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.

April 25, 2018
Stanley L. Cohen
Selective Outrage
Dan Kovalik
The Empire Turns Its Sights on Nicaragua – Again!
Joseph Essertier
The Abductees of Japan and Korea
Ramzy Baroud
The Ghost of Herut: Einstein on Israel, 70 Years Ago
W. T. Whitney
Imprisoned FARC Leader Faces Extradition: Still No Peace in Colombia
Manuel E. Yepe
Washington’s Attack on Syria Was a Mockery of the World
John White
My Silent Pain for Toronto and the World
Dean Baker
Bad Projections: the Federal Reserve, the IMF and Unemployment
David Schultz
Why Donald Trump Should Not be Allowed to Pardon Michael Cohen, His Friends, or Family Members
Mel Gurtov
Will Abe Shinzo “Make Japan Great Again”?
Binoy Kampmark
Enoch Powell: Blood Speeches and Anniversaries
Frank Scott
Weapons and Walls
April 24, 2018
Carl Boggs
Russia and the War Party
William A. Cohn
Carnage Unleashed: the Pentagon and the AUMF
Nathan Kalman-Lamb
The Racist Culture of Canadian Hockey
María Julia Bertomeu
On Angers, Disgusts and Nauseas
Nick Pemberton
How To Buy A Seat In Congress 101
Ron Jacobs
Resisting the Military-Now More Than Ever
Paul Bentley
A Velvet Revolution Turns Bloody? Ten Dead in Toronto
Sonali Kolhatkar
The Left, Syria and Fake News
Manuel E. Yepe
The Confirmation of Democracy in Cuba
Peter Montgomery
Christian Nationalism: Good for Politicians, Bad for America and the World
Ted Rall
Bad Drones
Jill Richardson
The Latest Attack on Food Stamps
Andrew Stewart
What Kind of Unionism is This?
Ellen Brown
Fox in the Hen House: Why Interest Rates Are Rising
April 23, 2018
Patrick Cockburn
In Middle East Wars It Pays to be Skeptical
Thomas Knapp
Just When You Thought “Russiagate” Couldn’t Get Any Sillier …
Gregory Barrett
The Moral Mask
Robert Hunziker
Chemical Madness!
David Swanson
Senator Tim Kaine’s Brief Run-In With the Law
Dave Lindorff
Starbucks Has a Racism Problem
Uri Avnery
The Great Day
Nyla Ali Khan
Girls Reduced to Being Repositories of Communal and Religious Identities in Kashmir
Ted Rall
Stop Letting Trump Distract You From Your Wants and Needs
Steve Klinger
The Cautionary Tale of Donald J. Trump
Kevin Zeese - Margaret Flowers
Conflict Over the Future of the Planet
Cesar Chelala
Gideon Levy: A Voice of Sanity from Israel
Weekend Edition
April 20, 2018
Friday - Sunday
Paul Street
Ruling Class Operatives Say the Darndest Things: On Devils Known and Not
Conn Hallinan
The Great Game Comes to Syria
Jeffrey St. Clair
Roaming Charges: Mother of War
Andrew Levine
“How Come?” Questions
Doug Noble
A Tale of Two Atrocities: Douma and Gaza
Kenneth Surin
The Blight of Ukania
Howard Lisnoff
How James Comey Became the Strange New Hero of the Liberals