May 16, 2012

Hallucinatory Grandeur

      The primary victim amid this week’s cascading bad economic news is not the economy but people’s faith in it.   The latest plunge by large banking houses into high risk ventures that turn calamitous seems to signal that much more is amiss than we realize.  Faith in the “market” has been badly undermined by the debacle at J. P. Morgan, where the extent of loss may rise to $4 billion according to the Financial Times.  Last Fall it was MS Global, this Spring featured Goodman Sachs misadventures, and this week it’s the best of the best (President Obama said so), J. P. Morgan, financier to the world.   

      The worldwide news about money is generally bad. Growth Indicators in China have turned strongly south. Eastern Europe is now officially in recession. Moody’s lowered twenty-six Italian banks’ credit ratings this week. Unemployment in the U. S. is now not expected to decline significantly for the rest of 2012.

      Put in another language, that’s 13 million of our friends and neighbors.  This coming Saturday 400,000 of them will be dropped from unemployment benefits.  They’ve been out too long.

A sinking feeling has spread from coast to coast and while it is clear that the people get it—they see what’s happening—but many national leaders remain true to the phantom of American exceptionalism.

   

      Last week columnist Tom Friedman told a California audience:  “I don’t want the U.  S. to be where the first moon shot took place, I want California and the U. S. to be where the greatest tech minds come from all over the world to do their own moon shoot.  When that happens, there will be plenty of jobs for the butcher, the baker and the candlestick maker.”  

      That same day California’s budget deficit reported a new high of $15.5 billion—threatening entire education, health and environmental systems. Friedman’s visions of grandeur express the popular American cultural faith that drives the nation. One wonders, however, if it’s not made of the same stuff as J. P. Morgan’s faith in “complex synthetic positions using credit default swaps.”

      If it is, and it probably is, pastors and other faith community leaders need all the more to avoid passing out weekly nostrums similar to Mr. Friedman’s grandiose visions, and switch to the hard lessons told and re-told in biblical literature. The teaching there is not about American exceptionalism, but about creating just relations among the whole human family. There is plenty of evidence that that’s exactly what people seek as the pain they endure grows.    

JOBS: THE DISCONNECT

Last Friday’s job report (May 3, 1012) raised serious doubt about whether or if current strategies to put people back to work make sense. Wall Street baron, Mohamed El-Erian, CEO of PIMCO, a global investment management firm with approximately $1.77 trillion of assets under management wrote the next day in the Financial Times

“Friday’s jobs data sounds a warning that should be heard well beyond economists and market watchers.  With just 115,000 new jobs in April, the U. S. economy is not creating enough employment to make a dent in the 12.5 jobless Americans in the labour force, of which a stunning 5.1 million are long term unemployed. Moreover, the disappointing monthly number managed to fall short of analysts’ massively subdued expectation of 160,000, highlights yet again the unusual sluggishness of the labour market.”

Catherine Rampell, editor of the Economix blog At the New York Times pointed out that same day:

"the share of working-age Americans who are in the labor force, meaning they are either working or actively looking for a job, is now at its lowest level since 1981 — when far fewer women were doing paid work. The share of men taking part in the labor force fell in April to 70 percent, the lowest figure since the Labor Department began collecting these data in 1948."

The jackpot question is the disconnect between the predicament of  millions of jobless people and the answers being given—often with fanatical enthusiasm—by civic and political leaders across the country.  In Silicon Valley more than one hundred thousand are unemployed in spite of its booming tech sector.  The California Summit later this week is pushing for “smart regulation, a smart workforce, smart innovation and smart capital.”  The local NOVA Manpower agency calls its strategy “Economic and Workforce Implications in the Age of Ipads, Android Apps and the Social Web.”  The focus is on up-grading the skills of the already up-graded.  

And the one hundred thousand?  The other 3 million in California? The other nine million around the country?   In light of the new jobless data the plain fact is that without manufacturing there is nothing for fat too many people.  Creating tech assembly plants in Cleveland, Newark, Detroit, Youngstown and Silicon Valley could generate tens of thousands of jobs.  The target should be to bring 20 percent of the jobs off-shored to China back to their own country of origin, the USA.   

The Wall Street driven optimism about the next technological fix is blotting many working people out of the picture.  Commentator Edward Luce describes the Silicon Valley mania in a nut shell.  Vince Khosla—who founded Sun Microsystems—sees the Silicon Valley as the story of the world as a series of disruptive technologies that were dreamed up by the bold and brainy. “The future is not set. It belongs to those with the bravest  imagination.”  [in Time to Start Thinking, Atlantic Monthly Press, 2012]

We’ve been on this asteroid before.  Back in the 1980s when  U.S. Central  banks saw larger profits could be had in Japanese, Korean and Brazilian steel-making, they pulled their investments from the great manufacturing centers in the Midwest and West and turned them into a rust belt.  Unemployed workers were told to get training and prepare themselves to work in the new service economy (where the pay was usually below a Living Wage.)  It never happened.

 U. S. companies willingly went along with this new plan for “financializing” profits instead of manufacturing products. Silicon Valley has outsourced at least 1.2 million of those kinds of jobs to China and other Asian locales.

The same dynamic is in play again. It is very clear now that high unemployment appears both chronic and permanent, and the solutions proffered are to upgrade the skills of the already upgraded.  

Paul Krugman:

   

“Consider, if you will, the current state of our nation. Despite hints of economic progress, we’re still in the midst of an immense disaster, in which unemployment and underemployment are devastating millions of American lives. And none of this need be happening! There has been no plague of locusts; we have not lost our technological know-how. Americans should be richer, not poorer, than they were five years ago. Yet economic policy across the board has become almost passive, has essentially accepted this disaster instead of trying to end it.”  [New York Times, April 29, 2012]

As this blog has noted before, we’re following a real theology here. This permanent downturn for the American people is rationalized as a function of God’s natural law!  It's the Divine Will that you should be out of work!

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