The downward cycle of the U.S. economy

“Free traders are resurrecting class war, not because they are Marxists but because they confuse free trade with global labor arbitrage. ... Committed to a 200-year-old theory that they no longer understand, free traders are cheering on the destruction of middle-class jobs and the dismantling of the ladders of upward mobility that make large income disparities politically acceptable.”

That’s not the view of a radical academic. It’s the opinion of Paul Craig Roberts, former assistant secretary of the U.S. Treasury during the Reagan administration in the Sept. 5 edition of CounterPunch. Robert analyzes the “vicious downward cycle of the American economy.”

Unlike Communists and other revolutionaries, Roberts does not draw the conclusion that this process is an intrinsic feature of capitalism. But when even establishment economists fear for the future of the U.S. economy, the system is indeed in grave crisis.

As Marx, Engels and Lenin stressed, capitalism is a system that, over time, necessarily leads to the concentration of ownership and wealth in fewer and fewer hands, and to growing mass poverty.

These trends do not proceed at a constant pace. For periods of time, various factors can obscure the long-term pattern. In the U.S. and Canada, for example, the powerful upsurge of militant working-class action starting in the late 1930s helped achieve broad gains in living standards and wages for millions of working people. Those gains began to be reversed under the impact of a ruling-class counteroffensive since the late 1970s.

That reversal is evident in many ways, such as the decline in wages for young workers reported by a recent Canadian Labor Congress study.

Roberts gives other examples, such as the “extraordinary increase in income inequalities” in the U.S. “Not so long ago CEOs were paid 20 times more than the average employee,” he writes. “Now some are paid hundreds of times more.” Median household incomes in the U.S. declined for a fifth straight year in 2004, mainly because of “ongoing weakness in the job market.” The U.S. poverty rate has climbed from 11.3 percent in 2000 to 12.7 percent in 2002, adding 5.4 million more persons to the poverty roll.

The majority of new U.S. jobs in the coming decade will be in domestic services that do not require a college education, Roberts says. “This is a strange job outlook for a high-tech economy allegedly benefiting from free trade. Domestic services are non-tradable. The U.S. economy has not created a net new job in tradable goods and services in the century.”

From his perspective, “free trade” has failed to stabilize U.S. imperialism by improving the lives of “native born American” workers and their families. Instead, he argues, the U.S. is declining into the status of a Third World country. “When capital and technology flow from the U.S. to China and India, the productivity of labor in China and India rises. In the U.S. it falls. Outsourcing is eliminating entire American occupations in engineering and information technology (IT).”

Roberts lays the blame on “libertarians and free traders (who) are so emotionally enamored of the market that they have forgotten that markets can as easily work against a country as for it.”

But is the problem simply “emotional”? Or is it the capitalist drive for maximum profits? As Roberts himself observes, “U.S. firms have learned that they can pay foreigners on H-1B and L-1 work visas lower salaries, force their American employees to train their foreign replacements, and then discharge their American workers. Consequently, there is double-digit unemployment among American software engineers, IT professionals and computer programmers.”

In fact, the U.S. Department of Labor is currently reserving some 52,000 high-tech job openings in U.S. firms for H-1B visa holders. They have granted over 600,000 new visas during the last five years, 39 percent of these for workers in computer-related occupations.

Noting that school systems are hiring teachers from the Philippines, India and Jamaica, Robert says, “This practice raises many questions: Does the money saved on teachers salaries go to administrators as bonuses for cost cutting? How can foreigners from outside our culture enculturate American students? What happens to enrollment in U.S. education and nursing curriculums as imported foreigners fill available positions? What happens to the laid off U.S. engineers and technical people who are displaced again, this time from teaching math and science in our schools?”

Roberts is right to warn, “Eventually, all Americans will be working for less, except the fat cats at the top.” But his questions reveal a racist outlook, denying the reality that U.S. imperialism has been built through the exploitation of generations of immigrant workers and slave labor and by using the “big stick” of military might to plunder the resources of the Third World.

Instead of arguing for policies to favor “native born Americans” (or Canadians) over Mexicans, Filipinos or Indians, as Roberts does, working people need to unite with out brothers and sisters around the planet. Rather than fearing the “dangers of class war,” we need to build a powerful, global labor fightback. And instead of shoring up U.S. imperialism, we need to fight for genuine national sovereignty, and for a global economy based on cooperation rather than the domination of a handful of transnational corporations.

Reprinted from Peoples Voice (, newspaper of the Communist Party of Canada.