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One Land, Two Economies

Economic prosperity and progress for the president are obviously synonymous with robustly higher profits for businessmen and stock speculators. The large majority of Americans must suffer because the crisis is not over for them. This majority hoped businesses would create millions of new jobs while the corporations exported jobs to low wage countries.
ONE LAND, TWO ECONOMIES

The US president and the media cheer the upswing. Stock prices climb and profits bubble up. Still ex-Labor Secretary Reich sees most Americans in crisis

By Rainer Rupp

[This article published 2/12/2011 in: Junge Welt is translated from the German on the Internet,  http://www.jungewelt.de/2011/02-12/032.php?print=1.]

The "role of the US as a leading power and shining light of the world" will be decided by the further economic development. Special efforts are now necessary. With these phrases, US president Barack Obama appealed to the patriotism of his compatriots on January 25, 2011. In his State of the Union address, he unintentionally revealed his own understanding of economic upswing as upswing with a great nearness to Wall Street. "Two years after the worst recession most of us have ever experienced, stock prices and corporate profits are climbing. The economy is growing again," Obama said. Economic prosperity and progress for the president are obviously synonymous withy robustly higher profits for businessmen and stock speculators.

What about the ten million persons who lost their jobs through the crisis, most of whom have still not found new work? Their view of things is foreign to Obama and the political millionaires who largely populate the administration and Congress. One of the few exceptions is the economist Robert Reich who was Labor secretary under Bill Clinton. In a devastating analysis, he recently described developments in the US as a divided land with two economies.

According to Reich, there are "the rich types of Wall Street and Washington" on one side of the economy who profit from the current bull market on the stock exchange and sit on a mountain of cash. The US Federal Reserve made that cash available to them practically interest-free and free of charge. On the other side, there is the economy of the large majority of Americans. They must continue to suffer because the crisis is not over for them. This majority hoped businesses would create millions of new jobs while corporations and trusts exported jobs to low-wage countries. This was very appreciated by the mammoth financial corporations that profited enormously from this praxis, Reich said.

At the beginning of February, the US Labor Department infused hope with a surprisingly strong decline in unemployment. Although only 36,000 new jobs were created in January, the unemployment rate fell back from 9.4 to 9.0 percent (altogether 13.86 million persons). This is very strange because3 over 600,000 new jobs had to be created for a decline of 0.4 percent. On February 4, 2011, the following news of the US economic news agency Bloomberg pointed to the statistical manipulation behind the scenes. In January the rate "fell so strongly because the number of unemployed declined 590,000." How could that happen when only 36,000 new jobs were created? Every month all those persons fall out of the official unemployment statistics who have been without employment for more than 99 weeks (from then on they do not receive any unemployment benefits any more).

Further on we read in Bloomberg: "A decline in the number of the working population around 162,000 in January helped force down the unemployment rate." Persons who are no longer officially registered as job seekers are simply dropped from the working population. Every month 125,000 persons press on the labor market on account of population growth. They are also not included in the official unemployment statistics.

This does not hinder US politicians and their obsequious journalists from citing the allegedly falling unemployment as evidence for a robust economic upswing. However the number of US citizens who want to work but find no job continues to rise. The fact that average working hours per worker in the US private economy fell in January from 34.3 to 34.2 weekly hours does not suggest an economic upswing. Only the profits of businesses turn out higher. Productivity increases. This means more output was squeezed out of the workforce with the same or declining number of workers.

The crisis in the second US economy in the world of workers and small employees as defined by ex-Labor Secretary Reich is certainly not over. Consumption in the last months has increased somewhat. But this was only possible because Americans again saved practically nothing and became heavily indebted through credit card spending.

The consumer frenzy in the US was financed through credits secured through second and third mortgages on their homes with rapidly climbing house prices. This is not possible any more. The foreclosures of homes continue undiminished in 2011 and housing prices will continue falling. The much-praised recovery of consumption in the "greatest economy of the earth," as the United States likes to be called, may only be a straw fire or flash in the pan. Moreover the signs mount up that the long feared inflation is picking up speed although the official statistics on price increases are manipulated even more strongly than the statistics on the unemployed.

RELATED LINKS:
Robert Reich, "Obama's Deal with the U.S. Chamber of Commerce," Feb 9, 2011
 http://www.laprogressive.com/economic-equality/obamas-deal-chamber-commerce/

Robert Reich, "The Republican Shakedown," Feb 23, 2011
 http://robertreich.org/post/3476451774

Video: Austerity Budget Means More Unemployment, Dean Baker, Feb 14, 2011
 link to therealnews.com

Video: Cutting Public Sector Wages Makes Recession Worse, Bob Polin and Jeff Thompson, Feb 23, 2011
 link to therealnews.com

homepage: homepage: http://www.steadystate.org
address: address: http://robertreich.org