How America Is Turning into a 3rd World Nation in 4 Easy Steps

It starts with destroying our manufacturing base.

By Thom Hartmann/Alternet/ November 10, 2012

New reports that Taiwanese transnational manufacturing corporation Foxconn may be opening up some plants in the United States indicate that our nation has now entered the terminal fourth stage of “third-worldization” or what may be better referred to simply as “recolonization.”

In case you don’t know, Foxconn is China’s largest private employer and is responsible for making many of those parts that go into your Apple iPhones, iPads, and iPods.

While Steve Jobs may have been a visionary when it came to technological design, he wasn’t a fan of labor unions – or American workers in general – so he outsourced most of his corporation’s manufacturing to Foxconn, which was notorious for its low-wage labor.

Foxconn workers live in over-crowded dorms that are located on the factory grounds. They work 12-hour shifts, and are routinely exposed to dangerous working conditions. Recently, 137 Foxconn workers fell ill after they were forced to use toxic chemicals to clean iPads. And in the last five years, 17 Foxconn workers have committed suicide on the job. Nets have since been installed around the factory to catch workers jumping out of windows.

So why the heck would Foxconn look beyond their Libertarian paradise of no labor laws to come to the United States and employ a bunch of Americans?

To know the answer to that question, we have to understand the four steps the United States is currently racing through to become a third-world nation.

Step 1: Destroy Manufacturing

From 1791, when our nation’s first Treasury Secretary Alexander Hamilton created an 11-point plan for American manufacturers, all the way until just the last few decades, the United States protected its manufacturing base with high tariffs on imports and government support for domestic industries.

This “protectionist” approach to trade transformed the United States into the world’s largest exporter of manufactured goods, which built and sustained an enormous middle class of Americans working in factories collecting high wages.

Then the forces of globalization crept in, extolling the virtues of a world economy free from national boundaries and protections for domestic manufacturing.

With Reagan’s Revolution in the 1980’s, Alexander Hamilton’s 11-point plant was scrapped. Tariffs were ditched and then Bill Clinton moved into the White House in the 1990’s and continued Reagan’s trade policies and committed the United States to so-called Free Trade agreements like GATT, NAFTA, and the WTO, removing all the protections that had kept our domestic manufacturing industries safe from foreign corporate predators for two centuries.

In the 1992 Presidential debate, third-party candidate Ross Perot famously warned about a “giant sucking sound” of American jobs going south of the border to low-wage nations.

Perot was right, but no one in our government listened to him.

In the 1960’s, one-in-three Americans worked in manufacturing, producing things of lasting wealth. Today, after jumping head first into one free trade agreement after another, only one-in-ten Americans works in manufacturing.

Over the last decade, 50,000 manufacturing plants in the United States have closed down and five million manufacturing jobs have been lost. They didn’t disappear, they just moved away to low-wage factories like Foxconn, in foreign nations.

Before Reagan won the White House, the United States was the world’s largest importer of raw goods and exporter of manufactured goods as well as the world’s largest creditor. But today, we’re the world’s largest exporter of raw materials and importer of manufactured good. No surprise, we’re also the world’s largest debtor.

When manufacturing dies, the economy goes with it.


How Long Before Our Color Changes?

Step 2: Harvest the Middle Class

America’s working class no longer builds TVs or computers or furniture on assembly lines; they now flip burgers at McDonalds and turn down the sheets at Holiday Inns. And those high-skilled workers who used to design the marvels of manufacturing now manufacture credit default swaps and mortgage-backed securities on Wall Street.

In the 1950’s when our economy still embraced Hamilton’s 11-point plan, manufacturing used to account for a quarter of GDP, but today it accounts for around a tenth, replaced by the low-wage service sector and Wall Street. And this new economy can’t support a middle class. A service sector can’t create lasting wealth, nor can Wall Street.

Before NAFTA, the average American taxpayer earned an inflation-adjusted income of $33,400 a year. By 2008, that number dropped to just $33,000. Working Americans maxed out their credit cards and took out a second mortgage on their homes just to make ends meet. Eventually, even that wasn’t enough to make ends meet.

On top of that, new financialized industries have risen up that specialize in harvesting even more wealth from the middle class. So-called private equity firms like Bain Capital execute a business model that depends on taking over American businesses, loading them with debt, laying off workers, and outsourcing labor to low-wage nations. Mitt Romney himself described Bain’s strategy as “harvesting companies for a profit.”

Even American factories that were more profitable than ever, like the Sensata plant in Freeport, Illinois, aren’t safe from this outsourcing. Thanks to globalization, it’s just a cheaper to employ labor in low-wage nations even if that means laying off 170 American workers and devastating an entire local economy.

Today upwards of fifty million Americans are living in poverty and depend on food stamps. The middle class devolved into the working class, which further devolved into the working poor class.

Local economies are collapsing, states are going bankrupt, and workers are being tenderized for colonization in the near future.

Step 3: Export American Wealth

There’s a hefty price tag associated with transitioning from the world’s largest exporter of manufactured goods to the world’s largest importer of manufactured goods. That price comes in the form of trade deficits.

In 2011, the United States had a trade deficit of over a half-trillion dollars with the rest of the world. Essentially, $558 billion U.S. dollars is being pocketed every single year by developing nations that are now manufacturing the goods that used to be manufactured right here in the United States.

With their pockets overflowing with U.S. dollars, foreign investors begin buying up American industries. Every single second, more than $4,000 of American industry is being sold off to foreign investors.

In a virtuous economy like the United States used to run, wealth is recycled within the community. Revenue earned by the local grocery store is invested in the local bank, which then hands out loans to local businesses to hire local workers who collect paychecks to shop at the local grocery store and so on and so forth.

But when foreign investors are injected into the equation, increasingly larger chunks of wealth are not re-invested in the local economy, but are instead invested overseas in the developing world.

This is one reason why President Obama’s stimulus package may not have had quite the bang for the buck as anticipated. When Americans use their extra dollars to buy a new LED television, or new clothes, or home improvements, there’s a good chance that a lot of the profits are actually going to overseas investors, stimulating their economy instead of ours.

Step 4: Recolonize

With American workers desperate for any kind of opportunity to work, Foxconn and other foreign corporations now have access to a brand new pool of cheap labor.

We’ve seen other companies before Foxconn take advantage of these new low-wage American workers. (Continued/ Read Entire Article Here)

Boldface added by BPR Editor
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  1. I like your analysis. And like Hartmann says, Ross Perot had it right and we didn’t listen. Free Trade was the biggest scam of all time for labor, but a tremendous success for multinational corporations.

  2. Mark says:

    The majority of first world countries are going through something similar. It seems to be largely driven through the retail sector and we’ve been in a downward spiral or ‘race to the bottom’ for the last three decades. The promise of having everything cheap has driven manufacturing off-shore, in the 80’s and 90’s a significant amount of jobs were created in the service industry and growth in different types of adminstrative requirements but with low cost telecommunications a lot of these jobs have been outsourced to 2nd world countries with English language skills such as India.

    Now, in theory these jobs should be replaced with those in emerging industries like sustainable energy, but we’re stuck in transition because of two improtant issues. Old world thinking continues to invest and lobby to destroy the competition in this area and lack of access to further education and up-skilling.

    Sadly we’ve canabalised our own economic capacity by chasing cheap everything…

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