The United States of America was, and still is, the wealthiest nation in the world. This is changing rapidly. We are collapsing as a nation. Each year we transfer more of our wealth to the world, while internally, the 1% in the U.S. continues to take more.
UPDATE 8.3.19: President Trump and Democrats fighting about Baltimore. A Black man tells the truth nobody wants to admit.
I’m one of those Black people who grew up in the “disgusting” community in West Baltimore that Trump described. So did my father. His life as a Black man illustrates how easy it is for the left and right to miss why the city’s Black community in Baltimore has struggled so much.
Almost every conservative critique I’ve read about Baltimore makes the same points: The homicide rate is out of control, taxes are too high and left-wing policies are killing the city.
Here’s what they hardly mention — jobs. The blue-collar jobs that once formed the backbone of the black community in Baltimore have evaporated. So has the stability they provided to the community.
One of the reasons my father had that wad in his pocket is because he had a well-paying job, with union benefits, as a merchant marine. He purchased two homes, helped put three of his children through college and saw much of the world even though he only had a high school education.
The community I grew up in during the 1970s and ’80s was full of men and women like my father. Many of them had blue-collar jobs at places like the Bethlehem Steel plant or the Domino Sugar plant in the city’s inner harbor.
My neighborhood in West Baltimore is now an economic wasteland. Those stable, career jobs have now been replaced with minimum-wage service jobs and temp work. [source]
The middle class and poor are pinched. The 99% are divided and fight amongst themselves, which delights the Most Rich.
“It’s easier to fool people than to convince them that they have been fooled.”
Mark Twain
An alarming report from the Federal Reserve Board (May 2018) showed 40% of Americans would struggle to raise $400 in the event of an emergency — that is 4 out of ten people. A Gallup poll a year later (May 2019) reported 43% of Americans say socialism would be a good thing for the country — that is 4 out of ten people.
Americans increasingly have given up on capitalism, as capitalism is transferring wealth to America’s 1% and the world.
The most energized new politician in America is Alexandria Ocasio-Cortez (AOC). At age 29, AOC became the youngest woman ever to serve in the United States Congress. She is a member of the Democratic Socialists of America.
Some of her plans include Medicare for All, a federal jobs guarantee, a proposed Green New Deal, abolishing ICE (U.S. department of Immigration and Customs Enforcement), free public college and trade school, and a 70% marginal tax rate for incomes above $10 million.
Essentially, the Right hates her; the Left loves her. I’m not here to engage in partisan politics. The question we need to ask is how the world’s beacon of capitalism has become an energized advocate to end the system and replace it with some form of socialism.
The Collapse of Capitalism in America
There are two key points in our downward trajectory highlighted in the illustration below. Point A is the end of World War II about 1945; Point B is around 1975 when Americans starting incurring deficits in our balance of trade.
Each year, as Americans, we engage in trade with other nations. We import goods and services from China, Japan, Germany and other countries. We pay them. We also sell goods and services to these and other nations. They pay us. If we sell more than we buy, we have a Trade Surplus.
From Point A (1945) to Point B (1975), we ran annual Trade Surpluses. This is good. We added more money to our national economy each year. Since Point B, about 1975, we have purchased more goods and services abroad than we sell. This is bad. We are giving our wealth to the world. This leaves less at home for all of us.
Globalization, Reaganomics and Immigration
After WWII, the U.S. and Canada were the only two major nations who had factories. Those in German, Britain, France, Italy, Japan, Korea, China had been destroyed in the war. As Americans, we paid to help rebuild the world through Marshall Plans and other reconstruction programs.
Our factories also ran at 110% so we could provide needed products here — and abroad. Factory workers made good money. The largest employer around 1950 was GM. Average salary in today’s dollars was about $35/hr. Today, the largest employer is WalMart and average pay is somewhere around $9.90/hr.
We were a manufacturing nation in the 1950s and 60s. We are a service-based economy today. Most of us are aware of this. We see it in our paychecks.
Globalization
America helped rebuild the world after WWII. But our factories were old — pre-WWII. We helped competing nations build brand new factories with the latest technology. As these countries began to produce, their products were cheaper than ours. They could make more products for less than we could.
Americans paid for and helped other nations build better factories than us! How fair is this?
Americans also started buying from them — slowly at first. The large increase in Trade Surplus right after the war (Point A) soon started to fall. Today, we buy most of our products made outside the U.S.A. This creates the large Trade Deficit.
Our deficit improved beginning around 2007, due to the Great Recession. We bought less from everyone, while doing our best to sell to the world. The Trade Deficit is somewhat better (less worse) today as we are producing more oil here at home, as well as shipping some of our surplus oil overseas. Yet we continue to buy more and more outside the U.S.A.
Reaganomics
The second significant change in America was the economic policy of Ronald Reagan. This is called Supply Side economics (SSE) or Trickle-Down theory. The idea is simple. Give more money to the Most Wealthy because they know better how to invest. They will use these additional resources to create new businesses, which will create jobs for families.
To start this process, Reagan dropped the top marginal tax rate to 28% from 75% set by John Kennedy in the 1960s. Today it’s around 39% and President Trump’s tax cuts reduced the corporate rate to 22% from 35%.
In theory, this makes complete sense. Americans were fooled — because it made complete sense. It didn’t work for Americans because the Most Wealthy invested outside the U.S.A.
They didn’t build factories in Chicago, Detroit, Baltimore, St. Louis, Cleveland, Kansas City or Milwaukee. They build them in China, Vietnam, Taiwan and other nations outside our country. Some experts claim SSE worked amazingly — by creating over a billion good-paying jobs worldwide — yet not here in America.
Americans (again) paid for and helped other nations build better factories than us! How fair is this?
More importantly, business owners used the Reagan tax breaks to close factories in these cities. The list I posted above is also a list of the Most Dangerous and Crime-ridden Cities in America.
Immigration
We currently have a political war on our southern border. Again, I’m not here to engage in partisan politics. Democrats, in particular elected officials such as AOC, want to open the border and flood the nation with illegal or undocumented workers. Republicans want to close the border and maintain a regulated, managed flow of immigration.
These new workers provide labor to key industries. These include agriculture, construction, hotels and restaurants, and many other service-based jobs.
California desperately needs labor for agriculture. If the border was closed, how would they attract workers? They would be forced to increase the offered wage rates. Rather than say $9/hr, as they pay today, they might have to offer $15/hr or even $20/hr. This would be good for middle class families.
If California can import thousands of new workers from Mexico, Honduras, Guatemala and El Salvador, they can continue paying $9. If the workers are undocumented or illegal, they will work for even less.
When our nation formed, southern Democrats used slave labor to work their fields. Today, western Democrats want undocumented or illegal workers to work their fields or service industry jobs. You have to decide if this is moral or not.
This flow of new labor keeps worker wages from increasing. Contrary to what ACO believes, the Philips curve does work. With low unemployment rates as we believe we have in America, wage inflation should increase. It has slightly — 3% year-to-year.
It should be growing faster. It isn’t — because America is flooding the market with new workers. The “unemployment” rate isn’t as low as published — because America is flooding the market with new workers — many who are undocumented or illegal and do not show up on official reports.
Slavery and the Collapse of Inner Cities in America
A third important event in our nation’s history was the end of slavery in 1865. The southern states imported slaves to work cotton and tobacco fields. This was an agricultural-based economy. With the end of slavery, most dark-skinned, freed human beings fled to the north to work in factories.
Slaves were not allowed to go to school. They had little formal education. Those who left for factories in the north weren’t offered much educational opportunity either. Factory workers do not need college degrees. People working in factories maybe graduated from high school. They wanted their kids to complete high school as well so they could join them in the decent paying factories jobs.
As factories began leaving, those who could leave the inner cities did. White families could get loans to buy houses easier than could Black families. White families found more inviting conditions in suburbs than did Black families. This was the institutional racism of the 1960s.
As talented people left the inner cities, as factories left the inner cities, tax revenue for cities dropped. Inner city government and public services collapsed. Conditions worsened. This caused more people who had the ability to flee to the suburbs. Those who could not get out were trapped. Those most likely to be trapped were primarily Black individuals and families.
If we look at the largest crime areas in America, they are heavily Black populations with high poverty rates. Globalizaton and Reaganomics trapped these people in Economic Dead Zones.
Most Dangerous Cities (Percent Black) [Poverty Rate]:
1. St. Louis: (49.2%) [26.7%]
2. Detroit, MI (82.7%) [39.4%]
3. Baltimore, MD (63.7%) [23.1%]
4. Memphis, TN (63.2%) [27.6%]
5. Kansas City, MO (29.9 %) [18.3%]
6. Little Rock AR (42.3%) [18.5%]
7. Milwaukee, WI (40.0%) [28.4%]
8. Rockford, IL (32.9%*) [22.7%]
9. Cleveland, OH (53,3%) [36.0%]
10. Stockton, CA (14.7%**) [23.7%]
* Chicago percent; ** Sacramenton percent
Nobody intended or planned for this to happen. People simply followed the jobs. White people had more flexibility and could move more easily. They had friends and family in other locations. The history of Black migration came from the south to northern cities. All they could do is return to horrible roots in southern areas. Some did. There weren’t good jobs there either.
War on Americans Over Drugs
With the collapse of inner cities, there was a loss of hope, increased despair, and much suffering. People in such conditions are easy prey to substance abuse. They smoke more cigarettes, drink more alcohol and use more illicit drugs.
With the loss of inner city jobs, it was more lucrative for a young teen male to partner in the illicit drug market. Drug dealers recruited young boys, as they were immune to prosecution. Youngsters stood watch on street corners. They were paid well. This led to a career in illicit markets. Eventually they were “popped.” Juvenile penalties led to adult prosecution and prison.
The teens had no interest in education, as there were no jobs. Once they had a felony conviction on their record, they were barred from the job market permanently. The War on Americans Over Drugs was a war primarily on Black Americans and a pipeline to prison.
Richard Nixon kicked off the War on Americans in 1970 with passage of the Controlled Substances Act. The most used illicit substance was cannabis (marijuana). His own task force, Shafer Commission (formerly National Commission on Marihuana and Drug Abuse), recommended some form of legalization.
Paranoid Nixon believed he had two major enemies: anti-war Hippies and Civil Rights activist Blacks. Both used cannabis. Law enforcement could penetrate both groups simply by saying they smelled it. Probable cause was easy. Nixon made cannabis a Schedule 1 drug, which prevented any research. Nixon fooled America.
Reagan continued the war — Nancy said, “Just Say No.” Bill Clinton and Joe Biden passed harsh penalties for inner cities drug users. Hillary traveled to suburbs to warn housewives about “Super Predators” in the inner cities. The monsters she described tended to be dark-skinned human beings. They didn’t intend to be racist — but all furthered racist policies.
America didn’t repair the broken inner cities. They arrested and incarcerated people who suffered despair and misery. People of Color suffered the most.
Globalization Moves to the Suburbs
Cities were affected first. Yet globalization continues. More and more jobs are moving overseas. More and more products and services now come from overseas. Some 40% of Americans do not have $400 in case of an emergency.
We have shipped our good jobs overseas. There are billions of workers willing to do what we could do — but for much less. For example, when Nike went to Vietnam, workers there were paid about $2.00/hr. Nike offered union positions in air conditioned facilities for $3.50/hr. Vietnamese workers were delighted. Their conditions improved significantly.
Average pay at a Nike factory close to Ho Chi Minh is $54 a month, almost three times the minimum wage for a state-owned enterprise. Ten years ago, when Nike was established in Vietnam, workers had to walk to the factories, often for many miles. [source]
Nike gets a good deal. They would have to pay $20/hr in the U.S. for labor. The U.S. also imposes more regulations. There are EPA rules, OSHA and worker protections, for example. Taxes can be high. Producing shoes in Vietnam is a good deal for Nike. They sell their shoes to Americans for close for $120 to $190 a pair.
World Cup and summer soccer spectacular is over. Nike sells cleated footballer shoes for nearly $300 to suburban kids getting ready for fall back-to-school soccer season.
Nike is making a fortune. Vietnamese workers are living large in Ho Chi Minh city. America is collapsing for the masses. Elite soccer players and pro athletes are doing well. US Women Soccer complained about their low pay. Their base salary had been $100,000 per year.
How about you? Do you make $100,000? Male soccer players had a base of $250,000. After World Cup, counting bonuses and winnings, the US Soccer women earned nearly $300,000 [story]. They complain they are paid unfairly.
“It’s easier to fool people than to convince them that they have been fooled.”
You’ve been fooled. The American Dream is an illusion.
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