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.
I could really use a truck here in Idaho, but I'm not about to pony up $20K to $40K with the tenuous employment situation. My boss and I are continuously fishing for more work. It comes in chunks of $40K to $200K at a time. We have a staff of 9 people that we are trying to keep fully employed. The current work backlog won't last until the end of the current calendar year. Our customers are all in the U.S. and the work we do can't be economically relocated to India. As you have noted, even long standing business relationships are getting strained. Our customers love the quality of work that we do for them. We've saved them mountains of money. Still, they are very short on cash this year. We can't save them money on projects that they have no money to even initiate.
Following that "model", you might be able to cobble up a business marriage of convenience that would allow you to "hook" the special treatment for foreigners by offering your expertise to set up the business.
"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."
In response to the posted quote:
Actually, I think saying "no" or people managing themselves was forgotten when Dr. Spock told parents that to tell their kids "no" was bad for the kids' self-esteem.
For any finite being, yes to something within their reach always has to mean no to something else that would be within their reach.
There's a good chance we'll have that no matter what we do - the surplus labor is not going away in the near future. On the other hand, we can retool our educational and social system to produce the kind of productive workers of the future instead of the industrial era educational system we have now.
Well it depends - is a burger-flipping job enough to make a living if the price of goods falls through the floor? The problem is a cultural one rather than an economic one - in the sense that middle-class culture looks down on such "stand-up" work as opposed to the "sit-down" work it sees as its birthright.
On another note - what exactly is the problem with burger-flipping jobs? We want burgers. We need people to cook burgers but we decry burger-flipping jobs. We don't want immigrants to have them, we don't want natives to have them but we still want burgers...
BUMP
I've been out of work for 10 months now. All the factories in my area of North Carolina have closed down except one, and they're boxing up their equipment and moving to Mexico soon. The unemployment rate is close to 15% here.
Thankfully, my wife has a full-time job at the local hospital, so we're hanging on. But we've definitely dropped out of the middle class.
That leader is coming.
No. Only that Tancredo is one of the handful of worthy congresscritters.
Immigration does have something to do with it when you realize that our goobermint issues visas by the carload to Chinese and Indians who are here to learn the service sector jobs so they can return home leaving their tutors jobless.
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