The Jobbing of Americans

By Paul Craig Roberts The United States continues to lose jobs. Since President George W. Bush has been in office, 2.5 million manufacturing jobs and nearly 600,000 service jobs have been lost for a total decline in private-sector employment of 3.1 million. The unemployment rate has risen to 6.1 percent. If this is recovery, what is going on?

Pundits call it "the jobless recovery." The economy is growing, but jobs are not. Why? One economist recently blamed the absence of job growth on high U.S. productivity. Those who are working are so productive, he said, that their output meets demand, making additional jobs superfluous. His solution, apparently, is to make people less productive.

I think that the jobless recovery is an illusion and that the U.S. economy is creating jobs - but not for Americans. Those 2.5 million manufacturing jobs have not been lost. They have been moved offshore and given to foreigners who work for less money. The service economy was supposed to take the place of the lost manufacturing economy. Alas, those jobs, too, are being created for foreigners. It turns out it's even easier to move service jobs abroad. For example, 170,000 computer-system-design jobs recently have been shifted abroad. Keeping knowledge-based jobs in the United States is proving as difficult as keeping manufacturing jobs.

Outsourcing, offshore production, work visas and the Internet make it easy for U.S. companies to substitute cheaper foreign employees for U.S. employees. Entrepreneurs in India have created firms that specialize in supplying skilled labor to U.S. corporations. The growth in the U.S. economy thus brings about a growth in foreign employment, not in U.S. employment. If this analysis is correct, U.S. job-seekers no longer will be able to tell the difference between recovery and recession. In the old economy, people lost jobs when the Federal Reserve caused a recession by curtailing the growth of money and credit. In the new economy, they lose their jobs because foreigners work for less.

This development has produced a disconnect between economic policy and employment. The Fed's low interest rates and Bush's tax cuts cannot bridge the difference between wages and salaries in the United States versus those in China and India.

When U.S. companies move their production for U.S. markets offshore, U.S. incomes and gross domestic product decline and foreign income rises. When the offshore production is shipped to the United States to meet consumer demand, it becomes imports.

A country that produces offshore for its home market is going to have a big import bill, as those goods come on top of goods that foreign companies export. In 2002, the United States had a trade deficit in goods of $484 billion and a current account deficit of $503 billion.

With production and employment moving out of the United States, the ability of the nation to pay for its imports with exports declines. In the end, there is nothing to bring about a balance between imports and exports except a collapse in the dollar's value. When that happens, cheap goods from abroad become expensive, and the living standard of an import-dependent population drops.

During the short period of time Bush has been in office, the dollar has lost 27 percent of its value in relation to the new European currency, the euro. Considering that European economies are not doing well and that the euro is an untested currency, the dollar's decline is not a good sign.

When we import $500 billion more than we export, foreigners must finance our deficit. They do this by using the dollars we pay them to purchase our assets, or they lend the money back to us by purchasing government or corporate bonds. Either way, Americans lose to foreigners the future income streams from stocks, real estate and bonds, and this worsens our current-account deficit in subsequent years.

Foreigners' willingness to finance our current account deficit with their direct investment in the United States has declined from $335.6 billion in 2000 to $52.6 billion in 2002, a decrease of 84 percent. This dramatic drop in the willingness of foreigners to hold U.S. dollar assets is the likely explanation for the drop in the dollar's value.

If U.S. companies cannot profitably employ costly U.S. labor to produce for U.S. consumers, it is unlikely U.S. companies will be able to export a lot of goods made with U.S. labor. As our manufacturing sector moves abroad, our ability to trade declines as we produce fewer products to offer in exchange for our imports.

The dollar is the world's reserve currency, which gives us the ability to finance trade deficits that no other country could afford. When an alternative reserve currency appears, the United States will undergo wrenching economic, social and political adjustments.

Meanwhile, a rising stock market is consistent with "jobless recovery" as the lower labor costs of foreign employees drive profits. The growing gap between average incomes and executive compensation will handicap the Republican Party and weaken its resistance to a leftward turn in American politics.

Paul Craig Roberts is a Florida-based columnist whose syndicated columns focus on economics, culture, politics and issues of political liberty. He served as assistant secretary of the U.S. Treasury under the first administration of Ronald Reagan.

Not sure any costs will ever approach zero, but they are going way down.

This is a long term view. Productions costs will eventually reach the limits of thermodynamics as we will eventually produce goods in the most efficient way possible. This has been what's happened thoughout all of human history. For example, energy costs are cheaper than they've ever been and set to get even cheaper.

I wonder if we are smart enough to see this ( as a society ) & to take some action ( as individuals ) to counter the problems?

There isn't much action that can be taken I think that isn't morally repugnant. These stem from basic laws of economics. Short of destroying India or China, setting up some sort of global neo-mercantilist system by military force, or somehow stopping technology development globally, there isn't much that can be done.

I don't think ND's scenario is Marxism -- yet clearly Marx had maybe 3/2's of the symptoms right his cure was all poison. In the Bible is ordained in Israel a Jubilee Year. A system reset.

We can not improve on that, but we must determine how best to make it work in the framework of Liberty, the "pursuit of happiness", Justice and assuredly -- life. For without a planned system reset we shall have chaos, aggravations and bloodshed. Time is short.

There is one solution which should satisfy the free traders and the dogmas of free market ideology. American workers can get free medical care, free education, public transportation, food stamps and subsidized housing. After that they will be able to work for wages competitive with China and India. This is the way to avoid protective tariffs and secure the profits for the investors while keeping jobs in America. What do you think?

I think that there is a reason that 'truisms' are so named, and that the truism that your posting brings to mind is that ... "There is no free lunch."

Globalism is going to do for the United States what the Internet did for Byte Magazine. I say forget gold, invest in ammunition.

He, he. So you think that a gun can help to protect/get the gold rather than reverse?

Machiavelli wrote in similar way in Discourses when he said that good soldiers are more important that money:
"I say, therefore, that gold ((as common opinion shouts)) is not the sinew of war, but good soldiers; because gold is not sufficient to find good soldiers, but good soldiers are indeed sufficient to find gold."

How America Lost Its Industrial Edge

I was working then at Forbes magazine in New York and I recall how struck I was by the large number of sophisticated people I met who exclaimed that "the future is in services! Manufacturing is a commodity business! We need to get out of it!"

Indeed, America did get out of it. Having allowed its manufacturing base to disappear, the U.S. now is in possession of almost an entirely service-based economy - beating all standards of economic history. The manufacturing sector exports, on average, 11 times more, based on per unit of output, than do service industries. Herein lies the problem: The United States no longer produces the goods to pay for its imports. You have to fund the gap.

For 30 years the United States has run these trade deficits. In the early days, they were relatively small and explained away as a temporary phenomenon. They long since have ceased to be considered temporary even by the most trenchant advocates of laissez-faire.

They have major negative consequences for the United States, particularly in undermining America's ability to project economic power abroad

Everyone becomes a service provider. This would have to be accompanied by a massive cultural shift in which such jobs are not looked down on by the old middle class society.

So most of the population simply settles into a meaningless burger flipper job, and we culturally adjust to the change. I really don't see that happening. Long before we get there someone will decide that the nice large house up the road is a perfect fit for them and they will simply move in. If we don't stabalize the middle class we will end up with either a facist state, or socialism. There will be no middle ground, and whatever is going to happen will come sooner then we expect.

About the only ingredient that we are currently missing is a charismatic leader to spark a change. Perhaps that is why our major political parties are doing their best to promote mediocrity. But, that is not hold up for long.

Without a strong middle class, there will be no upper class, and no capitalist system. There will just be the hungry and their prey.

The trick to avoiding Hell will be to make sure that "widely held ownership of the means of production" (which we actually have today) expands so as to forever crowd out "government ownership of the means of production." Once the government owns everything, we have a locus of absolute power, which then corrupts government officials absolutely. Next thing we know, one of them is Stalin. This appears to be the failure mechanism by which Marxism always goes bad, ending in an autocratic police state. It may be that freedom depends on the 'separation of business and state.'

That's a good thought, if you had widely owned enterprises with every executive, white collar worker, down to the blue collar workers, had stock/ownership in the company, then you'd have everyone have a stake in what goes on and of course they would have a say in what goes on. I'm afraid we are headed towards some sort of oligarchy, be it Marxist or Fascist, both are not good at all. I think on the tarriff issue, I like one idea floated on here where you have a flat tarriff on everything coming in, perhaps as a way to reduce or eliminate the income tax. Don't know if you agree with me or not on that one, but at least it is across the board instead of picking and choosing.

I remember the days when they said that we have robot factories and things like that, I think we are a bit away from that but when that although I remember those experiments that were done in the 1960's to the 1980's, but I see your point where when they become commonplace, capitalism will have to find an answer for it lest we end up with Marxism. I don't know what the true answer is when it gets to that point though.

This would have to be accompanied by a massive cultural shift in which such jobs are not looked down on by the old middle class society.

This is what the global socialists are after, after all. The massive culture shift is designed to destroy the American culture of freedom, individuality, standing up for your neighbor and an abiding respect for the rights of property. Why haven't the American people been asked if they want to change their culture to become a nation of servitude instead of a nation of prosperous producers? The American people haven't been asked because they would resoundingly say no. Instead the global minded "free traders" use an insidious system of embedding socialist and wealth transferring programs into their treaties. Hence the American people have been force into NAFTA, GATT, the INF, the IMF the Millennium Challenge,OPIC, AIDs funds to Africa and on and on and on.

We are forced into "the fight against global poverty" which is not the place of our government, but which is something it has pledged to do in Monterrey Mexico at the last United Nations Financing For Development Conference . We are being pushed into poverty by our own government by force, and the wholesale give away of American capital by grants, _not_ loans, outsourcing of jobs and economic incentives by our OWN government for manufacturing to relocate to third world countries.

Sometimes I wonder if this is not ruse done by closet Socialists. For example Antonio Gramsci designed devious method of preparing revolution by weakening the traditional morality and family. Maybe free traders and free marketeers want to bring back unregulated wild capitalism to create the very conditions which Marx wanted to see?

Hmmmm, good point. I'm sure most free traders really do sincerely believe in what they believe although I think there are a lot of holes in their logic. Like you, I wonder if there is some sort of agenda afoot, I remember when I listen to Chuck Harder's "For The People," where he was talking about all of us working on "the global plantation." Maybe that is it. Maybe bringing back a Charles Dickens world would nudge people over to the idea of a more managed economy by the powers of the government. The idea of the Middle Class really got its hold sometime after the Civil War or for non-U.S. citizens, perhaps in the mid-Victorian era and by the 1890's really got underway. I've heard of the Gramsci socialist by reading Pat Buchanan's book where the idea is to weaken the Middle Class and it goes downhill from there.

Sweden has no freedom; you can't even move to a new house without government consent, which takes 3 or 4 years, and as often as not results in denial.

I'm not saying their standard of living is super great over there, just "not bad" as things go. I guess if I had a gun put to my head where I had to choose to live in India, anywhere in the Middle East, or Sweden, I think Sweden would get the nod. I feel this is the best place to live in the world and I hope it stays that way. As to my friend, I know his family has a house over there, I'll have to ask him about what you need to do to buy one and move. One thing I think would be neat to see over there is the "Midnight Sun," he lives about a 2 hour drive from the Arctic Circle so he almost gets that where he lives, he live almost on the Baltic Sea.

Does this explanation work for you ?

No, because Home Depot's foreign business, like most other US corporations, is miniscule compared to it's domestic business.

Shipping jobs overseas may help HD's bottom line and make them more competitive against Lowes, but there's no net gain for the world market, just a loss for the domestic one.

"Corporate welfare" is a propaganda term. Class warfare.

So is CEO pay that is 400 times what the average worker earns. It is class warfare against the middle class. The U.S. worker is taxed and the U.S. government launders the stolen money back to corporations, which them outsources thier jobs to foreign nations.

You both make valid points. Unfortunately, we seem to migrate to the extreme ends of the issue. My trade of fire fighting is experiencing these problems. In 1979, when I started, it probably cost about $300 to outfit a fire fighter. Today, before a fire fighter can enter a building, he or she must be wearing about $3500 worth of gear, not including a portable radio that costs around $1500. That's just what the firefighter wears, and doesn't include the equipment to actually fight the fire. Additionally, there must be 4 firefighters onscene before interior operations can begin. It is becoming so expensive to outfit people and keep the staffing up, that many cities now have adopted what is called, "through the window" tactics. This basically means that unless a victim is inside, you let the place burn down, protect the exposures, and saddle up next time.

Now, when I entered, chiefs had absolutely no problem sending guys into places they had no business being, and often showed a callous disregard for the safety of their personnel. However, the cost (not necessarily salaries) of running a fire department have skyrocketed, and the "safety" regulations frequently don't make us any safer.

I don't think most people have a problem with safety regulations and trying to comply with them. However, I think most business owners are just d*mned tired of being treated like suspects because they want to run a business, and regulations that are designed to ensure that no one except the big guys can afford to start a business.

P.S. The lawyers are what's destroying America. Shakespear was right.

There is a great quote from Peter Drucker:

"Years from now the most important event historians will see is not technology, not the Internet, not e-commerce. Rather it is the unprecedented change in the human condition. For the first time, substantial numbers of people have choices. For the first time, they will have to manage themselves. And society is totally unprepared for it. Throughout human history, it was the super-achievers-and only the super-achievers (such as Mozart and Da Vinci)- who knew when to say "No." They always knew what to reach for. They knew where to place themselves. Now all of us will have to learn that."

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