(Week 7 - Tuesday, Sept. 9)
The nominating conventions are over, we know who the candidates are, and now there begins a two-month media blitz in which they will make their best pitch as to why we should elect them. If the past is any indication, I expect to hear strident rhetoric about how we as a nation need to "balance the budget," "live within our means," "practice fiscal discipline," "pay off our debt" and otherwise run America more "like a business." After all, say even consummate insiders running for re-election, the problem in Washington is that all these politicians, lobbyists and bureaucrats have for the most part never run a "business," and so have no feel for the sort of sensibilities and skills it would take to "balance the budget" for the nation as a whole.
This is, in my view, a fundamental mischaracterization of the nation's chronic problem with "debt." The United States is ideally not a business. Rather, it is a sovereign nation within which businesses operate. To facilitate the people's commerce within its boundaries, it has the power to issue a public money supply, without cost. Businesses need a source of income to offset expenditures, but the nation, as a sovereign economic entity that can create its own money, does not.
Unfortunately, the sovereign power to create the people's own money (the most essential element of the commons) has been abdicated to an extra-national (outside national control) banking cartel. The net effect of this abdication is that the sovereign socio/political/economic nation we call the United States has, in effect, been transformed into a "business" in the portfolio of an extra-national financial order.
Our elected representatives, who hold the trust to safeguard the people's monetary prerogative, have (with the people's negligent acquiescence, if the full truth be told) abandoned their responsibility to "coin Money (and) regulate the Value thereof", and have instead set up a scheme (the Federal Reserve System) whereby the only source the American people have from which to drawn the currency they need to conduct their commerce is to "borrow" it at "interest" from private banks.
There are millions of businesses that exist within this economy, and they each have their respective revenue flows, but as a whole combined enterprise the American economy (let us call it "Enterprise U.S.A.")has only one source of operating funds, and that is the money supply it borrows from the Federal Reserve System. "Enterprise U.S.A." always owes more to the banks than is in the money supply due to the "compounding-interest" fee attached to all bank loans. It follows, then, that "Enterprise U.S.A." is always obliged to go further into "debt" in order to meet its expenses. In essence, it is living by borrowing.
Any financial enterprise that cannot stay in business except by continually borrowing more money to finance its operations is by definition in a state of bankruptcy. "Enterprise U.S.A." (the American economy as a whole when seen as a "business," because it has given up its power to create its own money) is, therefore, in a state of bankruptcy. This is not a play on words. It is economic actuality. Our economic life has been transformed from the free and lawful expression of a sovereign people, into a "business" which is perpetually beholden to its creditors.
There is a sort of perverse "Golden Rule" that is bandied about in the back corridors of power. It says, "He who has the Gold rules." A more relevant version is, "He who is the creditor rules the debtor." The people of the United States have allowed their country to be transformed into a "debtor" nation that, to a large extent, no longer governs itself.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Tuesday, September 9, 2008
Monday, September 8, 2008
Column #37 THE LESSON FOR LABOR FROM "FLINT"?
(Week 7 - Monday, Sept. 8)
In yesterday's column I suggested that not only management, but also the participants in the labor movement would perhaps benefit from examining more closely their roll in the whole Flint drama.
The laborer who lost his job may indeed, with justification, criticize the board and CEO of GM for what they perceive as the board's callous decision to move the majority of the plants to "cheap labor" locales. On the other hand, to even suggest that those who lost their jobs may have had a hand in the disaster may seem to many to be grossly insensitive, given the difference in the political power, monetary compensation and personal suffering experienced by those on the respective sides in the matter.
In last week's columns I offered the view that the Flint episode was a prime example of a phenomenon that is happening throughout the country, caused in large part by a lack of awareness in the corporate world of the effect of the private-bank-loan transaction by which our money is created and issued within our present monetary system.
It is only reasonable to ask, given that the unconsciousness about the monetary system is culture-wide, if the labor movement, like management, is not in its own way susceptible to a narrowed vision on the same subject, and thereby also an unwitting contributor to the calamities (like Flint) that have befallen its members.
The heroic pioneers of the unionization movement truly were the leading edge of a just attempt by working people to at last secure, among other things, a better-than-starvation share of the economic pie for their labors. The lot of, not only the strikers, but virtually all working people was transformed for the better, and the industries they worked for benefited as well because they now had customers for their products with money in their pockets. It was a win-win.
Over time, however, something began to change. That is that, for a variety of reasons, the "interest" payments necessary to keep a burgeoning cold-war, consumer-society superpower supplied with money began to double and redouble. This meant that, while the economy was expanding by leaps and bounds, and while it seemed to many (maybe most) citizens that it could go on doing so indefinitely, there was a growing shortfall in the ability of the citizens of the nation to, as consumers, purchase the full value of their own production in the nation's domestic marketplace.
For people who worked for a livelihood this meant that, because so much money was being lost to the "interest" payments required to service the "debt" against the large and growing money supply, there was certain to be a shortage of purchasing power circulating in the economy to pay their wages, regardless of how high or low they were (or how productive they were in their labors).
This shortage of buying power was at core, not a wage-price-and-productivity problem (important as these considerations are), but a monetary problem. Like the world of corporate management, the labor movement did not recognize that. The result was that, like management, they took measures that only made the matter worse, and hastened the crisis that culminated in the virtual abandonment of Flint by the auto industry.
Flush from their victories in the late thirties and forties, the more powerful unions struck for very high wages and benefits, thinking that there would be a ripple effect from their gains that workers in the rest of the economy would be caught up in. Gains were made for a time, and it seemed to be working, but then it all came undone. Wages and benefits have since plummeted, and the organized labor movement itself is greatly diminished and in disarray. The unions were criticized for using their new-found clout to make demands that proved to be too high to sustain, relative to other segments of the workforce. A strong case can be made for this argument.
I think, though, that whether their demands had been high or modest, a process similar to what happened at Flint would still have unfolded. This is because the real issue for the worker is not whether the numbers on his paycheck are big or small. It is, rather, whether there is enough money circulating in the economy for the consumer (who is just the worker when he goes home) in the aggregate to buy the full value of whatever the workforce (who is just the consumer when he goes to work) in the aggregate produces.
A problem arises because this nation's money supply is borrowed from a private banking system, and so a large part of the average worker's wage is lost to "interest" payments for which he does not receive anything of value. This makes it inevitable that unsold goods, equal in value to that lost purchasing power, will pile up in the marketplace.
The pressure caused by the disparity between production costs and consumer buying power can be relieved in the short term by participants in the economy (including the Federal government)borrowing more money into circulation from the private banking system, selling the surplus goods to foreign countries, laying off workers (the cost of which is picked up by a public welfare system), or by corporations cutting their "short-term financial costs" by closing plants in the U.S. and relocating them in locales that have "lower productions costs" (i.e. "cheaper labor").
If the nation had a system whereby its money supply was issued directly out of the public domain (i.e. U.S. Treasury), a balance between the costs of production and consumer buying power would be assured. Unions, like management, don't seem to understand that. Their strategy of striking for high wages and benefits for the particular part of the workforce they represent, and assuming that this would cause a tide that would lift all boats, has proven to be disastrous in practice. It is time, I suggest, to reassess this approach.
In the end, I think that what will be found is that management and labor are not natural adversaries, but rather productive compliments of the economic whole. If they could but realize that and join together in the quest for a just and equitable monetary system, tragic episodes such as what happened in Flint, Michigan could be a thing of the past. Michael Moore and the CEO of General Motors might even become fast friends. Wouldn't that be worth a movie?
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
In yesterday's column I suggested that not only management, but also the participants in the labor movement would perhaps benefit from examining more closely their roll in the whole Flint drama.
The laborer who lost his job may indeed, with justification, criticize the board and CEO of GM for what they perceive as the board's callous decision to move the majority of the plants to "cheap labor" locales. On the other hand, to even suggest that those who lost their jobs may have had a hand in the disaster may seem to many to be grossly insensitive, given the difference in the political power, monetary compensation and personal suffering experienced by those on the respective sides in the matter.
In last week's columns I offered the view that the Flint episode was a prime example of a phenomenon that is happening throughout the country, caused in large part by a lack of awareness in the corporate world of the effect of the private-bank-loan transaction by which our money is created and issued within our present monetary system.
It is only reasonable to ask, given that the unconsciousness about the monetary system is culture-wide, if the labor movement, like management, is not in its own way susceptible to a narrowed vision on the same subject, and thereby also an unwitting contributor to the calamities (like Flint) that have befallen its members.
The heroic pioneers of the unionization movement truly were the leading edge of a just attempt by working people to at last secure, among other things, a better-than-starvation share of the economic pie for their labors. The lot of, not only the strikers, but virtually all working people was transformed for the better, and the industries they worked for benefited as well because they now had customers for their products with money in their pockets. It was a win-win.
Over time, however, something began to change. That is that, for a variety of reasons, the "interest" payments necessary to keep a burgeoning cold-war, consumer-society superpower supplied with money began to double and redouble. This meant that, while the economy was expanding by leaps and bounds, and while it seemed to many (maybe most) citizens that it could go on doing so indefinitely, there was a growing shortfall in the ability of the citizens of the nation to, as consumers, purchase the full value of their own production in the nation's domestic marketplace.
For people who worked for a livelihood this meant that, because so much money was being lost to the "interest" payments required to service the "debt" against the large and growing money supply, there was certain to be a shortage of purchasing power circulating in the economy to pay their wages, regardless of how high or low they were (or how productive they were in their labors).
This shortage of buying power was at core, not a wage-price-and-productivity problem (important as these considerations are), but a monetary problem. Like the world of corporate management, the labor movement did not recognize that. The result was that, like management, they took measures that only made the matter worse, and hastened the crisis that culminated in the virtual abandonment of Flint by the auto industry.
Flush from their victories in the late thirties and forties, the more powerful unions struck for very high wages and benefits, thinking that there would be a ripple effect from their gains that workers in the rest of the economy would be caught up in. Gains were made for a time, and it seemed to be working, but then it all came undone. Wages and benefits have since plummeted, and the organized labor movement itself is greatly diminished and in disarray. The unions were criticized for using their new-found clout to make demands that proved to be too high to sustain, relative to other segments of the workforce. A strong case can be made for this argument.
I think, though, that whether their demands had been high or modest, a process similar to what happened at Flint would still have unfolded. This is because the real issue for the worker is not whether the numbers on his paycheck are big or small. It is, rather, whether there is enough money circulating in the economy for the consumer (who is just the worker when he goes home) in the aggregate to buy the full value of whatever the workforce (who is just the consumer when he goes to work) in the aggregate produces.
A problem arises because this nation's money supply is borrowed from a private banking system, and so a large part of the average worker's wage is lost to "interest" payments for which he does not receive anything of value. This makes it inevitable that unsold goods, equal in value to that lost purchasing power, will pile up in the marketplace.
The pressure caused by the disparity between production costs and consumer buying power can be relieved in the short term by participants in the economy (including the Federal government)borrowing more money into circulation from the private banking system, selling the surplus goods to foreign countries, laying off workers (the cost of which is picked up by a public welfare system), or by corporations cutting their "short-term financial costs" by closing plants in the U.S. and relocating them in locales that have "lower productions costs" (i.e. "cheaper labor").
If the nation had a system whereby its money supply was issued directly out of the public domain (i.e. U.S. Treasury), a balance between the costs of production and consumer buying power would be assured. Unions, like management, don't seem to understand that. Their strategy of striking for high wages and benefits for the particular part of the workforce they represent, and assuming that this would cause a tide that would lift all boats, has proven to be disastrous in practice. It is time, I suggest, to reassess this approach.
In the end, I think that what will be found is that management and labor are not natural adversaries, but rather productive compliments of the economic whole. If they could but realize that and join together in the quest for a just and equitable monetary system, tragic episodes such as what happened in Flint, Michigan could be a thing of the past. Michael Moore and the CEO of General Motors might even become fast friends. Wouldn't that be worth a movie?
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Friday, September 5, 2008
Column #36 WHAT COULD THE EXECUTIVES AT GM HAVE BEEN THINKING?
(Week 6 - Saturday, Sept. 6)
The shutting down of the auto plants in Flint, Michigan, and their relocation to locales (like the desert along the American border in Mexico), in spite of the evidently overwhelming preponderance of physical and human reasons not to do so (see Col. #32), is often held up as a prime example of the "greed and stupidity" that supposedly has infected corporate America. To be sure, it would not be difficult to find justifications to criticize the move, but looked at from a wider perspective, is the matter really that simple?
I was not present at any of the board-room deliberations at which it was decided that the factories in Flint had to go, but I can well imagine that there were present expert accountants with flip-charts heavy with graphics and ledgers full of numbers that presented 'carefully researched facts' and 'reasoned arguments', the 'bottom line' of which gave 'incontrovertible testimony' that GM had no other financial option than to move those plants. Furthermore, I can well imagine that these human beings - accountants, board members, even Roger Smith himself - may have acted, more or less, in what they perceived as good faith. As they saw it, presumably, did they not have a company to save, and would not the continuing 'high cost of labor' that would be incurred by a decision to stay in Flint result in the closing of these plants, and the loss of local jobs, anyway? After all, they had only to look around them and see most of corporate world coming to a similar conclusion in their own respective spheres.
Is it possible that all these supposedly "best and brightest" people in the business world could be "greedy and stupid," or was there some greater reality (real or imagined) at work in this now global economy that they felt compelled to recognize and make the necessary adjustment to? In my experience I have had occasion to work, from time to time, with people from the executive suites (as well as many from the factory floor), and have found them generally to exhibit the same tendencies for human integrity and corruptibility that I find in any group of human beings. I have experienced them on the whole, in the terms of their own perceived worldview, to be fine and conscientious people.
Notwithstanding, the question still remains, how then could such a judgment (abandoning Flint and relocating the plants), which seemingly flies in the face of every physical, human and indeed economic reality that lies around them, seem to otherwise intelligent, knowledgeable and responsible people to be a necessary conclusion?
The answer, I believe, lies in the deceptiveness that is an inherent part of the private-bank-loan transaction. It arises because the transaction is not a common sense borrow-money-and-pay-it-back routine (as it purports to be), but rather a money-creation-and-issuance process by which a compounding fee (called "interest"), that is in a practical sense unpayable, is attached. Thus the terms used to describe this process, such as "borrow," "loan," "debt," "interest," "payback" and "satisfaction," all have a disarmingly familiar ring, but the actualities of the steps they identify do not fit the their common sense meanings or dictionary definitions.
The building of a whole monetary universe on the foundation of an unsound mode of creating and issuing currency, and an inaccurate use of language associated with the process, has spawned a financial culture that is skewed at virtually every turn. There is not room to do the topic justice here (it will be explored as these columns continue), but the extent to which this has compromised the ability of persons in our civilization to think clearly on matters concerning money is jarring to behold. I find this to be true across the full spectrum of society, white collar and blue included.
Not only management, but the participants in the labor movement in America as well, would, I suggest, benefit from examining more closely their roll in the whole Flint drama. Only then will they be able to come to grips fully with the tragedy that has befallen them, and move forward with confidence and clarity into the future. I will take up that thread in the next column.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
The shutting down of the auto plants in Flint, Michigan, and their relocation to locales (like the desert along the American border in Mexico), in spite of the evidently overwhelming preponderance of physical and human reasons not to do so (see Col. #32), is often held up as a prime example of the "greed and stupidity" that supposedly has infected corporate America. To be sure, it would not be difficult to find justifications to criticize the move, but looked at from a wider perspective, is the matter really that simple?
I was not present at any of the board-room deliberations at which it was decided that the factories in Flint had to go, but I can well imagine that there were present expert accountants with flip-charts heavy with graphics and ledgers full of numbers that presented 'carefully researched facts' and 'reasoned arguments', the 'bottom line' of which gave 'incontrovertible testimony' that GM had no other financial option than to move those plants. Furthermore, I can well imagine that these human beings - accountants, board members, even Roger Smith himself - may have acted, more or less, in what they perceived as good faith. As they saw it, presumably, did they not have a company to save, and would not the continuing 'high cost of labor' that would be incurred by a decision to stay in Flint result in the closing of these plants, and the loss of local jobs, anyway? After all, they had only to look around them and see most of corporate world coming to a similar conclusion in their own respective spheres.
Is it possible that all these supposedly "best and brightest" people in the business world could be "greedy and stupid," or was there some greater reality (real or imagined) at work in this now global economy that they felt compelled to recognize and make the necessary adjustment to? In my experience I have had occasion to work, from time to time, with people from the executive suites (as well as many from the factory floor), and have found them generally to exhibit the same tendencies for human integrity and corruptibility that I find in any group of human beings. I have experienced them on the whole, in the terms of their own perceived worldview, to be fine and conscientious people.
Notwithstanding, the question still remains, how then could such a judgment (abandoning Flint and relocating the plants), which seemingly flies in the face of every physical, human and indeed economic reality that lies around them, seem to otherwise intelligent, knowledgeable and responsible people to be a necessary conclusion?
The answer, I believe, lies in the deceptiveness that is an inherent part of the private-bank-loan transaction. It arises because the transaction is not a common sense borrow-money-and-pay-it-back routine (as it purports to be), but rather a money-creation-and-issuance process by which a compounding fee (called "interest"), that is in a practical sense unpayable, is attached. Thus the terms used to describe this process, such as "borrow," "loan," "debt," "interest," "payback" and "satisfaction," all have a disarmingly familiar ring, but the actualities of the steps they identify do not fit the their common sense meanings or dictionary definitions.
The building of a whole monetary universe on the foundation of an unsound mode of creating and issuing currency, and an inaccurate use of language associated with the process, has spawned a financial culture that is skewed at virtually every turn. There is not room to do the topic justice here (it will be explored as these columns continue), but the extent to which this has compromised the ability of persons in our civilization to think clearly on matters concerning money is jarring to behold. I find this to be true across the full spectrum of society, white collar and blue included.
Not only management, but the participants in the labor movement in America as well, would, I suggest, benefit from examining more closely their roll in the whole Flint drama. Only then will they be able to come to grips fully with the tragedy that has befallen them, and move forward with confidence and clarity into the future. I will take up that thread in the next column.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Column #35 THE MAQUILADOROS: MEXICO'S "FLINT"
(Week 6 - Friday, Sept. 5)
The Maquiladoros is a huge industrial district in Mexico which stretches along the U.S./Mexican border. It consists of thousands of factories that are foreign-owned, and were attracted to the country mainly by the "lower production costs" (a euphemism for "cheap labor"). The output of these plants is largely exported to the United States and other countries. This is where many of the factories that used to be in Flint, Michigan were relocated.
It would be difficult to find a place in the world where the evident contrast between "first world" vs. "third world" economics (high-value vs. low-value currency) is more starkly drawn. In San Diego on the U.S. side of the border, the average home is priced at upwards of a half-million dollars, while wages in the often horrific working conditions of the Maquiladoros on the Mexican side average $3.70; not per hour, but per day.
Most of the Mexican labor force consists of hard-working folk who have been driven out of the countryside because, as farmers, they could not compete with the heavily bankrolled and highly-subsidized agribusiness production of basic farm commodities on the American size of the border (where, at the same time, American family farmers have been losing their farms in large numbers because they can't pay their loans to the banks).
Perhaps the most ironic outcome of this process is that many of the Maquiladoros industries are themselves now being closed and relocated to other locales (mostly to China) in the never-ending corporate search for even "cheaper labor." As the Maquiladoros is shut down, thousands of displaced Mexicans feel compelled to cross the border into the U.S., where, if they make it, they will likely find economic opportunity that is relatively better than the desperate options in their home country, but they will also find themselves in the position of being re-exploited, as they are obliged to do the most difficult, dirty and dangerous work for whatever wage and working condition they can find. They have little recourse because they have scant political rights, being that they are not only "cheap labor," but "illegal labor."
Where is all this going? We can see in the Flint-to-Maquiladoros-and-beyond economic progression a compressed view of what is happening under the influence of the private "debt"-money system. The world is dividing ever more starkly into the "rich" vs. the "poor," the "haves" vs. "have-nots"; those who use money to make money vs. those who earn money by doing the work. This is not a matter of good people vs. bad. It is rather the virtually inevitable outcome of an inequitable monetary order.
To put it simply, the "haves" are those who are the recipients of the "interest" payments on money that is issued as "debt." The "have-nots" are the ones who make what is increasingly a less-than-living wage doing the basic work necessary for the maintenance of society, while making the "interest" payments on money they are forced to borrow into circulation to live.
The vaunted American work ethic is increasingly being rendered moot, as wealth accrues, not to productive labor, but to the exploitation of labor (i.e. ownership of the contracts for "debt" which those who labor are obliged to take on merely to live).
We are becoming a "civilization," both in America and throughout the world, in which the wealthy few dominate, through their privileged niche in the monetary order, the working many. There is still enough distribution of wealth in America to make it look like a middle class society, but the middle is eroding, as the many who are struggling just to maintain their lifestyle (or stay in their home) often attest.
The jobs that pay a living wage are disappearing, the work is being done by immigrants who are working for inadequate wages, and the middle class is struggling to hang onto its lifestyle (for now) by taking on more "debt." There is a relatively small (and shrinking) percentage of the population that is growing wealthy by "living off the interest." All are basically good people, but they are caught up in a dysfunctional economic order they don't quite understand, and more-and-more can't seem to control. Its mounting inequities are ultimately a threat to everyone, and are rooted in how our money is created, issued and controlled. That is the lesson of the Maquiladoros and Flint.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
The Maquiladoros is a huge industrial district in Mexico which stretches along the U.S./Mexican border. It consists of thousands of factories that are foreign-owned, and were attracted to the country mainly by the "lower production costs" (a euphemism for "cheap labor"). The output of these plants is largely exported to the United States and other countries. This is where many of the factories that used to be in Flint, Michigan were relocated.
It would be difficult to find a place in the world where the evident contrast between "first world" vs. "third world" economics (high-value vs. low-value currency) is more starkly drawn. In San Diego on the U.S. side of the border, the average home is priced at upwards of a half-million dollars, while wages in the often horrific working conditions of the Maquiladoros on the Mexican side average $3.70; not per hour, but per day.
Most of the Mexican labor force consists of hard-working folk who have been driven out of the countryside because, as farmers, they could not compete with the heavily bankrolled and highly-subsidized agribusiness production of basic farm commodities on the American size of the border (where, at the same time, American family farmers have been losing their farms in large numbers because they can't pay their loans to the banks).
Perhaps the most ironic outcome of this process is that many of the Maquiladoros industries are themselves now being closed and relocated to other locales (mostly to China) in the never-ending corporate search for even "cheaper labor." As the Maquiladoros is shut down, thousands of displaced Mexicans feel compelled to cross the border into the U.S., where, if they make it, they will likely find economic opportunity that is relatively better than the desperate options in their home country, but they will also find themselves in the position of being re-exploited, as they are obliged to do the most difficult, dirty and dangerous work for whatever wage and working condition they can find. They have little recourse because they have scant political rights, being that they are not only "cheap labor," but "illegal labor."
Where is all this going? We can see in the Flint-to-Maquiladoros-and-beyond economic progression a compressed view of what is happening under the influence of the private "debt"-money system. The world is dividing ever more starkly into the "rich" vs. the "poor," the "haves" vs. "have-nots"; those who use money to make money vs. those who earn money by doing the work. This is not a matter of good people vs. bad. It is rather the virtually inevitable outcome of an inequitable monetary order.
To put it simply, the "haves" are those who are the recipients of the "interest" payments on money that is issued as "debt." The "have-nots" are the ones who make what is increasingly a less-than-living wage doing the basic work necessary for the maintenance of society, while making the "interest" payments on money they are forced to borrow into circulation to live.
The vaunted American work ethic is increasingly being rendered moot, as wealth accrues, not to productive labor, but to the exploitation of labor (i.e. ownership of the contracts for "debt" which those who labor are obliged to take on merely to live).
We are becoming a "civilization," both in America and throughout the world, in which the wealthy few dominate, through their privileged niche in the monetary order, the working many. There is still enough distribution of wealth in America to make it look like a middle class society, but the middle is eroding, as the many who are struggling just to maintain their lifestyle (or stay in their home) often attest.
The jobs that pay a living wage are disappearing, the work is being done by immigrants who are working for inadequate wages, and the middle class is struggling to hang onto its lifestyle (for now) by taking on more "debt." There is a relatively small (and shrinking) percentage of the population that is growing wealthy by "living off the interest." All are basically good people, but they are caught up in a dysfunctional economic order they don't quite understand, and more-and-more can't seem to control. Its mounting inequities are ultimately a threat to everyone, and are rooted in how our money is created, issued and controlled. That is the lesson of the Maquiladoros and Flint.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Thursday, September 4, 2008
Column #34 THE MATTER OF "CHEAP LABOR"
(Week 6 - Thursday, Sept. 4)
The virtual closing down of the automotive industry in Flint, Michigan is an arch-typical example of what has happened to the industrial base across America in the name of industries having to move their operations abroad, driven by the "realities," supposedly, of having to remain "competitive" in a new global marketplace. A less artful way in which the issue is often stated is that American corporations have felt compelled to search the globe for "cheap labor." What, we should ask, is "cheap labor?"
The very idea that there is something that can be properly called "cheap labor" implies that there are "cheap people." To even utter such an expression without being mindful of what one is really saying is to demean inadvertently the work of all people. It is regrettable that this phrase seems to have been picked up by activists of all hues of the political spectrum. Even those who have presented themselves (sincerely so) as heartfelt champions of the victims of globalization too often repeat, without due reflection, the argument that industries leaving one country for another ostensibly because of "cheaper labor" is some new "global reality" that we have to live with, and premise their arguments from there.
If only, I have heard it said, we could improve secondary education, provide universal health care, offer inexpensive day care, inspire workforce motivation, make more investment in infrastructure or cut taxes, then we could "compete" more successfully in the global marketplace. Don't misunderstand. I am not suggesting that education, health care, child care, workforce motivation, infrastructure and wise fiscal management are not essential in their own right (one could find "debt"-based money at the root of their debilitations also). My point is that they are not the core of the perceived "competitiveness" problem, any more that taxing and spending parameters are at the heart of the "national debt" (see columns # 25 –31).
The problem is not "cheap labor," but rather "cheap money." If workers in different countries around the world were paid in national currencies that reflected the real value of exchanges of goods between those countries, the values of the currencies themselves would tend naturally to a just and equitable balance relative to each other. In fact, this is a long-held principle of classic economics.
What, then, has kept it from happening after the passage of centuries of time for such leveling to occur? The answer is that there have always been inequitable currency patterns established that more or less guarantee the dominance of one part of the world over the other.
For example, when the colonial powers were establishing their dominance over Africa in the eighteenth century, one of the first measures they would take was to levy a tax on every household that had to paid in a currency that was set up for that purpose. The only way the people could get the money to pay the tax was to work for their new rulers or supply them with the fruit of their land. As a matter of course, this currency was kept in short supply so a certain portion of the people, and eventually the country as a whole, were fated to sink into "debt." These patterns of "debt" still exist in "third-world" countries today, and the essential foreign currency is mostly dollars.
I sometimes detect in the usage of the expression "cheap labor" a certain "first-world" hubris that regards the workforce that lives in relatively "third-world" conditions as being "less developed," "less skilled or educated," "harboring lower expectations," or otherwise being expected to resign themselves to a lesser state of living. There are many variables at work here, and I don't want to be simplistic. Truth is that even such stereotypical labeling reflects some degree of reality, and/or alternative values and virtues described in a pejorative manner. For example, the lesser material "prosperity" of a given society may in part reflect their authentic valuing of less material wants, and embody its own virtues in the end.
Whatever the truth of the matter, such personal and cultural preferences deserve the chance to find their own natural expression. To have millions of people around the world laboring under inhumane conditions because they get paid in a currency that hardly buys anything, while they spend their days and life energies making luxury goods for those who have borrowed dollars to spend, is not something that can be lightly attributed to their misfortune of living in areas where labor is "cheap." There is cause and effect at work in such conditions, and one cannot get to their root without taking into account the monetary parameters under which each society labors.
The bottom-line truth is that nobody's labor is "cheaper." Humanly speaking, we all exert and sweat just the same to perform a given task. We all have the right, in freedom, economic and otherwise, to seek our full measure of dignity, development and expression. That won't be fully realized in a world in which there is "cheap money" posing as "cheap labor."
Richard Kotlarz
mailto:Kotlarzrichkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
The virtual closing down of the automotive industry in Flint, Michigan is an arch-typical example of what has happened to the industrial base across America in the name of industries having to move their operations abroad, driven by the "realities," supposedly, of having to remain "competitive" in a new global marketplace. A less artful way in which the issue is often stated is that American corporations have felt compelled to search the globe for "cheap labor." What, we should ask, is "cheap labor?"
The very idea that there is something that can be properly called "cheap labor" implies that there are "cheap people." To even utter such an expression without being mindful of what one is really saying is to demean inadvertently the work of all people. It is regrettable that this phrase seems to have been picked up by activists of all hues of the political spectrum. Even those who have presented themselves (sincerely so) as heartfelt champions of the victims of globalization too often repeat, without due reflection, the argument that industries leaving one country for another ostensibly because of "cheaper labor" is some new "global reality" that we have to live with, and premise their arguments from there.
If only, I have heard it said, we could improve secondary education, provide universal health care, offer inexpensive day care, inspire workforce motivation, make more investment in infrastructure or cut taxes, then we could "compete" more successfully in the global marketplace. Don't misunderstand. I am not suggesting that education, health care, child care, workforce motivation, infrastructure and wise fiscal management are not essential in their own right (one could find "debt"-based money at the root of their debilitations also). My point is that they are not the core of the perceived "competitiveness" problem, any more that taxing and spending parameters are at the heart of the "national debt" (see columns # 25 –31).
The problem is not "cheap labor," but rather "cheap money." If workers in different countries around the world were paid in national currencies that reflected the real value of exchanges of goods between those countries, the values of the currencies themselves would tend naturally to a just and equitable balance relative to each other. In fact, this is a long-held principle of classic economics.
What, then, has kept it from happening after the passage of centuries of time for such leveling to occur? The answer is that there have always been inequitable currency patterns established that more or less guarantee the dominance of one part of the world over the other.
For example, when the colonial powers were establishing their dominance over Africa in the eighteenth century, one of the first measures they would take was to levy a tax on every household that had to paid in a currency that was set up for that purpose. The only way the people could get the money to pay the tax was to work for their new rulers or supply them with the fruit of their land. As a matter of course, this currency was kept in short supply so a certain portion of the people, and eventually the country as a whole, were fated to sink into "debt." These patterns of "debt" still exist in "third-world" countries today, and the essential foreign currency is mostly dollars.
I sometimes detect in the usage of the expression "cheap labor" a certain "first-world" hubris that regards the workforce that lives in relatively "third-world" conditions as being "less developed," "less skilled or educated," "harboring lower expectations," or otherwise being expected to resign themselves to a lesser state of living. There are many variables at work here, and I don't want to be simplistic. Truth is that even such stereotypical labeling reflects some degree of reality, and/or alternative values and virtues described in a pejorative manner. For example, the lesser material "prosperity" of a given society may in part reflect their authentic valuing of less material wants, and embody its own virtues in the end.
Whatever the truth of the matter, such personal and cultural preferences deserve the chance to find their own natural expression. To have millions of people around the world laboring under inhumane conditions because they get paid in a currency that hardly buys anything, while they spend their days and life energies making luxury goods for those who have borrowed dollars to spend, is not something that can be lightly attributed to their misfortune of living in areas where labor is "cheap." There is cause and effect at work in such conditions, and one cannot get to their root without taking into account the monetary parameters under which each society labors.
The bottom-line truth is that nobody's labor is "cheaper." Humanly speaking, we all exert and sweat just the same to perform a given task. We all have the right, in freedom, economic and otherwise, to seek our full measure of dignity, development and expression. That won't be fully realized in a world in which there is "cheap money" posing as "cheap labor."
Richard Kotlarz
mailto:Kotlarzrichkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Wednesday, September 3, 2008
Column #33 WHY THE VALUE OF THE DOLLAR REMAINS SO HIGH
(Week 6 - Wednesday, Sept. 3)
In yesterday's column we noted that into the late 1970's the city of Flint, Michigan was the home of one of the largest automotive production complexes in the world, but after a concerted program by the management of General Motors to relocate these factories to other areas (like, for instance, the desert in Mexico) that in a physical and human sense had virtually no natural advantages over Flint (in fact were hugely disadvantaged), the workforce shrunk to only ten percent of its previous size in less that three decades.
The economic reason widely attributed in the media and claimed by the GM management to have compelled such a drastic move was that the Flint plants and workforce were somehow no longer "competitive" in the "global marketplace." By constructing a mental checklist of the relative physical and human advantages of the Flint-vs.-Mexico siting I attempted to demonstrate that this could not have possibly been the reason in actual physical or human terms. The only factor that did seemingly make the move economically compelling was the relative disequilibrium in the exchange ratio between the dollar (which currency American workers get paid in) and the peso (by which Mexican workers are paid).
If the value of the dollar remains high enough for long enough, this effectively becomes the reason that American workers cannot "compete," supposedly, with their foreign counterparts. That has evidently been the case for the last few decades, as the U.S. has run up enormous and mounting "balance of trade deficits." The perception that this "imbalance" was in effect, and would be for some decades at least, must, it would seem, have been a factor in the mindset of GM management (though perhaps not consciously in these terms) when they decided that they just had to move those plants to save the company.
The question then becomes, what has caused the value of the dollar to remain so consistently high with respect to the rest of the world that the American worker, even with every physical advantage, is no longer "competitive" (i.e. can no longer sell his goods at a competitive price on the international market)?
The answer is that the American dollar is the "reserve currency" of the world. That is, it is effectively the backing for every other currency. This status was established officially at the Bretton Woods Monetary Conference in 1944 which set the basis for the post-WWII monetary order. The dollar was unofficially dubbed "liquid gold," and it has since evolved in a way that is consistent with that nickname due to many factors.
These include that the U.S. economy for several decades after WWII was by far the largest, most materially productive and most stable in the world. It is only natural that the currency which was backed by the economic (not to mention military and cultural) might of this "superpower" would become the most sought after in global trade. If one had a dollar, one could be confident of being able to spend it freely almost anywhere in the world. If a nation had an ample supply of dollars in its central bank, that signified in the eyes of the world that it was "solvent" (much as gold used to indicate the same),which bolstered the value of that nation's own currency as well. World trade in oil was conducted (and still is) only in dollars. The list goes on.
The demand for the dollar has been, and remains, huge; so much so that well over half of American money circulates outside the U.S. (which is not to say that confidence is not wavering). As we have talked about since the start of this series of columns, the dollar is a "debt"-based currency that is created and borrowed into existence through private banks. It is out of the combination of these two factors that the potential for the American government to sell trillions of dollars worth of bonds "backing the dollar" arises. The process manifests in a cycle that basically unfolds as follows.
Participants in the U.S. economy borrow hundreds of billions of dollars into circulation through the private banking system every year. This money injects tremendous buying power into the American domestic market (which is complemented by American's huge appetite for goods). Americans could use the money to buy the output of their own factories, but it is often less expensive to purchase what they want from foreign nations, partly because these nations are willing to sell their goods more cheaply in order to obtain in the exchange the dollars that they need. They must, for example, have dollars to buy oil on the international market.
So, the U.S. runs up a huge "balance of trade deficit", and our dollars flow to foreign countries; but, they can't stay there. They have to flow back. Otherwise they will cause inflation in their own domestic market such that they will lose their "competitive" trading advantage and the flow of dollars will stop, or reverse.
Generally, foreign central banks, to support the value of their own currencies, buy up the "debt" paper (i.e. Federal bonds and other "debt" contracts) by which U.S. currency comes into being. They become the recipients of the "interest" payments that are made to service the "debt" on the U.S. money supply, and the American people abandon their "uncompetitive" industries, and borrow more money in an attempt to keep up lifestyles.
What I have described above is, in very simplified terms, the cycle that the American productive sector has been caught up in and driven out of business by, as exemplified by the fate of the auto industry in Flint.
The ways this play out are vastly more complex that what could be covered in this short article. The key to not getting lost amidst all the bewildering intricacies is to keep in focus that this all starts with the fact that the entire world is slipping into "debt" because it borrows its money into circulation from an international banking oligarchy, and these complexities arise out of the incredible manipulations that all parties feel obliged to participate in simply to survive.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
In yesterday's column we noted that into the late 1970's the city of Flint, Michigan was the home of one of the largest automotive production complexes in the world, but after a concerted program by the management of General Motors to relocate these factories to other areas (like, for instance, the desert in Mexico) that in a physical and human sense had virtually no natural advantages over Flint (in fact were hugely disadvantaged), the workforce shrunk to only ten percent of its previous size in less that three decades.
The economic reason widely attributed in the media and claimed by the GM management to have compelled such a drastic move was that the Flint plants and workforce were somehow no longer "competitive" in the "global marketplace." By constructing a mental checklist of the relative physical and human advantages of the Flint-vs.-Mexico siting I attempted to demonstrate that this could not have possibly been the reason in actual physical or human terms. The only factor that did seemingly make the move economically compelling was the relative disequilibrium in the exchange ratio between the dollar (which currency American workers get paid in) and the peso (by which Mexican workers are paid).
If the value of the dollar remains high enough for long enough, this effectively becomes the reason that American workers cannot "compete," supposedly, with their foreign counterparts. That has evidently been the case for the last few decades, as the U.S. has run up enormous and mounting "balance of trade deficits." The perception that this "imbalance" was in effect, and would be for some decades at least, must, it would seem, have been a factor in the mindset of GM management (though perhaps not consciously in these terms) when they decided that they just had to move those plants to save the company.
The question then becomes, what has caused the value of the dollar to remain so consistently high with respect to the rest of the world that the American worker, even with every physical advantage, is no longer "competitive" (i.e. can no longer sell his goods at a competitive price on the international market)?
The answer is that the American dollar is the "reserve currency" of the world. That is, it is effectively the backing for every other currency. This status was established officially at the Bretton Woods Monetary Conference in 1944 which set the basis for the post-WWII monetary order. The dollar was unofficially dubbed "liquid gold," and it has since evolved in a way that is consistent with that nickname due to many factors.
These include that the U.S. economy for several decades after WWII was by far the largest, most materially productive and most stable in the world. It is only natural that the currency which was backed by the economic (not to mention military and cultural) might of this "superpower" would become the most sought after in global trade. If one had a dollar, one could be confident of being able to spend it freely almost anywhere in the world. If a nation had an ample supply of dollars in its central bank, that signified in the eyes of the world that it was "solvent" (much as gold used to indicate the same),which bolstered the value of that nation's own currency as well. World trade in oil was conducted (and still is) only in dollars. The list goes on.
The demand for the dollar has been, and remains, huge; so much so that well over half of American money circulates outside the U.S. (which is not to say that confidence is not wavering). As we have talked about since the start of this series of columns, the dollar is a "debt"-based currency that is created and borrowed into existence through private banks. It is out of the combination of these two factors that the potential for the American government to sell trillions of dollars worth of bonds "backing the dollar" arises. The process manifests in a cycle that basically unfolds as follows.
Participants in the U.S. economy borrow hundreds of billions of dollars into circulation through the private banking system every year. This money injects tremendous buying power into the American domestic market (which is complemented by American's huge appetite for goods). Americans could use the money to buy the output of their own factories, but it is often less expensive to purchase what they want from foreign nations, partly because these nations are willing to sell their goods more cheaply in order to obtain in the exchange the dollars that they need. They must, for example, have dollars to buy oil on the international market.
So, the U.S. runs up a huge "balance of trade deficit", and our dollars flow to foreign countries; but, they can't stay there. They have to flow back. Otherwise they will cause inflation in their own domestic market such that they will lose their "competitive" trading advantage and the flow of dollars will stop, or reverse.
Generally, foreign central banks, to support the value of their own currencies, buy up the "debt" paper (i.e. Federal bonds and other "debt" contracts) by which U.S. currency comes into being. They become the recipients of the "interest" payments that are made to service the "debt" on the U.S. money supply, and the American people abandon their "uncompetitive" industries, and borrow more money in an attempt to keep up lifestyles.
What I have described above is, in very simplified terms, the cycle that the American productive sector has been caught up in and driven out of business by, as exemplified by the fate of the auto industry in Flint.
The ways this play out are vastly more complex that what could be covered in this short article. The key to not getting lost amidst all the bewildering intricacies is to keep in focus that this all starts with the fact that the entire world is slipping into "debt" because it borrows its money into circulation from an international banking oligarchy, and these complexities arise out of the incredible manipulations that all parties feel obliged to participate in simply to survive.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
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