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.
No, maybe not directly, but I'm sure you have no problem with government picking up the tab for unemployment, retraining, added police for increased crime (one of those little side effects of large job losses, etc), that way it doesn't directly impact your fantasy land reality.
Yup, unemployment is 5.2%. Those job losses are just rolling across the landscape. Is unemployment higher among people who can't multiply?
They can play some number game - one thing if the China products are much cheaper 10% cost might equal 50% of products. Second they can undervalue the import by the accounting tricks.
First time I've agreed completely with something you've posted. That is a little complicated for slots to understand though. Makes his little head hurt.
Yes, They're non-existent. Re-read what I posted. Im of the opinion that we are selling ourselves out to the chi-coms and every other third world nation.
Aw shucks. You got me again ol Toddster. I'm making a trip to Walmart today to buy 90.9% American products. I may be there awhile trying to find it among all the third worl dimports though. I'll lower myself to talk to you again when I complete that mission.
It's an adult world. America will either compete or perish.
Pile it up, pile it high...
American products at WalMart are closer to 70%. I know, math is hard for you. Keep trying though.
"Managed Capitalism" are the exact words used by Vladimir Putin to justify further control of the Russian economy by a corrupt government.
But the president's [Putin] concerns about democratic principles may miss the larger point. The real threat to Russia's future could lie in the economy. For now, its gross domestic product is booming, it boasts a budget surplus and a windfall from record high oil prices. But it is pursuing a model of corrupt, state-managed capitalism, economists and political analysts say, that is inimical to democracy and could condemn its economy to perpetual third world status.
Someone else had the temerity to call this the post of the day?!
The mind boggles at finding these kinds of statements on a conservative forum?
Yeah, free trade makes it harder for wages to rise after a recession.
The recession started three years ago in March 2001. Now, 36 months later, real hourly earnings are 1.85 percent higher. Compare that to the 1.95 percent loss on the 36-month anniversary of the 1990-91 recession. Three years after the 1980-82 recession started, real earnings had also declined by 1.49 percent.
I guess I'll have to do the work myself. $2.5 billion times 365 days in the year equals $912.5 billion. You have a source that shows the government is borrowing $912.5 billion this year? Maybe a source that shows the government borrowed $912.5 billion last year?
At the very least you should demand a refund for your college math classes. They didn't stick, did they ?
And how successful has that been? There is a great disparity in the 'reach' between money-conscious Share-holders and an entrenched CEO who often has lap-dogs on the Board of Directors. Wasting the corporate (i.e., the Shareholders) assets to line their own pockets, as I am sure you have witnessed as well. It is pandemic among American management almost. I am wondering whether the best approach (i.e., most feasible) would be one where management is, as a matter of state law, in a new Uniform Corporate Law Code or some such , not allowed to dilute company shares for their own compensation. I.e., no deferred or reserved stock options for services or compensation. Period. Cash on the barrel head only.
I can forsee Delaware not going along though.
So Federal jurisdiction might be necessary...although I loathe giving them authority in such an area. And the likelihood of passage would be low. After all..."corporate donors" = Congress in way too many cases.
Walmart didn't buy $220 billion last year, you make up figures on the fly and scream at others. Go do some research (as if). But I'll point out your mistakes for you.
Page 18.
2004
Net Sales: $256,329,000,000 (Walmarts domestic and foreign and SAMS clubs)
Cost of Sales: $198,747,000 (note this includes transportation, inventory and other such related expenses)
Operating & Admin expense: $44,909,000,000
Page 20:
The Walmart international segment made up 18.5% of total sales, or in other words: $47,420,865,000
Further note: large chunk of sales are in food items (Walmart Co sells 18% of all groceries in the US) in Walmarts and much higher in SAMS.
Agreed. What they need to do is pass a law requiring management salaries to be approved by the shareholders. Maybe even require a supermajority vote. The problem is that shareholders just go along with management.
Yawn.
Walmart didn't buy $220 billion last year, you make up figures on the fly and scream at others. Go do some research (as if). But I'll point out your mistakes for you. Page 18.
2004 Net Sales: $256,329,000,000 (Walmarts domestic and foreign and SAMS clubs) Cost of Sales: $198,747,000 (note this includes transportation, inventory and other such related expenses)
Yeah, if I was talking about fiscal 2004, you'd be right.
2005 Walmart Annual Report (PDF)
Page 14.
2005
Net sales: $285,222,000,000
Cost of Sales: $219,793,000,000
Gosh, that looks a lot closer to my $220 billion number than it does to your $198,747,000,000 number. Imagine my surprise.
General Electric is one of the five biggest companies in America and the biggest producer of appliances, such as dishwashers, refrigerators, stoves, and TVs. The biggest outlet for GE goods is Wal-Mart. During the last few years, GE has conducted a large amount of outsourcing. The IUE union, which represents GE workers, has estimated that during the last five to seven years, GE has fired more than 100,000 workers, one of the nation's biggest outsourcing massacres. Most of this work was outsourced to Mexico, China, and Asia in general.
At Masterlock, 250 union workers lost their jobs in 2000 when Wal-Mart suddenly dropped the company's products and switched to an offshore, low-wage competitor.
Levi Strauss is one of the biggest manufacturers of jeans and denim products, including the line of Docker slacks. Wal-Mart is the biggest retailer of Levi Strauss products. During the past 18 months, after meetings with Wal-Mart, Levi Strauss announced it will shut down its four remaining production plants in North America and shift the work to Ibero-America and Asia. Several hundred jobs will be lost.
Dial Soap sells 28.3% of its production to Wal-Mart. Under Wal-Mart pressure, Dial is shutting down its Compton, California plant and shifting work to Argentina.
1994-2004 Wage Facts:
For all workers, hourly wages rose 38.4% while the Consumer Price Index (CPI) just rose 27.1%, hence the real gain. For manufacturing jobs, hourly wages also rose more than prices, with a 34.1% gain.
Of course the protectionists will explain this away by claiming that the increases weren't enough and don't mean much.....until you look at pre-NAFTA wage increases decreases.
a pre-NAFTA comparison is in order. From 1984-1994, hourly wages for all workers rose 33.5%, while the CPI rose 42.2%, indicating a fall in real wages. The same happened for manufacturing jobs with hourly wages rising only 33%, well under the rise in prices. So it looks like workers did better in the years after NAFTA went into effect than before.
Isn't construction one of the industries where protectionists say wages are being driven lower since NAFTA (wage arbitrage) by the free traders? hmmmmmmm.....
we gained about 2 million construction jobs from 1994-2004, which paid well. In 2004, the average hourly wage for construction workers was $19.23. Construction wages also showed real gains from 1994-2004 while showing losses in the 1984-94 pre-NAFTA period.
Quote: American products at WalMart are closer to 70%. I know, math is hard for you. Keep trying though.
You are dillusional. I'll raise that bet to $5000. I'm serious.
Textiles and Apparel:
Carolina Mills is a 75-year-old company that supplies thread, yarn, and textile finishing to apparel-makers—half of which supply Wal-Mart. But since 2000, Carolina Mills' customers have begun to find imported clothing sold so cheaply at Wal-Mart, that Carolina Mills could not compete even if they paid their workers nothing! Since 2000, Carolina Mills has shrunk from 17 factories to 7, and from 2,600 employees to 1,200. Steve Dobbins, the CEO of Carolina Mills, told the December issue of Fast-Company magazine: "People ask, 'How can it be bad for things to come into the U.S. cheaply? How can it be bad to have a bargain at Wal-Mart?' But you can't buy anything if you're not employed. We are shopping ourselves out of jobs".
Lovable Garments, which was founded in 1926, had, by the 1990s, become the sixth-largest producer of women's lingerie in the United States, employing 700 workers. Wal-Mart became the biggest purchaser of Lovable's goods; in 1995, Wal-Mart demanded that Lovable slash its prices to compete with cheap imports. When Lovable indicated it could not do that, Wal-Mart illegally reneged on its contract, and outsourced the lingerie production to Ibero-America, Asia, and China. Without the Wal-Mart market, in 1998 Lovable had to close its American manufacturing facilities and fire the workers. Stated Frank Garson, who was then Lovable's president, "Their actions to pulverize people are unnecessary. Wal-Mart chewed us up and spit us out."
Food:
Vlasic Pickles was roped into a contract with Wal-Mart, in which Wal-Mart sold a 3 gallon jar of whole pickles for $2.97. Wal-Mart sold 240,000 gallons of pickles per week. But the price of the 3 gallon jar was so low, that it vastly undercut Vlasic's sales of 8 ounce and 16 ounce jars of cut pickles; further, Vlasic only made a few pennies per 3 gallon jar. With its profits tumbling, Vlasic asked Wal-Mart for the right to raise the price per 3 gallon jar to $3.49, and according to a Vlasic executive, Wal-Mart threatened that if Vlasic tried to back out of this feature of the contract, Wal-Mart would cease carrying any Vlasic product. Eventually, a Wal-Mart executive said, "Well, we've done to pickles what we did to orange juice. We've killed it"—meaning it had wiped out competitor products. Finally, it allowed Vlasic to raise prices; but in January 2001, Vlasic filed for bankruptcy.
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