Foreign Policy Blogs

The US Economy: 'We Are Losing Our Way'

I had meant to post this the day it came out, but as usual, my time became cluttered with more timely demands, yet, I thought it important to post this commentary by Bob Herbert — his last for the New York Times — on the current state, and direction, of the US economy. His thoughts are compelling. What’s more surprising to me is that I work on Wall Street and there seems to be a fundamental “disconnect” between the US economic outlook painted by Wall Street economists, and that presented by more independent and objective economic minds. Each side has their arguments, but only time will tell where it will all lead. Fortunately, my outlook is grounded in real life. I am too close to turn a blind eye to the every day struggles and hardships of ordinary working folks, and the middle-class — the backbone of the US economy. I think Bob Herbert has it right. Something is awry, and it is time people wake up, get active and get involved in holding our political and business leaders accountable. Here is what he had to say…

NYT (Mar 27) – So here we are pouring shiploads of cash into yet another war, this time in Libya, while simultaneously demolishing school budgets, closing libraries, laying off teachers and police officers, and generally letting the bottom fall out of the quality of life here at home.  Welcome to America in the second decade of the 21st century. An army of long-term unemployed workers is spread across the land, the human fallout from the Great Recession and long years of misguided economic policies. Optimism is in short supply. The few jobs now being created too often pay a pittance, not nearly enough to pry open the doors to a middle-class standard of living.

Arthur Miller, echoing the poet Archibald MacLeish, liked to say that the essence of America was its promises. That was a long time ago. Limitless greed, unrestrained corporate power and a ferocious addiction to foreign oil have led us to an era of perpetual war and economic decline. Young people today are staring at a future in which they will be less well off than their elders, a reversal of fortune that should send a shudder through everyone.

The U.S. has not just misplaced its priorities. When the most powerful country ever to inhabit the earth finds it so easy to plunge into the horror of warfare but almost impossible to find adequate work for its people or to properly educate its young, it has lost its way entirely.

Nearly 14 million Americans are jobless and the outlook for many of them is grim. Since there is just one job available for every five individuals looking for work, four of the five are out of luck. Instead of a land of opportunity, the U.S. is increasingly becoming a place of limited expectations. A college professor in Washington told me this week that graduates from his program were finding jobs, but they were not making very much money, certainly not enough to think about raising a family.

There is plenty of economic activity in the U.S., and plenty of wealth. But like greedy children, the folks at the top are seizing virtually all the marbles. Income and wealth inequality in the U.S. have reached stages that would make the third world blush. As the Economic Policy Institute has reported, the richest 10 percent of Americans received an unconscionable 100 percent of the average income growth in the years 2000 to 2007, the most recent extended period of economic expansion.

Americans behave as if this is somehow normal or acceptable. It shouldn’t be, and didn’t used to be. Through much of the post-World War II era, income distribution was far more equitable, with the top 10 percent of families accounting for just a third of average income growth, and the bottom 90 percent receiving two-thirds. That seems like ancient history now.

The current maldistribution of wealth is also scandalous. In 2009, the richest 5% claimed 63.5%  of the nation’s wealth. The overwhelming majority, the bottom 80% [the working and middle-class, people like you and I], collectively held just 12.8% [of the nation’s wealth]. This inequality, in which an enormous segment of the population struggles while the fortunate few ride the gravy train, is a world-class recipe for social unrest. Downward mobility is an ever-shortening fuse leading to profound consequences.

Tax cheat

A stark example of the fundamental unfairness that is now so widespread was in The New York Times on Friday under the headline: “GE’s Strategies Let It Avoid Taxes Altogether.” Despite profits of $14.2 billion — $5.1 billion from its operations in the United States — General Electric did not have to pay any U.S. taxes last year. As The Times’s David Kocieniewski reported, “Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore.”  GE is the nation’s largest corporation. Its chief executive, Jeffrey Immelt, is the leader of President Obama’s Council on Jobs and Competitiveness. You can understand how ordinary workers might look at this cozy corporate-government arrangement and conclude that it is not fully committed to the best interests of working people.  Overwhelming imbalances in wealth and income inevitably result in enormous imbalances of political power. So the corporations and the very wealthy continue to do well. The employment crisis never gets addressed. The wars never end. And nation-building never gets a foothold here at home.

New ideas and new leadership have seldom been more urgently needed. Read the whole article here.

This is my last column for The New York Times after an exhilarating, nearly 18-year run. I’m off to write a book and expand my efforts on behalf of working people, the poor and others who are struggling in our society. My thanks to all the readers who have been so kind to me over the years. I can be reached going forward at [email protected].

  • Dear Global Markets,

    I completely disagree I dont think that Europe or Asia can the US any lessons on Economics . The European Markets were so weak they had to form the EU just main and yet you still have countries like Greece, Spain, All of Eastern Europe a…nd Portugal whose markets are dragging the world economy down. If the US would stop diluting the dollar against the Euro just to maintain the EU’s integrity we could purchase Europe wholesale and sell it to China. The Euro has no natural resources or commodities to back it up other than the US Dollar. SO when Americans read articles like this we tend to push or political officials towards a more protectionist.


    Kerry Givens (via Facebook)

  • E. Elliott

    Kerry, I respectfully acknowledge your disagreement, but I tend to agree with Bob Herberts words and analysis, which is supported by much of the research I read on Wall Street; as well as my own view, which I will allow to stand on its merits. I might be inclined to rejoin your objection if you would be kind enough to provide stronger empirical support for your objection. Regional economic integration like the EU is nothing new, nor anything different than the regional economic cooperation created under NAFTA. What’s more, regional economic integration is where the world is headed. In addition, are sorely mistaken in your opinion about the economic strength of the EU. An examination of OEDC will show that the EU markets are comparable — and in some instances (eg, manufacturing base, job creation & exports) outperform — the US economic production, despite the laggards in the EU. In additio0n, the US is not diluting the dollar against the EU; the Federal Reserve is engaging in a monetary policy known as quantitative easing in order to allow US products to be more globally competitive, to boost US manufacturing, US exports (ergo, US job creation) against other global currencies. Lastly, it is HIGHLY probable in the not-too-distant future that the Greenback will no longer be the global reserve currency of choice. What will emerge according to views already expressed by the Fed, the US Treasury, the World Bank, the IMF, the EU, the G-20, and the UN, is a currency index composed of major global currencies — called ADRs or GDRs — and probably to be managed by the IMF. I urge you to dig a little deeper to understand where Mr. Herbert, and others who hold a similar outlook are coming from. But as always, thanks for reading the Global Markets Blog.

    E. Elliott


Elison Elliott
Elison Elliott

Elison Elliott , a native of Belize, is a professional investment advisor for the Global Wealth and Invesment Management division of a major worldwide financial services firm. His experience in the global financial markets span over 18 years in both the public and private sectors. Elison is a graduate, cum laude, of the City College of New York (CUNY), and completed his Masters-level course requirements in the International Finance & Banking (IFB) program at Columbia University (SIPA). Elison lives in the northern suburbs of New York City. He is an avid student of sovereign risk, global economics and market trends, and enjoys writing, aviation, outdoor adventure, International travel, cultural exploration and world affairs.

Areas of Focus:
Market Trends; International Finance; Global Trade; Economics