradigm' that will sweep existing sources away in the same way the motor car swept away the tram. How will future energy sources get a foothold in the face of such corporate self-interest?

Edited by Starcrossed

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After 911 Bush stated that the US would invest in new technologies so that it could move away from dependence upon Middle East oil - um, what exactly has been done in this regard?

Very little as been done in terms of renewable energy, the use of solar power, hydrogen cells, etc. The oil interests are both too powerful and greedy... and too short-sighted...

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I just don't get this. Person A has something to sell at price X. Person B wants to buy that something at price X. Done deal. They both win. Who is to stand in the way of that?

Person A is a small local farmer. Person B is that mega supermarket with the blue logo. Done deal...after the supermarket has screwed over the farmer. The farmer loses. If nobody stands in the way of that, you end up with environmentally devastating agribusiness, powered by oil, etc etc...it isn't always a level playing field.

Edited by munro

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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