The Fourteenth Banker Blog

August 1, 2010

The Apocalypse According to the NY Times

Filed under: Running Commentary — thefourteenthbanker @ 12:49 PM

In this Op Ed piece by David Stockman, the NY times hits on four deformations of the US economy created by policy mistakes of the last 40 years, and where they leave us today. Remember David Stockman? He was director of the Office of Management and Budget under Ronald Reagan. So this gives him a measure of credibility in placing blame squarely on his own party for their particular failures. His four deformations are:

  • Failure to balance international accounts and the resulting $8 trillion accumulated trade deficit
  • Explosion of government debt which will take it to Greek style levels
  • The vast unproductive expansion of the financial sector
  • The hollowing out of the larger American economy.

To focus on this one just a bit more:

The fourth destructive change has been the hollowing out of the larger American economy. Having lived beyond our means for decades by borrowing heavily from abroad, we have steadily sent jobs and production offshore. In the past decade, the number of high-value jobs in goods production and in service categories like trade, transportation, information technology and the professions has shrunk by 12 percent, to 68 million from 77 million. The only reason we have not experienced a severe reduction in nonfarm payrolls since 2000 is that there has been a gain in low-paying, often part-time positions in places like bars, hotels and nursing homes.

I will soon be posting on the similarities between the current American system of Political and Economic power concentrated in the hands of few today and how that compares to pre-revolutionary France.  The current manifestations of those power imbalances are different than they were then. We do not have either a dominant church or nobility, but we have power groups that act in a similar fashion. My post, perhaps later today, is intended to cautionary and certainly no endorsement of the type of revolution that occurred in France. Yet, if the Powers-That-Be do not heed the interests of the vast Third Estate, a revolution they will get. Hopefully a revolution at the ballot box. For no nation can stand an apocalypse and keep all measures of civility.



  1. Thanks for the link to the Stockman Op Ed piece. It’s well written – laser focused, accurate and honest. In paticular, I appreciated hearing the whole story, and not just the parts that support a paticular POV. Taking responsibility for past decisions/actions and the results produced is a refreshing change! The Country would benefit from more of this kind of analysis. It’s what leads to genuine UNDERSTANDING of the nature of where we’ve been and what we can and should do about it.

    I live in the OC and get both the LA Times and the OC Register on Sunday. In today’s Register Op Ed section there was a feature story on Milton Friedman (written by James L. Doti of Chapman University). The article emphasized Friedman’s view on freedom/free markets; it went on to decry government spending, government regulation, and our declining faith/attitudes towards free markets. What disturbed me was the authors insistience on DEFENDING Friedman, freedom, individual free choice, and free markets WITHOUT any reference to the real world results of Freidmanism and to what keeps those precious freedoms in balance. The Doti/Friedman piece is an example of the half-true, one-sided approach that our Political, Economic, and Intellectual Powers-That-Be present to the People as TRUTH.

    Here’s the quote from the article that got me going:

    “A society that puts equality…ahead of freedom will end up with neither equality or freedom…[A] society that puts freedom first will, as a happy byproduct, end up with both greater freedom and equality”.

    Oh yeah? Show me the numbers!

    Comment by Susan Marie — August 1, 2010 @ 4:56 PM | Reply

  2. Mr. Stockman is a master of the understatement:
    “It is therefore unseemly for the Senate minority leader, Mitch McConnell, to insist that the nation’s wealthiest taxpayers be spared even a three-percentage-point rate increase.”

    Unseemly? Moronic was the most polite term I could come up with.

    Comment by Dr. Frankie — August 2, 2010 @ 12:49 AM | Reply

  3. I would like to ask people like James Doti and Mitch McConnell how it’s possible that the US had perhaps its greatest growth after WWII (even allowing for the pent-up demand caused be first the Depression, then the war itself), during a time of what would now be called “crushing” tax rates? And how was it possible for companies to pay a good wage, benefits, a defined pension plan, AND a good dividend AND high taxes AND still make a profit? But all we hear now – to justify off-shoring jobs – is “US taxes are too high and so are wages; we can’t compete on the world stage with such a drag to our viability.”
    The fact that so many companies are now multi-nationals, with no allegiance to anything besides the bottom line, has driven this race to the bottom. I once had a debate in the ’90’s with a guy who said the problem as he saw it was that “American workers are greedy – if they would only agree to work for the same wages the workers in Bangladesh make, we’d be fine.” So, it was fine with him that Americans could go live under an over-pass or in shanty-towns, just as long as Corporate America didn’t have to pay decent wages and next to no taxes.
    Krugman’s column in today’s NYTimes no doubt sounds like conspiracy theory to many folks, but I’m not entirely sure he’s not dead on. The elites DON’T get it and they DON’T care about those of us out here trying to raise families and get by on more than subsistence fare.

    Comment by Sandi — August 2, 2010 @ 7:08 PM | Reply

  4. (I can see I need to put my glasses on before I begin typing – yikes! I meant “by”, not “be”. Oh, well.)
    As I drive around my local area, I see empty factories and mills, rotting in the sun like so much roadkill. Some have been abandoned and empty for almost a decade. Now the second stage of deterioration is setting in – the empty storefronts, weed infested parking lots. The only businesses in my small town now are fast food restaurants (near a major north-south fourlane), one department store (down from three), a Walmart, and six car parts stores. Oh, and the variations on “dollar” stores, and one rent-to-own store. Even the utility buildings for sale (for storing lawn mowers, etc.) are now “rent-to-own”! One car dealership is dead and the other is much less robust.
    I haven’t read Jared Diamond’s book yet on how societies collapse, but I am getting a pretty good idea at the micro level. As businesses here have died and not been replaced, I see the town’s tax base dwindle, the young people move out in search of decent jobs, and the town not only shrinks, but becomes a place where only those too old or too poor to move away, remain. The part of the population most vulnerable is left in a world of diminished services – not just governmental, but things like close shopping, transportation, etc.
    So, I ask you – “who pays”? Who pays for business to off-shore jobs? Who pays when corporate America treats its workforce like so much disposable garbage? Next time you hear Tom Donahue of the US Chamber of Commerce whine about the high cost of doing business in the US, remember who ultimately pays. We do.

    Comment by Sandi — August 3, 2010 @ 6:01 AM | Reply

  5. “I will soon be posting on the similarities between the current American system of Political and Economic power concentrated in the hands of few today and how that compares to pre-revolutionary France.”

    I look forward to that post! Thank you.

    Comment by dnarby — August 3, 2010 @ 9:39 AM | Reply


    Comment by Lucy Honeychurch — August 3, 2010 @ 9:42 PM | Reply

  7. […] Paul Craig Roberts of the Reagan years describes the conundrum accurately, adding his voice to David Stockman’s, then drives home the emergency measures to prevent an implosion. What is interesting on both […]

    Pingback by More Talk of Revolution « The Fourteenth Banker Blog — August 16, 2010 @ 8:44 PM | Reply

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