American De-Industrialization Continues Unabated

The United States of America, the world’s sole and absolute superpower, is the embodiment of all that we talk about when using the term “modern, highly developed, industrialized nation.” But this description is actually no longer accurate. The USA has been going through a process of de-industrialization for some time now and the economic crisis has dramatically accelerated that process. To be accurate, the USA should now be described as a “partially industrialized bubble nation.”

What this means is that, as far as the Gross Domestic Product (GDP) is concerned, income from industrial sales in the USA is less than that of other, typical industrialized nations like Germany, Japan or France. Aside from private consumption, the service sector dominates the economy, a significant portion of which is represented by financial services; in other words, mainly by bookkeeping entries.

At the beginning of World War I, the United States had already largely overtaken Great Britain as the world’s premier power and continued to expand its leadership throughout the 1920s up until the Great Depression hit. It also became the world’s leading industrial power, best characterized by the Ford Motor Company with its assembly line technology, the onset of the oil economy and the resultant boom in automobiles.

But even back then, the American brand of capitalism was already showing several unique characteristics.

In contrast to most other industrialized nations, the U.S. has placed no particular value on a well-trained workforce. Below the professional level of engineers and technicians, workers have been largely unskilled and have learned their skills on the job.

In contrast to most other industrialized nations, the U.S. has never accepted the concept of free and influential labor unions. Labor organizers who were too successful were either murdered or convicted of murder and later executed. The most successful anti-union tactic was the infiltration of corrupt politicians into positions of leadership within labor unions. The result today is that American workers are almost completely at the mercy of their employers. One to two weeks of annual vacation is the norm, and workers can still be fired for any reason, at any time.

In addition, the education system in America is unlike that of almost any other industrialized country. Free education is available only at primary and secondary levels; beyond that, community and technical colleges and universities are so expensive that children in lower socioeconomic classes have little chance of attending unless they are “gifted” and get scholarships. The education provided by the public school system is often so inferior that graduates who can’t afford better schooling have little chance of ever getting the knowledge and skills necessary to lead fulfilling lives. Instead, the focus is on producing nationalistic dimwits who know nothing but their own country. Television exacerbates this effect because America is the home of “dumbed-down” television, affecting seventy five percent of the population. These circumstances are also responsible for preventing the development of a social democratic political movement like those that exist in practically every other industrialized country.

The remaining twenty-five percent, i.e., those whose parents are wealthy enough to pay for their continued schooling, receive top-notch educations, the likes of which is unknown in virtually any other nation. It’s no coincidence that most Nobel Prize winners come from the United States or work in American universities.

This has resulted in a deeply divided society. On one side are the capitalists, bankers and, closely associated with them, the well-educated upper class. On the other side is the proletariat, kept uneducated and simple. Below them are the absolute poorest, who live in slums and support themselves principally by dealing drugs and participating in other criminal activities.

What results is a society of force; a society so shot through with violence that any other value has little or no meaning. There is no solidarity; everything is based on competition. Dog-eat-dog. There are only winners and losers.

You may be tempted to say that we in Germany are headed in the same direction ourselves. Exactly. It’s what Merkel and Westerwelle would like to see, but that’s not the point. The point is that the social structure in the United States displays similarities to the societies of many “Third World” nations, but very little resemblance to societies in other industrialized countries.

There was a huge, pent-up, global demand at the end of World War II that led to a long period of crisis-free expansion for the USA. In addition, the American dollar was the world’s reserve currency and the U.S. especially profited from this expansion. The world has been tied to the dollar ever since the Bretton Woods Accord in 1944. At first there was the safeguard that the dollar was backed by gold, but this practice was abandoned in 1973. Everyone who wanted to do business globally had to buy dollars. Dollar-based bonds issued by the U.S. Treasury were the only “safe haven,” and central banks around the world put their money in the U.S. Treasury. The result was that the United States was able to sell as many bonds and print as many dollars as it wanted without fear of inflation, as would have been the case under any other circumstances.

In this way, the rest of the world was supporting the USA and it wasn’t particularly necessary for Americans to produce industrial products. Whenever it was necessary, there was little need to produce anything of quality because the domestic market was so gigantic. Automobiles built by G.M., Ford and Chrysler, for example, often broke down within months of purchase, illustrating the frivolous nature of the American industry. American cars were virtually impossible to sell outside the United States. If G.M. wanted to sell cars in foreign countries, it turned to Germany’s Opel to design and build them; the same is true of Ford and its relationship to Ford in Cologne.

A foreign journalist living in the United States was given a G.M. compact to use. It had to be towed three times within the first six months. When he asked if that was normal, he was told, “Yeah, if you’re driving a G.M. product. If you want something better, you need to buy Japanese.”

When Volkswagen wanted to build its Golf model directly in the United States, the company built an entirely new factory in Westmoreland, Pennsylvania. They never reached the planned production figures though because Volkswagen was accustomed to using experienced craftsmen with relatively high cultural levels. The experiment had to be abandoned after several tries and the factory in Westmoreland was permanently closed.

When word gradually spread that Detroit automobiles were of inferior quality, all three American car manufacturers responded with attempts to inoculate their customers with doses of chauvinism: Buy American! Dealerships were festooned with American flags and banners. This took on a life of its own with auto dealers competing with one another to have the biggest flag. When the foreign journalist mentioned earlier last returned to the United States, he reported seeing a gargantuan American flag flying over a dealership on a 150-foot flagpole.

Instead of flying gigantic flags, no one apparently ever came up with the idea of building better cars.

Of course, none of this means that there is no longer any industry in the United States or that one can’t find quality merchandise. Don’t forget that two of the five biggest petroleum companies are American, nearly all large pharmaceutical firms are headquartered there and, in the areas of chemicals and petrochemicals, the United States leads the world. It should also be noted that G.M., despite all its problems, was the world’s largest car manufacturer until early 2008. Finally, it must also be noted that the United States leads the world in electronics. One need only mention companies like IBM, Microsoft, Google and Hewlett-Packard.

Still, the United States has far less industrial turnover than the European Union, despite the fact that they have roughly the same population and GDP.

The military complex, interwoven with space and air travel, also makes up a significant part of American industry. The U.S. has historically been a leader in this area and remains largely so today. But here we have another example of the quality problem so endemic to American manufacturing. The F-104 “Starfighter” was a fighter jet that quickly proved to be almost impossible to fly and was therefore never produced in any quantity for the U.S. Air Force. The vast majority of those produced were sold to Germany because, at the time, Germany needed a standard fighter jet.

Despite the fact that from the first day of deployment one Starfighter after another dropped out of the heavens, the German government insisted on buying more of them. And, despite the fact that most of the German pilots to go down with their Starfighters perished in the crashes, the government stubbornly stuck with the Starfighter program. Of the more than 700 planes purchased (and at a horrendously high price), more than 200 of them crashed. There was never any official inquiry as to why German politicians were so hooked on the aircraft, but it’s highly likely that corruption and toadying subservience to the United States played a role.

There are also obvious parallels to today’s German politicians and their attachment to nuclear energy plants despite the availability of environmentally friendly alternatives. But that’s not the subject here either.

The actual 2008 crisis began in the United States, originally as financial and real estate crises. These crises then went trans-oceanic, hitting other countries and becoming, for all intents and purposes, a global crisis. It then returned to the United States as an export crisis, as American exports collapsed catastrophically. The financial crisis, followed by the export crisis, led to massive layoffs in a nation where there are virtually no employment protection laws. The crisis then grew still worse as domestic consumption began to dry up.

A downward spiral began that eventually led to numerous factory closures. The process of de-industrialization accelerated and to this day shows no sign of slowing.

Meanwhile, this vicious circle of layoffs, factory closures and decreasing demand has cost 7.2 million jobs – 7.2 million long-term job losses!! That’s by far the biggest job loss since records have been kept. However, the tendency toward job cutbacks actually began in 2007, before the onset of the actual crisis.

All this has led to an unemployment figure, seasonally adjusted, of 15 million workers, not including those who can’t be proven to have applied for work in the last twelve months. That’s an unemployment rate of seventeen percent!

How does that square with recent reports that the United States has already entered the recovery stage, that GDP has begun to increase and that the stock market is on the rise?

Well, the fact is that the United States has injected enormous, unimaginable quantities of money into banks, insurance companies and mortgage institutions, and has additionally instituted a cash-for-clunkers program, as well as other economic stimulus measures. All this shows up in the GDP numbers but has yet to create enough jobs to offset the avalanche of terminations.

There’s only one thing that is already clear: There’s no recovery in the United States. All hope is in vain. Without jobs and incomes, there will be no recovery.

Exports aren’t looking much better either (just like here in Germany). It’s true that international trade, after suffering a crisis shock that sent it tumbling 50 percent, has begun to recover, showing improvement of 25 to 30 percent. But compared to the pre-crisis days, that’s still a disastrous collapse.

The relative increase in exports, however, has done nothing for unemployment statistics. I’ll close with a quote from the blog “Economic Crossfire.”

“The American labor market is one huge disaster, readily apparent from official data and relative charts, even considering all the whitewash involved. A recovery without jobs and incomes is just an illusion. The United States continues in crisis mode because credit losses will continue to rise and it will continue in crisis mode because the weak economic recovery in the labor market isn’t sustainable; it can only continue with massive injections of tax dollars, increased government debt and by letting the treasury presses print more and more money.”