America's Fall From Grace

by Craig Harrington
Published 01/23/09
http://www.economyincrisis.org

This country has been in a recession for over a year and even the most optimistic outlook puts recovery at least another year away. We have watched as our largest and most profitable companies have been reduced to ruins or brought to the brink of annihilation. We saw our commuter economy bludgeoned by the rising tide of oil costs. We saw the biggest government bailout in world history enacted against our will and with our tax dollars, and have yet to see any return for the investment. This country is certainly in a difficult spot, but the question remains.

How did we get here?

I. Free Trade

The United States’ position in the international economic community has changed dramatically in the 60 years since “free trade” replaced “economic nationalism” as the standard operating procedure of most governments. The United States has descended from the alpha and omega of the world economy.

Unfortunately, our policy approach to “free trade” hasn’t shifted at all to realign with our current situation. If anything, our policies are now even more geared toward a 1950s era America than they are for today's climate. International “free trade” is a one-way street in which all factors of production are shifted to the cheapest available market. That market used to be in the United States, but now it is located in Mexico, Southeast Asia, Europe or elsewhere. Labor in the U.S. is simply too expensive for most producers, so they take their businesses elsewhere and avoid the health, safety, wage and environmental standards already in place in the U.S.

This system has turned our economy - once based on exports and creating wealth - into a pauper surviving on imports while incurring more and more debt.

II. Foreign Takeovers

Our unbalanced trade system has a net result of importing goods and exporting dollars. From 2001-2008 the United States economy lost approximately $4.8 trillion via its import deficit. Much of this money simply leaves the economy never to return, but a sizable portion returns to the United States in the form of foreign direct investment (FDI). Businesses like FDI because it brings capital into their coffers, and the government likes it because they see all FDI as wealth producing “investment” – our government is obsessed with promoting “investing,” which is little more than gambling.

However, when a company receives FDI it must, in return, give over some controlling interest of the company. For example, a Japanese firm will come to the United States and use the money it acquired by selling goods to our consumers for the purpose of buying one of our companies. Thousands of U.S. companies have either been purchased outright or taken under control by foreign investors, essentially making them foreign companies. This speeds up our trade deficit, deflates our economy, and puts any future advancement from research and development in the hands of foreign interests.

The Committee on Foreign Investment in the United States is supposed to safeguard against unfair mergers and acquisitions, yet it takes little or no action in almost 99 percent of the case submissions it receives.

Several key factors have been instrumental in our fall from grace. Our “free trade” policies have allowed other countries to use unfair tactics to put our industries out of business. As disastrous policies allowed our companies and corporations to be taken over, we took no action to block the hostility or protect our sources of wealth. Our “free trade” ideology and our complete lack of protection from foreign takeovers are just a few of the many reasons that the economic situation in the United States is in such dire straights. We need to put people into elected office who are willing to right the ship and correct this imbalance. We cannot survive on more of the same. We must contact our elected officials, and implore them to either change the error of their ways or face defeat in re-election.

http://www.economyincrisis.org/articles/show/2366