I bet you that the North Koreans have 1% unemployment also with their closed and centrally planned economy economy. Of course they also don't have any electricity.
Posted on 06/07/2005 8:14:42 PM PDT by A. Pole
In May, the Bush economy eked out a paltry 73,000 private sector jobs: 20,000 jobs in construction (primarily for Mexican immigrants), 21,000 jobs in wholesale and retail trade, and 32,500 jobs in health care and social assistance. Local government added 5,000 for a grand total of 78,000.
Not a single one of these jobs produces an exportable good or service. With Americans increasingly divorced from the production of the goods and services that they consume, Americans have no way to pay for their consumption except by handing over to foreigners more of their accumulated stock of wealth. The country continues to eat its seed corn.
Only 10 million Americans are classified as “production workers” in the Bureau of Labor Statistics non-farm payroll tables. Think about that. The United States, with a population approaching 300 million, has only 10 million production workers. That means Americans are consuming the products of other countries’ labor.
In the 21st century, the U.S. economy has been unable to create jobs in export and import-competitive industries. U.S. job growth is confined to nontradable domestic services.
This movement of the American labor force toward Third World occupations in domestic services has dire implications both for U.S. living standards and for America’s status as a superpower.
Economists and policymakers are in denial, while the U.S. economy implodes in front of their noses. The U.S.-China Commission is making a great effort to bring reality to policymakers by holding a series of hearings to explore the depths of American decline.
The commissioners got an earful at the May 19 hearings in New York at the Council on Foreign Relations. Ralph Gomory explained that America’s naive belief that offshore outsourcing and globalism are working for America is based on a 200-year-old trade theory, the premises of which do not reflect the modern world.
Clyde Prestowitz, author of the just published “Three Billion New Capitalists: The Great Shift of Wealth and Power to the East,” explained that America’s prosperity is an illusion. Americans feel prosperous because they are consuming $700 billion annually more than they are producing. Foreigners, principally Asians, are financing U.S. over-consumption, because we are paying them by handing over our markets, our jobs and our wealth.
My former Business Week colleague Bill Wolman explained the consequences for U.S. workers of suddenly facing direct labor market competition from hundreds of millions of Chinese and Indian workers.
Toward the end of the 20th century, three developments came together that are rapidly moving high productivity, high value-added jobs that pay well away from the United States to Asia: the collapse of world socialism, which vastly increased the supply of labor available to U.S. capital; the rise of the high speed Internet; and the extraordinary international mobility of U.S. capital and technology.
First World capital is rapidly deserting First World labor in favor of Third World labor, which is much cheaper because of its abundance and low cost of living. Formerly, America’s high real incomes were protected from cheap foreign labor, because U.S. labor worked with more capital and better technology, which made it more productive. Today, however, U.S. capital and technology move to cheap labor, or cheap labor moves via the Internet to U.S. employment.
The reason economic development in China and some Indian cities is so rapid is because it is fueled by the offshore location of First World corporations. Prestowitz is correct that the form that globalism has taken is shifting income and wealth from the First World to the Third World. The rise of Asia is coming at the expense of the American worker.
Global competition could have developed differently. U.S. capital and technology could have remained at home, protecting U.S. incomes with high productivity. Asia would have had to raise itself up without the inside track of First World offshore producers.
Asia’s economic development would have been slow and laborious and would have been characterized by a gradual rise of Asian incomes toward U.S. incomes, not by a jarring loss of American jobs and incomes to Asians.
Instead, U.S. corporations, driven by the shortsighted and ultimately destructive focus on quarterly profits, chose to drive earnings and managerial bonuses by substituting cheap Asian labor for American labor.
American businesses’ short-run profit maximization plays directly into the hands of thoughtful Asian governments with long-run strategies. As Prestowitz informed the commissioners, China now has more semiconductor plants than the United States. Short-run goals are reducing U.S. corporations to brand names with sales forces marketing foreign made goods and services.
By substituting foreign for American workers, U.S. corporations are destroying their American markets. As American jobs in the higher-paying manufacturing and professional services are given to Asians, and as American schoolteachers and nurses lose their occupations to foreigners imported under work visa programs, American purchasing power dries up, especially once all the home equity is spent, credit cards are maxed out and the dollar loses value to the Asian currencies.
The dollar is receiving a short-term respite as a result of the rejection of the European Union by France and Holland. The fate of the Euro, which rose so rapidly in value against the dollar in recent years, is uncertain, thus possibly cutting off one avenue of escape from the over-produced U.S. dollar.
However, nothing is in the works to halt America’s decline and to put the economy on a path of true prosperity. In January 2004, I told a televised conference of the Brookings Institution in Washington, D.C., that the United States would be a Third World economy in 20 years. I was projecting the economic outcome of the U.S. labor force being denied First World employment and forced into the low productivity occupations of domestic services.
Considering the vast excess supplies of labor in India and China, Asian wages are unlikely to rapidly approach existing U.S. levels. Therefore, the substitution of Asian for U.S. labor in tradable goods and services is likely to continue.
As U.S. students seek employments immune from outsourcing, engineering enrollments are declining. The exit of so much manufacturing is destroying the supply chains that make manufacturing possible. The Asians will not give us back our economy once we have lost it. They will not play the “free trade” game and let their labor force be displaced by cheap American labor.
Offshore outsourcing is dismantling the ladders of America’s fabled upward mobility. The U.S. labor force already has one foot in the Third World. By 2024, the United States will be a has-been country.
You're not going to convince me that a journalist has a better handle on economic decision-making than a free market.
Quote: 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.
You don't have a clue. Our machine tool and stamping companies are being shipped to china on a grand scale. You need machine tools to build more machine tools.
We did not build the industrial base from scratch in WWII. It was already there. We just expandned on it.
Those companies are registered in America, thus they benefit from military, civil and diplomatic defense and expenditures. Furthermore, they benefit from US Government (read: taxpayer) subsidies.
Agree. Blackbird
And where is that created wealth being reinvested? In America? Yup, I see the manufacturies going up every day. /sarcasm
I'd be interested in comparing the growth rate of "like-sized" economies, but theres no economy in the world that is even half the size of ours or at our level of maturity (re infrastructure, delivery of services, etc), so its apples and oranges. Go figure !
We did not build the industrial base from scratch in WWII. It was already there. We just expandned on it.That's quite preposterous considering how much industrial capital and technique was developed *during* WWII. People build machine tools, dude, not other machines. Machines are (relatively) cheap, and getting cheaper as productivity continues to rise and the cash value of manufactured goods continues to crash. What matters in the new economy is knowledge more than capital.
This country has been running trade deficits pretty consistently for 40 years, but we continue to get richer.
I feel richer already, don't you? GM to close more plants and cut 25,000 jobs
Japan continues to grow wealthier, and own more of the world.
Its IIP (international investment position) is the highest in the world (although per capita two other countries are still well ahead), and it is the largest single foreign holder of our public debt, having around $700 billion in treasury debt.
The unemployment rate n America does not count those whose benefits ran out and no longer draw money out (the Europeans count everyone because their benefits never run out). The real figure is probably much higher - thank god we have the underground industry to absorb many of these displaced workers - drugs and sex industry.
I have seen many numbers for the Marshall Plan in Europe, but I actually have never seen a number for the U.S. funding of Japanese post-war reconstruction. If you have a good source on this one, I would be most appreciative.
Not to mention, the targeted audience, most everyone on the planet wears clothes, does everyone own a bulldozer or a 747? Blackbird.
Productivity requires that entire industrial base that you blithely dismiss. You are unaware that we have lost the basis of creating the productivity and efficiency gains we enjoyed in the past, as the entire production chain is in the process of being relocated out of the U.S. The collapse of US technical education is a telling symptom as U.S. students flee engineering, math and sciences like the plague.
Japan did try to dominate global manufacturing back in its day, and was on a track to succeed...until Reagan bitch-slapped them hard with trade quotas. And it wasn't just cars. Stopped their momentum dead in its tracks. And gave our manufacturers a breather to figure out how to get competitive again.
George W. Bush did the same kind of thing here with only one industry, Steel, despite the Importers League drumbeat, and an anti-american tilted WTO court. Fortunately Bush prevailed long enough to save our integrated steel mills... mills which are uniquely necessary for defense production. Mini-mills can't, and never will, cut it for defense.
And as for your preposterous conclusion, "A strong economy is no longer an industrial economy." Tell it to China, which you claim "fails to realize" that manufactured goods are a cash loser. They seem to be doing quite nicely don't they, despite your disparaging WORDS. And that is all they are. No truth to them as regards China whatsoever. How much of the U.S. "productivity gains" that you ascribe really are in fact labor substitutions outsourcing componentry for import and slapping U.S. labels on? And it is not just Roberts, but a broad spectrum of economic thinkers Milton Friedman (U. Chicago), Warren Buffet, and Paul Samuelson (MIT) have become deeply suspicious of U.S. productivity claims lately.
And you keep missing the core concern: Manufacturing for national defense requires a deep, broad base. Not just those currently actually hired to do defense work. Think of it in visual metaphor terms like a "pyramid". The top tip end of it is those who do the defense work. But they rest on the foundations below them...and without those foundations, they would collapse. And this is very real-world and very apt.
China is not driving GM out of business. If anything, China is making GM's business stronger because it is putting downward pressure on the dollar, which helps GM.
And a trade deficit is not a "bill." They are accumulating our dollars. The only thing they can do to make this "bill" come due, is they can stop accumulating our dollars, and start spending them. And that's what you want them to do anyway, isn't it?
By the way, we have a 5 % unemployment in comparison to the other industrial market based economies (>10 % in France, Germany). It is true, by comparison, that Cuba and Commie Russia had 1 % rates, but they also had virtually worthless currencies with no goods on the shelves to buy, so its Apples and oranges, again.
I bet you that the North Koreans have 1% unemployment also with their closed and centrally planned economy economy. Of course they also don't have any electricity.
If you're "looking" for work then you are counted among the unemployed. And, as you suggested, there are people who are "officially looking", but who have "other" income, and are counted nonetheless.
Quote: That's quite preposterous considering how much industrial capital and technique was developed *during* WWII. People build machine tools, dude, not other machines. Machines are (relatively) cheap, and getting cheaper as productivity continues to rise and the cash value of manufactured goods continues to crash. What matters in the new economy is knowledge more than capital
o.k. Country B decides to go to war with country A. So if country A has say 10 machine tools and country B has 100 and a war pops up and either country needs to produce 500 machine tools to win the war who is going to replicate the machines the fastest??? Machine tools replicate machine tools. Yes people make the machine tools (with other machine tools) but if people are standing around waiting to get their "nre" machine tool where does that get you??
And I agree we developed capital during WWII but we had a very strong base to begin with. Today all the old machine companies in the northeast are all gone. The few "specialized" companies that yuo call it would not be enough to get the ball rolling in quick order.
3rd World Economy bump [I guess we have to be a 2nd World Economy on our way to 3rd]
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