Posted on 12/07/2005 11:46:30 AM PST by Sonny M
The November payrolls job report was announced Friday with the usual misleading hype. Spinmeisters made the most out of the 215,000 jobs. Looking beyond the glitter at the real facts, this is what we see. Twenty-one thousand of those jobs were government positions supported by taxpayers. There were only 194,000 new jobs in the private sector. Of those, 37,000 are in construction and only 11,000 are in manufacturing. The bulk of the new jobs – 144,000 – are in domestic services.
Wholesale and retail trade account for 20,000. Food services and drinking places (waitresses and bartenders) account for 38,000. Health care and social assistance account for 27,000. Professional and business services account for 29,000. Financial activities gained 13,000 jobs. Transportation and warehousing gained 8,000 jobs.
Very few of these jobs result in tradable services that can be exported or help to close the growing gap in the U.S. balance of trade.
The 11,000 new factory jobs and the 15,000 of the previous month are a relief from the usual loss. However, these gains are more than offset by the job cuts recently announced by General Motors and Ford.
Despite the gains, total hours worked declined, as the average workweek fell to 33.7 hours. The decline in the labor force participation rate, a consequence of the shrinkage in well-paying jobs, masks a higher rate of unemployment than the reported 5 percent. The ratio of employment to population fell again in November.
Average hourly earnings (up 3.2 percent over the last year) are not keeping up with the consumer price index (up 4.3 percent). Consequently, real incomes are falling.
This is not the picture of a healthy economy in which growth in high productivity, high value-added jobs fuels the growth in consumer demand and provides savings to finance Washington's red ink. What we are looking at is an economy that is coming unglued from the loss of jobs that provide ladders of upward mobility, and from massive trade and budget deficits that are resulting in unsustainable growth in indebtedness to foreigners.
The consumer price index measures inflation at 4.3 percent over the past year. Many people, experiencing household budgets severely impacted by fuel prices and grocery bills, find this figure unrealistically low. PNC Financial Services has a Christmas price index consisting of the gifts in the song, "The 12 Days of Christmas." The index reports that the cost of the collection of gifts has risen 6 percent since last Christmas. Some of the gifts have risen substantially in price. Gold rings are up 27.5 percent, and pear trees are up 15.4 percent. The cost of labor (drummers drumming, maids-a-milking) has remained the same.
Populations are hard-pressed when the prices of goods rise relative to the price of labor, because this makes it impossible for the population to maintain its standard of living.
The U.S. economy has been kept alive by low interest rates, which fueled a real estate boom. Consumers have kept growth alive by refinancing their home mortgages and spending the equity in their houses. Their indebtedness has risen.
Debt-fueled growth is qualitatively different from economic growth that results from an increase in high value-added jobs. Economists who look at the 3-plus percent economic growth rate and conclude that things are fine are fooling themselves and the public. When the real estate boom ends, what will be the source of new spending power?
/sarcasm
I don't know what you do for a living, but I'm a business analyst. And my training tells me that in 50 years, traditional labor manufacturing will not only be gone in the US (10 years), but in most of the Third World as well. Virtually all consumer goods will be made, packaged, and even delivered by machines. Many already are (seen a Nissan auto plant lately?). The future of human labor is in knowledge, and international borders - while vital to freedom and free trade - are no barrier to its transmission. I don't really care whether the guy I'm paying is an American or an Indian - as long as he can do the job. You're quite wrong- we are not "going" Third World. The Third World is going US. All we need is better education, lower taxes, an end to illegal immigration, and fewer Democrat/socialist politicians, and we might be able to compete.
Thanks for your service...you served during difficult and hazardous times.
Paul Craig Roberts doesn't understand the economy.
Job growth means pressure on wages that reverberates all through the economy. In some areas there are no factory worker slots..... full employment. The unemployed are unemployable. They lack skills and the will. Workers will have to move.
This means that immigtration pressure will also increase as low end skilled jobs open up as the current holders find better jobs.
He also doesn't understand that a few manufacturing jobs result in hundreds of service jobs at the banks, the freight forwarders, the container yards, the ports, the steamship lines, DHL, FedX, UPS and all the others in the export chain.
"I can not figure out which is more appalling. Mr Roberts arrogant refusal to admit error or his complete lack of even the most basic grasp of Economics."
What errors has he made that he should acknowledge?
What economic principles does he lack an understanding of?
"I notice that more and more 'manufacturing' is highly automated, especially the lower skilled type."
And I notice that more and more manufactured goods are being imported, not manufactured here with more automated methods.
"Roberts has been predicting a collapse of the U.S. economy since 2001 and has been wrong at every turn. Roberts is a Bush-hating, Bush-bashing John LeBoutillier of economics -- and wrong just as often, which is almost all the time."
Could it be that the trends which concern Roberts (and should concern all Americans) have been going on since 2001 and (so far) have not unfavorably impacted our economy?
I recall the more experienced stock market watchers in the late 90s warning that "trees don't grow to the sky" and that the astronomical P/E ratios that we were seeing were warning signals. The NASDAQ experienced 3 consecutive years of 20+% growth. The less experienced stock market participants countered that this was the "new economy", rather than the "old economy" and that these companies were growing so fast that they would grow into their P/Es. Many of these people had never experienced anything other than a bull market.
Then came March of 2000. Over the ensuing 13 months, the NASDAQ went from well over 5,000 to under 1,500. Hundreds of billion of dollars in market capitalization were wiped out, setting our economy back well before 9-11 added to it.
Were the older market watchers "wrong" in late 99 and the first couple of months of 2000? Does the fact that a major correction to an adverse trend has not occurred YET mean there is nothing to concern ourselves with and we can simply allow that trend to continue with no corrective action?
How much longer can we allow our trade deficit to grow out of control? Will our economy hold together until we reach a $1 trillion/yr annual trade deficit? BTW at current trends, that will happen within the next 5 years or so. What are the implications if money managers around the globe lose confidence in the USD as the most safe and stable currency in the world and start shifting their enormous cash reserves out of them? BTW, this is already happeneing to a small extent. Let's hope that it does not grow any more.
One last question, and it reiterates the one advanced by Roberts at the end of the article: What happens to our economy when the real estate market slows down (as it inevitably must).
To those who consider these questions Bush-bashing, get a grip. I voted for Bush twice and, given the same choices I had in 00 and 04, would do the same again. However, I am not so loyal to Bush that I can ignore what I feel are very troubling trends. If they aren't troubling, please explain why you disagree.
>What errors has [Paul Craig Roberts] made that he should acknowledge? What economic principles does he lack an understanding of?<
Simple. An egregious Roberts error is he attempted to equate the ACTUAL effect of the manufacturing jobs that were created in 11-2005 with the POTENTIAL effect of future job cuts announced by auto manufacturers.
Roberts presumes that the economy is incapable of creating any future manufacturing jobs to offset the losses of a not-precisely known number of job cuts that have yet to occur.
It's a basic economic and logical error to compare something that already happened to events that have yet to happen, events that are only announced, and whose precise effects are not knowable at this point.
With that kind of flawed reasoning, it's no stretch to wonder what other flaws are less obvious.
-George
Phil, you asked whether I could refute anything Roberts said. I did point out a basic flaw in a separate reply to you.
But here is another deliberate distortion by Roberts:
>The ratio of employment to population fell again in November.<
OK, so in October this measure was 62.9 % (i.e., ratio of employed workers to the U.S. population). But notice how the devlishly clever Roberts says "fell again", trying to fool people into thinking this is a long-term trend.
In fact, starting in July, this ratio has been either 62.9 or 62.8. It was 62.8 in November.
But look at a longer trend.
In November 2005, this ratio was 62.8. In 11-04, it was 62.5. In 11-03, it was 62.3. In 11-02, it was 62.5. And in 11-01, it was 63.0. So the trend generally has been improving for the last four years.
I've point out two calculated distortions and flaws in Roberts' claims without breaking a sweat, including his false comparison of manufacturing jobs created in a single month to announced job cuts that have yet to occur and will transpire over numerous months, not just one.
Then he tosses in the lie that this closely watched ratio "fell again," as if it has been deteriorating continuously. In fact, the President's detractors often mentioned this ratio when it was slumping, and during the election. Now that it has been improving, they no longer bring it up.
Of course, Roberts, who has an agenda, brings it up.
The unemployment rate is 5%. Only in a Orwellian brainwashing scenario involving the pap Roberts tries to feed the gullible is a 5 percent jobless rate a bad thing.
Here's a third refutation of one of Roberts' distortions and/or flat-out lies
Roberts whines that we're hiring too many government employees and not enough private-sector workers.
Yet here are some facts that counter Roberts' twisting of the truth:
Over the last 12 months:
Non-farm payrolls have increased 1.5 percent, or 2 million jobs
Private sector employment is up 1.7 percent, or 1.8 million jobs.
Government employment is up 0.8 percent, or 166,000 jobs.
Private sector jobs are being created at a faster pace than total payroll jobs, and more than twice as fast as government employment.
And regarding housing. For how long have people been predicting the collapse of the housing bubble and it hasn't happened?
This week, even the Chicken Littles at the UCLA Anderson Forecast had to back off their most dire predictions about housing and concede there will be a slowdown, but not a meltdown. And they're pushing the time frame for this to happen into the future.
In fact, we don't know how the economy will react if and when housing cools. And it will likely cool in some markets, but perhaps not as much -- or at all -- in others.
Roberts has an agenda and will twist the facts to feed it to the gullible at NewsMax and Free Republic.
-George
Which begs the question about your views and MNJonnie's....who is making the more egregious "error"? Seems clear to me it isn't Roberts, at least so far as the economics of things.
In fact, with the loss of the U.S. industrial base, disguised by conflation of U.S. manufacturing numbers with imports being conjoined with U.S. componentry. I.e., "U.S. manufacturing activity" is being exaggerated... At current rates of industrial base implosion (which you yourself are more or less admitting to) we will soon be looking at having no defense industrial base. And it cannot be sustained as a cottage industry. We are seeing that now with defense inflation. They are not separable. They a intrinsically connected. And a U.S. service industry is essentially of zero value in a great power war...which all admit is looming with China's Axis.
ANd relocation of the U.S. manufacturing centers to the third world labor price cess pools, means that the R&D and managerial echelons follow. You are aware that GE has shut down numerous U.S. R&D operations, to create only four major R&D centers globally? Only one in the U.S. in NY, the other in Germany...and the other two in China and India. Surprise. So much for the idea of "win-win". Roberts is right, therefore with the case of GE proving it, that ABSOLUTE LABOR ADVANTAGE destroys the case for U.S. long-term well-being that the free traitors make.
Have you seen this?
Clarifications on the Case for Free Trade
by Dr. Paul Craig Roberts
[Posted January 10, 2004]
Free trade has necessary conditions. Today these conditions are not met. This point has escaped Joe Salerno and George Reisman (both writing on Mises.org), as it has a vast number of other people.
The case for free trade is based on David Ricardo’s principle of comparative advantage. Ricardo addressed the question how trade could take place between country A and country B (England and Portugal in his example) if country B was more efficient in the production of tradable goods (cloth and wine in his example) than A.
In other words, if Portugal could produce both cloth and wine at lower cost than England, how could trade between the countries benefit each?
Ricardo found the answer in relative or comparative advantage. He said that if Portugal specialized in wine, where its absolute advantage was greatest, and England specialized in cloth, where its disadvantage was least, total output would be higher than if both countries achieved self-sufficiency by producing both products. The higher productivity from specialization would result in mutual gains from trade.
For comparative advantage to reign, two conditions are necessary:
One is that capital and labor must be mobile within each country so that the capital and labor employed in England in the production of wine can flow into the production of cloth, where England’s trade advantage lies. In Portugal capital and labor must be able to flow from cloth to wine where Portugal’s advantage is greatest.
The other necessary condition is that capital and labor (factors of production) cannot be internationally mobile. If the factors of production are internationally mobile, capital and labor would move from England to Portugal, where both commodities can be produced the cheapest. Both wine and cloth would be produced in Portugal. Portugal would gain and England would lose.
Ricardo makes it clear that for trade to make both countries better off, trade must be based on comparative advantage. Ricardo gives reasons why, in his time, factors of production are internationally immobile.
Since the time of Ricardo, the key assumption of trade theory remains, in the recent words of trade theorist Roy J. Ruffin, "the inability of factors to move from a country where productivity is low to another where productivity is higher." In a recent article in History of Political Economy (34:4, 2002, pp. 727-748), Ruffin shows that Ricardo’s claim over Robert Torrens as the discoverer of the principle of comparative advantage lies in Ricardo’s realization that comparative advantage, the basis of the case for free trade, lies in "factor immobility between countries." Ruffin notes that "of the 973 words Ricardo devoted to explaining the law of comparative advantage, 485 emphasized the importance of factor immobility."
If factors of production are as mobile as traded goods, the case for free trade--that it benefits all countries--collapses. There is no known case for free trade if factors of production are as mobile as traded goods.
For some time I have been pointing out that the collapse of world socialism and the advent of the Internet have made factors of production as mobile as traded goods. Indeed, factors of production are more mobile. Capital, technology, and ideas can move today with the speed of light, whereas goods have to be shipped.
The collapse of world socialism has made Asian countries, such as China and India, receptive to foreign capital, and it has made first world capital willing to migrate beyond first world countries. The Internet makes it possible for a country to hire knowledge workers anywhere on the globe.
The Internet and the international mobility of capital and technology have, in effect, made labor internationally mobile, especially labor that is paid less than the value of its marginal product or its contribution to output. The huge excess supplies of labor in countries such as China and India ensure that it will be many years before labor in those countries, both skilled and unskilled, will be paid the value of its marginal product.
The international mobility of factors of production is a new phenomenon. It permits first world businesses, seeking lower costs, greater profits, and a stronger competitive position, to substitute cheap foreign labor for the entire range of domestic labor involved in the creation of tradable goods and services. Only labor involved in non-traded goods and services is safe from foreign substitution. It is not yet possible to package hair cuts, surgical operations, dentistry or home repairs as internationally tradable services.
Many people confuse the workings of capitalism that lead to lower costs and greater profits with free trade. They overlook the necessary conditions for free trade to be mutually beneficial. The same people tend to confuse the free flow of factors of production with free trade. I have been amazed at the number of fierce adherents of free trade, even among economists, who have no idea of the necessary conditions on which the case for free trade rests.
Senator Schumer and I do not attack the doctrine of free trade. We accept it. We simply point out that the known necessary conditions for free trade to be mutually beneficial do not hold in today’s environment where factors of production are as mobile, if not more so, than traded goods. What we are witnessing, we think, is not trade based on comparative advantage but the flow of first world factors of production to cheap Asian labor where the productivity of capital and technology is highest.
We do not dispute that global gains might exceed first world losses. Nevertheless, the flow of factors of production to absolute advantage in place of comparative advantage vitiates the case for free trade--that it produces mutual gains to the countries involved. What we may be witnessing is global capitalism destroying national sovereignties, leading to a global government, much as Marx described capitalism’s role in the overthrow of feudalism and the rise of the nation-state.
None of the points raised by Mr. Salerno and Mr. Reisman touch on this analysis. They do not make a case for free trade based on the international flow of factors of production to absolute advantage. They do not show that the case for free trade does not rest on the principle of comparative advantage. They do not show that comparative advantage reigns supreme in today’s world of internationally mobile factors of production. Nothing they say touches in the slightest on what I said.
What can be done? Neither Senator Schumer nor I have solutions. Pressed for solutions by the New York Times editors, we said the solution was to restore the conditions necessary in order for free trade to produce mutual gains to the countries involved. But as we could not specify how factor immobility could be restored, the editors allowed us to present a problem without offering a solution.
All we have done is to ask people to think about the implications of the international mobility of factors of production in a world of nation-states. Our first success came on Wednesday, January 7, where a large and varied audience at the Brookings Institution acknowledged that we had identified a problem that deserved thought.
Other responses have been humorous. My free market friends ignored the content of the argument. Their only concern was that I was ruining myself by associating with Schumer. One indignantly declared: "The next thing you will be doing is coming out for gun control!" Schumer’s friends have responded similarly: "Why are you giving luster to that Reagan ideologue who only cares about the rich!"
Other responses have been disappointing. Mr. Reisman’s knee jerks. He mistakenly sees an attack on the doctrine of free trade and rushes to its defense, attributing to me statist motives that I never express and do not have. Reisman’s response is curious in another way. His "refutation" is based on assumptions that he cannot show to be operative.
Mr. Salerno raises a number of red herrings. As many libertarians are blinded by the same red herrings, I will address them and others that he does not mention.
Many people have noted that there is nothing new about the international mobility of capital. However, two crucial aspects of international capital mobility are new: (1) Until recently, capital mobility was limited to the first world, where labor cost differentials are not great. (2) Because labor costs do not greatly differ between first world economies, offshore production for home markets was not the reason for the capital flows. When Japanese and Germans invest in automobile plants in the US, it is to produce products for sale in US markets, not to displace car production in Japan and Germany by selling cars produced in the US in their home markets.
Another widely made error is to assume that US labor displaced by outsourcing, off shore production or the Internet moves into US export industries to meet increased demand for US goods from countries whose labor is made more productive by the inflow of US capital and technology. This model assumes that comparative advantage reigns. The model does not work if absolute advantage reigns.
The enormous and growing US trade deficit, reflecting our growing dependence on imported manufactured goods, the decline in US manufacturing, and the new, but rapid, loss of knowledge jobs, does not bear out the view that US labor displaced by factor mobility is re-employed in export industries. Certainly there is no empirical evidence for Salerno’s statement that US capital outflows are leading to "increased real demand for U.S. exports which raises prices and real wages in these industries." Isn’t Mr. Salerno aware that the dollar is declining in value and the prices of US exports are falling?
The theorizing offered by Mr. Reisman and Mr. Salerno is based on the assumption that comparative advantage reigns. If the necessary conditions for comparative advantage are not present, their theorizing does not hold.
Some try to avoid the issue of comparative advantage with an argument that we always benefit anytime we can acquire a good or service at a lower opportunity cost. This is true as partial equilibrium analysis. If 20,000 US workers involved in the production of brassieres lose their jobs to cheaper foreign producers, their loses will be outweighed by gains to 100 million American women. However, we cannot generalize this argument without the assumption of trade based on comparative advantage. If the full range of domestic labor involved in tradable goods and services can be replaced by cheaper foreign labor, the loss of incomes outweighs the lower prices. The lower prices themselves will be lost to currency devaluation.
Mr. Salerno also confuses the mobility of factors of production within a country with the international mobility of factors of production. The two things are entirely different. The flow of factors of production within the US from North to South or East to West is not comparable in the effects to international flows. To learn the difference, Mr. Salerno need only consult an international trade text.
Another common confusion comes from the misinterpretation of the inflow of foreign capital to the US. Many think that because the US is "a net importer, not exporter, of capital" we are staying ahead of the game. Just look at the huge amount of foreign capital that comes to the US, friends tell me, and the relative small amount of our capital that goes to China. How can we possibly be losing out when we get the lion’s share?
People who argue this way implicitly assume that the foreign capital inflows are going to the construction of new plant and equipment, or at least into new businesses bringing new jobs. However, the facts are different. In recent years, the vast bulk, in some years almost 100%, of foreign capital inflows represent foreign acquisition of existing US assets. Foreign ownership of US stocks, bonds, and real estate is heavy and rising. Foreign ownership means that the current and future income streams produced by these assets belong to foreigners. We are paying for current consumption (imports) by giving up our wealth and future income flows. Being a net importer of capital in this case means that we are consuming wealth, not producing it.
In contrast, US capital flows to China are used to construct new plant and equipment, not to acquire existing Chinese assets.
It is trite to say that capital inflows and trade deficits are mirror images. The question is: which is driving the other? This can vary in time. I was able to refute the "twin deficits" theory advanced by Martin Feldstein and widely parroted by others during Reagan’s first term by showing that the US became a "net importer of capital" not because foreign capital had to rush in to finance "Reagan deficits," but because US capital outflows collapsed in response to the higher after-tax rate of return in the US due to the Reagan tax cuts. The capital stayed at home, and we financed our own deficit.
Today we are a net importer of capital because we are increasingly dependent on imported manufactured goods as a result of outsourcing and off shore production. Goods, and increasingly services, that US multinationals produce abroad for the US domestic market are driving up the trade deficit. Foreigners use the dollars we pay them to acquire ownership of our assets.
People also confuse themselves and others by comparing the large US investment stake in Europe with our small one in China. They overlook that our stake in Europe is a historical result of first world capital and technology being confined to the first world by world socialism. The global mobility of first world capital is new; thus, our stake in China is not as massive as our stake in Europe. Many commentators overlook that new developments are not contained in historical data. They also overlook that it takes large investments just to maintain the existing value of US investments in Europe. As it is extremely expensive to close a plant, adjustment to the new conditions cannot be instantaneous.
As a director of a global manufacturing firm, I am very much aware that outsourcing of high value- added products and jobs has begun to affect European countries. The difference is that, unlike Americans, Europeans are not blind to the reality.
Libertarians need to substitute their thinking caps for their knee-jerk reactions. A hidden agenda might be behind "globalism"--the international redistribution of first world income and wealth. It is a given that if factors of production are internationally mobile, domestic labor that is paid the value of its marginal product cannot compete with foreign labor in situations where excess supply prevents the foreign labor being paid the value of its contribution to output. If absolute advantage rules, capitalism itself will redistribute income and wealth from rich countries to poor ones.
Libertarians might say all to the good. But this overlooks that they live in a sovereign country. The downward adjustment in wages and salaries necessary to bring the US into equilibrium with the global labor market requires reductions that cannot be achieved. For example, try to imagine what must happen to existing mortgages and debts if US workers are to compete with Chinese and Indian workers employed by first world capital and technology. So many people forget that the reason that highly paid US workers could compete against lowly paid Asian workers is that the US workers were much more productive due to the immobility of capital and technology. The international mobility of factors of production has stripped away the productivity advantage of first world labor. Try to imagine the political instability in store for the US as the ladders of upward mobility collapse. The reality toward which we head is not a libertarian paradise.
Are libertarians going to allow their ideology to do their thinking? What good does it do for libertarians to go into denial and to call me, patronizingly, names?
The proper way to answer the argument that Schumer and I have made is to make a case that free trade is mutually advantageous in the absence of comparative advantage. Alternatively, make a convincing case that comparative advantage does not require at least some factors of production to be immobile. Anyone who can devise a new theory that proves free trade to be mutually advantageous in circumstances where factors of production are as mobile, if not more mobile, than traded goods will win a Nobel Prize.
-----
Paul Craig Roberts [send him mail] is John M. Olin Fellow at the Institute for Political Economy, Senior Research Fellow at the Hoover Institution, Stanford University, and Research Fellow at the Independent Institute. Former Chief Economist, and Deputy to Donald Regan, U.S. Treasury Secretary, Reagan Administration
By reference to the world in terms of 19th century modalities, I think both you and Mr. Roberts miss the import of the 21st. All of the modern contrivances you describe are products first and foremost of the mind, not the body. Buggy whips, as with most goods and services prior to the middle of the last century, were created primarily by physical human labor - by muscle power and manual dexterity. So were cars, and planes, and toasters - until now.
As we in the First World have moved toward a service and information economy, our output is primarily the result of thought, not sweat. Modern computers, transportation devices, and energy sources are increasingly the result of intellectual, not physical effort. They are now, and will increasingly be manufactured by machines - designed, engineered, and controlled by the minds of men. This is not some futuristic fantasy - it is happening now. At the same time, information services - whether telecommunications or financial servies, are already dependent on the creative powers of educated minds. Those needs are advancing beyond our present ability to serve them - as our education system falters - and more about that in a minute.
In this new world, the values imparted by "comparative advantage" no longer depend upon physical location, but on education, training, and the free exchange of information. Labor-intensive production is now dominant in areas where relatively unskilled labor prevails, and wages are accordingly low. In Third World nations (which are not "cesspools" - by the way - revealing remark, that) the sweaters and toys and trinkets now produced by hand will one day be created by machines - with human design and oversight - and much sooner than you think. High-end products - semiconductors, and media devices are already largely produced by robotics. Who designs them? Engineers from wealthy nations working for large corporations at high wages. Who markets them? Retail giants from the US and Europe.
What Adam Smith (and Ricardo after him) could not have forseen was the speed with which humankind would move away from mere subsistence. The creation of food, clothing, and shelter are no longer the primary pursuit of economic activity - they are a given - except, that is, in the true "cesspools" of the World - Communist tyrannies, and pre-mercantile African tribal societies.
Now, with all of this, and with even more staggering changes on the horizon (nanotechnology is going to change everything - you read it here first), do national borders matters? The answer is: yes, in the extreme. Property rights, and the right of free exchange are and will remain the necessary preconditions for political liberty. Not all nations protect these equally. Ours does, for the most part. The European Union (as long as it lasts, which in my view will not be long), is less inclined toward freedom, and will continue to stagnate as a result.
Now what of the oft-hyped "outsourcing" of services to emerging nations? These are certainly not physical tasks, and they are being transferred in some numbers to countries such as India. Why is this occurring? Because of a lack of educated, trained workers in the US to perform these jobs. That's why companies such as Dell and Microsoft will shunt your help-desk call to Bangalore - trained labor appears readily available, and the perception is that it's cheap. Only it's not all that cheap, as the aformentioned companies are discovering. Quality issues abound, response times are slow, knowledge of American protocols is sketchy, managerial oversight is lacking. Given the choice, Americans will pay more (because they can) for higher quality service. That's our advantage. The real problem is far deeper, though.
Our primary problem is education. Our students are indoctrinated in politically-correct garbage, instead of science and math. They are fed "social studies" instead of History. They are denied religious values, while given multicultural pop psychology as a (poor) substitute. If we are to compete in the world, spread Freedom,continue to create wealth, and benefit from the technological advances that lay just before us, only a renewed commitment to education will serve. That means having the political will to take on the public school bureaucracy and the liberal institutions that support it - but that's another argument for another day.
Inn the meantime, I appreciate this discussion - we need to have it. The other side (the Left) is only concerned with the acquisition and maintenance of power - by theft or fiat or both. I think we have better ideas.
Let me see...what company in their right mind would pay wages to an American citizen instead of to the Chinese government (soon to be our enemies I think)? The answer,true patriots buy American (where possible) and hire Americans. Free Trade is nothing more than one world garbage which will lead to a loss of sovereignty for the US and will lead to Rich/poor population. The middle class will cease to exist. Sometimes the cost of buying cheap, foreign goods is higher than you think.
Really, tell that to the highly educated IT professionals who lost their jobs to cheap Indain workers-in India and the US (cheap guest workers). The idea that if only we became a more educated workforce...is untrue. We must become a cheaper workforce-as in like third world workers-willing to subsist on scraps tossed to us by wealthy multi-national types.
Yep. Especially as those low skilled job often have high workcomp costs.
The presence of an "undocumented" - illegal - workforce in the US is primarily a political problem, not an economic one. Neither political party wants to deal with it, because of the benefits such workers provide to businesses (increased profitability) and to consumers (lower prices). At the same time, the longer-term costs of our current "temporary guest worker" policy are becoming apparent each day: exploding welfare costs, crime, drugs, and even the threat of terrorists taking advantage of unsecured borders.
When the costs of this policy outweigh the perceived benefits, Congress will finally act. That day is coming - hopefully before we receive another painful lesson about the dangers of open borders. At the same time, potential American replacements for these jobs exist in significant numbers - but our endless panoply of Federal (and state) welfare programs greatly reduces the incentives they have to work. And so the jobs go to those who will.
As for IT professional jobs being outsourced to India - that is primarily an economic issue, but one with some political causes. For one thing, these are largely jobs being created - not moved. The reason India is attractive for this purpose is the presence of a large English-speaking community and significant numbers of technical professionals being educated by schools in that country. Employment costs are far lower, too; though as demand for these workers rises, so will their salaries.
The cost of American workers is inflated not only by the differential in wealth, but by government mandates - payroll taxes for SS/Medicare, health care and legal expenses. These things are unlikely to change in the short run, so American service employees must have other advantages to allow companies to want to hire them - and they do. American workers are far more productive than their outsourced counterparts. They are easier to manage, culturally-assimilated, and more adaptable to changing priorities. ( I could cite several studies on this, but let's keep it brief).
Among the advantages American workers do not currently possess in great enough numbers is education - and that needs to change. Where foreign workers make economic sense, they will be used - and ought to be. Foreign companies hire Americans all the time, and for the same reasons.
Finally, most jobs today are not being created by large multinational corporations. They are the result of small business generation, most of which is happening right here in the US, and these new businesses are largely hiring American citizens, not foreigners. In summary, the demand for skilled labor outstrips supply, while the demand for unskilled labor is being depressed by the presence of an alien army. These are not unsolvable problems, but they cannot be addressed by pretending that we live in a vacuum, or that by closing our borders to illegal aliens, we can close them to free trade, and still thrive.
Tell that to each of the lost industries I alluded to. Or even the proverbial Wal-Mart or Target, etc... They seem to be busy differentially prioritizing "output" from China.
By your logic, does that mean that 80% of the "thinking" appears to be going on over there?
In this new world, the values imparted by "comparative advantage" no longer depend upon physical location, but on education, training, and the free exchange of information.
Wrong. It depends on proximity to production. Engineers, scientists, etc. are needed for production. Hence the burgeoning demand in China and India independent of the simple R&D outsourcing fact. They have crowded out our own students, and made it unprofitable for them to pursue careers essential for our national security. For China, this is Win-Win. Or as the Xlinton's would say, its a "two-fer"!
For the U.S., its lose-lose.
As for "free exchange of information" that is not what is going on, albeit some Western companies are selling out our birthrights for a mess of pottage today. The Chinese are out-and-out stealing information. 700,000 spies (students, businesses, etc) here annually. Every single one of them. They all report back to their communist totalitarian government.
Your attempted "curing" of what Adam Smith did not forsee is manifestly erroneous. You have not even begun to satisfy your burden of proof. Start building your case. Roberts challenge stands before you, and you have not even begun to construct a plausible case.
First things first. Honestly observe what is happening. Your off to a bad start in that department when assert such nonsense as the following:
Why is this occurring? Because of a lack of educated, trained workers in the US to perform these jobs. That's why companies such as Dell and Microsoft will shunt your help-desk call to Bangalore - trained labor appears readily available, and the perception is that it's cheap.
This is so evidently contorted on your part, it self-refutes. There is no lack of educated trained workers in the U.S. for software. There is a severe "structural" unemployment problem... a structural problem created by the "perception" you alluded to.
And btw, don't get so smug about: In Third World nations (which are not "cesspools" - by the way - revealing remark, that)
Until you come up with a better description of mass poverty and Anti-American zenophobia enforced and entrenched by Communist Governments.
We can only help those people if we remain strong ourselves, and undermine those regimes. Trading indiscriminatly as you advocate, without those prerequisites of effective counteraction, is simply subsidizing and putting totalitarianism on life support. You are then siding with cesspool-maintenance, and not for the 'new economy' which you are enamored of, probably in your ivory tower.
The proper way to answer the argument that Schumer and I have made is to make a case that free trade is mutually advantageous in the absence of comparative advantage.
Alternatively, make a convincing case that comparative advantage does not require at least some factors of production to be immobile.
Anyone who can devise a new theory that proves free trade to be mutually advantageous in circumstances where factors of production are as mobile, if not more mobile, than traded goods will win a Nobel Prize.
**Ah, you are aware of the already existing automotive manufacturing implosion at Delphi, not just the impending one at GM and Ford, aren't you?**
Of course. Yet if there were already job cuts from Delphi, there nevertheless was the gain in manufacturing jobs reflected in the November 2005 data.
If the Delphi situation is also an estimate on jobs yet to be lost, you're headed toward the same logical precipice that Roberts already plunged from.
** Which begs the question about your views and MNJonnie's....who is making the more egregious "error"? **
Strawman argument. It begs nothing.
If the Delphi cuts occurred, then the November gains in manufacturing came despite the Delphi cuts. If the Delphi cuts have not occurred, then that's an attempt to compare the actual apples of the past to the speculative oranges of the future. It's a logical fallacy.
** Seems clear to me it isn't Roberts, at least so far as the economics of things. **
Of course it's Roberts who has blundered. He served up half-baked ideas that were riddled with egregious errors -- because Roberts has an anti-Bush agenda. I've refuted multiple points he spewed. It would be unfortunate to see others plunge over the same cliff as Roberts.
-George
''an engineer, leaving GM detroit, and moving to a California position, with Hyandai.''
well you wont see Honda or Toyota hirng a GM engineer
going from junk[GM] to even more junk[Hyandai]
Sorry, but you have failed despite mighty rhetorical exertions, to demonstrate a single error by Roberts.
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