Guest Post by Paul Craig Roberts
The question is often asked: “What can we do?” Here is a prescription for peace and prosperity.
We will begin with prosperity, because prosperity can contribute to peace. Sometimes governments begin wars in order to distract from unpromising economic prospects, and internal political stability can also be dependent on prosperity.
The Road to Prosperity
For the United States to return to a prosperous road, the middle class must be restored and the ladders of upward mobility put back in place. The middle class served domestic political stability by being a buffer between rich and poor. Ladders of upward mobility are a relief valve that permit determined folk to rise from poverty to success. Rising incomes throughout society provide the consumer demand that drives an economy. This is the way the US economy worked in the post-WWII period.
To reestablish the middle class the offshored jobs have to be brought home, monopolies broken up, regulation restored, and the central bank put under accountable control or abolished.
Jobs offshoring enriched owners and managers of capital at the expense of the middle class. Well paid manufacturing and industrial workers lost their livelihoods as did university graduates trained for tradable professional service jobs such as software engineering and information technology. No comparable wages and salaries could be found in the economy where the remaining jobs consist of domestic service employment, such as retail clerks, hospital orderlies, waitresses and bartenders. The current income loss is compounded by the loss of medical benefits and private pensions that supplemented Social Security retirement. Thus, jobs offshoring reduced both current and future consumer income.
America’s middle class jobs can be brought home by changing the way corporations are taxed. Corporate income could be taxed on the basis of whether corporations add value to their product sold in US markets domestically or offshore. Domestic production would have a lower tax rate. Offshored production would be taxed at a higher rate. The tax rate could be set to cancel out the cost savings of producing offshore.
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