EDITORIAL FOR AUGUST 3-7, 2011

I’m CAVE MANager Paul Lotsof.   If you’ve been following the news reports, unemployment is the highest it’s been since the depression of the 1930s, our federal government is up to its ears in debt, most state governments are close to insolvency and our schools are suffering from a lack of funding.   People are  being kicked out of their houses because they can’t make the payments.  Our newspapers and TV stations are telling us that all of these problems are the result of “the recession”.    But can a recession really be a cause of problems?

When I was a child I had a toy wagon that I loved to ride around in.   One day the wagon stopped working, and that day my great uncle came to our house for a visit.   I asked Uncle Julius to take a look at my wagon and see if he could figure out what was wrong with it.   He looked at the top and he looked at the sides and then he turned the wagon upside down.   I asked him what was wrong with it.   He shook his head and proclaimed, “It’s broke!”

By telling me that the wagon was broke, Uncle Julius hadn’t really shed any light on why the wagon didn’t work.   It would have been a lot more helpful if he’d told me something about how it happened to get broke and what needed to be done to fix it.

The same logic applies to our economy.   Attributing the mass unemployment and similar misery to “the recession”  sheds no light on the cause of the problem or what needs to be done to fix it.   The recession doesn’t cause anything.  It’s just the name we have given to the sick economy we have.

A few years ago, when the recession started, our media told us that it was caused by several factors.   For one thing, some crooks in New York City had been selling securities for way more than they were worth.   We were also told that careless loan officers had been granting home mortgages to people who were poor credit risks.   And finally, we were told that big corporations were paying their top executives as much as some professional football players make.   The difference is that football players work hard and earn the millions that they make.  Highly paid business executives are con artists.

I don’t doubt that some crooks on Wall Street, some overpaid corporate types, and some careless loan officers contributed to the recession but I’m not buying the line that they are the major reason why millions of Americans have been out of work for years along with a host of other economic ills.

Well, what then is the dominant cause of the recession?    A look at my new vacuum cleaner might provide a hint.   It’s stamped “Made in China”.    So is my can opener and so is my window air conditioner.   In fact the digital sound recorder that I’m using to record this editorial was made in China.   Check out your favorite retail store and you’ll find that the shelves are lined with goods made in China, and to a lesser extent other third world nations.   Most of these goods used to be made in the U.S.A.

Put yourself in the position of a manufacturer.   Move your factory to China and you can skip the minimum wage laws, you don’t have to pay Social Security or Medicare, no unemployment benefits and no need to pay lawyers to fight discrimination lawsuits.   You don’t even need to build  handicapped restrooms.  Most of these savings go to your bottom line in the form of higher profits.   So moving the jobs overseas makes plenty of sense.

Some estimates are that over the past ten years, about three million American jobs have been moved to China.  That wouldn’t be so bad if China spent the money we send them buying goods made in the United States.   But that’s not what has happened.   We send our money to China but the Chinese buy from us only a small fraction of the value of the goods that we buy from them.  It’s also important to understand that when an American worker loses his job he loses much of his purchasing power.   He buys less and that creates still more unemployment. 

The obvious question is why our government is allowing all of this and why nobody is even talking about the impact on our economy of sending all those jobs overseas.  The answer is that no American politician, including President Obama, wants to lock horns with the rich and powerful and all their big money.   It’s much easier to just blame the disaster on “the recession” and have the federal government spend money like crazy in an effort to get Americans back to work.   Bringing back those lost jobs isn’t even on the table nor is preventing even more jobs from moving overseas.   Like my wagon, our economy is broke and if confronting the cause of the problem  is out of the question, it will be a long time before it is fixed..

I’m CAVE MANager Paul Lotsof and the opinions you’ve just heard are mine and not necessarily anyone else’s.    If you’d like a copy of this editorial or you’d like to express your opinions, go to the CAVE web site at CAVEFM.com.     That’s CAVEFM.com