Swans Commentary » swans.com September 24, 2007  



Is The USA Heading For Third World Status?


by Gilles d'Aymery





(Swans - September 24, 2007)  Three characteristics common to poor, Third World countries are a high level of debt, an income distribution concentrated in the top 1% of the population, and an economy based on export of raw materials and import of manufactured products. By these three measures alone the United States is slowly but blithely marching toward Third World status. The U.S., aside from its military hardware that is sold for the better destruction of whole swaths of the world, is increasingly becoming a junkyard nation that exports its trash and raw materials in abandon and imports all the goodies it no longer produces. A tale of comfy slippers brought me to that observation.

My three-year-old slippers, which I liked very much, got gnashing holes in their soles. They were made of soft suede leather and plush sheepskin. If memory serves, we had bought them at a Costco Warehouse for about $30. They came from China. I wanted to replace them with new slippers that would be like peas in a pod. It took us some searching; Costco did not carry them any longer. We could not find them anywhere until a trip to Nordstrom, a rather high-end department store. Here they were, indistinguishable from the originals. They carried the name of an Australian company, UGG Australia, which might have explained, beside the retailer's mark-up, the stiff price we had to pay -- $65. Turns out they too were made in China. We could as well have shopped on sheepskin.com and gotten a similar product for $40. Live and learn. So, I looked into slipper issues, and ended up reading an article in the French Le Monde, "Les déchets, ressource américaine" ("Trash, an American resource," by Eric Leser, September 11, 2007). Yvonne Smith, the spokeswoman for the port of Long Beach in California was quoted as saying (loose translation), "We export cotton to China and we import textile; we send them animal hides and we get shoes back; we remit scrap metals and we buy machine tools from them; we export old newspapers that come back to us in the form of packaging for other products."

Americans are the uncontested worldwide Kings of Trash and they now have become major exporters of junk -- all kinds of junk from corrugated paper and old newspapers and magazines, scrap metals like screws and nails, crushed car bodies, steel, iron, and aluminum wastes, old computers, monitors, telecommunication equipment, and what not. China is by far the major US customer. In 2006 China bought 52% of all US exports of scrap paper and, overall, 42% of all US exports of trash. This is the second biggest export of "made in the USA products" to China after planes and other aerospace products. In return China exports to the U.S. machine tools, computer and telecommunication equipment, and everything else under the sky that can be found at Wal*Mart and at your local hardware store, and even at high-end department stores. Containers landing on the West Coast with Chinese manufactured products are filled with our trash and sent back. Proponents of this system claim that it's good for the environment -- the trash does not end up in landfills; it helps with our trade deficit; and then after all, who cares they say: The US remains the biggest exporter of high tech products in the world.

Unfortunately, the U.S. is no longer the top exporter of high tech information- and communications-technology products. China has widely overtaken the U.S., as a report by the Organization for Economic Cooperation & Development showed in January 2006. China is no longer a mere exporter of T-shirts and cheap consumer products, and the U.S. is a net importer of information and communication products. Paul Craig Roberts, the former assistant secretary of the Treasury in the Reagan administration, reports that, "in 2006, the last full year of data, the U.S. exported $47,580,000,000 in computers and imported $101,347,000,000 in computers for a trade deficit in computers of $53,767,000,000. In telecommunications equipment the U.S. exported $28,322,000,000 and imported $40,250,000,000 for a trade deficit in telecommunications equipment of $11,883,000,000." ("As the Empire Slips: Greenspan and the Economy of Greed," CounterPunch, September 20, 2007.) Not everything comes from China, of course, but a large chunk does and is reflected in the mushrooming trade deficit the U.S. faces. In 1986, when Mr. Reagan was joyfully implementing his voodoo economics, the trade deficit with China was a mere $1.665 billion. Ten years later, in 1996, as the Clintonians were busily building the bridge to the 21st century through unfettered neo-liberalism, the deficit jumped to $39.520 billion. At the end of 2000, as Mr. Bush was concocting his faith-based compassionate conservatism, the deficit had reached $83.833 billion. By 2006, it exploded to $232.589 billion, and for the first six months of 2007 it has already reached $141.305 billion on its way to the $300 billion mark. We're going to have to export a lot of trash to rectify this unsustainable trade imbalance! Over a short period, two decades (1985-2006), the U.S. has accumulated over $1.375 trillion in debt with China.


US Trade With China 1985-2007 (in million USD)


US Exports

US Imports


2007 (July)




























































































 Source: Foreign Trade Division, US Census Bureau.


Increasingly, China is developing its indigenous technology and with the help of the 200,000 engineers it graduates every year is poised to become a global player in high-end manufacturing. China is also developing its own automotive industry. Currently, Chinese cars are derided by Western carmakers as poor, unsophisticated copies of their own superior products, which is exactly how Toyota was treated by GM, Ford, and Chrysler in the 1960s. Today, the three American carmakers are desperately fighting bankruptcy, Toyota is the top manufacturer in the world...and everybody is struggling to emulate Toyota's processes. It won't take 50 years for the Chinese to flood the world market with their automotive products.

In addition to the US trade deficit that has been growing steadily since the 1970s, the current public debt limit is $8.965 trillion. Treasury Secretary Henry Paulson told Congress last week that the federal government would reach the limit by October 1, 2007. The Senate Finance Committee has agreed to raise the limit by $850 billion to $9.82 trillion -- the fifth increase of the debt limit since Mr. Bush was installed in the White House. Quite possibly, when Mr. Bush leaves office in 2009, the US national debt will pass the staggering $10 trillion mark -- quite a legacy, indeed.

The last dimension of the Third World conundrum, within the scope of this article, has to do with immense affluence and concentration of wealth within a tiny subset of the polity. Wealth is mainly gained through exploitation and corruption, and kept through power. In the United States, leaving apart the richest few -- the Forbes 400 who have a combined wealth greater than the entire GDP of Canada, and whom I have assailed time and again (see, among other pieces my blips #26 and #27, as well as #41) -- affluence is the mark of about 1% of American households and to a lesser degree the next 19% -- the first quintile. Wikipedia has a decent Web page on "Affluence in the United States," but for a more solid analysis, one should visit the Web site developed by G. William Domhoff, a Research Professor in Sociology at the University of California, Santa Cruz, in particular his Web page "Power in America: Wealth, Income, and Power." Domhoff is the author of the seminal book, Who Rules America? (McGraw-Hill Humanities) originally published in 1967 and re-edited four times since, the latest in 2006. He provides an abundance of information on income distribution and the ensuing power that the top 1% of the population, and to a lesser degree the next 19%, brings to bear on the control of the whole country. He offers all relevant charts that demonstrate the extent of income inequality in the U.S. The distribution of financial wealth in 2001 reflects that pyramidal structure. The top 1% controlled 39.7%, the next 19% had 51.5%, and the remaining 80% only 8.8% of the country's financial wealth. The top 1% fills the ranks of the decision makers whose decisions are being implemented with the assistance of the next 19%, the managerial class, and everybody else adapts as well or as poorly as they may.

Yes, there are other factors that contribute to Third World status, like for instance the state of education, health care, the infrastructure, a large middle class, etc., but even the US education and health care systems are gravely lagging behind practically all other First World nations. Middle class? "Since 1975, practically all the gains in household income have gone to the top 20% of households." (Source: CIA Factbook.) As to the infrastructure, simply take a look at New Orleans, our falling bridges, or our inner cities. (Keep also in mind that the USA is now a net importer of foodstuff -- another characteristic of Third World status -- that is, more than 50% of the food we eat comes from foreign countries. Even Trader Joe's garlic comes from China!)

We have not yet fallen into downtrodden status, but we are certainly headed that way, at least if the 80% of American households are unable to take back the power that they have gradually lost over the past 45 to 50 years. I'm afraid the odds are against the vast majority, which is in the financial minority.


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About the Author

Gilles d'Aymery on Swans (with bio). He is Swans' publisher and co-editor.



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Published September 24, 2007