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.
What can you really conclude about China? Most of the people who live there are agrarian, using third world farming methods, and surviving with govt subsidies. You can think of them as a huge Taiwan surrounded by 20 Laos's. Not necessarily the inevitable powerhouse you're imagining.
I don't care if they spend the those dollars or not. Our economy is growing as fast as it can without incurring inflation anyway. If they started to spend the dollars that they would otherwise accumulate, how would that help us?
At 5.1%, our unemployment rate is hardly worth losing sleep over. If China is taking all of our jobs, then why is the unemployment rate only 5.1%? What they are doing is they are taking the bad jobs--the low pay jobs. And most of the low pay jobs they are taking are not from Americans, but from other countries which would otherwise supply what the Chinese supply.
We don't make significant amounts of textiles in this country, and we haven't for decades. The few jobs that will be lost by allowing Chinese textiles flood our stores will be jobs which are low pay jobs, mostly held by illegal aliens. And keep in mind that there are jobs that are created by cheap Chinese textiles as well. A lot of clothing sales jobs would be lost, for example, if the cost of clothing went up because cheap Chinese clothes were no longer available.
Do you think the Chinese can force us to sell them our defense technology? I think not. Besides, they've done a very effective job of stealing it. Why pay for something you can get for free?
Our imports from China are a paper tiger. Our oil imports comprise 40% of the trade deficit. If you're worried about the trade deficit, then focus on that.
Why on earth would China give it up? It's beating us at manufacturing? Hope that they give it up to justify the sinking ship of Free Trade? Just like they'll revalue their currencies? :)
And yet they produce more super conductors then we do, more televisions, etc. Yet they are our creditor and we are the debt ridden begger on the knees praying they don't dump and devalue our currency.
We need to come up with something big they can't outsource. Right now, we're treading water with all those small home-grown businesses/garage inventions. Oh well, China doubtless will steal or buy the technology/whatever.
I should have said, 'cellphones and HDTV's weren't enough'.
You are so right.
Cold fusion, anyone? But if we came up with a cheap, plentiful alternative fuel and stopped using oil, the Middle East would have nothing to sell. They'd hate us. We can't have that.
We have a lot that can't be outsourced: "would you like fries with that?", "Welcome to Walmart", "your problem is your watchmacallit is blown on your gasketcrankcasefilter, just leave it here over night", etc.
Your car won't run off cold fusion and your lawn furniture won't be made from cold fusion. We'll still need lots of oil.
Those were capitalist societies, who wanted to enhance societal wealth. Communist China's intentions are markedly more inimical, and adversarial...expressly wishing to displace the U.S. as the pre-eminent global power. The talk about the U.S. "Hegemon" is merely envious projection of their own designs.
Well, I am in favor of us lessening our dependence on foreign oil --- maybe turkeys will be one of our fuel sources. I checked http://www.changingworldtech.com/when/future.asp again a few minutes ago, and apparently things are still going well. In fact, I saw an interesting quote near the bottom of the page: We, therefore, expect to move forward with large operating facilities (at least 1,000 tons/day) in Colorado, Alabama, Georgia, and Nevada.
Help me to understand you, please. Are you saying that USA built "a war time industrial base largely from scratch"?
bttt
This represents, in macro terms, a "Dis-saving". But that can only go so far and so long.
Anyways, it is not the jobs per se that concerns me, but the loss of the U.S.'s industrial muscle. This should concern all Americans. And where is that muscle going?
That's a mere technicality, the fact of the matter is that most refuse to fly the US flag at their headquarters lest they hurt the feelings of some country where they operate. Their profits increasingly come from abroad. They have increasingly pressured our government for policies that are detrimental to the long term interests of the country but in their short term interest.
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