Obama’s Donut Economics

The stock market is rallying. The economy will recover by year end, and strong profits among big players like Goldman Sachs, IBM and Google will spread to other big corporations. However, many small businesses and working Americans won’t be cheering.

Since December 2007, the private sector has shed 6.6 million jobs—half in manufacturing and construction. Lousy banking practices and a surge in imports, mostly from China, are the main culprits but are not getting fixed.

President Obama’s bank reforms will fix many abusive lending practices. However his reforms hardly touch Wall Street’s increasing aversion to the ordinary business of making sound loans, and its obsession with abusive derivatives trading and the big bonuses that creates.

The Federal Reserve and FDIC have poured $2 trillion in cheap credit into the banks and financial houses, mostly benefiting the biggest players. Hence, Goldman Sachs and J.P. Morgan post record profits and Citigroup and Bank of America survive when they should simply be dismembered in bankruptcy court. Meanwhile, regional banks that rely on Wall Street for credit simply can’t get enough money to make loans or they end up like CIT Financial and others—broke and bankrupt.

Small and medium sized manufacturers, builders and retailers rely on those disenfranchised regional banks and can’t borrow enough money to sustain operations as the economy recovers. New opportunities in the President Obama’s new green economy will go to big players like GM and to businesses in China, where the government understands global commerce is played by rules of prison football.

China has more than 100 million rural underemployed workers, who if moved into factories could replace every manufacturing job in the United States, Western Europe and Japan. China lacks the technology to capture all those jobs but Beijing recognizes its huge, growing market provides leverage to impose teach-to-sell conditions on the likes of GM and GE.

Beijing maintains high barriers to imports, requires Western companies to transfer technology to sell in China and subsidizes exports to the tune of at least $500 billion a year.

Beijing requires 70 percent of all green energy hardware sold in China to be manufactured there. Buick is a top-selling brand, but GM can’t export from Michigan but must produce and source parts in China.

Any suggestion to get tough with Chinese mercantilism is naively labeled protectionism by President Obama and his aids.

Hence, the $789 billion stimulus will create some jobs but those will be mostly low-paying government jobs.

The economy will stage a moderate recovery but few jobs will be created that adequately replace lost high paying manufacturing and construction jobs.

Nevertheless, large companies like GE, GM and IBM are well poised to profit, having downsized domestic operations to service a smaller U.S. market and aggressively expanded in China.

President Obama is serving donuts. The big guys will get the cake and working Americans the hole inside.

PETER MORICI is a professor at the Smith School of Business, University of Maryland School, and the former Chief Economist at the U.S. International Trade Commission.








More articles by:

PETER MORICI is a professor at the Smith School of Business, University of Maryland School, and the former Chief Economist at the U.S. International Trade Commission.

Weekend Edition
September 21, 2018
Friday - Sunday
Paul Street
Laquan McDonald is Being Tried for His Own Racist Murder
Brad Evans
What Does It Mean to Celebrate International Peace Day?
Alexandra Isfahani-Hammond
Hurricane Florence and 9.7 Million Pigs
Nick Pemberton
With or Without Kavanaugh, The United States Is Anti-Choice
Andrew Levine
Israel’s Anti-Semitism Smear Campaign
Jim Kavanagh
“Taxpayer Money” Threatens Medicare-for-All (And Every Other Social Program)
Jonathan Cook
Palestine: The Testbed for Trump’s Plan to Tear up the Rules-Based International Order
Jeffrey St. Clair
Roaming Charges: the Chickenhawks Have Finally Come Back Home to Roost!
David Rosen
As the Capitalist World Turns: From Empire to Imperialism to Globalization?
Jonah Raskin
Green Capitalism Rears Its Head at Global Climate Action Summit
James Munson
On Climate, the Centrists are the Deplorables
Robert Hunziker
Is Paris 2015 Already Underwater?
Arshad Khan
Will Their Ever be Justice for Rohingya Muslims?
Jill Richardson
Why Women Don’t Report Sexual Assault
Dave Clennon
A Victory for Historical Accuracy and the Peace Movement: Not One Emmy for Ken Burns and “The Vietnam War”
W. T. Whitney
US Harasses Cuba Amid Mysterious Circumstances
Nathan Kalman-Lamb
Things That Make Sports Fans Uncomfortable
George Capaccio
Iran: “Snapping Back” Sanctions and the Threat of War
Kenneth Surin
Brexit is Coming, But Which Will It Be?
Louis Proyect
Moore’s “Fahrenheit 11/9”: Entertaining Film, Crappy Politics
Ramzy Baroud
Why Israel Demolishes: Khan Al-Ahmar as Representation of Greater Genocide
Ben Dangl
The Zapatistas’ Dignified Rage: Revolutionary Theories and Anticapitalist Dreams of Subcommandante Marcos
Ron Jacobs
Faith, Madness, or Death
Bill Glahn
Crime Comes Knocking
Terry Heaton
Pat Robertson’s Hurricane “Miracle”
Dave Lindorff
In Montgomery County PA, It’s Often a Jury of White People
Louis Yako
From Citizens to Customers: the Corporate Customer Service Culture in America 
William Boardman
The Shame of Dianne Feinstein, the Courage of Christine Blasey Ford 
Ernie Niemi
Logging and Climate Change: Oregon is Appalachia and Timber is Our Coal
Jessicah Pierre
Nike Says “Believe in Something,” But Can It Sacrifice Something, Too?
Paul Fitzgerald - Elizabeth Gould
Weaponized Dreams? The Curious Case of Robert Moss
Olivia Alperstein
An Environmental 9/11: the EPA’s Gutting of Methane Regulations
Ted Rall
Why Christine Ford vs. Brett Kavanaugh is a Train Wreck You Can’t Look Away From
Lauren Regan
The Day the Valves Turned: Defending the Pipeline Protesters
Ralph Nader
Questions, Questions Where are the Answers?
Binoy Kampmark
Deplatforming Germaine Greer
Raouf Halaby
It Should Not Be A He Said She Said Verdict
Robert Koehler
The Accusation That Wouldn’t Go Away
Jim Hightower
Amazon is Making Workers Tweet About How Great It is to Work There
Robby Sherwin
Rabbi, Rabbi, Where For Art Thou Rabbi?
Vern Loomis
Has Something Evil This Way Come?
Steve Baggarly
Disarm Trident Walk Ends in Georgia
Graham Peebles
Priorities of the Time: Peace
Michael Doliner
The Department of Demonization
David Yearsley
Bollocks to Brexit: the Plumber Sings