The Betrayal of the American Dream Read Online Free PDF Page B

outcry arose, but Brian Griffiths, an executive with Goldman Sachs International, brushed aside the criticism:
    “We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all.” For all? Griffiths was silent on when that “greater prosperity” might trickle down to the rest of us.
    The economic elite are forever telling working Americans that the lag in their earnings is just the way it is going to be in a globalized economy. But other countries also compete head-on in the global economy—with different results. Germany and Japan have healthy trade surpluses, in contrast to the ballooning U.S. trade deficit, which cumulatively is nearing $10 trillion, far larger than that of any other country. That Germany and Japan provide education and training for workers is important, to be sure, but that’s not why both countries are succeeding so well in the global marketplace. Germany and Japan are succeeding because each has national policies that protect basic industries and encourage jobs.
    China is routinely the focus of our trade deficit. It rose from $84 billion in 2000 to an all-time high of $295 billion in 2011. U.S. government officials, lawmakers, and economists complain loudly about this, citing China’s policy of manipulating its currency to keep the cost of its exports artificially low. But the problem isn’t in China—the problem lies in us, and in our own policies.
    Not so long ago, Japan was the target of similar complaints. Because of Japanese import barriers, American products weren’t allowed into Japan. Over the years, the U.S. government repeatedly negotiated deals with Japan that were supposed to enable American companies to sell more products in Japan. But those deals were rarely enforced, and so the trade barriers remain.
    In 1990, at the zenith of concern about Japan’s unfair trade practices, the U.S. trade deficit with Japan was $41 billion. During the past decade, the annual deficit has often been double that. The Japanese are no doubt delighted to see America’s anger over trade issues shift to China. It allows them do business as usual with the United States—to their advantage.
    If the middle class has been hammered by U.S. trade policies that favor our trading partners more than our own citizens, it has also been hit by the actions of a group of opportunists at home who likewise benefit from favorable policies set down by Congress. These are the moguls of private equity. The activities of private equity companies burst into the national debate early in 2012 when Mitt Romney’s Republican opponents (of all people) accused him of being a job-killer for his past work at the Boston private equity firm Bain Capital. Bain certainly did its share of cutting jobs at the companies it acquired, but there was nothing unusual about that. Eliminating jobs is what private equity funds do—all of them. This is how, for instance, Stephen A. Schwarzman, CEO and one of the founders of the Blackstone Group, the nation’s largest private equity fund, has become one of America’s richest men with an estimated net worth of $4.7 billion.
    It’s no coincidence that the private equity industry has exploded in the last two decades at exactly the same time that the decline of the middle class has been most pronounced. The money managed by these firms has skyrocketed, rising from $5 billion in 1980 to an estimated $1 trillion by 2012. In addition to 2,300 private equity firms, nearly 10,000 hedge funds, some of which are similar to private equity firms, have another $1 trillion under management. This means that Wall Street has $2 trillion in funds to buy and sell companies, often with disastrous results for almost all the people who work for them.
    While the practices of many publicly held corporations have been detrimental to the welfare of their employees, the private equity firms have generally been much worse. Secretive, insular, and essentially unregulated, private equity