How America Is Turning into a 3rd World Nation in 4 Easy Steps
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America's working class no longer builds TVs or computers or furniture on assembly lines; they now flip burgers at McDonalds and turn down the sheets at Holiday Inns. And those high-skilled workers who used to design the marvels of manufacturing now manufacture credit default swaps and mortgage-backed securities on Wall Street.
In the 1950's when our economy still embraced Hamilton's 11-point plan, manufacturing used to account for a quarter of GDP, but today it accounts for around a tenth, replaced by the low-wage service sector and Wall Street. And this new economy can't support a middle class. A service sector can't create lasting wealth, nor can Wall Street.
Before NAFTA, the average American taxpayer earned an inflation-adjusted income of $33,400 a year. By 2008, that number dropped to just $33,000. Working Americans maxed out their credit cards and took out a second mortgage on their homes just to make ends meet. Eventually, even that wasn't enough to make ends meet.
On top of that, new financialized industries have risen up that specialize in harvesting even more wealth from the middle class. So-called private equity firms like Bain Capital execute a business model that depends on taking over American businesses, loading them with debt, laying off workers, and outsourcing labor to low-wage nations. Mitt Romney himself described Bain's strategy as "harvesting companies for a profit."
Even American factories that were more profitable than ever, like the Sensata plant in Freeport, Illinois, aren't safe from this outsourcing. Thanks to globalization, it's just a cheaper to employ labor in low-wage nations even if that means laying off 170 American workers and devastating an entire local economy.
Today upwards of fifty million Americans are living in poverty and depend on food stamps. The middle class devolved into the working class, which further devolved into the working poor class.
Local economies are collapsing, states are going bankrupt, and workers are being tenderized for colonization in the near future.
Step 3: Export American Wealth
There's a hefty price tag associated with transitioning from the world's largest exporter of manufactured goods to the world's largest importer of manufactured goods. That price comes in the form of trade deficits.
In 2011, the United States had a trade deficit of over a half-trillion dollars with the rest of the world. Essentially, $558 billion U.S. dollars is being pocketed every single year by developing nations that are now manufacturing the goods that used to be manufactured right here in the United States.
With their pockets overflowing with U.S. dollars, foreign investors begin buying up American industries. Every single second, more than $4,000 of American industry is being sold off to foreign investors.
In a virtuous economy like the United States used to run, wealth is recycled within the community. Revenue earned by the local grocery store is invested in the local bank, which then hands out loans to local businesses to hire local workers who collect paychecks to shop at the local grocery store and so on and so forth.
But when foreign investors are injected into the equation, increasingly larger chunks of wealth are not re-invested in the local economy, but are instead invested overseas in the developing world.
This is one reason why President Obama's stimulus package may not have had quite the bang for the buck as anticipated. When Americans use their extra dollars to buy a new LED television, or new clothes, or home improvements, there's a good chance that a lot of the profits are actually going to overseas investors, stimulating their economy instead of ours.