Who Lost America?

I used to have a job
Doing spot labor every day
I used to have a job
Doing spot labor every day
But when I got to work this morning
Lord, they packed up and moved away

Blues Artists Son Seals- “Going Back Home”

We are sixty years out from the Congressional hearings on who lost China. For those more U-Tube focused and who know more about Betty White than Theodore White, a very brief explanation is provided. After Mao Tse Tung won the Chinese Civil war in 1949 by defeating Chang Kai-Shek, the American governing class was in a state of shock. We had backed Chang and supplied intelligence, money and materials. Yet Mao’s rag-tag army won. This was an incalculable loss for a post-war America watching the the “Iron Curtain” fall on Eastern Europe.Fear that communism might truly encircle the world was given fresh impetus.

Senator Joe McCarthy, keen for ever more evidence of the Communist conspiracy in the United States, started focusing his paranoia on career diplomats, generals, and journalists such as Theodore White. He outlined a broad conspiracy including incompetence in our unsuccessful support for Chang, and of probable intellectual support at the state department and in newspapers and magazines for Mao and the communists. “Who lost China?” was a question that was asked a hundred times and answered with several hundred possibilities. The question is still hotly debated by academics in the field today.

With Congressional Hearings over policy failures (Wall Street, BP, mortgages) once again all the rage, I would like to propose one more, in honor of the past. I would like congressional investigators to have hearings on the question “Who lost America?” as it is my belief that America has been deeply wounded by China: the relevance is striking.

The following are some questions I suggest be asked; some are multi-part ones.

1. How did America, which used to manufacture enough goods not only for our own growing population, but for the entire world as well, end up buying everything with a “Made in China” label affixed to it?

2. How did America, which once had the most stable and valuable currency; the reserve standard to the world, lose that status, and the dollar become more like a third world currency? How did China accumulate over $1.3 trillion of our banknotes, which are concentrated in their central bank, and become our largest creditor?

3. How did our unemployment rate skyrocket, while manufacturing and blue collar unemployment rates climb to 15%? How did millions of manufacturing jobs get sent to China? Why can’t an American who wants to work get a job?

4. Who benefited from the ascendancy of China and the decline of America?

5. Who promulgated the economic theories that led to this historic change? Who approved and enacted them?

I would start the hearings with academics. There are dozens of them sitting in prestigious chairs of economics at all the leading universities. For decades they have extolled the benefits and virtues of “free trade”. These academic Mr. Magoo’s saw a world of utopian economic efficiency. China or Mexico would make everything we needed for next to nothing. We would all buy it for a fraction of the cost to make it here at home, and the net savings would accrue to Americans in the form of increased purchasing power, and force the economy into “higher value” areas of production. Academic papers and books described a transformation to a service economy that would soak up the displaced manual laborers.

Next up would be the elected government officials and unelected bureaucrats of both parties.Their complete and unquestioning faith in free trade was central to both the Democrats and Republicans. Bill Clinton lobbied for - and signed - every NAFTA type agreement that came his way. The backbone of the Republican party; the Bob Dole’s and the Mitch McConnell’s - as corporate shills for the new global corporate America - were equally enthusiastic. No one, save the forgotten Ross Perot, describing the “giant sucking sound”, which was his description of jobs heading to Mexico under NAFTA, cared to ask the question: What if the academics were wrong? What would happen to the American worker?

Worse, these fools didn’t even negotiate the treaties with any penalty clauses if things went wrong. There were no triggers put in place if all the jobs went abroad and nothing but debt came back in return. If anyone in the world thinks that China practices free trade, they are analyzing or experiencing something that there is not one shred of evidence to support. Our congressional panel needs to put these academic and political groups on the stand and get some real answers.

As to the currency, Treasury is up next. Every Treasury Secretary since Snow has made a kow-tow pilgrimage to ask, implore, and virtually beg China to let its currency be exchanged at a free market rate. The answer was – and remains - a semi polite – “drop dead.” Read my article Beijing Duck http://worldwide-java-jag.blogspot.com/2009/06/beijing-duck.html for more about this. How deeply wrong and pathetic all these men have been to not stop this currency value hemorrhage. China has completely destabilized our currency, our debt ratios, our prestige, and we are nothing but paper tigers in the face of it. Congress needs answers here, and Charles Schumer is the lead senator to ask these hard questions. He has been labeled a “China Basher” by the media which just shows you the depth of the free trader’s power. My term for Schumer would be “China Rectifier.” It’s hard to imagine a more lethal self-inflicted wound to America than having a totalitarian country with an Asiatic mindset and a justifiable historic grudge against the West in possession of our economic future. This part of the hearings might last a long time.

Who sold our workers into poverty and despair? We have all read the horrifying statistics that there is something like 6 workers applying for each available job. Millions are out of work, the factories are closed, the mills silent. 99% of everything that can be purchased at Wal-Mart is made in China. Whole cities lie in ruins. It is now the “Rape of Detroit” not Nanking. Ski jackets that used to be made in America and cost $500.00 are now made in China and still cost $500.00.It is impossible to buy entire categories of electronics and appliances that are not made in China. The stimulus is stimulating the factories of Shenzhen not Cleveland or the Carolinas. We drive by shuttered malls and abandoned housing projects while the Chinese are building the equivalent of one Chicago every year. Chinese workers are on strike for higher wages, there is a labor shortage in costal China, while Americans workers are living with their grandparents or in their cars, eating at soup kitchens and begging for jobs cleaning up at burger joints. Our congressional panel needs to know why anyone from either party or anyone in the media did not see this coming.

Are we all just serfs to the giant manufacturers and big box stores? Are their quarterly profit objectives the same as America’s long term societal and economic needs? Did everyone - including mom and pop consumer - pursue their personal advantage, (everyday low prices) resulting in a complete breakdown at the workplace? The result is eroding tax bases, massive civil service lay-offs, a torn safety net, and bankrupt our cities and states. These are all partly the result of the economic vitality of this country being sent to China. What are the names of the corporate, retail, and media heads behind this please? We need a step-by-step answer from the Wal-Mart’s, the K-Marts, the Sears, and every other retailer that decided to shop in China.Where did they think all this outsourcing would end? Were they totally ignorant of Henry Fords’ observation, and subsequent actions, that without adequate pay levels there would be no customers for his Model-T cars? Save a few dollars and destroy your town, your state and your country. That’s not good business or efficient marketing, that is national self-destruction and perhaps traitorous. Sam Walton and his corporate heirs have done more damage to this country than Al Qaeda could every dream of.

A side committee can hold hearings in a different room as to why OHSA rules, regulations, and notices now take up an entire wall. We will also need to know how the trial lawyer’s fees, coupons for their clients, and class action suits, drove jobs into the arms of the Chinese. Union bosses need to face intense scrutiny too, for imposing impossible work rules guaranteeing low productivity.

Who benefited is the key question we need answered. In the very short term, seemingly everyone. Lower prices on everyday items meant we could all afford more stuff. Retail boomed and malls sprouted like mushrooms. America has something like 6 times more retail footage per person than Scandinavia. There was shopping everywhere: airports once reserved for fights were now malls with planes. Lower cost stuff and even cheaper Chinese money flooded the country, but who - in the end - actually came out ahead? Are retailers happy? Are real-estate trusts happy with their commercial portfolios? Are consumers happy with their job prospects and disposable income? Our congressional panel needs to ask everyone in the supply chain “How’s that working out for ya?” A casual glance at the papers and business magazines would reveal not very well. Everything asset-based is significantly depressed, and job and income prospects are as dismal as anyone can remember.

I would not be surprised to see an American version of the “Golden Venture,” the Chinese ship loaded with immigrants in search of jobs that ran aground off Queens, New York in 1993. Only this ship will be loaded with desperate Americans sailing to China where there are actual labor shortages.

The last focus of the panel is perhaps the most trenchant and poignant. Why did everyone endorse this folly? Everyone such as the Republicans who love big business and just wanted what they wanted. The Democrats who normally looked out for labor and the struggling middle class, rushed to sign every free trade bill shoved their way. The entire political establishment, the Treasury, the Federal Reserve, the Trade Department and the legislative branches simply failed to see the obvious. What was the obvious? Simply put, our trading partners were not interested in free trade; they were invested from day one in predatory trade.You send us your currency and jobs, we’ll send you goods. We’ll undervalue our currency, inviting you to de-industrialize your country. We will run surpluses that we won’t spend on anything you produce, farm, or have intellectual property rights to, and we will buy your debt because you insist on living it up as if you had a productive economy. In the end you will owe us trillions, won’t be able to pay us without pain since you don’t produce anything, and we will boom while you close schools, firehouses and hospitals.

The top university economics departments bought into this, ditto the Wall St. Journal and the U.S. Chamber of Commerce. Sadly, they conned America into believing it. Who lost America?Hint: look in the mirror.