Dr. Tahir Rauf
In 1960’s, the American presidents Lyndon Johnson and then John F. Kennedy imaged the United States (US) to transform into a “Great Society”; create a prosperous country through new economic policy of major social programs, public education, healthcare, urban problems, transportation, eliminate poverty, eradicate injustice and meet severe financial and economic calamities. New immigration policyopened its doors for millions of immigrants with a common belief of a better life in a new homeland. At the end of the World War II, the US was the dominant force invirtually every industry and technology making it far richest country of the world.
The decline of the US economy began in September 2008 when not only banks but entire financial system built on debts of mountains was collapsed. The US dollar reached to its low 1.39 to a Euro. The US imports became greater than exports and caused the net outflow of foreign currency. The US has been importing goods, but China has been using its foreign exchange reserves to buy the US debt. Free market
thesis has brought the US economy at its lowest point since depression of 1930’s.
China has become a world factory of exportable manufactured goods with increasing sizable trade surpluses. China appears to have gained a certain respects by repaid economic growth about 10 percent annually and gained about $200 billion a year from US alone. The US trade deficit with China has cost 2.4 million American jobs between 2001 and 2008. A total of 3.2 million – one in six US factory jobs – have disappeared between 2000 and 2007 (USATODAY, April 20, 2007). Considering
both number of unemployed 14.6 million with unemployment rate edged to 9.6percent in the US (US department of labor, September 2010). The world economic growth standpoint the US growth ranges to 2.3% in 2009 where as China’s growth still steamy 10.5% as world champion partnering with 9.7% growth in India driven by robust of industrial production and macro economic performance (IMF, October2010).
Over the last decade, 8 million manufacturing jobs were lost. Many policymakers embraced the idea that American’s future lies in service industries not manufacturing. It is true; US trade surplus was $140 billion in 1998. The new service jobs in retailing and food service pay far less than manufacturing. The biggest new service provider is India not America. The accounting firms handling taxes, airline reservations, helpline assistance in fixing computers, reading x-rays, the Wall Street
analyses and IT service firms, all operate and service from India. Hence, Indian companies’ have profit margin of 20% while US companies are in 3% range.
The US banks gave loans to people that couldn’t afford them. And consumers became too greedy and bought homes, cars and things on credit cards they couldn’t afford. As a result of this, the stock market became unstable. Many home buyers were given a chance to own a home through the subprime loans. Sub-prime US housing loan package of dubious value, and timeless cheap credit created an illusion
in new market economy that assets have always rising curve in value. Over a trillion dollar was channeled into the sub-primate mortgage market. These loans gave people the false impression that they could afford a home that was out of their pricerange.
In an American economy consumer activity is vital, and credit is lubricant fuel.Federal Reserve reports that despite dry life styles, the American shoppers have a revolving credit of Visa cards $827 billion, and mortgage debt $10.1 trillion in July 2010.
Most US major Corporations are raising billions of dollars by issuing low interest rate bonds and keeping its savings till the economy perks up. The Federal Reserve reported the America’s 500 largest non-financial companies have accumulated $1.8 trillion cash on their balance sheets. Federal Reserve interest rates are near to zero for almost two years which is rational for corporations to seize the opportunity
by selling bonds instead of investing and creating jobs. Most corporations are not spending this money on new plans, equipments, or hiring new workers.
Nevertheless, low interest rates hurt retirees whose incomes from saving havefallen substantially and putting 14.9 million people unemployed. Low interest rates combining inflation and lot of cash available make people greedy which witnessed a series of bubbles in last two decades of technology stocks, subprime mortgages,
house industry, and soaring commodity prices of food and oil.
Over the past decades, half of the US Corporations have gone multinational regardless of their performance within the United States. Corporations compete economically, countries do not. This international trade is entirely in the hands of global corporations and corporate leaders have sole mission to increase the shareholders wealth, and no obligation to the larger society of their countries.The United States largest creditor country in 1980s’ to world’s largest debtor county with net foreign debt over $13 trillion today.
American major retail store imports from China are currently $30 billion annually. Wal-Mart has been providing steady employment to the American workforce, but most jobs it offers are cost to minimum wage, most cases without healthcare and other retirement benefits. The effects of most workers who lost their jobs create fear for other workers to hold down their jobs even at the reduced wages. On the other hand, many of American jobs left for China are paid above the minimum wage and often include pension and healthcare benefits too.
Two wars of Iraq and Afghanistan has drained US treasury costing estimated over $1 trillion since 9-11 terrorist attack. (CRS Report for Congress, July 2010). Medical and social cost is in addition to this. In addition, the threat of terrorism has imposed a hefty cost on businesses to jack up security related expenditures that shrinks profit
margins in private sector as well serious budget problems for local, state and federal governments.
The key measure of a standard of leaving is health. The US performance is woefully inadequate. Americans pay twice as much others leading countries for their medical care cost. The American leaves about 15% of its people without medical care. Therefore, the US Carmaker employee more people in Canada because of low healthcare cost and second highest taxes in the USA.
The America’s stories of enormity are disruptively perverted. For instances, the world tallest buildings are in Dubai, largest public trading house is in Beijing, the biggestrefinery is in India, largest airplanes are built in Europe, the largest investment funds
are in Abu Dhabi, biggest movie industry is Bollywood not Hollywood, and the largestcasino is in Macao not in the Las Vegas. Among the world’s top richest people, firsttop two are American and next two in ranking are Indians. India has 69 billionaires (Forbes India, September 2010). A dozen Indian billions are wealthier than American
icon Donald Trump. Distribution of power in all Industrial, financial and cultural domains are moving away.
However, the United States is still one of the most competitive economies in a global forum, dominated in biotechnology, defense, aircraft manufacturing and nanotechnology; its universities raked top and about half the researchers are first generation immigrants contribute to a research in science, medicine and
In an era of economic inequality, the Wall Street profit raised sky high and the ordinary middle class was stuck into depression toward poverty. The American Community survey 2009 shows 14.3 percent of the US population had income below their respective poverty thresholds. The number of people in poverty increased to 44
million. One out of five kids was living in poverty in 2009 (US Census Bureau).
Evidently the best and brightest ideas have been invoking false doctrines that have undermining the American prosperity.
Dr. Rauf can be reached Trauf24@gmail.com