I wonder where real wages and our economy would be if the misconception that full employment is the worst fate mankind could face wasn't held as a universal, but unsupported truth.
Posted on 10/20/2004 2:40:59 PM PDT by Willie Green
For education and discussion only. Not for commercial use.
If you think Pedro Martinez' numbers against the New York Yankees look bad (and they do), they're nothing compared with the government's latest monthly trade figures. Dismal as the Boston Red Sox ace's performance against the Bronx Bombers has been, he looks like a champion next to the trade numbers, which are one important measure of the U.S. economy's performance against the rest of the world.
Not that the trade surplus and deficit figures tell us everything we need to know about America's competitiveness. In particular, they compare apples and oranges – how U.S. products fare in overseas markets versus how foreign products do in U.S. markets. And even studying the trade figures industry by industry can be misleading. By definition, they can't shed light on which U.S. industries depend how heavily on exports and/or face major foreign competitors, and which U.S. industries sell mainly to the humongous U.S. market and/or face little import competition.
Still, according to mainstream economic theory, these trade balance figures say a great deal about the relative strength of America's economy, whether it is waxing or waning, and what its future composition will be. The reason? What a country trades most successfully – where it wracks up its biggest surpluses - eventually becomes what it makes most successfully and prolifically. And what it trades least successfully – where it wracks up its biggest deficits - eventually becomes what it makes least successfully and prolifically. That, in plain English, is what comparative advantage in all its forms is all about.
The deficits also show that the United States is a country that consumes far more than it produces. Although the economic price for this profligacy has appeared minor so far, anyone expecting the situation to last forever and is blasé about its worsening must believe there really are free lunches after all.
The August, 2004 trade figures released Oct. 14 by the Census Bureau show an overall U.S. deficit in goods and services of $54.04 billion, second all-time only to June´s $55.2 billion. This year´s January-August deficit level, as a result, is more than 19 percent larger than last year´s, meaning that the annual deficit figure is on its way to smashing last year´s $421 billion record total.
Even worse, the U.S. deficits keep soaring despite the soft patch recently encountered in domestic growth, and the gradual continued weakening of the dollar. The first is supposed to keep imports down and the second is supposed to buoy exports, but little of these macroeconomic effects are being felt.
Further, the closer one examines the deficit figures, the worse they look. Remember the rule that what a country trades most successfully it will wind up making most successfully? Well, by this logic, the United States doesn´t have much of a long-term future as a manufacturer. August´s manufacturing deficit was the second highest on record, and this year´s cumulative manufacturing deficit so far is more than 21 percent higher than last year´s January to August record total of $307.45 billion.
And don´t think that the problem is concentrated in so-called dinosaur, smokestack industries – which, incidentally, create most of America´s best-paying jobs on average. The $4.5 billion August deficit in advanced technology products set a new record, too.
Of course, many supporters of current U.S. trade policies see no special value in maintaining a world-class domestic manufacturing at all. But the August trade figures should scare them, too. America´s longstanding surplus in tradable services shrank by 19 percent, to $3.2 billion – the lowest surplus since the Census Bureau began tracking this trade in 1992. Since 2001, moreover, the January-August service surplus has declined a stunning 27 percent, to $33.07 billion. Still think that we can export our way out of our enormous national trade deficits and resulting debts by speeding up our shift to a service economy? Please!
Even more worrisome, much evidence indicates that the United States is also seeing its competitive edge erode in information technology and professional services – the supposed industries of the future, for which displaced manufacturing workers are supposed to reeducate and retrain themselves, and which America´s youth should target during their schooling.
The U.S. surplus in the “other private services” category, which captures trends in these sectors, did rise from $31.44 billion in the January-August, 2001 period to $33.15 billion in January-August, 2002. Since then, however, the surplus has fallen by 4.4 percent, including a fractional decrease in August, 2004, to $3.96 billion. In August, 2003, the surplus was $4.08 billion – 2.94 percent higher.
When America began losing older industries such as textile and apparel and steel, free trade cheerleaders predicted that the forces of comparative advantage would push the nation up the technology ladder to automobiles and ships and machine tools and consumer electronics. When these industries began faltering, Americans were told not to worry, for they would be freed up to concentrate on high tech goods like computers and semiconductors and aircraft and advanced telecoms equipment. When many of these industries began migrating en masse to high-income Japan and then low-income countries like China, professional services like law, engineering, and finance, and info-tech services like software writing were then declared the new economic future.
The latest trade figures show that these sectors won´t be saviors for the vast majority of America´s workforce, either – leaving two obvious alternatives. Americans´ comparative advantage will be in sales – hawking to each other the wares of other nations. Or maybe we´ll just all go back to the farm. But the only problem with that scenario is that farming is also under intensive attack from foreign competition.
Sorry, I was wondering about why you were fixated on starting salaries over average ones, but I realized you were talking about yourself, instead of making a larger point.
Pretty darn close to infinity. Are you that thick?
I'm not too familiar with a 64 Beetle myself --- but are you sure they had no brake system or parking break? Were gas guages really unavailable in the 60's?
If "free trade" is such a good idea, why do these same politicians support tax rates ranging from 20% to 40% on trade between American citizens?
Check that list --- I'm sure some of those 'options' were also on the '64 car --- maybe not fuel warning lights but gas gauges that accomplish the exact same thing --- more reliably. Mirrors on passenger visors shouldn't really be a huge cost or improvement --- I don't know if they were on cars in the 60's though.
Actually, the tax numbers I used included both parts of Soc Sec (employee and employer) so after tax income would be about $4300 in 1964 and $20,270 in 2004. But I see your point. I also looked up the CPI conversion factor for 1964. It's .166 so a better comparison might be a 2004 car that cost $1800/.166.
So, how does a 2004 car that costs $10,800 compare to a 1964 VW?
Actually, it means that you have less disposable income than you did thirty years ago.
I never answered your question...we are a small, family owned marketing supplier to Nissan, DaimlerChrysler (Mercedes and SMART) and GM based in CA. We are a very small company, but I am telling the truth dealing with GM has become very painful...we are probably at a break even point on our business with them. Some day we will likely decide it is better not to have the business, and expand the other clients which pay better.
And with regards to the Toyota Tundra trucks, about five years ago, all the rave at GM was voluntary buyouts. The HR person would hit up each department waving forms for staff to sign with a giant bonus attached if they would seperate from the company. Every month the bonuses would be ratcheted up, along with the threat that "when we have to lay people off, there will be no cash attached, so volunteer now" As you can guess, the most qualified and marketable workers would see this as a boon.
Toyota hired away the person that designed the Chevy Silverado manufacturing process from GM. (The latest Silverado, which is now several years old) GM even paid them to leave....and the person walked right into Toyota's hands and planned and built their Indiana plant, and is designing the Texas plant.
The person responsible for Chevy Trucks advertising for the last 20 years was also encouraged to leave after a missed promotion. (Passed over for an outsider) He turned in his papers for retirement, was given pats on the back and within a month was working for Toyota for brand marketing for the Toyota truck line. It is no coincidence that Toyota is in Nastruck and those zany Darrell Waltrip Toyota Truck commercials are on during Nascar. (Another former Chevy guy)
185 - It's been a long time, and my memory is not great about it, but it does seem to me that my girlfriend's 68 Beatle had a low fuel red lite + guage, and a low oil pressure red light (I don't remember guage), but the lite would go out on reving it up, and also had a passenger side visor mirror. It seems to me that she was mad because it was not on the driver's side, as it was her car. I may have gotten my cars/women memories a bit mixed, but I think this is right. I remember her far more than the VW, and can still picture her lovely visage at this moment and the good times we had, and wonder what happened to her.
186 - LOL - "So, how does a 2004 car that costs $10,800 compare to a 1964 VW?"
Name a NEW car which list price that low - the lowest list price I can find is for a 2005 Ford Focus, at $13,230. And I would be willing to bet that there is not one you can find in the whole US for that list price, while the $1800 VW was available at any VW dealer.
Name a NEW car which list price that low - the lowest list price I can find is for a 2005 Ford Focus, at $13,230.
Would you like salt and pepper with those words?
I wonder where real wages and our economy would be if the misconception that full employment is the worst fate mankind could face wasn't held as a universal, but unsupported truth.
Regarding the charts, thanks. I actually generated that chart using the online graphing options at the Bureau of Labor Statistics site. As you probably know, I posted a number of similarly generated charts at http://home.att.net/~rdavis2/jobs.html.
Also, thanks for mentioning the apparent connection of wages and the strength of the dollar. I did look at some exchange rate data off the Federal Reserve site and saw the steep drop from 1970 to 1980, the partial recovery through 1985, the drop to new lows through 1991, and the partial recovery through 2002. Since then, it's dropped to its prior lows. In any case, I had not thought of the likely connection with wages.
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