Read Online How the Economy Was Lost: The War of the Worlds (Counterpunch) by Paul Craig Roberts - Free Book Online

budget is also in the red to the tune of about $400 billion. As Americans have ceased to save, the federal government is dependent on foreigners to lend it the money to operate and to wage war in the Middle East.
    American consumers are heavily indebted. The growth of consumer debt is what has been fueling the economy. Social Security and Medicare are in financial trouble, as are many company pension plans. Decide for yourself—is this the economic picture of a superpower that can dictate to the world, or is it the picture of a second-rate country dependent on foreigners to finance its consumption and the operation of its government?
    No-think economists make rhetorical arguments that the decline of U.S. manufacturing employment reflects higher productivity from technological improvements and not a decline in U.S. manufacturing per se. George Mason University economist Walter Williams recently ridiculed the claim that U.S. manufacturing jobs are moving to China. Williams asks how the U.S. could be losing manufacturing jobs to China when the Chinese are losing jobs faster than the U.S.: “Since 2000, China has lost 4.5 million manufacturing jobs, compared with the loss of 3.1 million in the U.S.”
    The 4.5 million figure comes from a Conference Board report that is misleading. The report that counts was written by Judith Banister under contract to the U.S. Department of Labor, Bureau of Labor Statistics, and published in November 2005 (www.bls.gov/fls/chinareport.pdf). Banister’s report was peer reviewed both within the BLS and externally by persons with expert knowledge of China.
    Chinese manufacturing employment has been growing strongly since the 1980s except for a short period in the late 1990s when layoffs resulted from the restructuring and privatization of inefficient state-owned and collectively-owned factories. To equate temporary layoffs from a massive restructuring within manufacturing with U.S. long-term manufacturing job loss indicates carelessness or incompetence.
    Banister concludes: “In recent decades, China has become a manufacturing powerhouse. The country’s official data showed 83 million manufacturing employees in 2002, but that figure is likely to be understated; the actual number was probably closer to 109 million. By contrast, in 2002, the Group of Seven (G7) major industrialized countries had a total of 53 million manufacturing workers.”
    The G7 is the U.S. and Europe. In contrast to China’s 109,000,000 manufacturing workers, the U.S. has 14,000,000.
    When I was Assistant Secretary of the Treasury in the Reagan administration, the U.S. did not have a trade deficit in manufactured goods. Today the U.S. has a $500 billion annual deficit in manufactured goods. If the U.S. is doing as well in manufacturing as no-think economists claim, where did an annual trade deficit in manufactured goods of one-half trillion dollars come from?
    If the U.S. is the high-tech leader of the world, why does the U.S. have a trade deficit in advanced technology products with China?
    There was a time when American economists were empirical and paid attention to facts. Today American economists are merely the handmaidens of offshore producers. Apparently, they follow President Bush’s lead and do not read newspapers—thus, their ignorance of countless stories of U.S. manufacturers moving entire plants and many thousands of U.S. engineering jobs to China.
    Chinese firms, including state-owned firms, have numerous reasons, tax and otherwise, to understate their employment. Banister’s report gives the details.
    Banister points out that the excess supply of labor in China is about five to six times the size of the total U.S. work force. As a result, there is no shortage of workers in China, nor will there be in the foreseeable future.
    The huge excess supply of labor means extremely low Chinese wages. The average Chinese wage is $0.57 per hour, a mere 3 percent of the average U.S. manufacturing worker’s wage. With