Here in the US there are several reasons why we are in a recession. One of them is the NAFTA treaty signed into law by Bill Clinton and I may add approved by both houses before he signed it. In the county where I live we lost 5 sewing plants. The larger one at is's apex employed about 650 people. These people were given prolonged unemployment benefits and money for re-education at the local community college.
Now, before I go further let me give another dimension to NAFTA and relocation of industry before I go to their throat. We have been plagued here in the US by unions since early in the 20 century. In the beginning unions were a noble cause(although the heirarchy were questionable figures) but they were formed because of a need. Working conditions were bad, wages were terrible, children were worked like slaves, there were no benefits-all the makings to encourage change. The unions grew stronger and stronger and in time outgrew their purpose. Higher wages pushed up the prices of things such as automobiles and other necessities. For example, in about 1970 the auto workers were making about $16.00 per hour give or take a few bucks with some benefits, while in the South where I live about $4.00 per hour was the norm for manual labor. Textile plants moved to the South because the labor was cheaper with no unions. You might say in the 60's and 70's the Southern US was the "Mexico" of the day. So, to make it short you have the first ingredient "unions".
Then, came government regulations, further making it hard for idustry and corportations to do business. Hold on I am no advocate of large business hear me out. You have OSHA, and the EPA knocking on your door making life and doing business miserable, not to mention taxation. What would you do if you owned a factory and it cost you $8.00 to make a t-shirt when you can move to Mexico or China and make it for $2.00 and sell it for the same price? And these figures aren't exact I'm saying it cost much less off shore than here. How do you compete with an economy that the per capita income is $12000.00 per year when it is around 4 times that here and in other Western countries?
Then, to make things worse, the local banks tighen up on the money supply in these areas that were hit hard by plant closings.In the US small business is the largest employer. It is about 75% of the emloyers. So the banks quit lending money locally, because as one banker at a large East Coast Bank told me, why should we make 4000 loans here in this county when we can make 1 10,000,000 loan in a larger metropolitan area to say a developer and eliminate people and work? The answer is simple,
if you had 10,000,000 to invest would you put it all in one stock? Of course you wouldn't if that one investment went bad you have had a bad day. And the other side of the coin is this, people in these areas that put money on deposit are getting a mere 2.5 or 2.8 % return on their money with the bankers making loans in other areas and letting the rural areas dry up. In the mean time small business is having it rear rough, laying people off or closing completely, the credit ratings of the people in those areas gets real low thus making things worse for doing business in the area because of low beacon scores (which is another story)and creates a vicious cycle of despair. Meantime, all the high rollers and big spenders are having a party paying theirself too much money and creating a "service economy" and folks a service economy never served anyone but the folks at the top. Real
estate went crazy here especially at the beachs and the bankers greedily finaced the developers thus pushing up the prices and the bubble has burst. Now, they wish they had mad more loans to more people and diversified the investments.
I could write you a book. This is just part of it. Rome tried a service economy, it didn't work for them either, the same principles apply today that applied then. Also, too many entitlements-too many people are eating out of the Federal trough. In the county I live in $6,000,000 per year is budged for a county of 52000 people for medicade. If you could sum it up nice and tidy here it is:
Greedy people
Too Much Government
Hope this has enlightend someone.
odin1
Too Much Government
Greedy People
