How America Lost Its Industrial Edge

Insight on the News - Issue: 06/24/03 ^ | 11/9/03 | cp124

[Norse]

I'm optimistic - more tax cuts will be pushed by Bush probably every year he is in office. Hopefully he is able to win again. What we need though is a flat tax system, that would really cause a true renaissance here in the U.S.

[GatekeeperBookman]

And by the way-the ChiComs have ownership of many factories OUTSIDE of China. Their Army has the ownership, that is. You know, Army like shoot 'em up bang-bang. I think they go by the handle 'PLA'. They make lots of the money from Wal Mart.

Wonder if they paid in cash for their name to be carved over the entrance to the main room at the Bush Library at A&M in Texas?? 'Peoples Republic of China'-sounds kinda nice don't it? Maybe they just loaned shares of one of their commercial enterprises, in lieu of cash?

[Norse]

Well, if I were going to invest in metals - (which is a good idea in my opinion..not everything..but just to diversify in case of a disaster) I would just buy gold. This stuff is solid, not physically of course, but it won't change in value on you, and if the world economy hits depression and war, this stuff will still hold its value. Don't worry about lead, etc. Go for the gold...like Rocky...

[VRWC For Truth]

I've seen all this - the causes of the problem are not free markets but instead regulation and taxation at home coupled with a currency that experiences swings in value.

We have a winner. Big government is the problem, not free trade.

[VRWC For Truth]

Can I supersize your government you Socialist traitor?

[GatekeeperBookman]

You know what we need is a no tax system for some little time. I have an article from Paul Craig R.... ( can't say his name here on FR I think ), about how the Medieval serfs payed less than we do.

I am sure Bush will push tax cuts-that's the last defining difference between the Demoncats & Repulidumbs-the tax rate. That's all there is. And pretty soon we can just make direct cash payments to our neighborhood illegals-at the local church or grocary or hospital or whereever they may be. The gov will find great economies in direct payments-dirrect transfers of money. The mexicans send a BILLION a week South-they need the money.

[GatekeeperBookman]

Gold makes very poor cases & won't stand the temperatures of burning gun-powder. Brass is far superior. Even silver too soft-except for projectiles.

[GatekeeperBookman]

Demoncats & Republidumbs are in that business-wholesale. I would love to see figures from china with love for the pols on both sides. Wonder what really waits in Swiss banks & offshore in cheaper facilities-for Slick, Jimma,et al & maybe some nice respectable Republidimbs???

[Norse]

Sure it might melt but gold is practically indestructable.

[Norse]

>You know what we need is a no tax system for some little >time.

I'm more in favor of incremental change - we don't need any shocks - also incremental is a far more realistic way to achieve our goals - must easier to make it happen.

[GatekeeperBookman]

Its all about power-money is power & for us 'citizens' it is freedom. Remember when it was illegal for us to OWN gold?? Now they want to criminalize personal firearms. I think I see a pattern.

[ArneFufkin]

BUT IMO any company who created their business on American shores whose citizens provided the opportunity to create that business and provided the safety of their military to protect that company then moves their business off-shore to make an easy buck and in the process screws the same American worker who made their existance possible ... are TRAITORS to me.

I agree with Norse on the proper reaction to being labeled a "traitor" because I see the opportunities and inevitable impertative of American companies and workers competing expertly and profitably in the Global Market of goods and services.

I'm not a traitor if I recognize NO obligation to provide you a well paying job. You earn your way in this life. You need to butch up your attitude and bolster your arsenal of productive skills and expertise.

Some of you folks should just come to peace with your world view, and go join the jaunty go-getters of AFSCME - whether asleep on the clock or enjoying open ended paid disability leaves, the fast paced lethargy of civil service is WAITING FOR YOU!

Put Lennon's "Imagine" on, and think of your new world. We obviously owe you big time. If we all knew you were an American, we'd have put you on the payroll at once.

[cp124]

Jobless in the USA
Paul Craig Roberts
Thursday, Aug. 7, 2003

Throughout history, peoples have been overcome by trends and forces that they were unable to recognize. Could the United States be losing its economy to forces economists mistake for benevolent free trade?

Traditionally, free trade has required a country's workforce to compete indirectly against the workforces of other countries in the markets for traded goods and services. Fears in the post-WW II era that U.S. wages and living standards would be undermined by imports made with cheap foreign labor proved to be wrong. U.S. labor was better educated and worked with more and better capital and technology, which made American labor much more productive. Higher productivity protected U.S. wages and employment from cheap foreign labor.

The collapse of world socialism and the rise of globalism have made U.S. capital, technology and business know-how highly mobile. Today, it is as easy – and far less expensive – for a U.S. firm to produce abroad for U.S. markets. Instead of locating its capital and technology in Ohio, California or South Carolina, the company locates its facility in China, for example.

By locating in China, the firm substitutes a workforce that is paid less than a dollar an hour for U.S. labor that costs $26 an hour. By locating in China, the firm also avoids expensive regulations, torts, employment taxes and discrimination lawsuits.

The mobility of capital and technology means that American labor now faces direct competition in global labor markets. This is a new development.

A Chinese person working with U.S. capital and technology is just as productive as an American. The Chinese worker can be hired for much less, because living standards and the cost of living are far lower in China.

The huge labor surplus in countries such as China and India means that wages are not likely to rise very rapidly in those countries. U.S. firms that substitute Chinese and Indian labor for U.S. employees are building in lower labor costs for years to come.

Eventually, as China and India become fully employed first world economies, wages will be bid up and labor will be paid according to its productivity. By then the U.S. might be a third world country.

Existing mortgages, cost of living and accustomed living standards prevent U.S. wages from falling to levels that would be competitive with China's. Americans have to seek work in their next best alternative when they lose their well-paying manufacturing and high-tech knowledge and service jobs to foreigners. By definition, these are less productive jobs paying less.

When jobs move out, skills move with them. At the rate at which the United States is losing software and computer engineering jobs, for example, how much longer will U.S. engineering schools be offering this major?

When manufacturing jobs are lost, so are jobs in trucking, warehousing, banking and insurance. There is a chain effect that reduces the overall productivity of the United States as a location of economic activity.

The loss of high productivity jobs takes away the ladders of upward mobility and wipes out human capital. A displaced U.S. software engineer cannot move to China or India to seek employment in his profession.

Retraining is not an answer, because almost the entire range of knowledge jobs can be outsourced. The Internet permits U.S. employers to hire people in India, China and the Philippines as stock analysts, accountants, researchers, designers, engineers, radiologists – any occupation that doesn't require a hands-on, face-to-face, local presence.

Economists assume that the substitution of foreign labor for U.S. labor is the benevolent workings of free trade. But what is being traded when U.S. employers move jobs out of the country? Many of our imports are products made for American markets by U.S. firms.

Economists mistake the free movement of factors of production for free trade. Raised on the theory of comparative advantage, economists know that free trade is mutually beneficial. They dismiss without thought any concerns that seem to call free trade into question. The case for free trade has been unassailable for so long that economists have overlooked that today's circumstances do not comply with the assumptions of the theory.

The gains from trade flow from each country focusing on what it can do best and trading for other goods. The idea that there are comparative advantages in production is based on countries having different endowments of immobile factors of production. When the theory was developed, agricultural output was an important component of Gross Domestic Product, and a country's advantages resided in its climate and geography.

David Ricardo discovered the principle of comparative advantage in the early 19th century. Ricardo recognized that the principle did not hold if all factors of production are internationally mobile. Mobile factors of production would migrate to countries that had the greatest absolute advantages. Those countries would gain, and all others would lose.

Climate and geography cannot migrate, but capital and technology can. Today, absolute advantage resides in an abundant supply of cheap and willing labor. Now that Asia is safe for capitalism, capital and technology flow to countries where labor costs are lowest.

The global mobility of factors of production is a new development. Until recent years, it was not safe for capital and technology to migrate outside North America, Western Europe and Japan. No first-world country had an absolute advantage in labor cost.

The collapse of world socialism changed circumstances overnight. U.S. labor now faces direct competition in global labor markets. The excess supply of labor in these markets will drive down wages, salaries and employment in the United States. As the dollar is likely to lose value under pressure from our growing trade deficit, the decline in wages will not be compensated by a decline in prices, and U.S. living standards will fall.

It is irresponsible for economists to dismiss these concerns by citing empirical evidence from historical correlations. New developments are not reflected in historical data.

Economists dismiss as "anecdotal evidence" the news reports of millions of high-paying U.S. white-collar jobs being moved overseas and filled by foreigners. American high school and college students are far more realistic than economists, as they search for careers that cannot be shipped out or given to foreigners on work visas.

U.S. labor no longer has the advantage of education, training, technology and capital over its foreign competition. Existing wage levels, however, assume that Americans still have these advantages. The extraordinary wage differences between the United States and Asia mean that jobs will flow out of America into Asia. Tax cuts and low interest rates cannot compensate for the huge wage differences.

U.S. corporations have made a strategic decision to move jobs abroad. What corporations will employ the displaced U.S. employees?

Dr. Roberts' latest book, "The Tyranny of Good Intentions," has been published by Prima Publishers.

Copyright 2003 Creators Syndicate, Inc.

[clamper1797]

Another shameless free traitor

[Held_to_Ransom]

Advanced manufacturing certainly merits its glitzy, high-tech strategic status. But it exists at the pinnacle of the manufacturing infrastructure, and is reliant on a solid base of more traditional industries and interconnected suppliers

Absolutely, and that infrastructure of jobs upon which people can develop and grow their skills is being built by us at breakneck speed in China.

It's not really a puzzle. All we really need to do is ensure that our schools produce high quality individuals to enter at the ground floor. They will contribute to the system and make it possible to build.

Now, if only we could figure out how to teach them to read, it would be a start.

[jackbill]

This whole article is bull shit. Not once did the author mention UNIONS. Unions have killed the American manufacturing base - from the steel industry through high tech.

I graduated from high school in 1949. In my city, we had a depression. Finally, the Pittsburgh Plate Glass Company came in and built a $34 million plant to manufacture precision glass products. People who had been unemployed for years finally had a job. And within a year or two, they went on strike for more money, and destroyed the company.

Do they have my sympathy? Hell no. Let them starve.

[clamper1797]

High tech has NEVER seen a union

[A. Pole]

Economic commentator Eamonn Fingleton speaks bluntly about what he sees as the frittering away of the United States' manufacturing base and what he regards as the consequent stagnation of the American standard of living.

Bump.

[ArneFufkin]

From the wellspring of Arne-riffic bold, daring and spunky outside-the-box nonsense, consider this proposal:

Log off Free Republic. Find some job people will pay you actual cash-money to do. Find some talent or skill that people will pay you what you think you are worth to perform the job.

Having failed that, return to Free Republic and call people traitors and demonstrate that headshrinking cannibals straight from the jungle of New Guinea are more attractive employee candidates than you.

[RightWhale]

What is happening is at least three things at once.

First, research is falling behind. The US may still have the lead, but others are catching up. The huge lead the US had at the end of WW II is gone.

Second, upgrading and modernizing is mostly up to the industry itself. This is a huge disadvantage compared to industries of other countries that had to rebuild after WW II and countries that are now building modern plants.

Third, wages are high, prices are high. and some of this is due to the factory workers themselves through their unions. Ayn was right about this.