Reich: Corporations thrive without America

[dave_p]

From prospect.org:

Double Decoupling The rest of the world's major economies no longer depend on America's. Neither do America's own largest corporations / Robert B. Reich 05.02.07

How can investors do so well while the real economy is doing so poorly?

It's because of two great decouplings that have occurred in recent years. First, the rest of the worlds' major economies have decoupled from the United States economy. China, India, Japan, and Europe are now such large markets they can grow briskly even as America slows.

Second, America's largest corporations have decoupled from the United States. Their overseas subsidiaries are booming even as their American operations stagnate. General Electric expects more than half its revenue this year to come from outside the United States for the first time. More than half of Boeing's new orders are from overseas. Ford is struggling in America but doing well in Europe.

In other words, the president's supply-side tax cuts are great for America's global investors, who have been investing their extra money around the world -- either in foreign companies or in global American-based ones. But little or nothing is trickling down to average working Americans.

[HereSince1628]

1. It's trickle out economics...

The trickle down voodoo of Reagan never happened, but now off-shoring is a major way to avoid US regulations and labor costs the trickle out has turned into a flood.

[Lasher]

2. The 2001 & 2003 tax cuts actually encouraged US job loss.

Investors were less compelled to reinvest dividends in US operations, so they instead used their tax cut money to build new offshore facilities. US job creation fell far short of even Junior's own characteristically low goals.

[dave_p]

3. It's bigger than offshoring

Classical offshoring's about using labor elsewhere to undercut rivals at home. This is a case of the goods not even coming home. They don't need home.

The globalization hypothesis is that better-off workers may lose out on earnings, but they ultimately gain as coinsumers through access to cheaper goods produced by lower-paid competitors. There's some evidence for that: Americans were doing pretty well until 2000.

This is something else. The production isn't even necessarily going abroad, but the purchases are. It's more about fiscal policy enriching a tiny elite while letting working Americans' living standards stagnate. The corporations don't even need America.

Another GOP mission accomplished, this time for real.