Posted on 07/13/2003 7:09:50 AM PDT by cp124
The Jobbing of Americans Posted July 3, 2003
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.
Man, for me, I want to make stuff. Conceive, design, build, market and sell a real frigging thing... something well-built in America, using American ingenuity and labor, and the envy of the world. Kind of like our weapons, only useful for something more than killing and intimidating (not that there aren't plenty of losers around the world who badly need to be killed or intimidated).
Free? None of those things comes for free. There is some source of money. That source is confiscation by the government from those who have earned the money. Socialism. Communism. No thanks. That concept has failed every time it has been tried.
I'll answer that this way: We have an innovative product, competitively priced, sufficiently impressive to get considerable seed capital from one of the firms in the area whose business it is to fund such enterprises.
Since that time, we've been told over and over and over again by potential customers, all of whom we have done business with in the past as employees or consultants, that they cannot do business with us because the federal government gives them so much in the way of cash incentives to go offshore with their investment dollars, both for labor and capital equipment. And these are companies and people with whom we have a good business and personal relationship. They're not strangers. And these aren't cold calls.
Individual sales to the public also look soft, simply because people are spending scared money now. And part of our marketing strategy is to try and get a sense for this area of sales in 2-5 year range. Addmittedly, it's crystal ball stuff, and nobody does it well. But it's essential that we take a good hard look at it. And if the middle class continues to erode from the pressure of illegal immigration, H-1Bs, L-1s and offshoring, there will be no market for what we do selling direct to the public.
I appreciate your comments. I really do. But this is the real world, and we're on the hook for a lot of money. I know the simplistic answer to those whose careers in industry are obliterated is "Well, just start your own business." Fine. All well and good. I just know that anyone contemplating such a move better have their eyes wide open to the business climate in this country in the early 21st century. You just don't hang out your shingle, open your doors and expect the money to start rolling in.
I just wish we'd have given this more thought a year ago.
DITTO...
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