Robert Borosage: The Real Economy Strikes Back

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from OurFuture.org:



The Real Economy Strikes Back
By Robert Borosage

October 7th, 2008 - 9:44am ET



So much for the $700 billion bailout of Wall Street. Stocks are tanking across the world. Clearly, once the bailout passed, investors took a good look at the real economy and dove for the mattresses. We’re headed into a great reckoning. And at the heart of that, as argued in our new op-ad in the New York Times, is this country’s unsustainable global economic strategy.

What we’re seeing, as Joseph Stiglitz has argued, is the failure of an economic model, an implosion of free market fundamentalism – the notion “that markets are self-correcting, allocate resources efficiently and serve the public interest well,” and governments should just get out of the way.

We’ve gone down this path for 30 years. Abroad, global corporations and banks essentially wrote the constitution of the new global economy, protecting property rights but not workers, consumers or the environment. Banks and currencies were deregulated without protection against destabilizing speculation.

At home, President Reagan launched the war on unions and the rollback of government and regulation. The minimum wage was frozen for a decade. Undocumented workers were exploited to undermine wages and standards. Companies used globalization as a club against workers. Pensions and health care benefits were cut. Over the last eight years, productivity and profits rose, but wages lost ground. We lost one in five manufacturing jobs. Now some 15 million service jobs are at risk of being offshored.

Yet the global economy depended on American consumers as the buyers of last resort. Sustaining a low-wage, high-consumption economy is no mean trick. The gulf was bridged by growing debt built on successive asset bubbles. Household debt soared to unprecedented levels as Americans loaded up on credit cards and cashed out their homes. And the U.S. is now the world’s largest debtor, having added over $4.4 trillion in foreign debt since 2001. We must borrow or sell off assets with $2 billion a day simply to cover our trade deficits. We now run a high-tech trade deficit with China. Mexico exports 50 percent more cars to the U.S. than the U.S. exports to the rest of the world.

What can’t go on indefinitely, won’t. And with the bursting of the housing bubble, the reckoning is here. .......(more)

The complete piece is at: http://www.ourfuture.org/blog-entry/2008104107/real-economy-strikes-back