Skid row America

For the last half year, strident announcements made by various sections of the government of the US have proclaimed that the American economy has recovered, that the country’s gross domestic product (GDP) is rising again, that jobs are being created, that new homes are being built and bought, and that overall, life in the USA is improving.

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Published: Fri 16 Jan 2015, 9:43 PM

Last updated: Thu 25 Jun 2015, 7:49 PM

Much as the American public would like to believe such announcements — for the satisfaction of wants and needs influences behaviour a great deal, and it is in catering to such behaviour that economics is reputed to be useful — the evidence signals otherwise. It is a rosy scenario that has been painted by a group of vested interests amongst which the US government and its various agencies is only one.

Typically, and unsurprisingly, it is television new channels which have repeated the claim, but which have neglected to mention that on this ‘road to recovery’, wages in the US continue to decline, while an ever-greater section of working-age adults have given up looking for work and have dropped out of the labour force altogether.

Paradoxically in such times, Americans (and the people they do business with overseas) search for positive economic news, so official announcements hinting at an American economic turnaround, and news that amplifies such suggestion, tend to proliferate. However, America faces a US$ 458 billion trade deficit and the ‘recovery’ is going to do very little to alter that imbalance.

Quoting official data that tends to be under-reported, an American think-tank, the Information Technology and Innovation Foundation, has said that the manufacturing sector in the US has lost over a million jobs net and over 15,000 manufacturers since the beginning the recession, which took hold in 2008. Based on these numbers, the US only added one new manufacturing job for every five that were lost. This points to the inescapable if uncomfortable fact that much of the ‘growth’ in the USA since the recession’s lows was just a cyclical recovery instead of real structural growth that will improve long-term conditions.

The Obama administration has been quick to make political capital from the top-line data which shows that there has been four years of ‘growth’, that 520,000 jobs have been added in manufacturing in the last three years. What the Obama administration does not mention is the 2.5 million jobs lost between 2007 and 2009, and that by the end of 2013, real manufacturing value added was still 3.2% below 2007 levels, even though GDP grew 5.6%.

The dominance of neo-classical economics is perhaps as much to blame for this state of American affairs as the propensity of publics to be fooled by selective statistics. As long as things appeared to be going well — or were portrayed as going well — the majority of economists did not consider the American condition (despite mounting government debt and a rising trade deficit) a matter for concern. It is time the critical new evidence presented from within the US was recognised and acted upon, in the country’s counties if not in Washington.



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