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.
Interesting, and worse than I thought. So, just how exactly are we going to get foreigners to buy more US made products so that we can turn our balance of trade deficit into a balance of trade surplus?
From your table, it looks like wages went down from 1977 to 2005, where is all that "economic growth" that we have been told we were having? If wages went down from 1977 to now, and taxes went up in that same time frame, then we are worse off?
That only covers a week and a half of new immigrants. What are the other 127,000 immigrants that enter our labor force in May going to do? What are unemployed americans going to do if we are creating fewer jobs than the number of new immigrants entering our labor force?
#270 Good post. Thanks for the ping. Will try to catch up tomorrow.
I don't know. Are they overpaid, undereducated union employees with bad attitudes? Then probably not. Maybe if the union hadn't hamstrung GM with ridiculous work rules it's possible the company wouldn't be circling the bowl.
the US used to be a place where even a high school graduate could get a job, skilled or semi-skilled, and afford the basics of a middle class life - including a wife who did not have to work, and children.
Yeah, after WW II destroyed the manufacturing capacity of every country from France in the west to Japan in the east. If only we could go back to those days every high school graduate could make $100,000 a year. Too bad we can't go back to those days.
I'm sorry, listening to you whiners I thought our incomes were dropping. Guess you were wrong.
(of course this counts the top 2% who now make around 240 times the average salary).
Feel free to find info that proves all the gain was made by the top 2%. And please don't post any more graphs about India. It just makes me think about America's declining technical skills.
Ever find your book or did you make up the info about Americans making under $25,000?
Yeah, I guess you missed the part about the government having to borrow $2.5 BILLION DAILY, 80% of which comes from foreign sources: primarly Japan and China.
You ever figure out the mistake in your above statement? Or are your math skills that poor?
Oh my god!! Computer programmers lost jobs after the tech bubble burst? That MBA is really paying off for you!!
Don't know what your software graph is supposed to prove.
The fact that the service trade surplus is shrinking doesn't prove that services are suffering, only that the surplus is shrinking. Try again?
By the way, I love that all these graphs are from the far left wing "think" tank E.P.I. What's wrong? Couldn't get any good graphs from the CPUSA website?
If the "managers" are going to be some of your math challenged friends on this thread, I weep for your "managed capitalism".
Please tell me again how 100% of WalMart's products are made in China.
I just paid my bills and need someone/something to laugh at.
You should laugh at yourself, everyone else is.
Were you two in the same math class? You've got a lot of the same weaknesses. Please, use your MBA smarts and get some info regarding median incomes in this country. That'll eliminate your outlier issue.
You might even be able to prove your point. I'm sure E.P.I. has a nice chart for you. LOL!!
Not sustainable - the competitors would then start to come back.
All depends what the barriers to entry are: knowledge base, heavy investment in heavy industry (particularly difficult if the equipment has been shipped overseas and new equipment is not readily available), brand name association, etc.
I guess you missed the point that increasing the minimal wage also has an inflationary pressure on the rest of the market (not to mention it's a rather socialist edict you're pushing).
I guess you're hard of comprehension, didn't go to analytical thought class, did you? Yes, programmers lost jobs, while demand and imports from India shot straight up.
By putting equalizing tariffs on their goods till they drop the protections from their markets (something China has never done even though required by WTO)!
Where was the growth? Stick around long enough and Toddsterpatriot will shove his increase in minimal wage table as proof of "growth". He'll also post how exports under NAFTA grew (true) without showing how imports grew several fold faster (just count the credits not the debits).
Union employees are less then 15% of the labor force and dropping, that excuse is worn out and tired. The 60 THOUSAND or so jobs lost in furniture manufacturing (now in China) from NC were not Union jobs, they're people (many of whom) are now sitting on welfare unemployed and thanks be we can save a dollar or two on cheaply made Chinese junk furniture while paying out ten or twenty dollars in extra taxes or debt spending to cover the terminally unemployed. Whoopy. As always, you and yours ignore the social costs that society has to pick up and pay, that out weigh the few dollars saved.
Walmart sucks up 10% of China's exports, that's roughly $20 billion a year, makes up 2-3% of America's economy and forces suppliers to eventually move to China by demanding yearly 5% cost cuts, till they can't afford to be in America anymore. But you already knew that.
Ya chemical engineering I believe was our government having anti-development policies. Its going to be interesting to see what happens in the next 25 years in industries like nuclear power.
Its my opinion we will need a major build up of energy production.. And of course transmission is a big issue. Its silly right now in America we have increasing power costs each year. Where as you look at every industry in the free market, costs fall year after year. Whichever nation is the most pro-development with energy gets a big advantage because power for their industry and even now IT is cheaper.
One place there is big demand for engineers is for electrical engineers. My father works in that profession, and htey are having a difficult time finding electrical engineers. Especially with some management experience. And the big wave of retirements hasn't even started, most of the current engineering staff are in their mid-50's in the power industry.
Then there is nanotechnology where again you need a large pool of engineers. I fear we will lose out on that to the Chinese, Koreans and Japanese.
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