The U.S. economy is fragile for the middle class. Big corporations, the ultra rich and upper-income people are doing well. But for most of the middle class there is high unemployment and underemployment, lost insurance and pension benefits and devalued property. Many have used their nest egg, and many rely on state and federal safety nets. Unfortunately, those programs are being reduced or eliminated by most states and will soon be joined by the federal government.
Other significant economies in the world are faring much better, and middle class prosperity is commonplace. China just recorded a $270 billion trade surplus with the U.S. and continues buying U.S. debt as well as debts from some of the troubled nations in Europe. Japan enjoys a trade surplus as well but suffers from an overvalued currency making exports difficult but their middle class continues to thrive. They continue to record a trade surplus with the U.S. every year and buy U.S. debt. Germany is the premier economy in Europe and claimed late last year that unemployment is at a 20-year low. Their middle class is prosperous.
The difference between the U.S. and other countries might not be in how the respective governments act but more significantly in how their corporations act. In the U.S., big corporations and their surrogates (Chamber of Commerce, Business Round Table et al) have done much to drive down wages for the middle class while reducing taxes significantly for the wealthy and large corporations. Corporations have decimated American unions, leveraged workers to give up benefits and wages to prevent their jobs from being "offshored," and employed lower-wage immigrants to further drive down wages. They consistently oppose a minimum wage or assured health care. It is doubtful they are willing to pay living wages similar to foreign companies. It is increasingly difficult for middle class Americans to find good paying jobs or a path to the upper middle class.
Many U.S. companies invest offshore. They go overseas for more profits and lower taxes often times sending their products back to the U.S. for sale. They expatriate jobs when they do. Oddly, they receive U.S. tax breaks for doing so. As a consequence, the U.S. has a horrific trade deficit every year (over $500 billion in 2010) and doesn't collect enough tax revenue to cover its spending. According to Forbes magazine, Exxon Mobil in 2009 paid over $37 billion in foreign taxes but none to the U.S. even after receiving subsidies from the U.S. government and selling most of its products here. A Japanese or German company would consider it unpatriotic to invest outside their nation unless it benefited their national economy. Subsequently they continue to provide high-paying jobs at home and their middle classes prosper.
Sign Up and Save
Get six months of free digital access to The Sun News
Sergio Marchionne is one example of how a European chief executive behaves. He is the CEO of Fiat Motors in Italy and now also of Chrysler after investing in it when it failed. He saved Fiat from bankruptcy seven years ago and extracted $2 billion from GM to end a joint venture with them. He is now trying to salvage Chrysler, but not to the exclusive benefit of Americans. Italians will benefit greatly. Fiat will produce Jeeps in Italy for export to the U.S., and it will introduce Fiat and Alfa Romeo cars in the U.S. through the Chrysler dealership network. Saving Chrysler kept some good jobs in America but it strengthened Italy's leading company and created even more good paying jobs in Italy.
There are comparable stories in the U.S. Sam Walton, Warren Buffett and Bill Gates come to mind. More often however, American corporations are managed by agents working for their own betterment with complete disregard for the overall effect on the country or its people.. The Wall Street Journal recently reported that U.S. corporations have over $2 trillion in cash on hand. They aren't investing it though. America needs innovative job creation and it should come from these wealthy companies. They should have as much commitment to the nation they thrive in as their foreign competitors do for their countries. I should acknowledge that I worked in one of Sergio Marchionne's organizations.
The writer lives in Myrtle Beach