U.S. Labor Force: One Foot in the Third World

Chronicles Magazine ^ | Tuesday, June 07, 2005 | Paul Craig Roberts

[durasell]

China will be making heavy equipment inside of five years. They'll be making airplanes in ten.

As for shoe and t-shirt manufacturers, I would lump small manufacturers of all kinds in with them, such as small tool and die shops, etc. Many of those have already gone to China.

None of those jobs are coming back. Ever.

[Brilliant]

China already makes airplanes and heavy equipment. We do it better. And we aren't going to help our airplane and heavy equipment industries by penalizing them to protect shoe makers and t-shirt makers.

Personally, it does not bother me that the shoe makers and t-shirt makers aren't coming back. Keep in mind that China did not drive our shoe makers and t-shirt makers out of business. We haven't had those industries for decades. The Chinese are competing more against the Mexicans and Indonesians than they are against Americans.

If China ever decides to cut off our supply of shoes and t-shirts, I'm sure we will have no difficulty resurrecting those industries.

[varon]

No matter what, he says, the United States is slipping into Third-World status. It is a done deal; it cannot be stopped.

If not economically then at least socially and culturally.

[A. Pole]

China's growth rates have stayed put for nearly two decades. Any slowdown can only happen if there is a drastic worldwide decline in the demand for "Made in China" goods, or if there is political turmoil in China. As there isn't much sign of either of these happening, don't hold your breath till any of these happen.

End even "if there is a drastic worldwide decline in the demand", it will be rather for the MORE expensive goods made OUTSIDE of China.

[A. Pole]

It's an adult world. America will either compete or perish.

How the American workers can compete in selling their labor, when their living expenses are much higher? Can they work for less than they spend?

How can they lower their living expenses without moving out of USA or without government subsidies?

[CarrotAndStick]

But then the profits of making small equipment isn't too small. And the Chinese are catching up on making larger and more expensive stuff too. These days, more and more auto majors are setting up shop in China and India, to make cars there and sell them back to their home countries, mostly Europe at present.

I still believe the only way to stop China is internal political turmoil or a drastic cut in Chinese imports by the internatonal community. Our best bet lies with the former option. Hopefully, it'll be a home-grown democratic revolution. But given the way how the world gave a pat on China's wrist for Tianmen, I am not too hopeful of this happening either.

[CarrotAndStick]

Oops, I re-read your comment, and therefore withdraw my earlier post to you.

[Paul Ross]

... it is remarkable that he proposes no solutions. No matter what, he says, the United States is slipping into Third-World status. It is a done deal; it cannot be stopped.

Actually, he does, they just aren't in this article. The Usual Suspects shriek bloody murder of course when they are outlined.

[Last Dakotan]

Ask yourselves: is underselling your goods or services a sustainable practice?

No, nor is it meant to be. The Chinese will subsidize their currency just long enough to drive the maximum amount of industry from the US.

Manufacturing is unique as it requires immense amounts of patient capital and a deep knowledge base. Neither of which can be assembled quickly to regain a lost market.

Asia has other advantages than price too.

[jb6]

Meanwhile, Asia continues to subsidize the US by providing it below-market-value goods and services--and we're supposed to be the losers? Ask yourselves: is underselling your goods or services a sustainable practice?

You do understand that once dumping (that's what it's called) has cleared out the US competitors, prices will rise. Furthermore, if you think we're ever going to get those factories we're busily shipping to China back, you're kidding yourself. That infrastructure is gone. We don't even have the facilities (on a large scale) to make equipment anymore, most of that is in China too.

If we ever reach a crises with China, we either obey or they can crash our economy: flood the market with dollars and nationalize our factories.

[Paul Ross]

We make lots of stuff. We make construction equipment and airplanes for example. True, we don't make shoes or textiles.

Rather than try to contort certain manufacturing industries as irrelevant, essentially a new buggy-whip excuse for your posture, why don't you defend your first proposition...i.e., we have trade "winners." I.e, "We make construction equipment and airplanes for example." Do you know what the vectors are for trading those items? Do you? It sure doesn't sound like you do.

The author (with all of his political misanthropy aside...basically regarding the Iraq War, which I expect to be brought up ) does study those very issues in economics. His biography frankly indicates that he deserves a lot more respect than those currently shilling for the destruction of U.S. industry.

PAUL CRAIG ROBERTS

Hon. Paul Craig Roberts is the John M. Olin Fellow at the Institute for Political Economy, Senior Research Fellow at the Hoover Institution, Stanford University, and Research Fellow at the Independent Institute. A former editor and columnist for The Wall Street Journal and columnist for Business Week and the Scripps Howard News Service, he is a nationally syndicated columnist for Creators Syndicate in Los Angeles and a columnist for Investor’s Business Daily. In 1992 he received the Warren Brookes Award for Excellence in Journalism. In 1993 the Forbes Media Guide ranked him as one of the top seven journalists.

He was Distinguished Fellow at the Cato Institute from 1993 to 1996. From 1982 through 1993, he held the William E. Simon Chair in Political Economy at the Center for Strategic and International Studies. During 1981-82 he served as Assistant Secretary of the Treasury for Economic Policy. President Reagan and Treasury Secretary Regan credited him with a major role in the Economic Recovery Tax Act of 1981, and he was awarded the Treasury Department’s Meritorious Service Award for "his outstanding contributions to the formulation of United States economic policy." From 1975 to 1978, Dr. Roberts served on the congressional staff where he drafted the Kemp-Roth bill and played a leading role in developing bipartisan support for a supply-side economic policy.

In 1987 the French government recognized him as "the artisan of a renewal in economic science and policy after half a century of state interventionism" and inducted him into the Legion of Honor.

Dr. Roberts’ latest books are The Tyranny of Good Intentions, co-authored with IPE Fellow Lawrence Stratton, and published by Prima Publishing in May 2000, and Chile: Two Visions—The Allende-Pinochet Era, co-authored with IPE Fellow Karen Araujo, and published in Spanish by Universidad Nacional Andres Bello in Santiago, Chile, in November 2000. The Capitalist Revolution in Latin America, co-authored with IPE Fellow Karen LaFollette Araujo, was published by Oxford University Press in 1997. A Spanish language edition was published by Oxford in 1999. The New Colorline: How Quotas and Privilege Destroy Democracy, co-authored with Lawrence Stratton, was published by Regnery in 1995. A paperback edition was published in 1997. Meltdown: Inside the Soviet Economy, co-authored with Karen LaFollette, was published by the Cato Institute in 1990. Harvard University Press published his book, The Supply-Side Revolution, in 1984. Widely reviewed and favorably received, the book was praised by Forbes as "a timely masterpiece that will have real impact on economic thinking in the years ahead." Dr. Roberts is the author of Alienation and the Soviet Economy, published in 1971 and republished in 1990. He is the author of Marx’s Theory of Exchange, Alienation and Crisis, published in 1973 and republished in 1983. A Spanish language edition was published in 1974.

Dr. Roberts has held numerous academic appointments. He has contributed chapters to numerous books and has published many articles in journals of scholarship, including the Journal of Political Economy, Oxford Economic Papers, Journal of Law and Economics, Studies in Banking and Finance, Journal of Monetary Economics, Public Finance Quarterly, Public Choice, Classica et Mediaevalia, Ethics, Slavic Review, Soviet Studies, Rivista de Political Economica, and Zeitschrift fur Wirtschafspolitik. He has entries in the McGraw-Hill Encyclopedia of Economics and the New Palgrave Dictionary of Money and Finance. He has contributed to Commentary, The Public Interest, The National Interest, Harper’s, the New York Times, The Washington Post, The Los Angeles Times, Fortune, London Times, The Financial Times, TLS, The Spectator, Il Sole 24 Ore, Le Figaro, Liberation, and the Nihon Keizai Shimbun. He has testified before committees of Congress on 30 occasions.

Dr. Roberts was educated at the Georgia Institute of Technology (B.S.), the University of Virginia (Ph.D.), the University of California at Berkeley and Oxford University where he was a member of Merton College.

He is listed in Who’s Who in America, Who’s Who in the World, The Dictionary of International Biography, Outstanding People of the Twentieth Century, and 1000 Leaders of World Influence

[Asclepius]

Neither of which can be assembled quickly to regain a lost market.

Yeahright. That's why we lost world war ii. We simply couldn't build a war time industrial base largely from scratch fast enough. Again, dude, if you're only advantage is price, and they begin to rise again, you lose.

[superiorslots]

Quote: Does anyone remember when everyone thought Japan would bury us economically? Whatever happened to the Japanese juggernaut, anyone?


You cannot compare with what is happening with china/India today as what happened with Japan 15-20 years ago. The primary differnce is we were not shutting down US factories by the thousands and moving them to Japan.

[Asclepius]

You do understand that once dumping (that's what it's called) has cleared out the US competitors, prices will rise. Furthermore, if you think we're ever going to get those factories we're busily shipping to China back, you're kidding yourself. That infrastructure is gone. We don't even have the facilities (on a large scale) to make equipment anymore, most of that is in China too.

Yeahright. That's why we lost world war ii. We simply couldn't build a war time industrial base largely from scratch fast enough. Again, dude, if you're only advantage is price, and they begin to rise again, you lose.

[Last Dakotan]

We had the skilled basis for an industrial machine going into WWII.

As a critical point, WWII required that the machine tool plants of New England be enlarged. These plants and their skilled base of craftsman don't exist anymore.

[Asclepius]

You cannot compare with what is happening with china/India today as what happened with Japan 15-20 years ago. The primary differnce is we were not shutting down US factories by the thousands and moving them to Japan.

Precisely wrong. Japan's re-industrialization was an attempt to capture American manufacturing. What they failed to realize--what you fail to realize, what the Chinese fail to realize--is that the cash value of manufactured goods continues, is continuing, to crash, not because of cheap labour, but because of prodcutivity and efficiency gains and the low cost of freight (at the moment). A strong economy is no longer an industrial economy: it simply isn't 1927 any more, dude, and crying won't bring it back.

[jb6]

And we're looking at 5 % unemployment rate here. ..

Got you beat, the Soviets had about a 1% unemployment rate.....and where are they now? Lets talk the industry/pay of those jobs not just the job numbers.

[Paul Ross]

Yeahright. That's why we lost world war ii. We simply couldn't build a war time industrial base largely from scratch fast enough. Again, dude, if you're only advantage is price, and they begin to rise again, you lose.

Your knowledge of history is suspect. We didn't have to build the defense industrial base "from scratch" in World War II. We already had a domestic industrial base...sorely underutilized... that was quite available for conversion.

To repeat: The U.S. industrial base was INTACT going into World War II, as we had protected it to the max with the Smoot-Hawley Tariff so reviled by your side. And that protected industrial base was what made the difference in the war.

Wither now that industrial base?

[Asclepius]

We had the skilled basis for an industrial machine going into WWII.

As we do now, only far more so. Visit Carnegie Mellon's school of Industrial Administration or any of the successful specialty steel plants outside of Pittsburgh.

So what's your point?

[Asclepius]

And that protected industrial base was what made the difference in the war.

Let me change the line of questioning as I appear to have you flummoxed. If an "industrial base" is so horribly vulnerable that it requires the massive subsidy of onerous, consumer-punishing protectionist legislation (as you yourself argue), or the subsidy of slave labour in the third world to even make it profitable at all (as you yourself argue), does that not suggest to you, ahem, a hiccough in your line of reasoning?