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.
Still claiming exports didn't increase after NAFTA? Calling you ignorant of that fact was the truth, not a personal attack. As far as factual debate, how can I debate someone so ignorant of the facts?
My, my, my, you are flummoxed. The chart proves the relation of the issues. Trade Deficit charted over time against US Dollar Value Against Major Currencies. They have been going in adverse directions in precise tandem....and I remember how 4-5 years ago the "phony trade" apologists for the deficit pooh-poohed this... where are they now?
Have we reached a tipping point with the trade deficit? One thing for sure, you haven't answered the question.
The phony traders are the ones, in effect, advocating the massive subsidy to [China's ] industry at the expense of [U.S.] consumers"...note "consumers" have to have something called "money" before they can consume. And here you are railing against protecting U.S. industry....which is the source of the consumer's money. H'mmmm. You don't sound too American to me. Anyways, as the dollar slides against the major currencies...we are all hurt...including the "consumers."
U.S. Consumers and U.S. Producers go hand and hand. You are preaching a false dichotomy.
And I note you totally blow off the explicit U.S. taxpayer subsidy of Ex-Im Bank and OPIC.
Anyways, don't try and lecture Free Republicans about competition, its benefits...and its pitfalls. One of the things you have in the current situation is a dangerous Chinese-created economic black-hole, an NEP operation. I.e., it ain't natural...and it sure as hell is not the UNSEEN HAND of Adam Smith. American industry is in a PRICE competition with Communist-controlled-and-maintained slave labor. And that is not just a figure of speech when you consider China's Laogai concentration camps. American firms have been forced into a situation where since they can't 'lick 'em so they have to join 'em. And they have.
why, pray, is the cash value of manufactured goods crashing to the point where most of the cost of what you buy is the freight?
Where is your proof for that hand-waving assertion? And how much of the so-called "crashing" is really attributable to China's low labor rates?
Last Dakotan's idea of factual debate.
CAFTA won't fly because NAFTA has been such a failure. All the premises, such as a gains in goods exports, NAFTA was sold to the American people on have failed to materialize.
Additionally our Federal government has proved to be inept at policing such trade agreements. I initially was a big supporter of free trade, but when a theory fails in practice I know when to quit believing in it.
5 posted on 06/02/2005 9:04:52 AM CDT by Last Dakotan
You're right, exports to Mexico going from $50.8 billion in 1994 to $110.7 billion in 2004 isn't really an increase. Were you in the same math class as SwankyC?
It's true. Since NAFTA consumers are making less and less because all the high paying jobs are being replaced by lower paying jobs.
As you can see from this chart.
I didn't realize we were losing that business also. That hurts; that was one that I thought we still were doing okay in.
Do you know which companies are displacing ours? I know that Japan has a good domestic industry, so it wouldn't surprise me if they were also exporting some. And I think the Europeans have some production also, so it wouldn't surprise me if they weren't gaining some traction here. [I haven't seen anything on the large side from the Koreans, but it wouldn't surprise me to find out that they have both a domestic and export business.]
You could be right, and you could argue that growth in th overall world economy as capital moves around searching for the highest profit is a good thing, as corporations invest overseas and take profit from overseas markets and from overseas labor to domestic stockholders and consumers and overseas consumers have more spending capital and so on. A world economy, where, as long as theres no aggression or State intervention is a good thing.
And let me remind you, if there is a correction, and China reduses its "subsidy" of the dollar etc, our flexibility in labor, and movement of capital, etc will allow us to adjust a lot more effciently than in other countries, including China. Its when the State gets overly involved that more permanent problems arise.
I keep waiting for the chinese currency peg to be dropped or shifted. So is the Treasury Sec'y. China won't do it without being compelled.
Actually, 108% growth over 10 years is only 7.6% growth per year.
How does raising the prices our people pay "recover" costs for us?
Thank you Harvard Business School and all your greedy progeny!
Misconstrual again I see. And there is one little problem with your numbers...the imports.
Remember this rejoinder from that thread?-- "Ignoring imports and counting only exports is like balancing a checkbook by counting only deposits but not withdrawals. The many officials, policy analysts, and business leaders who ignore the negative effects of imports and talk only about the benefits of exports are engaging in false accounting. NAFTA supporters frequently tout the benefits of exports while remaining silent on the effects of rapid import growth." No answer from your side to date.
Considering the huge pent-up demand and the low development of their infrastructure, thats not incredibly high. I believe it was higher in Japan in the 50's/60's.
we've had this debate before, in order for that stat to be meaningful, you would have to:
- remove all government workers, because I'm only interested in how private sector workers are doing. government workers do not add to the tax base, and they have contracts with built in wage increases, their salaries never go down. I could also make the case that people who work in health care are also "part time" government workers, since so much of the $$$s spent on health care (and on their salaries) come from government (medicaid, medicare).
- I would also remove all workers making over $250K a year, I don't want to see their wage increases in those figures. The reason is that if you include them, you include the concentration effects of what is happening in industry with offshoring. When oracle sends 1000 $75K engineers from the US to India, their US executives get big bonuses, while their now unemployed US workers are likely taking lower wages. When the executives at a US furniture company send their manufacturing jobs to China, they also increase their compensation as a result, their laid off workers are working at Home Depot now. The stats mean nothing if those concentration effects are not excluded.
Show me what is happening to the stats with those two filters applied - I guarantee you that middle class private sector wages have fallen over the last 5 years.
Well, since he did not mention imports and only said promised growth in exports did not occur, what did I misconstrue?
The many officials, policy analysts, and business leaders who ignore the negative effects of imports
Negative effects of imports, like what?
Looks like you have your work cut out for you. Please ping me when you find this info, I'd be interested to see if you're right.
Maybe look at median income, that will at least eliminate the pesky rich people skewing the averages.
Yep. I was in the IT sector for 20+ years with experience from mainframe to client server including the latest technology. I started in the Real Estate sector several months ago and we are seeing the same thing as the rest of the country is soon to be realized - no jobs - no house.
It will not be long when property values start their downward spiral, just in time for me to get my Real Estate License.
That looks impressive until you ask "108.5 percent of what?"
That looks impressive until you ask "108.5 percent of what?"
Wither now that industrial base?
Check it out, Smoot Hawley helped us win WW II. A unique perspective to say the least.
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