Posted on 03/20/2005 8:11:01 AM PST by A. Pole
A country cannot be a superpower without a high-tech economy, and America’s high-tech economy is eroding as I write.
The erosion began when U.S. corporations outsourced manufacturing. Today, many U.S. companies are little more than a brand name selling goods made in Asia.
Corporate outsourcers and their apologists presented the loss of manufacturing capability as a positive development. Manufacturing, they said, was the "old economy," whose loss to Asia ensured Americans lower consumer prices and greater shareholder returns. The American future was in the "new economy" of high-tech knowledge jobs.
This assertion became an article of faith. Few considered how a country could maintain a technological lead when it did not manufacture.
So far in the 21st century, there is scant sign of the American "new economy." The promised knowledge-based jobs have not appeared. To the contrary, the Bureau of Labor Statistics reports a net loss of 221,000 jobs in six major engineering job classifications.
Today, many computer, electrical and electronics engineers, who were well paid at the end of the 20th century, are unemployed and cannot find work. A country that doesn’t manufacture doesn’t need as many engineers, and much of the work that remains is being outsourced or filled with cheaper foreigners brought into the country on H-lb and L-1 work visas.
Confronted with inconvenient facts, outsourcing’s apologists moved to the next level of fantasy. Many technical and engineering jobs, they said, have become "commodity jobs," routine work that can be performed cheaper offshore. America will stay in the lead, they promised, because it will keep the research and development work, and be responsible for design and innovation.
Alas, now it is design and innovation that are being outsourced. Business Week reports ("Outsourcing Innovation," March 21) that the pledge of First World corporations to keep research and development in-house "is now passe."
Corporations such as Dell, Motorola and Philips, which are regarded as manufacturers based in proprietary design and core intellectual property originating in R&D departments, now put their brand names on complete products that are designed, engineered and manufactured in Asia by "original-design manufacturers" (ODM).
Business Week reports that practically overnight large percentages of cell phones, notebook PCs, digital cameras, MP3 players and personal digital assistants are produced by original-design manufacturers. Business Week quotes an executive of a Taiwanese ODM: "Customers used to participate in design two or three years back. But starting last year, many just take our product."
Another offshore ODM executive says: "What has changed is that more customers need us to design the whole product. It’s now difficult to get good ideas from our customers. We have to innovate ourselves." Another says: "We know this kind of product category a lot better than our customers do. We have the capability to integrate all the latest technologies." The customers are America’s premier high-tech names.
The design and engineering teams of Asian ODMs are expanding rapidly, while those of major U.S. corporations are shrinking. Business Week reports that R&D budgets at such technology companies as Hewlett Packard, Cisco, Motorola, Lucent Technologies, Ericsson and Nokia are being scaled back.
Outsourcing is rapidly converting U.S. corporations into a brand name with a sales force selling foreign designed, engineered and manufactured goods. Whether or not they realize it, U.S. corporations have written off the U.S. consumer market. People who do not participate in the innovation, design, engineering and manufacture of the products that they consume lack the incomes to support the sales infrastructure of the job diverse "old economy."
"Free market" economists and U.S. politicians are blind to the rapid transformation of America into a third world economy, but college-bound American students and heads of engineering schools are acutely aware of declining career opportunities and enrollments. While "free trade" economists and corporate publicists prattle on about America’s glorious future, heads of prestigious engineering schools ponder the future of engineering education in America.
Once U.S. firms complete their loss of proprietary architecture, how much intrinsic value resides in a brand name? What is to keep the all-powerful ODMs from undercutting the American brand names?
The outsourcing of manufacturing, design and innovation has dire consequences for U.S. higher education. The advantages of a college degree are erased when the only source of employment is domestic nontradable services.
According to the March 11 Los Angeles Times, the percentage of college graduates among the long-term chronically unemployed has risen sharply in the 21st century. The U.S. Department of Labor reported in March that 373,000 discouraged college graduates dropped out of the labor force in February—a far higher number than the number of new jobs created.
The disappearing U.S. economy can also be seen in the exploding trade deficit. As more employment is shifted offshore, goods and services formerly produced domestically become imports. No-think economists and Bush administration officials claim that America’s increasing dependence on imported goods and services is evidence of the strength of the U.S. economy and its role as engine of global growth.
This claim ignores that the United States is paying for its outsourced goods and services by transferring its wealth and future income streams to foreigners. Foreigners have acquired $3.6 trillion of U.S. assets since 1990 as a result of U.S. trade deficits.
Foreigners have a surfeit of dollar assets. For the past three years, their increasing unwillingness to acquire more dollars has resulted in a marked decline in the dollar’s value in relation to gold and tradable currencies.
Recently, the Japanese, Chinese and Koreans have expressed their concerns. According to a March 10 Bloomberg report, Japan’s unrealized losses on its dollar reserve holdings have reached $109.6 billion.
The Asia Times reported on March 12 that Asian central banks have been reducing their dollar holdings in favor of regional currencies for the past three years. A study by the Bank of International Settlements concluded that the ratio of dollar reserves held in Asia declined from 81 percent in the third quarter of 2001 to 67 percent in September 2004. India reduced its dollar holdings from 68 percent of total reserves to 43 percent. China reduced its dollar holdings from 83 percent to 68 percent.
The U.S. dollar will not be able to maintain its role as world reserve currency when it is being abandoned by that area of the world that is rapidly becoming the manufacturing, engineering and innovation powerhouse.
Misled by propagandistic "free trade" claims, Americans will be at a loss to understand the increasing career frustrations of the college educated. Falling pay and rising prices of foreign made goods will squeeze U.S. living standards as the declining dollar heralds America’s descent into a has-been economy.
Meanwhile, the Grand Old Party has passed a bankruptcy "reform" that is certain to turn unemployed Americans living on debt and beset with unpayable medical bills into the indentured servants of credit card companies. The steely-faced Bush administration is making certain that Americans will experience to the full their country’s fall.
To find out more about Paul Craig Roberts, and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.
COPYRIGHT 2005 CREATORS SYNDICATE, INC.
Okay, I just couldn't imagine a lot of IT jobs in rural Iowa.
And yes, outsourcing is about the money. Did anyone say different? I don't mean just on this thread, I mean anyone, anywhere?
Speaking just for myself, if I were me, I'd do what I had to do -- drive a cab, work a warehouse jobs, substitute teach, do the minimum wage thing -- and then update my skill set. Because if the IT jobs are anything like the blue collar jobs, then they ain't coming back. Ever.
Spacecraft design and operations. Something tells me that the spacecraft is going to do for the 2010's what the computer did in the 80's
Once the real estate bubble pops, lookout.
Pray tell how is there 'slavery' in India due to outsourcing?
My statement was that the people who negotiate free trade deals negotiate with countries that allow slave labor. Two of these countries are India and China.
My question was how is it that America can allow trade policy to be changed so that American companies can do business with slave nations? America banned slavery within its borders and the companies doing business with China and India are insured by the US taxpayers through OPIC and are often in public private partnerships with the US government. Companies insure by American citizens and that partner with the US government should by rights, not do business with slave nations on the authority of the 14th amendment.
Show me proof that the factories in the Pearl River Delta put a gun to the heads of the women who work there. Those women would be consigned to a life in the fields or in prostitution if it wern't for those factories. Same thing in India.
Great, but you said:
Pragmatic (not ideological) national policy combining market and well calibrated government intervention usually worked very well.
Surely you can say how well Japan did since 1989. Don't need a PhD to gather the historical data, do you?
You said government intervention usually worked very well. Back that up with some data. If it's not too much trouble. Unless you're gonna admit you were wrong. That intervention doesn't work very well.
I had one of these jokers argue that child labor in these countries is so bad, the kids are better off starving to death.
I dont agree US Tech is dead. Nokia just licensed Microsoft patents for all their cellphones.
Toyota USA
Direct N.A. Employment 36,349
N.A. Dealer and Supplier Employment 200,000
Direct N.A. Investment $15,265,000,000
Cumulative N.A. Production 11,846,096
N.A. Vehicle Sales (2003) 2,072,190
Cumulative N.A. Vehicle Sales 34,452,600
N.A. Purchasing* $22,722,000,000
N.A. Toyota, Scion and Lexus Dealers 1,713
Total U.S. Philanthropy (since 1991) $227,000,000
Honda USA
25,000 US employees, 100,000 dealership employees and 600 US suppliers.
Alpharetta, GA Power Equipment Headquarters, Auto Zone, Finance, Parts Center
Honda Rider Education Center
Anna, OH Engine Plant
Honda's largest engine facility in the world, the Anna plant annually produces more than one million L-4 andV-6 engines.
Ann Arbor, MI Emissions Lab
Cantil, CA Testing
Colton, CA Honda Rider Education Center
Denver, CO Emissions Testing Lab
East Liberty, OH Automobile Plant
Using Honda's flexible manufacturing, this plant produces cars and light trucks on the same assembly line.
Transportation Research Center (Test Track)
Greensboro, NC R & D Center
Lincoln, AL Automobile and Engine Plant
Opened in 2001, this is our newest North American Automobile Plant, producing the Odyssey minivan, the Pilot and V-6 engine.
Marysville, OH Motorcycle Plant
Honda's first U.S. production facility, the Marysville Motorcycle Plant has produced more than 1.8 million motorcycles and ATVs since 1979.
Automobile Plant One of the most integrated and flexible auto plants in North America, it houses stamping, welding, paint, plastic injection molding and assembly under one roof.
Mojave Desert, CA R & D Test Track
Raymond, OH R & D Center
Russells Point, OH Transmission Plant
Santa Clarita, CA Honda Performance Development (Auto Racing)
Swepsonville, NC Power Equipment Plant
This facility has an annual production capacity of 1.5 million multi-purpose power equipment engines.
R & D Center
Irving, TX Honda Rider Education Center
Troy, OH Honda Rider Education Center
Timmonville, SC All-Terrain Vehicle Plant
Personal Watercraft Plant
Honda's primary ATV plant in North America also handles engine assembly under the same roof and, in 2002, opened a second plant for personal watercraft production.
Torrance, CA U.S. Sales & Marketing Headquarters
R & D Center
And travelling to Mars.
OK, let me help you then. Japan before 1989 was doing spectaculary well. After 1989 it slowed down but still is doing OK. Let us compare the unemployment and trade deficit with USA:
USA trade deficit in 2004: $665.9 billion
Japan trade surplus in 2004: 18.59 trillion yen ($180 billion)
USA unemployment in 2004: 5.5%
Japan unemployment in 2004: 4.5%
That's chump change. Remember, all the profits are being expatriated. /sarc
"Why? Because your companies want to make money there. Your companies and politicians do not care about slave labor. They do not care about the execution of the innocent. They do not care about human rights. They care about copyrights and national security. But what they have done is to help turn China into an economic and military giant. But it is still a Communist giant which crushes human beings."
"Human dignity means nothing to your greedy politicians and corporate leaders. They see China as a great place to make money. And it does make good business sense. No unions. No strikes. Slave labor. The state maintains order for you. "
--Harry Wu
Free and Endless Supply of Workers
China¡¯s booming economy continues to increase through its use of slave labor or Laogai camps. Laogai means ¡°reform through labor.¡± It¡¯s a system of prison factories and detention centers set up by former Chinese leader Mao Zedong during the 1950¡¯s as a means to re-educate through labor and increase economic gain for the People¡¯s Republic of China. As of 1979, there were apparently only several thousand people being forced to work in the Laogai system. Today it has become an enormous source of free labor and financial profit for the Chinese government. According to estimates from the Laogai Research Foundation, there are 6.8 million people incarcerated in China¡¯s 1,100 labor institutions.
For those incarcerated in these facilities, the reality they face is long hours of brutal treatment with little sleep or food to sustain themselves. Reports of 20-hour work days and violent oppression force some detainees to choose suicide instead of being beaten, starved, or worked to death according to a paper by Stephen D. Marshall, ¡°Chinese Laogai: a hidden role in ¡®Developing Tibet.¡± Others mutilate or injure themselves in an effort to avoid the work. Inmates who fall behind or refuse to work are shocked with electric batons, beaten, sexually assaulted, or thrown into solitary confinement. Among those that make up the population in these labor camps are criminals, political prisoners, and practitioners of the spiritual practice Falun Gong, who reportedly now make up to half of those detained in the Laogai labor system.
Who Uses Slave Labor?
Forced labor has become both a form a torture and a source of great profit for China. With the enormous amount of free labor that comes from Laogai, China has lured many overseas businesses into its profit-through-slave-labor system. With ridiculously cheap wholesale labor costs many cannot resist the bait and unknowingly come to support this illegal practice.
Common everyday products ranging from artificial Christmas trees, Christmas tree lights, bracelets, tools and foodstuffs, et cetera are among some of the products manufactured and exported from these facilities. According to a 1998 House Committee on International Relations report, companies who reportedly have or had products made in China¡¯s Laogai are Midas, Staples, Chrysler, and Nestle¡ä. A recent report from one detainee in the Changji Labor Camp in Xinjiang states the Tianshan Wooltex Stock Corporation Ltd., a contractor to Changji Labor Camp, makes products for overseas companies such as Banana Republic, Neiman Marcus, Bon Genie, Holt Renfrew, French Connection and others. Orders from Banana Republic number between 200,000 and 280,000 pieces a year.
The products made in these facilities are produced by people who are forced to work in unsafe and unhealthy conditions. Detainees in Laogai have said that because of malnutrition, sleep deprivation and stress they often contract lice, scabies, hepatitis, tuberculosis, and other ailments. Sick detainees are still forced to work. Many are not allowed to take showers for long periods of time, allowing all manner of bodily substances to come into contact with the items they manufacture. These products are then shipped all over the world.
Stopping Laogai Products
Laws on the books that outlaw slave labor products have not been able to stop the tide of illegally and inhumanely manufactured merchandise from being shipped and traded worldwide. For example, since 1983 it has been illegal to import goods into the United States made through using slave labor. According to the Laogai Research Foundation China¡¯s government publicly guaranteed to stop the export of slave labor products in October 1991.
In 1992, China and the United States signed a Memorandum of Understanding (MOU) in an effort to enable the US access to information it needed to control its import ban on prison labor products. According to this MOU the Chinese government had committed itself to investigating all claims of slave labor.
The agreement proved to be worth little in real results, given the profits China stood to lose from its free source of labor the Laogai system provides. Brushing aside requests from the US for answers on the issue, China provides ¡°sanitized¡± camps for inspectors. Other tactics used to ensure production continues include false holding companies, changing addresses, and mixing labor camp output and non-prison businesses together.
¡°Thus, the commercial exploitation of slaves in China¡¯s labor camps is effectively an open secret in the world of commerce,¡± says Harry Wu, founder of the Laogai Research Foundation.
The High Cost of China's Laogai
(By Riordan Galluccio, The Epoch Times, 3/24/2004)
The graph shows that year-ended growth in Japanese real GDP has cycled around an average of 1.6 per cent since 1990, with peaks occurring in 1990, 1996 and 2000.
See, the best thing about a planned economy like Japan's is that growth is nice and steady. Not too fast, not too slow, just an ever larger economy, quarter by quarter, year over year.
Much higher growth than America's unplanned economy, as you can see.
Well, the money Nissan sends us every month is spent in CA.
So now trade surplus or deficit is the indicator of a successful or failed economy?
How about the Japanese federal deficit?
Budget:
revenues: $1.327 trillion
expenditures: $1.646 trillion,
Public debt: 154.6% of GDP (2003)
Compared to ours.
Budget:
revenues: $1.782 trillion
expenditures: $2.156 trillion,
Public debt: 62.4% of GDP (2003)
Boy, that pragmatic (not ideological) national policy combining market and well calibrated government intervention sure is expensive. And all it got you since 1990 was 1.6% growth? Maybe they should try something new?
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