Working for Less– The Downward Spiral of the American Economy

I can recall fading enterprises cannibalizing themselves as they failed. In those cases, Pan Am, US Steel and such, assets were sold off, employees devalued and finally the business went into bankruptcy or was simply sold off.

It appears that we, the US, are in the midst of an orchestrated national devaluation–a downward spiral resulting in decreasing opportunity and increasing poverty. Economically, we’ve gone where we’ve never been. It’s peculiar because some segments of our population have never had it so good, while others have, in our lifetime, never had it so bad. Citing long dead economists as authority to justify the current situation is simply wrong minded–they never could anticipate the world we live in. We are in uncharted economic territory.

Like a failed corporation we have yet to realize that our operating assumptions are misguided. Perhaps Perot was right about the sucking sound from globalization? Maybe we needed to better finance our social programs? Going to war without good reason and without immediate pain (taxes to pay for it) seems dumb in retrospect. Deregulation of companies whose highest goal is to monopolize markets hasn’t worked. Remember the S and L fiasco, Enron, and most recently the banking derivative frauds. Maybe unfettering capitalists isn’t such a good idea?

Think banks learned anything from their downfall in 2007-2008? Check out last week’s MF Global collapse. Think Corzine is the only one now playing with highly leveraged debt? Think again.

Some believe there is a tension between democracy which by its nature supports equal rights and capitalism who ultimate goal is market domination and monopoly. These issues appear unresolved and still evolving.

Why has capitalism succeeded while democracy has steadily weakened? Democracy has become enfeebled largely because companies, in intensifying competition for global consumers and investors, have invested ever greater sums in lobbying, public relations, and even bribes and kickbacks, seeking laws that give them a competitive advantage over their rivals. The result is an arms race for political influence that is drowning out the voices of average citizens

Consider the move to hiring contract employees. Cheaper, probably not–given the hiring contractor’s slice of the money and their need for profit. For the worker, lower salaries and no benefits.

Ginny Townsend, 41, took a job in January as a nursing assistant in the state-run home for veterans here. Technically, she works for a private company that supplies some employees to the veterans home under a state contract. She makes $10 an hour, about half the wage of the public employees working at the facility.

We can argue whether the lower salaried employees offer the same quality services as the previous government direct hires and probably find examples both ways. What we can’t argue about is the impact of such low salaries on the ability of these employees to support themselves and families. On $10/hour they can’t. At $10/hour they will be unable to afford to save for retirement and provide their family’s health care–yes, our republican friends think that high deductible health savings accounts are the answer, but the question is for whom?

The greatest irony of this move is that it probably doesn’t save money!

Economists and other academics who study outsourcing are divided about whether it usually saves a government money. Recent data from Arizona shows that privately operated prisons often cost more to operate than state-run facilities. A study by the Project on Government Oversight, a nonprofit Washington group, found that in 33 of 35 occupations, using contractors cost the federal government billions of dollars more than using government employees.

Medicynical Note: The privatization movement removes income from those who need it most. The policy adds to the cost of the social safety net–consider WALMART’S contract employees who no longer have health care coverage going to emergency rooms for “free care” and needing MEDICAID for health services. Consider how much these minimum wage employees will be able save for retirement? Contracting doesn’t pass the smell test in that it does not result in a net savings and removes money from the economy.

It is but one part of our race to the bottom.

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