Tuesday, September 30, 2008

How the American Economy Became a Sleazy Carnival Freak Show


Whatever happened to the once-mighty American economy?

The United States once had the mightiest economic juggernaut of any nation in history. Our "Arsenal of Democracy" played a big role in winning World War II. During that conflict, we overwhelmed our enemies with a tidal wave of efficient industrial production of everything from bombers to jeeps to battleships.

During the 1950s, America's industrial might was at its peak. We were the richest, most prosperous nation in history. U.S. workers earned the highest wages in the world. We enjoyed the most generous benefits and vacation time of any First World nation. American products, from planes to cars to televisions, were second to none in quality and were in demand worldwide. The Great American Middle Class was a prosperous and growing club that saw its fortunes improve, year after year.

Today, all of this seems like a distant memory. America's economy today is a joke. "Made in the U.S.A." is no longer a symbol of quality. In fact, our nation doesn't make much of anything these days. Our trade deficits are at nightmarish levels. And in three short decades, we've gone from being the world's biggest creditor nation to its biggest debtor nation.

Since we don't manufacture anything these days, all we Americans do these days is buy stuff made in other nations. And we really don't even have the money to do that, so we borrow trillions of dollars from prosperous nations in East Asia.

In fact, the U.S. economy today resembles a sleazy carnival midway. Rather than producing useful goods and services, our Carnival Freak Show Economy these days spends more and more time running scams and swindling people (think Wall Street). We've exported most of the good-paying jobs that sustained our once-mighty middle class. And the gulf between the haves and have-nots has grown to its widest since the infamous Gilded Age of the late 19th century.

A half-century ago, General Motors was the nation's biggest employer. Today it's Wal-Mart, a company that offers such paltry wages and benefits that many of its workers have to file for public assistance just to make ends meet.

And that's just one of the ways that Wal-Mart, and other Fortune 500 companies, pocket corporate welfare. In fact, corporate welfare plays a big role in today's Carnival Freak Show Economy.

Not only have the good middle-class jobs disappeared from the U.S. economy, but ordinary workers who do still have jobs have seen their wages stagnate for the past 30 years. Meanwhile, the richest 1 percent now garner the largest share of the national income since 1929.

One might ask: if the once-great American economy no longer produces anything useful, what exactly does it do these days?

Good question.

Decades ago, America's great corporations were widely admired. Most Americans back then felt they were a positive force in American society. Back then, corporations created good jobs and produced things of value. They also paid taxes (back in the 1950s, for example, corporations paid half of all taxes---today, it's less than 10 percent).

Contrast that to today. Today's biggest corporations, from ExxonMobil to Wal-Mart, are increasingly feared and hated. Many Americans regard them as greedy money-grubbing entities that can't be trusted.

The same could be said of today's CEOs in general. As recently as 1982, the average CEO made around 42 times what the average worker earned. By 2005, CEOs made around 431 times what the average worker earned.

And what, exactly, have CEOs done to earn this phenomenal increase in pay? It's hard to say. In fact, in recent years, there has been an increasingly disconnect between soaring CEO pay and the performance of U.S. corporations.

Take Peter Cartwright of Calpine, a maker of gas-fired power plants, for example. In 2005, Forbes reported that Calpine's average annual return to shareholders over the past six years had been minus 7 percent. During the same period, Cartwright pocketed an average annual $13 million. So much for the wisdom of the "free market."

In fact, the "free market" has nothing to do with it. It's a rigged game---just like the crooked games one encounters at a sleazy carnival midway.

When you go to a carnival midway, it's wise to keep an eye on your wallet. And America's Carnival Freak Show economy is no different these days.

The Military-Industrial Complex: A Profiteering Monster

As an example, take a look at America's military-industrial complex, a major pillar of the modern U.S. economy.

Today's military-industrial complex has turned into the very threat to democracy that Dwight D. Eisenhower warned us about in 1961.

It's a bloated, inefficient, tax dollar-devouring, profiteering monster that is out of control. And for all the trillions of dollars it consumes, it's difficult to really see how the nation benefits from it. After all, for all the ocean of dollars our nation has sunk into the Pentagon, it wasn't able to prevent 19 young men armed with nothing more than box cutters from inflicting on our nation the worst terrorist attack in history.

Curiously, for such a major, and costly, part of our economy, the military-industrial complex gets little scrutiny from our politicians these days. They're happy to continue feeding the monster, with little oversight, as long as the big defense contractors are generous with their campaign contributions.

And although Halliburton has garnered the most headlines as the biggest piglet at the trough, it's hardly the only defense contractor reaping fat, no-bid, "cost-plus" contracts, year after year.

In fact, the Center for Public Integrity revealed in 2005 that some $900 billion in defense contracts since 1998 had been awarded without competitive bidding or effective oversight. It's crony "capitalism" at its finest. And the suckers on the carnival midway are We The People: the taxpayers who fund the whole racket.

Wall Street: Crony Capitalism

Continuing our tour of America's Freak Show economy, lets take a look at a second major pillar of the modern U.S. economy: Wall Street.

While never universally loved, Wall Street has captured the American imagination over the decades as a symbol of U.S. economic might. But these days, most Americans fear and detest Wall Street---and for good reason.

Wall Street once played an indispensable role in the U.S. economy. But it's increasingly difficult to determine what, exactly, Wall Street does that is useful these days. Wall Street's idea of "innovation" these days is to create ever-increasingly complex financial instruments that no one can figure out. It's all a scam that is becoming unglued as investors become increasingly wary of what they're putting their money into.

And like the military-industrial complex, it seems Wall Street can only function these days with a hefty dose of billions of U.S. taxpayer dollars. (Take, for example, the Fed's recent bailout of investment bank, Bear Stearns). Although U.S. Treasury Secretary, Henry Paulson defended the bailout as necessary, ordinary American saw it as yet another example of rigged crony, "capitalism."

The Great American Prison Industry

Continuing our tour of America's Carnival Freak Show Economy, let's not leave out what has emerged in recent decades as the fastest-growing sector of our economy: the Great American Prison Industry.

America, the "land of the free," now has the world's biggest prison population, with a staggering 2.3 million people behind bars. Not surprisingly, the prison industry has become one of America's leading employers. And towns with bleak economic prospects now court new prisons the way they once courted new factories. Increasingly, Americans are either in prison, or working for a prison (a strange trend for a nation likes to think of itself as a beacon of freedom).

In past decades, Americans used industry and manufacturing to build our nation into the greatest superpower the world had ever seen. Today, we've "outsourced" our manufacturing and made shopping (with borrowed dollars) the main pillar of our nation's Carnival Freak Show economy.

Of course, it's all a big Ponzi scheme that is unsustainable. The nations that hold our increasingly worthless currency are likely to eventually get spooked and start off-loading their dollars. When that day comes, Americans will finally realize that whatever "prosperity" our economy has seen over the past three decades has been nothing more than a credit-fueled mirage.

When that day comes, we Americans will finally realize that we've been swindled like suckers at a sleazy carnival midway. P.T. Barnum would be proud.