So, Paul Krugman got the Nobel Prize in economics for figuring out that, historically, industrialized capitalist countries trade heavy manufacturing goods and technology primarily with each other, rather than with economically underdeveloped countries, right? Brilliant! Well, I am no economist, but from my humble position it has always seemed clear that the major customer for US industrial goods was Europe. That the so-called 3rd and 4th worlds were primarily sources of raw materials, cheap labor, and cheaper consumer goods seemed obvious.
Somehow, the thought of exporting heavy industrial equipment, manufacturing materials or consumer durables to people with little access to electricity, who travel on mostly rough dirt roads, and live in scattered rural villages, brings to mind visions of the ridiculous. Yes, I know that over the past several decades, there have been improvements in transportation and communication as we have shipped entire US-owned industries to those developing countries, and flooded their markets with cheap, subsidized grains, etc; and that subsequently, millions of small farmers have lost their land and livelihoods, and moved into large cities where they live in scrap metal and paper huts on garbage dumps, and try to enter the US illegally in search of work. On the other hand, the cheap toys, clothes, and household items imported from less economically developed countries really helped take the sting out of the increasingly lower real wages and rising cost of living experienced by most of us American wage-workers over the past 30 years and more. But that, apparently, has not been of interest to the Nobel Prize winner, who seems only progress in this process.
And, this leaves me wondering which is more absurd—the fact that Krugman’s colleagues had their noses stuck so deeply within the pages of economic mythology that they could not see the importance of competitive trade between industrialized capitalist economies, or that Krugman thinks this has process has “led to higher wages” and improved standard of living for workers the world over! The average real wage of US workers has not increased in 30 years. During those same 30 years, the rate of profit in industrial manufacturing sector—the real economy—has also declined. As early as 1972, Citibank reported that for 5,100 of the US major corporations, the rate of profit was down and had not reached the level of the mid-1960s. International Bankers were complaining of not only a lack of investment capital, but also a lack of profitable ventures in which to invest. The sales of the steel industry had been falling since 1970, leading to a cut in domestic production. Years before that, oil producers had cut back production and refining for the US market and concentrated on the more profitable foreign markets. We saw layoffs, unemployment, cuts in economic production and expansion, a decline in sales, and falling profit rates long before the so-called “energy crisis” of the 70’s. To paraphrase our leader, President Bush, this sucker started going down a long time ago. During the decades since the 70’s we have had increasing inflation, “stagflation,” “jobless recoveries,” and one bubble and bailout after another as the wealthy gamble on the paper bull market and ignore profitability losses in the real economy. Americans might be surprised to know that, as Antonia Juhasz, leading industry critic and expert on corporations and globalization, states in her latest book, “The Tyranny of Oil”, there is more domestic drilling and production of oil going on in the US today than ever before. But it is all for export. No profitable market for it here! US oil companies, her research shows, are stockpiling and hoarding oil. They, and the banks that have bought up oil fields and pipelines, have been the biggest speculators in the oil futures market bidding up the price of oil. US oil companies are the largest internationally. How’s that for “economies of scale” with the power to influence trade?
Krugman taught his fellow economists that governments should subsidize these “key industries” to encourage “large-scale” production,” “competitive advantage,” and “lower prices (!)” The fact that large-scale industries, like industrial agriculture for example, can force small, efficient family-operated farms out of business (in both the US and Mexico) because they have easy access to financial credit, enormous government subsidies, and infrastructure not available to smaller producers, certainly does give large-scale producers a great competitive advantage. But excuse me if, from the point of view of a wage-worker, I have not really experienced the lower prices, higher standard of living, and greater diversity of products that is suppose to come from this. Hey, we used to have over 40 different types of wheat in this country. Now, thanks to large-scale industrialized agriculture, we have four or five kinds (plus a rash of wheat allergies among consumers). My very efficient farmer relatives were forced to rent their land, and finally moved into town to work in factories. Today, to have the standard of living my father was able to provide as an urban factory worker in the 1950’s—a three-bedroom house, large gardens and fruit trees, near good schools and public transportation—it takes two adults working two jobs, full-time, at least. And you can forget the clean air and clean water we took for granted back then. But I am sure that from the heights of the Royal Swedish Academy of Sciences, Krugman’s theories on world trade and prosperity shine more visibly than the real world experiences of myself and the rapidly growing number of everyday low income and unemployed wage-workers the world over. Myopia is also the name of a wealthy hunt club here in Massachusetts.
MARY LYNN CRAMER has dedicated the past twenty-five years to very-low paying “applied economics,” working as a bilingual social worker with families and children. She has degrees in economic history, economic theory and social work. She can be reached at: firstname.lastname@example.org