Jeff Faux

Jeff Faux was the founder, and is now Distinguished Fellow, of the Economic Policy Institute.

Recent Articles

America's Trade Policy of the Absurd

Saving middle-class America will require a radically different conception of trade and the national interest.

For three decades, both Democratic and Republican administrations have been making trade deals with elites of other countries that favor the interests of multinational investors over the interests of American producers and workers. U.S.-based banks and corporations get access to cheap labor and to the financial systems of other nations. In return, U.S. workers are exposed to competition from countries where wages are suppressed (Mexico) or where government runs effective industrial policies (Germany) or both (China). As a result, a chronic trade deficit has made us the world's largest debtor, undercut the bargaining power of the working middle class, and hollowed out U.S. manufacturing. Because our labor markets are integrated, the damage has spread to virtually every industry, occupation, and region. Real wages and benefits have stagnated even as the value of what Americans produce keeps rising. Two-tier wage systems, off-the-books employment, and disappearing pensions make the...

Industrial Policy: The Road Not Taken

In the 1970s, Wall Street and its economists defeated manufacturing.

By the mid-1970s, cracks in the American industrial base were already visible. For the first time in the 20th century, the United States began running trade deficits. Factory closings that had earlier been limited to apparel, shoes, and plastic toys spread to steel, small appliances, and auto parts. And the decision by the Arab states to control oil prices signaled that the era of cheap energy that had fueled American manufacturing was coming to an end. These early signs of trouble set off this country's last serious debate over the question of whether the government should have a policy for supporting a healthy manufacturing industry -- that is, an "industrial policy." For its advocates, industrial policy seemed a no-brainer. The manufacturing sector was the generator of productivity and innovation. It had been the engine of America's rising prosperity and the bedrock of its political as well as economic power. Without America's capacity to become the "arsenal of democracy" --...

One More Bubble to Go

We've relied on a robust dollar to see us through the crisis, but that cushion is about to disappear.

The word from Washington and Wall Street is that the worst is over. Sure, it will take a while for jobs to recover, for housing to come back, and for wages to rise. But we are definitely on the road to recovery from the biggest debt-bubble collapse since 1929. Maybe. There were actually two debt bubbles. One was driven by Americans borrowing against unsustainable inflation in housing prices. The other was driven by America borrowing against unsustainable inflation in the price of the U.S. dollar. One more bubble is left to pop. When it does, our unique economic cushion -- privileged access to the world's savings -- will deflate. Like overvalued housing prices in the run-up to the 2008 crash, the dollar is headed for a substantial fall. The question is whether our political class can minimize the hit to working Americans' already-battered living standards. On the available evidence, the answer is, "No." The central threat here is not the currently rising federal deficit, which despite...

The Ultimate Bear Market

The uncouth bankers who brought down Bear Stearns make for an entertaining story. But the real responsibility for the crisis lies elsewhere.

House of Cards: A Tale of Hubris and Wretched Excess on Wall Street by William D. Cohan, Doubleday, 468 pages, $27.95 "We all fucked up," says Alan Schwartz in the final paragraph of House of Cards . "Government. Rating agencies. Wall Street. Commercial Banks. Regulators. Investors. Everybody." Schwartz was the last chief executive officer of Bear Stearns, which, when it collapsed in March 2008, became the first of the financial-market dominos that ultimately toppled the U.S. and world economies. His generous sharing of culpability is a bit like the sly confession of the serial murderer who implicates his parents, his teachers, and the police for their failure to keep him from killing. Still, he has a point; there are multiple fingerprints at the scene of this crime. House of Cards is not the complete picture of the bursting of Wall Street's credit bubble. Other books will give you a clearer understanding of swaps and derivatives (Charles Morris' The Trillion Dollar Meltdown ), policy...

What to Really Do About Immigration

Half a million Mexicans will cross the border annually for the next 15 years. Here's a plan to enable them to stay home.

Art by John Ritter
The backlash against illegal immigration -- which looks like the Republicans' only hope for a wedge issue in next November's election -- is largely aimed at Latinos, of whom the vast majority are Mexicans. In fact almost 60 percent of all undocumented workers in the United States are from Mexico, and close to 12 million of that country's nationals now live in the U.S. Fix the Mexican part of the problem and the divisive politics of illegal immigration shrink dramatically. But the news from south of the border is not good. The number of Mexican workers continues to grow faster than the number of Mexican jobs that pay enough to earn a living. And there is no end to this problem in sight. A November 2007 Mexican government report concluded that even if the overall economy grows steadily, low wages and social inequality will continue to generate heavy out-migration to the U.S. at the current annual rate of roughly 500,000 -- for the next 15 years! Moreover, Mexico's overall growth is...