Hundreds of years ago the Incas would sacrifice virgins to appease their Volcano God.
The Gods and methods of sacrifice may have changed, but the tradition remains.
Like the Incas of old, we find ourselves helpless against forces we do not understand. The foundations of our economy shake and falter in terrifying ways.
In our desperation for answers we turn to High Priests of Economics who tell us these evils have befallen us because of our sins. We must sacrifice the innocent to the Volcano God or it will destroy us all.
The High Priests of Economics never explain exactly how these sacrifices will fix the economy, nor do they mention that the sins in question might be their own. Yet we still rush to offer up our children's futures through unpayable debts while never considering that there might be better alternatives.
Sacrificing Jobs on the Cross of Free Trade
"Jesus Christ is Free Trade, and Free Trade is Jesus Christ."
- Dr. Robert Browning
The High Priests of Economics tell us that "globalization cannot be stopped," just like the wrath of the Volcano God. We've been told that there is no alternative to neoliberal globalization other than utter ruin.
The High Priests tells us that the destruction wrought by "Globalization is good" and should be embraced, and those that denounce multinational corporations are not just wrong, but dangerously wrong.
There is no shortage of politicians and media outlets who will tell you that free trade agreements are a "win-win" proposition, and that they will always create more jobs than they will destroy.
Yet history shows otherwise.
A good example is NAFTA. Despite predictions that NAFTA would create 170,000 American jobs in just the first two years, Congress set up the NAFTA-TAA (Trade Adjustment Assistance) program for displaced workers. Between 1994 and the end of 2002, 525,094 specific U.S. workers were certified for assitance under this program. Because the program only applied to certain industries, only a small fraction of the total job losses were covered by this program.
"Outsourcing is just a new way of doing international trade."
- N. Gregory Mankiw, chairman of Bush's Council of Economic Advisors
What's more, NAFTA job losses are skewed towards high-paying jobs.
Since 1979, the real wage structure of our economy has moved significantly downward, as increasingly more workers have slipped into lower income brackets. NAFTA contributes to this trend: while only 21% of jobs in the 1989 economy were in the high-wage bracket, 23% of the jobs eliminated by NAFTA trade fall in that category. In contrast, the low-wage bracket represented 36% of 1989 jobs but only 32% of NAFTA casualties.
And it wasn't just the wages of Americans that fell. The wages of manufacturing workers in Mexico have done nothing but go down in relative terms. In 1993, Mexican hourly compensation costs for production workers in manufacturing were 14.5% of those for their counterparts in the United States. By 2001 they had fallen to 11.5% of U.S. costs.
This shouldn't surprise anyone. David Ricardo, legendary economist and free-trade proponent, explained how this dynamic worked nearly two centuries ago.
"If instead of growing our own corn... we discover a new market from which we can supply ourselves... at a cheaper price, wages will fall and profits rise. The fall in the price of agricultural produce reduces the wages, not only of the laborer employed in cultivating the soil, but also of all those employed in commerce or manufacture."
- David Ricardo, Des principes de l'economie politique et de l'impot, 1835
So you see, your wages are supposed to fall with free trade globalization. Those who worship the Volcano God knew this all along. They also knew that our manufacturing base was going to move south of the border when NAFTA was passed.
What they didn't bother telling us is that a nation that consumes what it doesn't produce is destined to become poorer, and the idea of a service-based economy is a non-starter.
"The causes of wealth are something totally different from wealth itself. A person may possess wealth i.e. exchangeable value; if, however, he does not possess the power of producing objects of more value than he consumes, he will become poorer. A person may be poor, if he, however possesses the power of producing a larger amount of valuable articles than he consumes, he becomes rich. The power of producing wealth is therefore infinitely more important than wealth itself; it insures not only the possession and the increase of what has been gained, but also the replacement of what has been lost. This is still more the case with entire nations (who cannot live out of mere rentals) than with private individuals."
- Freidrich List, The National System of Political Economy
The High Priests just don't understand why we can't accept our wages falling and our nation getting poorer. You must suffer for the greater good, of which we understand but you cannot. Or to put it another way:
...the sufferings of these workers are inseparable from the progress of industry, and are necessary to the prosperity of the nation, he simply says that the prosperity of the bourgeois class presupposed as necessary the suffering of the laboring class.
Some may dismiss this quote because it was made by Karl Marx. However, Karl Marx was pro-free trade. He supported it because he believed that it would engender conflict between the working class and the rich, and thus hasten the day of social revolution.
Free trade means the freedom of movement for capital. However, the laws against the free movement of labor remain. Thus, when it comes to free trade, those who control capital will always have the advantage.
What the High Priests did not anticipate was a failure of the system from the bottom up through bankruptcy of households, small businesses and communities. That is what happened late last year. Such widespread insolvency threatens the very system that the High Priests depend on. Without this system no one will be willing to sacrifice their children to the Volcano God. Without those sacrifices the priests lose power.
People might even commit the ultimate heresy: toss out the neo-liberal economic model.
Sacrifices for the High Priests
"Capitalism will never fail because Socialism will always bail it out."
- Nathra Nader
In late September 2008, capitalism was on the verge of failing.
The reason for this calamity wasn't because the government taxed too much or spent too much.
It wasn't because the Federal Reserve raised interest rates or contracted the money supply.
It wasn't because the American consumer stopped spending.
It was because the financial system knowingly overpriced a major financial asset class, and then leveraged itself against that asset class in the vain hope that the Day of Reckoning never came.
It's really quite simple when you break it all down.
The High Priest of Economics realized that something had to be done. So he came to Washington and told us that unless we willingly gave sacrifices to the Volcano God we would all be destroyed.
Congress must approve a $700-billion US financial bailout or see the lifeblood squeezed from the world's richest economy, the U.S. central bank chief warned Wednesday, as the crisis overran the presidential campaign.
Bush administration officials warned of a looming economic disaster akin to the Great Depression of the 1930s if an angry and rancorous Congress failed to act swiftly to fund a bailout that would be larger than the total cost of the Iraq war.
There was no time to debate this. Besides, the High Priests had explained before there was no alternatives anyway. No one would be held accountable because the Volcano God answered to no one.
If anyone was guilty for angering the Volcano God, it was us. It was our sins that brought us to the edge of doom, so we better cough up those virgins pronto.
Well, that's what the Priests told us. It turns out that Paulson and Bernanke lied to us. Bernanke was then rewarded for his lies by being re-appointed as High Priest by President Obama.
Other problems with the bailout have also come to light. For instance, instead of making a profit, it will instead lose up to $200 Billion.
Instead of the banks using that money to lend to small businesses to produce jobs, the TARP banks are cutting back on lending at the fastest rate on record.
"There has been nothing like this in the USA since the 1930s," he said...Not only is that unprecedented, but it is also a record decline in percent terms — down at over a 12% annual rate on a 13-week basis...these declines in lending activity are triple the most severe downdrafts we have seen in the modern era — there is no comparison.
So what did the bank do with all those hundreds of billions of dollars of taxpayer money if they aren't lending it out? Why they used it to make risky bets in the stock market.
"Little of the bailout money given to banks seems to have been passed on to businesses or consumers. But it must have gone somewhere and it might have gone to the proprietary desks of the banks to punt the markets... Clearly, someone has been buying, and given that it hasn’t been ordinary investors and the institutions that does just leave the banks.
Nobel Prize-winning economist Joseph Stiglitz says that the problems on Wall Street are worse now than they were before the crisis. Wall Street has gone back to making bigger and bigger bets on the economy in a way that resembles gambling at a casino.
"There's no fundamental change in the way the banks are run or regulated, there's just fewer of them."
- Peter J. Solomon, former Lehman vice chairman
To be fair, the banks have used the taxpayer bailouts for more than just speculating in the stock market. They've also used it to lobby lawmakers to prevent reforms in the financial system. They've also given themselves massive bonuses.
It's understandable for a commoner to wonder what was the point of bailing out Wall Street banks if they aren't going to lend the money (much like what happened in Japan in the 1990's).
Never fear. The High Priests will answer those questions. Just look at this headline:
We saved the world from disaster, Fed's Bernanke says.
The Volcano God was appeased by our sacrifice. Obama agrees.
Yes, the job market continues to get worse and worse. Yes, bankruptcies are at epidemic levels. Yes, the credit crunch is intensifying. Yes, foreclosures are hitting new records. Yes, almost 35 million Americans are on food stamps and 39 million people live below the poverty line.
But if we hadn't bailed out the bankers so that they could cut off credit to small businesses while using the bailout money to speculate on the stock market, things would be much worse. What's that? You say that doesn't make any sense?
You should not say such things or you will bring doom upon us all. Where is your fear of the Volcano God?