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U.S. Labor Force: One Foot in the Third World
Chronicles Magazine ^ | Tuesday, June 07, 2005 | Paul Craig Roberts

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.


TOPICS: Business/Economy; Foreign Affairs; Government
KEYWORDS: assclown; bitterpaleos; cafta; china; chinawar; debt; deficit; free; india; jobs; market; mexico; nafta; outsourcing; paulcraigroberts; ruin; trade; waaaaaa
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To: superiorslots; Aliska; A. Pole; neutrino; Braak
How would you like to have people like these free traitors watching your back during a battle??? So much for watching out for their fellow countrymen.

Not me, neither. I had the same thoughts as you. I find them to be worse than the secular left, at least the left is more honest in their agendas whereas the free trade crowd is mainly made up of "faux conservatives." In short, I compare them to our version of Howard Dean.

I admit, I did question to whether I was a true Freeper or not and then it dawned on me, a true Freeper is a person who is concerned about America, her sovereignty, her future, and if I may bum off of Michael Savage, borders, language and culture. That is a true Freeper. Michael Savage did have a part on his show on how free trader is like "free traitors" where they are selling our future and security and even Marx himself said that "we will hang them with their rope that they sold to us."

All I can say is that I pray that God and Jesus would open their eyes, hearts and minds.
421 posted on 06/09/2005 6:47:09 PM PDT by Nowhere Man (Lutheran, Conservative, Neo-Victorian/Edwardian, Michael Savage in '08! - DeCAFTA-nate CAFTA!)
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To: durasell

Not really, most of the ones I ever met are night managers at bowling alleys, who hate it when well paid, self confident guys who are married to beautiful women come in and rub their nose in the fact they cut the muster and got well paid union jobs!!!!


422 posted on 06/09/2005 6:47:42 PM PDT by investigateworld ( God bless Poland for giving the world JP II & a Protestant bump for his Sainthood!)
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To: Paul Ross
"And where in the CPI is there a category for foreign travel?"

There is no such category, for the simple reason that foreign travel isn't an item that affects the daily lives of American workers to the extent of salaries, taxes, and domestic inflation.

Might as well factor in the cost appreciation of Ferrari's and yachts as add in your trip to France to our CPI figures!

Just teasing.

423 posted on 06/09/2005 6:48:17 PM PDT by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
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To: 1rudeboy

I should say, in his defense, that he was one of a kind. Not only did he fully enjoy his wealth (a rare thing among the rich) but he also built one of the most fascinating museums in NYC and was generous beyond all reason. I know several people who were touched by his acts of kindness. We won't see his kind again any time soon.


424 posted on 06/09/2005 6:49:25 PM PDT by durasell (Friends are so alarming, My lover's never charming...)
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To: 1rudeboy
Don't forget, "The information is there, look it up yourself."

Who was the other idiot who posted an excerpt with no link? Where another paragraph in the article totally destroyed his silly assertion?

I'm used to these guys being bad at math, but basic comprehension too? No wonder why they fear competition.

425 posted on 06/09/2005 6:52:55 PM PDT by Toddsterpatriot (If you agree with Marx, the AFL-CIO and E.P.I. please stop calling yourself a conservative!!)
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To: investigateworld

A night manager in a bowling alley? There's a job that cries out for a bottle of cheap vodka hidden somewhere around the office.


426 posted on 06/09/2005 6:54:04 PM PDT by durasell (Friends are so alarming, My lover's never charming...)
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To: 1rudeboy
Image hosted by Photobucket.com

Scramble fighters to intercept! B-)

CF-105 Avro Arrow and CF-100 Avro Canuck (background) of the Royal Canadian Air Force
427 posted on 06/09/2005 6:54:10 PM PDT by Nowhere Man (Lutheran, Conservative, Neo-Victorian/Edwardian, Michael Savage in '08! - DeCAFTA-nate CAFTA!)
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To: oceanview
"within 10 years, the DoD is going to have to support a "cottage industry" for semiconductor manufacturing inthe US unless they want to source components needed for military projects, from china."

About ten miles from where I sit, there's a sprawling Intel factory in Chandler, AZ that just received a $2 billion overhaul so it can continue to produce the latest Pentium chips. The US semiconductor industry is still competitive because this is much more of a capital-intensive industry than a labor-intensive industry. Semiconductor chips are designed by people but are 95% produced by machines. The machines cost the same amount of capital wherever they are used in the world. The industries that are moving to China are those with a lot of labor content. Unfortunately that includes high-skill jobs such as computer programming.

But engineering is not a dying occupation. My nephew just graduated with his MSEE from a top school in California and is going to work for Microsoft later this month. One thing to keep in mind is that employment in assembly-line manufacturing is declining everywhere in the world as engineers design smarter, more productive machines and more efficient production methods. Unemployment and declining manufacturing payrolls is a huge problem in China as well as in parts of the US. Machines are doing more and more of the work and this will continue. That's why the service economy has been growing much faster than the manufacturing economy for fifty years.

428 posted on 06/09/2005 6:56:40 PM PDT by defenderSD ("I am not a troll" said the troll as a thunderous Zot descended on him.)
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To: durasell
LOL
I never made it to the rarefied air of Wall Street, but I never been a night manager!
429 posted on 06/09/2005 7:00:38 PM PDT by investigateworld ( God bless Poland for giving the world JP II & a Protestant bump for his Sainthood!)
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To: investigateworld

I saw an entire alternate existance of slow death and anti-fungal spray flash before my eyes the second I read it...

Also, if I may say so -- both free traders and protectionists miss the point. Business will always follow cheap labor. It's a rule as sound as any physics law. Given the spread between American wages and those of third world countries, there is no way American workers can compete head to head in similar industries.

The real point of the debate -- if I may say so -- is how to make the U.S. workforce relevant in this new century?


430 posted on 06/09/2005 7:07:36 PM PDT by durasell (Friends are so alarming, My lover's never charming...)
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To: Toddsterpatriot; tallhappy; Black Jade
The author you are so desperately latching onto seems to have ignored the history of the last four years. Note the tandem vector changes. Other free trade authors have noticed the same thing, and tried to also wave their arms in mindmill fashion to ignore it...and thrown away equally cheap conclusory statements...that were belied by their own data.

Conclusively.

So why don't they admit it? Well, because of what I said about you before. If you were an honest debater you would admit that you were and have been wrong about U.S. Dollar Debauchment and that you need to rethink your entire trade philosophy. So would they. Guess they aren't honest.

So I ask again, do you maybe see a tipping point, h'mmmm?

My take? God save our country. We're in it deep now. You yourself are admitting, after your usual fashion, that when China revalues their currency, the rmibi/yuan, (which float they have deliberately withheld despite frantic U.S. Administration pleas), that it will have a seriously deleterious impact. They have put it off to keep their economic industrial black hole going. And they wanted to do the float when it would have had a decisive "realignment" impact on the power relationship between the two countries. I.e., a shock to be delivered only when they don't need us anymore, and could care less about the securities investments in the U.S. Well worth the price of destroying what remains of our economy, they reason. But they know doing it now will have multiple adverse effects from their perspective. They will lose the force of their black hole...slowing down FDI and outsourcing. And their sudden higher charges allow their Pacific Rim neighbors to become much more competitive.

And most deadly for the Chinese Communists: It likely would cause a U.S. recession, changing the entire U.S. political dynamic...but not destroying its economy which is in their long term objectives. The political sea-change will allow...possibly force... U.S. manufacturers to reverse the outsourcing decisions. And regain some sense of balance and perspective in their policies and political postures. For China's NEP charade to work to its intended, patiently-awaited result...we the suckers in the U.S. must not be allowed to catch wise to our vulnerability.

From their standpoint, it would be a premature tipping of the communist government's hand. And the anticipated loss of U.S. business (from both recession and policy correction... induced by the sticker shock) would also give us the wedge we need to fan the flames of unrest and discontent in China against the communist tyranny. We could finally begin to seek regime change in Bejing.

Hence, I don't think we are going to see any rmibi float soon, beyond the barest token, until they are good and ready. Which isn't this year or next....they aren't "through" with us yet.

But a Hamiltonian economic policy is yet within our purview.

Ending capital gains, and income taxes personally and corporate. Taxing consumption. And promotes savings and investment. One that favors U.S. production, and disfavors imports. Providing the funds for Federal government operations and programs.


431 posted on 06/09/2005 7:12:45 PM PDT by Paul Ross (George Patton: "I hate to have to fight for the same ground twice.")
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To: Southack

Guess it isn't ALL sources then, is it?


432 posted on 06/09/2005 7:19:42 PM PDT by Paul Ross (George Patton: "I hate to have to fight for the same ground twice.")
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To: durasell
Also, if I may say so -- both free traders and protectionists miss the point. Business will always follow cheap labor. It's a rule as sound as any physics law. Given the spread between American wages and those of third world countries, there is no way American workers can compete head to head in similar industries.

I would phrase it a bit differently: Given the current spread between American wages and those of third world countries, there is no way American workers can compete head to head in similar industries on the basis of price alone.

That is, if you are asking for $20 per hour and the other fellow is happy with $1 per hour, you had better be offering something to justify your higher wage rate. That something could be higher quality, higher output, or (more likely) both.

For example, my dentist recently charged me $180 to drill and fill a tooth. There is a guy named Pablo who works on a construction site and knows how to handle a drill. I'll bet Pablo would do my dental work for much less. Why don't I hire him instead of my dentist, and save some money?

The real point of the debate -- if I may say so -- is how to make the U.S. workforce relevant in this new century?

Excellent point.

433 posted on 06/09/2005 7:26:02 PM PDT by Logophile
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To: Logophile
Which of the items on my list (Post 386) would Hamilton object to?

So far as printed, likely none. But Alexander Hamilton also had some very pronounced...and pointed views on trade.

434 posted on 06/09/2005 7:27:06 PM PDT by Paul Ross (George Patton: "I hate to have to fight for the same ground twice.")
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To: defenderSD

your nephew is lucky, not everyone is graduating from the top schools and going to work for MSFT. Across the board, engineering is in decline as a profession. Middle aged ones are being offshored, college bound kids are not entering the programs. I see nothing that will reverse this trend.


435 posted on 06/09/2005 7:32:57 PM PDT by oceanview
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To: Paul Ross
"Guess it isn't ALL sources then, is it?"

Incorrect.

All American sources, yes.

All foreign sources, no.

436 posted on 06/09/2005 7:45:43 PM PDT by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
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To: Paul Ross
Note the tandem vector changes.

If you ignore the 4 years prior when the deficit increased while the currency strengthened, you might have a point.

If you were an honest debater you would admit that you were and have been wrong about U.S. Dollar Debauchment and that you need to rethink your entire trade philosophy.

Until you posted the chart which refutes your own assertion, I didn't take a position one way or the other on the effect the deficit has on the dollar or the dollar has on the deficit. You know why? Because your chart, and the PhD who wrote the article both say there is no relationship.

So I ask again, do you maybe see a tipping point, h'mmmm?

No, and as evidence I give you the 10% drop in the Euro over the last few months. If there was a tipping point the dollar would be ever weakening, not getting stronger.

You yourself are admitting, after your usual fashion, that when China revalues their currency, the rmibi/yuan, (which float they have deliberately withheld despite frantic U.S. Administration pleas), that it will have a seriously deleterious impact.

Huh? Where did I admit any such thing?

Ending capital gains, and income taxes personally and corporate. Taxing consumption. And promotes savings and investment. One that favors U.S. production, and disfavors imports. Providing the funds for Federal government operations and programs.

You're making sense here. Too bad your earlier posts made you look like such a fool.

437 posted on 06/09/2005 7:48:15 PM PDT by Toddsterpatriot (If you agree with Marx, the AFL-CIO and E.P.I. please stop calling yourself a conservative!!)
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To: oceanview
there is absolutely no need for any american kid to be studying engineering anymore, unless they want to compete for their wages with the Indians and Chinese. its a losing proposition

Engineering Employment U.S.

I feel sorry for any kid that you make that recommendation to. You really don't know what you are talking about.

1998 Link

2004 Link

438 posted on 06/09/2005 7:58:02 PM PDT by FreeReign
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To: FreeReign

Logic and facts don't matter when protectionism is involved. The sky is always falling with these guys.


439 posted on 06/09/2005 7:59:49 PM PDT by Toddsterpatriot (If you agree with Marx, the AFL-CIO and E.P.I. please stop calling yourself a conservative!!)
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To: durasell; Dane; Toddsterpatriot; 1rudeboy; A. Pole; hedgetrimmer
Well said. I for one don't separate free trade, open borders as they all will lead to one thing, the entrenchment of the Democrat Party.
As the debasement of the American Worker continues, they will look to who promises the most. Nobody, no person can out promise a Democrat: "Christopher Reeves will walk I tell ya, (when I'm elected)".
All the charts and graphs in the world don't mean anything, as they do not reflect the percentage of improvement based on the multiplier effect of deficit spending.
440 posted on 06/09/2005 8:00:12 PM PDT by investigateworld ( God bless Poland for giving the world JP II & a Protestant bump for his Sainthood!)
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