The Jobbing of Americans

Insight Magazine ^ | July 3, 2003 | Paul Craig Roberts

[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.

[NoControllingLegalAuthority]

I'll tell you about pain. Do you think the millions thrown out of work in America are going to continue to support that politically? They will be in the streets and they will be voting with a vengeance.

Buggy whips were a tiny part of the nation's output back then. The present destruction of American manufacturing is cutting such a wide swath through this country, we won't even be able to build critical, strategic defense items to protect ourselves.

A country that makes nothing is nothing.

So you want free market capitalism? So do I but it doesn't exist because countries such as China will not let Americans sell our products there.

If you textbook capitalists put money ahead of your country, you are traitors. Here are the priorities: God, family and country, in that order.

[Jason_b]

"What do you think?"

I think our problem is currency related. Truly. I explained why on another thread.

Oracle to double staff in India to 6,000

I cut and paste the response here:
To anyone who will listen:

Labor is (relatively) cheap in India and expensive here because we are exporting inflation (paper dollars) to them and they are exporting deflation to us.

The reason we CAN export inflation is because the government is creating it.

Get the government to stop creating inflation and then we will stop exporting it and the foreigners will stop exporting deflation to us.

It really is about that simple. These problem with jobs leaving the US are currency related.

Expect these problems to continue as long as the government creates inflation and we export inflation.

The only way to stop the inflation spiral is to return to sound money, and that is understood to be gold and silver coinage and money substitutes (paper dollars, computer bits) that are redeemable and not in excess of the gold and silver coin on deposit somewhere.

DO THIS---and suddenly (because money becomes relatively scarce compared to when it was credit manufactured at zero cost) foreign labor will not look so cheap, and the temptation to send it out of the country will be gone. It will stay at home and only enough will leave (or come in) to balance small international trade imbalances. Foreign goods will again be paid for by local goods going the other way, not credit. Americans will be back at work and it will be done without "protectionist" trade barriers. The national debt will no longer be necessary because nearly all currency will be real instead of credit (except for some bills of exchange sort of credit). There might be some slight 1-2%/yr deflation in prices over time but it would be benign compared to the massive wage, salary, deflation felt by workers whose services in America are no longer needed because foreigners will work for 10% of what Americans will work for in paper dollars terms---as we export inflation to them and they export deflation to us.

If you found the above the least bit thought provoking, please read post 42 of this thread.

[MEG33]

Of course I was using a common analogy.I have no answers.People were in the street during the depression,veterans camped out in Washington DC.My father went from small town upper middle class to living in a former rental and thrilled when he had a $40 a month job pumping gas.We were lucky because we could milk a cow, keep chickens and we had a garden and canned vegetables before Victory gardens so we were never hungry.I have no idea why you think I think I know a thing about how to improve things.I know I hate Marxism.My husband was without work when we had 2kids in college.I know the pain.

[Skywalk]

Somewhere between where we are now, and "Terminator" times, there is an era where Machines Are Our Friends.

Hey, that's being an organic supremacist, Nick. Don't you realize that superintelligent, sentient programs like SkyNet are only doing the jobs that humans won't or can't do, like producing robots that hunt people?

You touched on something, which is the increasing adoption of Marxist terminology or sentiment by many that consider themselves free market. In fact, we just had some people whining about rolling conditions back to the 1890s, as if even people in Vietnam making sneakers are working under such circumstances(THEY'RE NOT.) We may be on a road to a great transition but with people even on this forum embracing autarky or some soft-facsism I don't see much hope for a solution that appeals to FREE people.

Just a bunch of slaves begging for their jobs programs around here.

[Skywalk]

We agree. All these bitching National Socialists on this thread would quit whining a bit if government were slashed in half, and if non-vital regulations were eliminated. As if thousands of pages of regulations are necessary. The economic geniuses on this thread don't realize that a great deal of regs are supported by big business to keep out smaller competitors, or by one sector of industry at the expense of another. Why? because government got involved in the first place. Once that happened, it was only a matter of time before regulations crafted to benefit or hold back a certain segment of the business world would emerge.

[Skywalk]

Good point about burger jobs. I've often said that the professional man making 29K is more likely to land a quality mate(and this is very important for us men) than the plumber pulling 45K. Granted there can be a difference in the conduct of the two, but there need not be if more of us did not disdain "labor."

While I prefer not to flip burgers, because I have more skill and intelligence than would fit the job, there's nothing wrong with such jobs. But in all honesty, there is still a HUGE sector of society that works in these types of jobs for their entire lives and does so without shame.

[eeriegeno]

Perhaps this keeps HD's costs down and the american consumer pays less, and this lowers inflation and keeps interest rates low which lowers US companies cost of capital which makes them more competitive.

Perhaps the $20 million dollars that Pres/CEO Robert Nardelli collects from HD every year keeps HD's costs down too? And the next 4 execs in HD's chain also extract a cool $15 million from the profits.

[George Frm Br00klyn Park]

"Those 2.5 million manufacturing jobs have not been lost. They have been moved offshore and given to foreigners who work for less money"

"And this has been happening intentionally for 35 years."
===============================

ES, With the government subsidizing corporations {welfare incentives via tax breaks and actual grants} that move the jobs offshore. As in education, I see NO WAY that the policy makers didn't KNOW the destruction they would bring to the U.S. of A. AND, as a result, the destruction of any hope of freedom for the peoples of the world.

What really gets me is those "conservatives" who say and write that "It will be a good thing. Just wait and see." Dupes, or traitors???? I no longer can tell the difference. Henry Kissinger????? This is bad. Peace and love, George.

[harpseal]

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...

There are several problems with burger flipping jobs as the primary sustenance of our economy. Unless there is a very broad middle class to purchase meals out (even burgers) there simply will not be enough of those jobs. In short an economy needs a market able to purchase its goods and services. Unless an economy is producing enough goods and services in a world trade envirornment to eventually balance out the imports then the value of the currency used to purchase the imports will fall until the costs associated with those imports is so high that no one can afford them.

Of course long before we hit the total collapse of the dollar and unemployment at 50% of the work force we will find the USA has degenerated into a state of civil warfare. The people of the USA will only put up with the outsourcing of their jobs subsidized with their tax dfollars for so long before there is blood shed and a lot of blood shed.

[TopDog2]

Buggy whips were a tiny part of the nation's output back then.

Not only that, but those displaced buggy whip workers moved into the many other manufacturing jobs that became available. Now, with so many jobs being sent overseas, workers don't have that option. Now, an unemployed blue-collar worker has little hope of finding a new job that will pay him even a fraction of his old wages. Heck, even white-collar workers are finding that they are being displaced from, not only their jobs, but the middle-class. This is a recipe for disaster.

[B-Chan]

You'll recall that in the "Venus Equilateral" universe the author solved the problem created by the replicators by creating a deus ex machina -- a contrived substance ("identium") that for some mysterious reason exploded when exposed to the replicator's scanning beam.

I doubt that the Author of our universe will be as willing to create such a facile way out.

[MEGoody]

"The politicians and corporate elites will eliminate the middle class."

Yeah, I noticed a lot of that going on during the Clinton years. The rich got a whole lot richer, and the poor got a whole lot poorer.

I don't have a problem with that in general. The rich generally get richer because they invest their money and work hard. The poor get poorer because of continuing to make poor choices in life. The Dems sure hate when this happens though, at least when a Republican is in office.

[MEGoody]

"Welcome to the newest Third World country."

LOL Gettin' a little ahead of yourself there, Chicken Little.

[skeeter]

Attention: Kmart shoppers, the pot just called the kettle black.

Coolie(sp?) is a chinese word for 'hard laborer'. Nothing racist about it. Don't be so thin skinned.

[ARCADIA]

Gettin' a little ahead of yourself there, Chicken Little.

Just the facts. Take off the blindfold and you will see it as plain as day.

[Jim Cane]

Perhaps the $20 million dollars that Pres/CEO Robert Nardelli collects from HD every year keeps HD's costs down too? And the next 4 execs in HD's chain also extract a cool $15 million from the profits.

But Harley Davidson only exists still because Ronald Reagan imposed a big fat tarrif on over 700cc Jap bikes, when HD was headed for extinction.

Bob Nardelli and gazillions of clownish Harley riders must be thanking their lucky stars for that thing, that dirty word, that nationalist practice that the randian purists deride, what do they call it....? "Protectionism", yeah that's it!

[bvw]

Not just the government. A friend of mine (with his own railroad, sort of!) advised me to do the same thing two years ago with the railroads -- to go into business with a black woman so as to be able to do business with the railraods using a Section 8 type program. Otherwise, he explained, it would be very difficult to get the work as a tiny start-up.

From this, and other things, I have learned, directly, just how invasive Federal Bureaucracy has become, that our economy is already a oligarchic fascism, and the cement on that model is hardening.

[bvw]

The amount on ecomonic insights on FR is very enheartening to me, and yours is tops -- up their with Nick Danger's watershed post of yesterday.

I can also be pessimistic as too what such beautiful blooms of intelect mean -- for I have grown tomatoes, and I now that to force the fruit, you slaughter the roots.

Yet great ideas are like the finest seeds -- they will survive even if we do not.