Now we know!

“Secretary of the Treasury Timothy Geithner said recently that China is holding to its decades-old strategy of stealing American intellectual property, in a pointed statement reflecting U.S. officials’ growing impatience with Beijing.”  (Huff Post, September 25, 2011)

Mr. Geithner said “China is very, very aggressive in stealing U.S. technology”.

The Huff Post report continues:

“They, China, have made possible systematic stealing of intellectual property of American companies and have not…(moved)…to put in place the basic protections for property rights that every…economy needs…”, Mr. Geithner told a forum in Washington.

“We’re seeing China continue to be very, very aggressive in a strategy they started several decades ago, which goes like this:  you want to sell to our country, we want you to come produce here…if you want to produce here, you need to transfer your technology to us”, Geithner said.

Although unusually direct, Geithner’s comments echo a common refrain from U.S. officials and (business) executives.  The new U.S. Ambassador to China, Gary Locke, who has assailed China in the past for its trade practices, has put the defense of U.S. intellectual property among his chief priorities.

(Related to) Washington’s dissatisfaction with Beijing’s trade policies, leaders in Washington have long argued that China’s yuan currency is undervalued, giving Chinese companies a price advantage that costs U.S. jobs. 

Ed Farkas comment:

The issue of intellectual property “started several decades ago” and leaders in Washington “have long argued” that China’s yuan is undervalued.

Putting it in a nutshell, the U.S. government is saying that China is dealing in a very unfair way with America, and the situation has continued for decades.

This being the case, why do we keep on buying from China? 

On a net basis, we are currently sending money to China at the rate of $273 billion per year.  (Official figure; probably the real figure is higher).  We are rewarding China for its unfair behavior by sending China hundreds of billions of dollars every year. 

It is completely insane to send huge amounts of money to China every year over “several decades” while they are dealing very unfairly with us.  If China hasn’t corrected its behavior over “several decades”, obviously it is never going to happen.

Consider a typical ordinary American citizen.  Let’s call her Mrs. Jones.  Mrs. Jones buys food and many other items to feed her family and run her home.  If she finds the store she is dealing with is treating her unfairly, is she going to continue to deal with that store over “several decades"?

Obviously not!  She would have to be insane to continue dealing with that store.  In a lot shorter time than “several decades”, she would find alternate arrangements for her purchases.

Our insane behavior of rewarding China for its unfair practices has continued for more than “several decades”, through successive Republican and Democratic administrations, and generation after generation of members of House and Senate. 

What is the cause of this insane situation?

Good question and simple answer.  The American “business community” has a dream that it will be able to sell to over one billion people in China.  Despite a lot of evidence that this dream will never be reality, the business community continues to pursue this dream. 

In pursuit of this dream, the business community has corrupted the U.S. government so that the government will keep China happy through unrestricted free trade. 

The business community is unconcerned about the “collateral damage”: an impoverished America, 25 million people unemployed and the American dream destroyed.  We can now understand that all the suffering of the ordinary working men and women of America has occurred in support of the vain hope that the business community will be able to sell to one billion Chinese consumers. .

Evidence is found in the same Huff Post report. The report goes on to say “A coalition of 51 U.S. business groups has sent a letter to senators” who are trying to get legislation passed to force adjustment of the yuan to a fair level.

The letter “urges (senators) to focus more on China’s inadequate protection of intellectual property rights and restrictions on market access”.

Ed Farkas comment:

The “51 U.S. business groups” are clearly and blatantly putting their own selfish interests ahead of the interests of 312 million Americans, and are putting pressure on the government to accommodate those selfish interests.

If “51 U.S. business groups” are finding it difficult to succeed in China, why don’t they pack up and come home to America, hire Americans, and be happy to sell to 312 million Americans?

It is unbelievable that “51 U.S. business groups” have vainly pursued their dream of selling to one billion Chinese consumers for more than “several decades” but still have not given up their dream. They are continuing to pursue their dream at the cost of complete destruction of the American economy.

Further Ed Farkas comment

The problems in dealing with China must be very serious to cause Secretary Geithner to come out and make the comments he made.  Geithner is not usually seen as a rebel or as a reformer.

Contrast Geithner’s dark view of China with Secretary Clinton’s cheerleader happy speech concerning China, which she presented in January 2011.

Does Secretary Clinton ever speak with Secretary Geithner?

Click on link immediately below to see my analysis of Secretary Clinton’s nonsensical speech:

Secretary Clinton's speech

Why is Robert Reich doing this?

Robert Reich, Secretary of Labor in the Clinton Administration, had a lengthy article in the New York Times on September 3, 2011.  The article carries on Reich's program of twisting and obfuscating the real history of how we got to our present disastrous situation of 25 million or more unemployed. 

Reich also refuses to mention the one and only one method available to solve our problem and that is to put tariffs on imported goods from foreign countries that don't buy from us in approximately equal quantities.

Reich is a highly intelligent man. He must know that his twists and obfuscations are not factual.  Why is he doing this tremendous disservice to America?

Reich is very popular right now, receiving invitations to be on Wolf Blitzer and other prominent TV and radio shows. There is a strong censorship in place in the media.  Anyone who tells the truth of how our jobs were lost, and says what has to be said about getting our jobs back from overseas, is ostracized and will never be invited to be on TV or in the newspapers.

But someone with Reich's public recognition status should be be able to go against the censorship and speak the truth.  Maybe if he did that he would get even more acceptance on TV and radio!  Breaking the censorship would be big news!

I submitted a rebuttal to Reich's article.  Of course no response from the New York Times. The New York Times is firmly in the twisting and obfuscation camp, especially with their columnist Thomas Friedman.

In any case, here is my rebuttal to Reich's article!

Why does Robert Reich mention the “middle class“ so often (article, September 3, 2011)?  Is it because he doesn’t want to deal with a “lower class”?

Instead, let’s talk about the “rich”, as defined by Reich, and the non-rich.  The clear implication of Reich’s first few sentences is that there is one fixed stream of income.  The rich are getting more than their share of this income, leaving the others, the non-rich, without “enough purchasing power to keep the economy going…”. 

But there is not a fixed income stream to be shared out.  More on this point later!

Why does Reich mention the income of the rich but does not mention the word “income” in relation to the non-rich?  I suspect use of the word “income” would force Reich to acknowledge the major cause of increasing disparity, namely 20 or 25 million of the non-rich are unemployed and therefore without income!  Simple as that!  No need for intricate theories. 

Now we come back to Reich’s phrase about “purchasing power”.  Sending manufacturing jobs overseas has made the American economy a sieve.  People can use their “purchasing power” but it is very difficult to avoid buying a foreign-made item.  So the money spent immediately drains out to foreign countries, rather than staying in America and continuing to work in the American economy.  “Purchasing power” cannot rescue the American economy.

America’s negative balance of trade in manufactured goods with all foreign countries is over $500 billion per year.  This amount is real physical wealth leaving impoverished America and going to enriched foreign countries.

Now we can also go back to Reich’s strong implication that there is a fixed income stream and the rich receive more than their share of it.  If our non-rich had employment, and if we were not suffering a hemorrhage of over $500 billion per year, the rich could continue their present income but the non-rich would have more income!  In other words, the pie would be bigger.     

Reich has an explanation for lack of employment:  “…new technologies – container ships, satellite communications, eventually computers and Internet – started to undermine any American job that could be automated or done more cheaply abroad.”

This explanation has some truth to it but hides the real story of how our manufacturing jobs went overseas.  If we don’t know how we got to our present problem of massive unemployment, we cannot solve the problem.

In the early 1960s, some American manufacturers got the idea of transferring their manufacturing activity to low-wage countries.  Their profits would increase because they would continue to sell their products in the United States at the same prices.  From a small beginning, more and more manufacturers jumped on the bandwagon.

This process of transferring manufacturing activity overseas was solely on the initiative of the manufacturers.  It was not forced by external factors such as competition or technology advances.

The 1960s mark a turning point for the United States, from a world leader in manufacturing and exporting, to starting on the road that leads to today, where the manufacturing sector is a brutally slimmed-down version of its former self.

According to Reich, “Starting in the late 1970s, the middle class began to weaken.”  What on earth is he saying here?  But the fact is that by the late 1970s the continuous transfer of manufacturing activity to overseas locations was having a noticeable effect on the economy. 

Reich further observes: “The middle class nonetheless continued to spend…”.  Is this statement part of a “blame the victim” strategy?  I thought Reich wants people to exercise “enough purchasing power to keep the economy going”. 

The bottom line is that there is one and only one way to solve our unemployment problem and that is to get our manufacturing jobs back from foreign countries, starting with low-tech consumer products.

The survival of the United States of America is at stake.  Our first concern should be our own people and our own nation, not political correctness toward China and the theoreticians who cooked up the trade agreements.