The crash of 2008 and the Great Recession were inevitable consequences of three decades of economic policies designed by and for Wall Street and the wealthiest Americans. At the heart of the problem was the hollowing out of American manufacturing, the growing dysfunction of our financial sector and a rapid increase in economic inequality, all of which crippled the growth engine of the U.S. economy.
Starting in the 1980s, corporate America decided to boost profits by shipping U.S. jobs overseas. NAFTA and the admission of China into the World Trade Organization (WTO) accelerated the drive to relocate production to “export platforms” in foreign countries that would ship goods back to the U.S. market. Corporations that sent jobs overseas became forceful proponents of a “strong” (overvalued) dollar, which enhanced the profitability of their overseas operations but at the same time made much of the U.S. manufacturing sector uncompetitive and led to perennial U.S. trade deficits.
Also by the 1980s, the U.S. financial sector was failing to perform its essential function of channeling savings to productive investment in the real economy. Financial firms on Wall Street focused instead on making a quick buck by stripping assets from existing businesses and downsizing their workforces, and on various forms of complex financial engineering that had little economic value. Financial firms also provided critical support for a “strong dollar” policy that diverted productive investment away from the U.S. manufacturing sector toward overseas operations. By the eve of the crash of 2008, the manufacturing sector had shrunk to half its 1960 size, while the financial sector had doubled in size and accounted for 40 percent of corporate profits.
|US dollar vs. Euro|
|US dollar vs. Japanese yen|
|US dollar vs. Swiss franc|
|US dollar vs. British pound|
For each currency the story is basically the same. The dollar held steady or appreciated during the late 1990s/early 2000s as investors sought dollars amidst increasing US interest rates and a bullish US stock market, then weakened for roughly the seven years preceding the financial crisis. If anything, a strong dollar is associated with strong economic performance rather than any weakness.
The next bit about the decline of US manufacturing -- the piece goes on to twice reference "deindustrialization" -- is plainly false as illustrated by yet another chart:
|What deindustrialization looks like|
...The experience of the past 30 years shows that rising inequality is bad not only for workers, but also for the economy as a whole. Less affluent households tend to spend more of their income, generating more economic activity, while more affluent households tend to consume less. Wage stagnation undermines political support for the levels of taxation necessary to support public investment in things like roads and schools, which underpins future economic productivity. And high levels of inequality are associated with political decision-making that leads to slower growth. In short, the upward redistribution of income throws sand in the gears of the economy.
...The Republican candidates pretend that tax cuts for corporations and the wealthy are the answer to wage stagnation and the economic crisis, but the Bush years taught us that these obscenely wasteful tax cuts only make the problem worse. They are the equivalent of eating our seed corn, because they starve the kind of public investment in education, infrastructure and innovation that is indispensable for long-term economic growth.