A War We Can Win

A War We Can Win

by hopper

AUG 14, 2011

"In a trade war, everybody loses. Some may lose more than others, but everybody loses," said Nicholas Lardy, senior fellow at the Peterson Institute for International Economics.

That’s what the free-traders say.  That’s what people who are paid to perpetuate the current arrangement want you to believe.  That’s what the transnational corporations that pay them to make you believe that want you to believe.  But it’s bullshit.

Unlike the wars in Iraq or Afghanistan, we win a trade war hands down.  We're the biggest consumers in the history of the universe. A black hole for consumer goods.  We’ll consume you to death.  At only 4% of the world's population we're responsible for 25% of the world's consumption. We're the only people we need to sell to.

At this point it would be instructive to understand when and why that happened.  Not just for a history lesson, but because if we have any hope of restoring our underlying economic strength we’re going to need to do it again.   

The start of the 20^th century was the era of the robber baron, very rich and very poor and nothing in between.  Child labor, factory workers making slave labor wages, ridiculous CEO compensation, very low or no taxes on corporations,  no workplace safety, no environmental regulations, no tariffs, no unions,  no consumer economy,  no middle class.

That era culminated in the stock market crash of 1929 and the great depression.

But in the decades that followed progressive policies changed all that. 55-90% top tax rates encouraged management to put operating profit back into their companies rather then extract it, offshore it, or pay it out in dividends to the investor class.  We had tariffs that made it cheaper to produce goods here rather than import them, while providing middle class jobs . We allowed labor to organize which gave people the buying power to, well, buy.  And as a result by the end of 1960's we had a massive middle class and production capacity that was the apple of the worlds eye. 

During this golden age of American economic domination CEO’s earned an average of 25-35 times more than their workers.

Then came Reagan, massive tax cuts for the rich and the corporation, free trade, deregulation and outsourcing.  Lots of outsourcing.  Today CEO’s out earn their workers by a factor of 300. And today our national debt is 14 times what it was just over 30 short years ago. 

And for now we still we spend like nobody’s business, like nobody else in the world.  These days much of it is on credit because over the last 30 years we’ve instituted tax and trade policies that have utterly betrayed the American worker, but we still spend.  It’s part of our national DNA really.  And we would spend even more if we restored the middle class to its former glory.

Henry Ford famously paid his workers enough to have a shot at buying his cars and as a result he smoked the competition.  So let Chinese factory owners figure out what Henry Ford did a hundred years ago.  And let us remember our history.  If a trade war is what it takes, let’s hang a loss on the transnational interests and win one for the USA.