Record Profits and the Huge Sucking Sound of American Jobs

As a result of the financial crisis of 2008, U.S. corporate profits declined to the lowest level on record in the fourth quarter of that year, accounting for only 4.5% of GDP.

The collapse in profits led to the largest decline of the S&P 500 Index in any calendar year in history, with investors losing 45.5%. This $8 trillion plunge in wealth wiped out the possibility of retirement for millions of Americans who had already endured a similar stock market meltdown only eight years earlier. This would only be the beginning of much more misery to come.

Shortly after entering office in 2009, President Obama responded by passing the American Recovery and Reinvestment Act of 2009. Although most of the stimulus funds were earmarked for state programs, state tax revenues collapsed by 11.8% in 2009, the largest decline ever. Even worse, local governments have remained in a very precarious position since 2009. 

By 2010, U.S. corporate profits mounted a tremendous rebound. By 2011, profits soared to record-highs. Since then, corporate profits have consistently held these levels. This impressive run has been reflected in the strength of the stock market.

Could this be a sign of an economic recovery?

After all, Wall Street bankers, economists and Washington officials constantly remind Americans that the stock market serves as a barometer of the U.S. economy. However, the validity of this claim depends upon how one defines the economy.

If the U.S. economy is defined with respect to the health of corporate America, then yes, America is recovering; in fact, it’s booming. But we all know that consumer spending makes up close to 67% of all economic activity in the U.S. Therefore, because consumers are the driving force of the economy, the only thing that matters when determining whether a recovery has occurred is the overall financial health of consumers. Let’s take a brief look.

At present, nearly 50 percent of the entire U.S. population receives government assistance of some kind. And you can bet millions of others do not know how to obtain assistance due to the endless bureaucracy involved, or else refuse to take it due to their sense of pride.

So who are these 50 percent? Let’s take a look. Twenty million Americans are without a job, while millions have lost their home to foreclosure. Tens of millions of Americans are underemployed or can only find part-time work. Fifty million Americans are without healthcare coverage. Finally, fifty million Americans are living on food stamps, and fifty million Americans are living in poverty. [1]

Thus, as you can appreciate, the U.S. economy has by no means recovered, yet corporate profits are near record-highs. According to free market economics, record profitability should lead to a good deal of domestic job creation. However, there has been virtually no job growth in the U.S. since 2007.

The big secret is that corporate America is hiring; it just isn’t offering jobs to Americans, aside from the low-wage jobs nobody wants. The real jobs are being offered to workers in developing nations.

The explanation for the overseas job boom is simple. It costs much less to hire workers in India, China, Taiwan, Vietnam, Indonesia, Malaysia, South Korea, Philippines, Brazil, Argentina, and other developing nations. This is where some of America’s best jobs have been going for many years due to its so-called “free trade” policy. The problem is that “free trade” constitutes unfair trade for firms based in the U.S.

Here’s how it works. Because America’s trading partners do not play by the same rules, a large portion of business costs in developing nations are subsidized by the local government in order to better compete with advanced nations. Thus, when U.S. corporations relocate overseas, they receive enormous financial benefits compliments of the host government.

For instance, because the United States has the world’s only employer-based healthcare system, most large corporations in the U.S. offer health insurance to employees in exchange for tax deductions. But this still costs corporations a good deal of money. In contrast, because most nations have single-payer (universal) healthcare, U.S. corporations employing foreigners overseas do not need to worry about these expenses. [2]

In addition, developing nations lack stringent safety and environmental protection guidelines seen in the United States. As a result, even with a weak dollar, it’s still much cheaper for U.S. corporations to outsource to developing nations.

So in fact, while Washington warns that the U.S. must avoid protectionism at all costs, it continues to permit protectionist policies in developing nations in order to exploit their cheap labor, while avoiding costly environmental regulations. This is all being done in the name of corporate profits, and at the expense of U.S. jobs.

The solution to transforming free trade into a system of fair trade isn’t to gut safety and environmental controls from the workplace, as many republicans have suggested. These safety standards are in place for good reason. Instead, all nations must be required to implement and enforce the same regulations as in the U.S. and other advanced nations, or else they should be booted out of the World Trade Organization. 

Finally, one cannot legitimately discuss U.S. trade policy without mention of health insurance, since it represents the fastest growing expenditure item for American-based corporations. Thus, in addition to the other items mentioned, if Washington truly intends to create good jobs, it must transition to a single-payer healthcare system in order to reduce labor costs for American-based firms. [3]  

The North American Free Trade Agreement (NAFTA) serves as the foundation of America’s “free trade” strategy. During the 1992 presidential election, NAFTA became the central topic of debate. At the time, Independent Presidential candidate Ross Perot Sr. took an adamant stance against NAFTA. During one of the presidential debates, Perot warned, “you’re going to hear the huge sucking sound of jobs leaving the U.S,” if NAFTA was passed.  

This “huge sucking sound” has been getting louder each year since the Clinton-Gore duo passed NAFTA. Yet, Washington has continued to expand “free trade.” For instance, President Bush opened the “free trade” door to Central America. And President Obama extended it to South Korea, despite promising to level the trade playing field during his campaign.

In every instance when trade has been expanded, Washington has promised it would lead to better jobs for American workers. But in every case, just the opposite has happened. It should be quite clear by now that America’s trade policy has been nothing short of a complete disaster for the middle class, while serving as a new source of wealth for the elite class.  

“Free trade” has also been responsible for the spectacular economic growth and soaring living standards in Asia and Latin America over the past decade. Hence, Washington has effectively transferred the wealth and income from middle-class Americans to wealthy shareholders and working-class citizens of the developing world. [4]

If Washington intends to create good jobs in America, it cannot rely on the World Trade Organization to police the system. Washington must implement stringent protectionist policies to counter those of developing nations. But this is unlikely to occur because U.S. trade policy has been bought and paid for by corporate America. And corporate America is only concerned with maximizing profits, even if it results in economic treason. [5]

Decades ago, a symbiotic relationship existed between corporate America and U.S. workers. It was a relationship that was responsible for creating the middle class. And it served as the catalyst for what would become America’s greatest economic period.

But this relationship began to change in the late-1970s. At the time, General Motors was the nation’s largest employer. Today, America’s largest employer is Wal-Mart. This pretty much tells the story of America’s decline.

Washington continues to distract from America’s “free trade” disaster, all while insisting that protectionism would make matters worse.

Clearly, Washington has no intention of restructuring U.S. trade policy. Accordingly, Americans have lost all hope for their future, and rightly so. While millions of good jobs continue to be sent overseas, Americans sit idle as their future and that of their children goes down the drain. Until a system of fair trade has been established, Americans will continue to hear the “huge sucking sound.”

Shills of America’s fascist economic framework have always been quick to criticize various socialist policies of Europe. But they never mention that Europeans receive free healthcare and education. In contrast, the ridiculously high cost of healthcare and education in the U.S. is forcing millions of Americans into bankruptcy, while preventing millions of others from obtaining access to these vital resources.  

The United States has its own brand of socialism; one that benefits corporations at the expense of the people. This is what Benito Mussolini labeled as corporatism, otherwise known as fascism. The fascist elements which have infiltrated America’s political and economic foundation have fueled the nation’s decline. Until these elements have been removed, the United States will remain in its downward trajectory.

As the Banking Cartel continues to rape Europe, the European people aren’t being distracted by Facebook or Paris Hilton. And they aren’t falling for the pandering and lies uttered from their bought-off politicians. They are fighting for themselves and the future of their nation.

In Europe, the politicians fear the people because Europeans have a rich historical precedent, serving as a reminder of what happens to politicians that go against the interests of the people.

In contrast, Americans fear their politicians. This is why nothing is being done to address America’s fascist regime. This longstanding regime has transformed the United States into the most criminal nation in the world, where the wealthy reap the rewards of fraud at the expense of the people. Americans could learn much from the European people. 

[1] My own estimates differ significantly from the official data, which are 32 million unemployed, and seventy to eighty million in poverty. The reported data for unemployed Americans includes discouraged workers from the past several years based on my own calculations versus Washington’s official data. Despite having spent hundreds of billions of dollars on special programs to slow or prevent the foreclosure wave, these programs have been ineffective. Finally, the total shadow inventory of foreclosures adds more than five million foreclosures to the picture over the next three to four years.

[2] The case of China represents an extreme situation, due to the fact that much of its business resources are government-subsidized, from land and water, to finance capital and utilities. This is specifically why most major U.S. corporations have built a huge presence in China, from Intel and IBM, to Ford and General Motors.

[3] There are many additional reasons that add support for the benefits of a single-payer healthcare system, from improvements to accessibility, reduced costs to individuals, less medical waste, less fraud, greater access to preventive screenings, and superior clinical outcomes. These issues have been detailed in America’s Healthcare Solution, although the argument for a single-payer system was not the focus of this book.

[4] A detailed analysis of these conclusions can be found in America’s Financial Apocalypse.

[5] The World Trade Organization (WTO) is just one of many establishment organizations that have been responsible for globalization. Hence, it is ludicrous for one to expect the WTO to ensure that all member nations play by fair rules of trade. In my view, the main purpose of the WTO is to ensure that unfair trade persists so that the developing world continues to offer slave labor for corporate America.

Originally published on Press TV, August 24, 2012.