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.
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.
Does this explanation work for you ?
Easy money has greated aided if not caused this stampede outsourcing of jobs. Why? Because in an easy money market, the corporation executives become finanically irresponsible, become culturally irresponsible. They end up unable to see the real source of wealth, because they are deluged with cheap wealth.
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?
Are you trying to tell me that the reason companies are moving jobs overseas is because of immigration ?
Except, how will the US government afford all this? These corporations will cease to be known as American. They have made it quite clear hey owe little to the United States. They won't stay here to support a giant welfare class. Or they will slowly merge, be acquired or competed into non-existance by the new world power.
This imbalance is largely now being financed with consumer credit.
As long as the "necessaries" are being produced at home, the likelihood of a true depression will be slim, but once foodstuffs, energy and even housing become dependent on foreign labor or are under foreign control then credit will no longer pay the bills.
Unfortunately we are at hazard. We have great strengths, but our weaknesses have been let run too far, we are vulnerable, we are being exhausted by the "kindness" of our enemies and even now our friends -- for Communits China is our enemy, while India our friend.
The Indians have made a bad choice -- for China is their enemy worse than ours. Better they see to our health then to ruin it.
That one is both so important and so obvious I wonder why no one ever seems to pick it up. It isn't free trade when one country's market is wide open, and the other is tarriffed and highly regulated.
Yes, you have found the reason. Eliminate unemployment insurance completely and the economy will boom. I guess that closing hospitals will eliminate problem with seriously sick people as well.
Attention: Kmart shoppers, the pot just called the kettle black.
I think we should respect our Founder wisdom and levy a relatively low 10~15% "revenue tariff" on ALL imported goods.
The proceeds could then be used to Abolish the Corporate Income Tax without bankrupting the Treasury.
This solution is more in keeping with Madison's notion of the principles of true free trade.
That summary bests the whole article.
You jest, but what I see coming and too far in the future is a "means-test" for the collection of S.S. benefits, whether they be monthly retirement payments or Medicare reimbursements.
One will have to be dirtpoor before they will see a dime.
Don't worry. If the trend continues it will be very easy to fulfill this requirement.
Economic fallacy number one: Jobs are fungible, zero-sum commodities, i.e. a job gained in India is a job lost in the US.
The reality is that jobs are not zero-sum commodities. The argument is similar to the argument against the minimum wage - that is that simply raising the minimum wage doesn't make all minimum wage workers richer - it makes some richer at the expense of others who lose or don't obtain jobs.
Same thing here - 100 jobs in India may be the same as 10 jobs here or worse yet no jobs for anyone because the costs are much higher than the returns here.
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