By Rob Kall: I wanted to start off citing a little bit from your new book. You
say in it, "The collapse of the Soviet Union in 1991 and the rise of the
high speed internet have proved to be the economic and political
undoing of the West."
That's a big deal! I'd like you to dissect each of those a little bit.
I thought that collapse of the Soviet Union was a pretty good thing.
Why are you saying it's so bad for the US?
::::::::
Rob Kall Bottom Up Radio
I interviewed Paul Craig Roberts on March 27th. This is part one of a two part interview.
Here's the link to the audio recording Podcast.
Thanks to Don Caldarazzo for doing the transcript.
Rob Kall: And welcome to the Rob
Kall Bottom Up Radio Show, WNJC 1360 AM, reaching metro Philly and South
New Jersey, out of Washington Township, New Jersey, sponsored by Opednews.com . Just Google the words "Liberal news," and Opednews.com shows up at the top of your Google search, or one or two [1 or 2] on your Bing.com search. But we're left of Liberal, really. And we're certainly not a Democratic or a Republican site at Opednews.com
My guest tonight is Paul Craig Roberts. He's a
former editor at the Wall Street Journal, he was policy director at
the Treasury, and in recent years he has been just kicking butt talking
about the truth about the economy, about the Constitution, about the
rights in America, and the future of America. He's got a new book out:
The Failure of Laissez Faire Capitalism and Economic Dissolution of the West. Welcome to the show, Paul.
Paul Craig Roberts: Hey, glad to be with you, Rob.
Rob Kall: I think this is the fourth
of fifth time I've had you on the show, which may make you one of the
most, or the most, frequently revisited guests. Your website is Paulcraigroberts.org
. I wanted to start off citing a little bit from your new book. It
just came out the beginning of the year. You say in it, "The collapse
of the Soviet Union in 1991 and the rise of the high speed internet have
proved to be the economic and political undoing of the West."
That's a big deal! I'd like you to dissect
each of those a little bit. I thought that collapse of the Soviet
Union was a pretty good thing. Why are you saying it's so bad for the
US?
Paul Craig Roberts: Well, you know,
Rob, it led to that Neoconservative nonsense about the end of History,
which of course unleashed the notion of American hegemony over the
world, and the ideology behind all of the wars and the aggression that
the United States has been conducting since the George W. Bush
administration. But I'm speaking in the book economically; and what
happened economically because of the collapse of the Soviet Union and
the rise of the high speed internet is that it made it possible for
Western corporations (corporations in the United States, Europe) to
arbitrage labor across national borders.
In other words, when the Soviets collapsed, it
had a big impact on thinking in Communist China and Socialist India.
Their response to the failure of the Soviet Union was to open their
vast, underutilized labor to Western capital. So the corporations found
out that they could produce for their home market offshore in India or
China, dramatically drop the labor cost, and thereby dramatically
increase the profits flowing in capital gains to shareholders and in
performance bonuses to executives.
So the collapse of the Soviet Union began the
arbitrage of of labor, and it ended up separating Americans from the
production of the goods and services that they consume. The economy has
been dead in the water ever since, and the Federal Reserve under Alan
Greenspan tried to substitute - for the missing growth in consumer
income in employment - consumer indebtedness. So we had the rise in
consumer indebtedness, the real estate bubble, the various financial
frauds, and the ongoing financial crisis.
Rob Kall: You also said about this being caused by the high speed internet. How's that tie in?
Paul Craig Roberts: Right. That's what I'm getting to now.
Rob Kall: OK.
Paul Craig Roberts: The
manufacturing goods were produced offshore and sent in. Now. What the
high speed internet allowed the corporations to do was to offshore the
production of professional services, such as software engineering,
information technology; and now, of course, research, design. They
could hire people in India to do this work, and they could send it in on
the high speed internet, and so we have seen the employment for
Americans in rapidly growing fields such as software engineering and
information technology simply dry up. The work is now done offshore and
sent in on the internet. So the consequence of Soviet collapse was to
destroy American manufacturing jobs, and to destroy professional service
jobs that had always been the ladder of upward mobility for American
university graduates.
Rob Kall: Now I've got to say, when I
talk to kids going to college, I say "Don't look for a job that can be
outsourced by the internet." Even radiologists are being outsourced.;
so if you get an x-ray, they send the results to India to have a
radiologist in India do it instead of an American doctor doing it. It's
so scary.
Paul Craig Roberts: Yep.
Rob Kall: You wrote in your article When Truth Is Suppressed, Countries Die -
the first half of the article is mostly about this topic, about how
theorists were saying that we would be transitioning to an information
economy, and did the creative approaches and what have you, and what you
argued was that you've got to have production; you have to have
manufacturing, or if you lose that, you're in big trouble. I wanted
your comment, and I just think that it also ties into the space program,
which both parties are just throwing away and selling off and getting
rid of now, and letting India and China and every other country pick up
on.
It seems to me like -- I've been saying it for
a while now: the US is being strip-mined, and they're basically just
going through us, and we're going to be left a third world country,
which you've written a lot about. Talk a little bit about that and
globalization too, because this is all tied in to corporate
globalization. I've just thrown a lot at you; pick whatever you want to
talk about from it.
Paul Craig Roberts: OK Rob. It's
certainly the case that innovation follows manufacturing. If you're not
manufacturing things, you're out of touch, and you don't know what to
innovate, or how to innovate. So the kind of arguments that we got from
the shills for global corporations (like Michael Porter at Harvard, all
of these people paid to come up with phony studies to reassure
Americans that they weren't really losing anything by closing down the
manufacturing sector), the argument they made was: "OK, look. These are
'dirty fingernail' jobs, and we don't need them. We are now going to
all be white collar workers doings intellectual work innovating! We'll
be doing all the innovations, and the Chinese will have the dirty
fingernail jobs of producing the products that we innovate.
This was the Line, this was the "New Economy" that they talked about. Of course it was all just baloney! Because,
as I said (to repeat myself), if you're not making things, you don't
know what to innovate. You get out of touch with technologies. You
become a Third World Country. We now see from all the surveys that
increasingly, American corporations innovate outside the country where
their offshore plants are. And we recently had a report from twenty
[20] MIT professors who were aided by the graduate students, so we had
twenty professors at MIT who have issued a report that we've lost the
ability to innovate, or we're, in the process, about lost, because
things that are made aren't made here, and so we've lost the ability to
innovate. So I see that as vindication. I've been warning about this
for years, and this study, it was recently reported out in the last
month or two, I think.
The other point I've been making for a decade
about offshore production is not free trade, it's labor arbitrage; and
that all tradable goods and services can be moved offshore. So that you
can very easily have a permanent unemployment rate of 25% or 35%
percent or even higher, because the only jobs that can't be offshored
require hands-on performance: like going to the dentist, or getting your
hair cut, or being served in a restaurant by a waitress, or in a bar by
a bartender. Those kinds of jobs are the only ones that can't be
offshored, and so -
Rob Kall: Paul, can you just
describe what you mean by arbitrage? I think it's usually a word used
to talk about the stock market. What does it mean, and how does it
apply in terms of jobs?
Paul Craig Roberts: It means the
same things as in the stock market if there is a difference in price.
In the case of labor arbitrage, the price is labor. So if the American
manufacturing worker costs $22 an hour (with all the benefits, and so
forth), and the Chinese at the time this started cost 25c an hour
(laughs), you have an amazing labor cost difference. And so they look
at this and they say: "Well, wow! We could really drop our cost of
production by producing with this Chinese labor, because instead of
twenty-five bucks an hour, it's twenty five cents." That's what we mean
by labor arbitrage. They just say, "OK, we're not hiring these
Americans, we're going to hire the Chinese." That's labor arbitrage,
and it has nothing whatsoever to do, nothing is being traded.
There's no free trade, there's no any kind of
trade, it's just labor arbitrage. It's just like if somebody in the
stock market sees a difference in pricing somewhere, they move quickly
to take advantage of it. Now they use these extremely high speed
computers to try to get in front of trades, and they trade on
nano-pennies in nanoseconds. So that's what the labor arbitrage means.
Now let me finish this story. As I warned for a decade, the job
offshoring was undermining employment opportunities in the United
States, and certainly had stopped the rise in consumer income.
Well, two years ago, the Nobel Economist
Michael Spence did the same studies that I've done, and came to the same
conclusion. It was published (I think) as a Council For Foreign
Relations paper. He said the same things that I've said, that the
United States faces a hell of an employment challenge, because so much
has been moved off, and so much more can be. The main function of
globalism is to de-industrialize high-wage countries that are
developed.
The other main result of globalism is to turn
lesser developed countries that had viable agriculture and were
self-sustaining, to turn them into monocultures; supplying like one crop
for global markets, and then that makes them -- first of all, that
destroys the economic-social systems there, and people now are dependent
on food imports. The big farms, of course, haven't room for much of
the population that used to be on sustainable farms. So globalism is a
wrecking force of amazing power to wreck. It doesn't do anything good except for shareholders of big corporations and their managers, or chief executives.
Rob Kall: Now, in your new book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West,
you write, "Globalism and financial concentration have destroyed the
justifications of market capitalism. Corporations that have become too
big to fail are sustained by public subsidies, thus destroying
Capitalism's claim to be an efficient allocator of resources." When you
talk about globalism, I think you're talking about corporate globalism,
which is basically the only globalism we have. Am I right on that?
Paul Craig Roberts: Yeah, sure.
What they mean by globalism is the total free movement across national
borders of capital and production, so that -
Rob Kall: In a sense, by creating
this corporate Globalism system that we have now, we have a system where
corporatism transcends the power and the Democracy of nations! Isn't
that true?
Paul Craig Roberts: Yeah, right.
Well we've seen that, haven't we; in Greece, Italy, and now Cyprus.
Remember when the Greek bailout was up, and the Greek Prime Minister or
President said, "OK, I'm going to put it to vote"? And the EU said, "No
you aren't! The people don't get to decide. You resign right now."
And then they appointed from outside, they appointed the government of
Greece. And they did the same thing to Italy! The Italian Prime
Minister or President or whatever they call him wasn't elected, he was
appointed by the EU bankers.
So now what we see in Cyprus with this new
development where they have redefined bank depositors as investors whose
capital is at risk, they won't let this go to a vote. The Parliament
voted down the first bailout plan, and so the second plan that the
bankers came up with and took to the Cyprus President -they said:
"There's no vote. You can't vote. Either you sign this, and thereby
commit the country, or we're cutting you off from money, and you're
going down the tubes." So the assault on Democracy is widespread. It's
the same thing here. You may remember when Paulson wanted the bailout
for the banks, he wanted the $750 billion, he went to Congress and said,
"Quick, give us some money or there's Martial Law."
So there's no longer - governments don't
represent the people anymore. In Europe, they represent the very
powerful private banks, and they're going to be sure they don't lose any
money; so that shareholders in the banks are being made whole by, in
the case of Cyprus, seizing some share of the bank deposits of
depositors. And what they did in Greece, they cut wages and salaries,
they cut pensions, they cut social services, they sold off public assets
like water companies to private companies, who then doubled the price,
and then that way the suppressed the living standards of the Greek
people in order to pay off bankers, so that the shareholders of the
banks didn't lose any money. Now we have the Dutch Minister saying,
"OK, the Cyprus solution of stealing bank deposits, that's the template
for all future bailouts." It's going to come here, too. Not only that,
Rob -
Rob Kall: You've got a great article that you wrote saying, "It has happened here," based on the Sinclair Lewis book It can't Happen Here. I want to go to another article, you wrote. You wrote an article called While Left and Right Fight, Power Wins. I'm going to get back to it as soon as I do a station ID.
This is the Rob Kall Bottom Up Radio Show,
WNJC out of Washington Township, reaching metro Philly and South Jersey,
sponsored by Opednews.com
. Where you're going to get news that you won't see in the mainstream
media, where you get the kind of news that the mainstream media blocks
from the people that the mainstream media won't cover.
Now, Paul, back to this article, While Left and Right Fight, Power Wins -
I want to start it off and then you can talk about it. What you wrote
was, "My experience with the American Left and Right leads to the
conclusion that the Left sees private power as the source of oppression,
and government as the countervailing and rectifying power, while the
Right sees government as the source of oppression, and a free and
unregulated private sector as a countervailing and rectifying power." A
beautiful, clear way of saying that! "Both are concerned with
restraining the power to oppress, but they take opposite positions on
the source of the oppressive power and remedy."
And you say, "The Right is correct that
government power is the problem, and the Left is correct that private
power is the problem. Therefore, whether power is located within the
government or private sectors cannot reduce, constrain, or minimize
power. " And you talked about how the Founding Fathers had a solution,
that it didn't work, and now we've got accumulation of new dictatorial
powers in the Executive Branch in the name of protecting us from
terrorists, and with deregulation's creation of powerful corporations to
big to fail. Can you talk a bit more about this?
Paul Craig Roberts: (laughs) Well Rob, you covered it about as clearly as -
Rob Kall: Well, OK, yeah, you said
it beautifully and clearly -- so, what's the answer? The Left and Right
are up against each other, do you see a way that the Left and Right can
find some common ground?
Paul Craig Roberts: I don't know.
They don't seem to be able to. They're locked -- you know, generals
fight the last war, and so does the Left and Right. Now, there have
been different times in our history when there was too much private
power, not enough government power as a countervailing force. the
roaring twenties, and then we had Roosevelt and the New Deal, and they
put in financial regulation to put some sort of social control over the
private power, so things got in better balance. Then beginning with the
Clinton [administration], massive deregulations. We had with Thatcher
and in France the massive privatizations of State companies. With
Clinton, this moved so far that they repealed the Glass-Steagall act,
which had separated commercial from investment banking. Once that
happened, we got the financial crisis.
In other words, from Roosevelt giving us some
kind of a balance, what really happened was the entrenched bureaucracy
then got more and more arrogant and abusive, and became gratuitously
interfering in people's lives and in business. I can remember, for
example, in the 80s OSHA would go around -- there are a lot of small
businesses, there's only one door in, one door out; OSHA would go around
and fine people because they didn't have an exit sign over the only
door (laughs). This is an abuse.
There were other cases. In Florida, for
example, there was a father and son, and they had a State permit to
build a house, and they built the house, and the Federal Government
declared that they had built on a wetland and put them in prison for
building a house where they had a permit to build! This is going too
far. And other environmental regulations went too far: they gave
farmers and ranchers lots of trouble for cleaning out the drainage
ditches for re-fencing property. They claimed The Navigable Waters Act
of the United States, and they claimed that cleaning out a drainage
ditch could lead to pollution of navigable waters, even though there's
no navigable water in sight!
So the things got so abusive that it caused a
reaction to the regulation, and then the reaction has gone to far.
They've completely deregulated the financial system, they've taken all
the constraints off of debt leverage, they have taken the position
limits off of speculators. So, it's now gone back to where it was
before Roosevelt (laughs). So this sort of thing happens because it
gets out of balance. When one side runs with it too far it becomes
abusive, it becomes too much regulation, and then it becomes too little
regulation. So keeping the balance requires sensibility, intelligence,
and not ideologies. If the people are committed to ideologies and are
operating ideologically, then it always gets out of balance.
Rob Kall: It seems, though, that
currently we have two parties that are both on the same side, the
corporate side - more than anything else What do you think about that
statement?
Paul Craig Roberts: Well, that's
true, the two political parties. But they're not necessarily identified
with Right Wing and Left Wing. What happened to the Democrats was the
offshoring of the manufacturing jobs destroyed the power of the labor
unions and the ability to finance the Democratic party. See, the
Democrats were financed by labor, the Republicans were financed by
business, and so there was countervailing power. They could contain one
another. Neither side could go too far away from some sort of
balance. But when the unions lost all these manufacturing jobs, and
former cities which were powerhouses in manufacturing just dried up and
disappeared, the Democrats then had to go to the same sources of
financing as the Republicans. So now, both parties are dependent on the
same financing, and this then has made it easy for the corporations to
control both parties!
Rob Kall: So you take it back again
to globalization. Again, globalization has contributed to the loss of
us having two really different political parties. So what do we do
about globalization? Could we just shut it down? When Bush was
president, he just said "We're not going to participate in the Kyoto
treaty." Is it possible that a leader could come along and say, "We're
just not going to participate with the World Bank, and the World Trade
Organization, and NAFTA and CAFTA. We need to re-write all of them!"
Is that something that could change things? Could that make a
difference?
Paul Craig Roberts: I don't think it
could happen because it serves corporations in the short run. You
know, American corporations, not Japanese or even German, not Chinese,
but American corporations are very short term. The chief executive is
there only four of five years. That's the time he has to make his
fortune, and the way they're making their fortune is by offshoring. So
they're not going to want -- and the WTO, NAFTA, all these things were
set up for corporate interest. So since they have the power now,
political as well as economic, particularly the banks, then they're not
going to say, "OK let's get rid of our get rich quick scheme that's
serving us so well." They're not going to do that.
What's happening though is that it's failing.
It doesn't work for the industrial countries, it works for China
(laughs), who gets all the offshored production, and so American GDP
becomes Chinese GDP, and American jobs become Chinese jobs, and American
consumer income becomes Chinese consumer income. What's happening is
the balance of power in the world is shifting completely away from the
West. It's washed up.
Rob Kall: So what you're saying is,
the more trade agreements that Obama and any President signs, they're
basically accelerating the transition of power to China.
Paul Craig Roberts: Exactly. Yeah. And India, other former third World countries, but they're the rising countries now.
Rob Kall: The BriC countries.
Paul Craig Roberts: Look, the
Chinese manufacturing force, you know how large it is? 112 million!
You know how large the American is? Eleven million. Eleven!
Rob Kall: But let me get back: is it
possible if we could find and elect a leader who said "My first step as
the new President is to cancel these global trade agreements." Would
that be possible, if they were able to stand up to all these different
people.
Paul Craig Roberts: How would he get financed to get elected?
Rob Kall: That's another issue, but
could it be done? Could we just step away from them and "These aren't
working. We're going to start over again and write new, real global
trade agreements that reflect on our need to protect our industries and
not let them just be totally destroyed.
Paul Craig Roberts: It can't happen
for the reason I said, that right now it serves the interest for the
power, so they're not going to overturn it. Now, when it becomes
apparent that we've destroyed ourselves, you can't get the power back.
You think the Chinese are going let you all of a sudden let you overcome
this? No. They'll hold the upper hand. They're not going to say "OK,
let's now destroy ourselves the way the Americans destroyed
themselves." I think it's all over with for the West. I don't think
they can come back, and so what we're going to be in is a period of
transition in which the West becomes no longer the ruler of the
universe. It will be slowly declining. In fact, the collapse could be
sudden. We don't know what -
Rob Kall: Now you've written about
that. You've written about how at some point the dollar is going to
burst, and you've talked in some interviews and your writing about how,
in these different bubbles -- are we in the middle of a dollar bubble
right now, a money bubble?
Paul Craig Roberts: Yes. The dollar
is one of the biggest bubbles in history. The Federal Reserve is
creating over a trillion new dollars annually, but the demand for
dollars is not rising by a trillion annually. And so, sooner or later,
this has to affect the price of the dollar, that is, the exchange
value. And we already see the important nations moving to decouple from
the dollar.
We have the BriCs: this is China, Russia,
Brazil, India, South Africa. Altogether now, that's probably about half
the world's population. And it's probably half of the traded goods
(laughs). And so they're setting up a system in which they settle their
trade with one another in their own currencies. The dollar is no
longer used as a reserve currency. They're setting up their own version
of an IMF. They're just going to bypass all the Western institutions.
We see in China and Asia the rise of an Asian currency bloc, which is
being organized around the Chinese currency. We see deals with Japan
and China to settle their trade with one another in their own
currencies.
So the demand and use for the dollar is about
to rapidly constrict. We'll have a situation where the Feds are not
only creating a trillion new dollars more than the demand is growing,
but the demand will be shrinking! And so the thing will blow up. And
when the dollar bubble pops, so does the bond market bubble, the stock
market bubble. We will have the biggest economic catastrophe in the
history of the world, and there is no solution. The United States will
go from being a so-called superpower to a nothing!
It could happen at any time. It's a perfect
storm that the idiot policy makers have created because they don't serve
the public interest, they serve a few rich bankers. The whole thing
has been keyed toward protecting the banks that our deregulation policy
allowed to get to big to fail. Not only that, but the public officials,
the Secretary of the Treasury, the FED, the financial regulatory agency
heads, they're all the former bankers themselves, all their proteges.
You have a situation where the class that caused the crisis is running
the solution, and the solution is to keep the banks from having any
pain; what it does to the rest of us is not their concern.
Rob Kall: I've been calling, along
with a number of others, for an end to billionaires, a "No Billionaires"
program. That the billionaires have just too much power, these
oligarchs are buying and running our politics, our nations. What do you
think about the idea of a no billionaires policy?
Paul Craig Roberts: I don't mind it,
but I don't think that addresses the real issue. Because the people
running the policy are not individual rich people: they are the very
large financial institutions. They may finance billionaires in some
scheme a billionaire has, but the power is Goldman Sachs, JP Morgan
Chase, Citibank, Bank of America. It's these financial institutions,
they have financialized the economy. The economist Michael Hudson has
made it clear that what's happened is Industrial Capitalism is over and
done with. We have Financial Capitalism, and what they do is, they
organize a whole economy so that all the surplus is drawn off in
interest paid to banks.
The banks any longer finance plant equipment
and industries. It's "Debt Peonage," that's what Michael Hudson calls
it, Debt Peonage, where increasing shares of national income are drawn
off into the banks in interest and fees, all that sort of thing. And so
there's no -- even if consumers had growing incomes with an increasing
share drawn off into interest payments, that leaves very little for
increased demand for goods and services. You kill it, you kill the
economy by financializing it. And that's what's really happened.
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