American jobs must not be lost, says Kissinger

TIMES NEWS NETWORK ^ | JULY 16, 2003 | KALPANA SHAH

[IonInsights]

LAS VEGAS: When a former US secretary of state of the stature of Dr Henry Kissinger walks into a technology conference, 10,000 techies filling up the Ballroom at Mandarin Bay stand and applaud, even before he says anything. When he answers a question about outsourcing of economic activity, his reply draws a bigger applause from the largely American audience.

“If outsourcing would continue to the point of stripping the United States of its industrial base, and of the act of getting out its own technology, then it requires really careful thought of national policy and probably create incentives to prevent it from happening.”

It was Mr Sanjay Kumar, chairman and CEO of Computer Associates (CA) who put the question to him. Mr Kumar mentioned the increased outsourcing of technology related work, from insurance claims, airline reservations, computer programming to countries like India and China and asked Dr Kissinger whether this would erode middle class power bases in Europe and the US.

Dr Kissinger’s answer: “I don’t look at this from an economic point of view but the political and social points of view. The question really is whether America can remain a great power or a dominant power if it becomes a primarily service economy, and I doubt that. A country has to have an industrial base in order to play a significant role in the world. And I am concerned from that point of view.” The mood was unambiguous — American jobs must not be lost.

Mr Kumar also reminded him about his acceptance speech after winning the Nobel Peace prize where he had voiced concerns about the rise of technology, and asked whether he had changed his mind about technology since then. Dr Kissinger said, “My concerns have mounted since then. I am of a generation that grew up on books. It helps you develop concepts. With computers, you don’t have to remember things because the information is all there.” He worries that despite the fact that there is an explosion of information, the problem is how to transform information into knowledge and knowledge into wisdom.

“I worked with leaders who had an intuitive sense of the future although they didn’t have so much information. Statesmen have progressively more information but they have progressively more insecurity because they have no sense of the evolution of the system,” he said. The role of technology should be to bridge the gap between availability of information and the ability to use it, Dr Kissinger said. An idea that the IT industry will have to mull over.

[Sam Cree]

bump

[bvw]

Why do these media poopahs fawn over KIssinger? Those ideas of national security have been aorund for the ages. The Scot, Adam Smith spoke of them. The old New England folk wisdom "Make do or do without." alludes to it.

Kissinger repeats a common, obvious, and ancient wisdom and it is considered new, novel? I do give him credit for plagerizing the commons and doing so in front of a crowd of nitwits in too big shoes.

[tkathy]

We need huge tax incentives for American jobs, and huge tax penalties for outsourcing.

[Happy2BMe]

This "protect American jobs" is a real surprise coming from Kissinger - he is a "One Worlder."

Very surprising.

[Cacophonous]

As I've said repeatedly, there is no measurable difference between Republicans and Democrats.

[Jim Cane]

How can a corporation who does this be considered loyal to America?

Corporations want their employees to remain loyal, just long enough so that they can beat their faithful dogs to death with a stick, in order to bring in cheaper-to-feed cats.

[Jim Cane]

We lead in innovation and product development.

Only for so long. Once the corporations who fund the vast majority of R&D shut down shop in the U.S., we can no longer innovate.

[liberallarry]

I don't believe we're that stupid. But then I'm not knowledgeable.

[Jim Cane]

As I've said repeatedly, there is no measurable difference between Republicans and Democrats.

There is. One likes "some" guns, and the other hates them all. It's not much, but should the need for AR II arise, it's better to have had the former xcrewing you all the while.

[Noumenon]

My response to an RNC beg letter:

I am a 52 year old, well-educated man - technically adept and literate. A classical education bestowed upon me a keen understanding of history and a sense of the tragic aspects of the human condition. I am grateful for this and the family I have.

What I do not have is a job - I've been out of work for almost a year.

What I do not have is a smile on my face as I watch good paying tech jobs go offshore to places like India.

What I do not have is any sense of satisfaction as I watch this administration do nothing - absolutely nothing - to stem the tide of illegal immigration or to deal with the illegals already in this country.

What I do not have is respect for an administration that believes that unconstitutional guns laws such as the 1994 'assault weapons' ban are just fine with them.

I voted for Bush and Cheney in the last election, believing them to be men of principle who would match deeds to words. I looked on with hope as Bush took command of the 09/11 crisis. But when I look at the fact that I am unemployed and remain so despite my best efforts; when I look at the fact that the extention of the 1994 AW ban will make of me an instant criminal; when I look at the fact that, thanks to the flood of illegals entering the country, Americans are fast becoming a minority in some parts of some states; when I look at the fact that the 2004 election will amount to nothing more than a contest between two forms of socialism that differ in style rather than substance - I think that I'll just sit this one out. For the life of me, I just can't find anyone who deserves my vote, my support or what few dollars remain in my bank account.

Have a nice day.

[Protagoras]

Yes, until now American workers had/have a better standard of living.

And it's more expensive to have that standard?

[EagleMamaMT]

I would say it's more than surprising. It's downright ominus. If a big "globalist" like Kissinger is saying this, then I imagine America is in more trouble than we "peons" know.

[Digger]

.. a contest between two forms of socialism that differ in style rather than substance..

That's your "Two-Party Cartel". It's people like you that are finally realizing the fraud of the pols. Virtually all bought & paid for by the elites.

[angkor]

Protective legislation is 100% guaranteed to end in bankruptcy for the protected industries.

The "protected industries" you speak of are Indian entrepreneurs, living in America (typically on green cards), who promote the outsourcing to Bangalore of jobs such as customer support, programming, call centers, and whatever else can be done through cheap telephones and Internet connectivity.

I know what I speak of, since I know one Indian who sold his H1-B staffed, NYC-based computer services company for several million $$$. His staff of 30+ technicians was 100 percent imported Indian labor making 1/2 American technical rates, and he told you so with no end of self-satisfaction. That's how he got so much $$ for his company: he charged American rates, and paid Indian rates.

These smirking Indian entrepreneurs are scamming the U.S. visa system with H1-B and abusive "L-1 intra-company transfer" visas.

So frankly, I don't care if these Indian entrepreneurs go bankrupt in America, rather than buying $1M townhouses on the Hudson River.

In most cases these people are not even Americans.

[EagleMamaMT]

BRAVO!! Great post! It's looking more and more like I'm going to be "sitting this one out", too.

[snopercod]

You're a little flippin' late, Henry.

[Jim Cane]

And it's more expensive to have that standard?

Stagnant wages, increased unemployment, a negative job growth, a weaker dollar, with inflation (higher CPI) thrown into the mix.

It's more expensive for most Americans. The Middle Class. Where most of the votes are.

U.S. Economy
National Update
June 2003

Evan F. Koenig reviews recent economic conditions in the United States.

It’s a familiar story. Consumer spending is following a steady upward track, while all of our other “hard” indicators of real activity are, at best, stagnant. Hope comes from a rebound in financial-asset prices. Analysts have for some time predicted that an acceleration in economic activity is “just around the corner.” Judging by stock prices and junk-bond spreads, investors are betting that the analysts have finally got it right. Meanwhile, despite all the talk about deflation, core inflation is more likely to increase than fall in the year ahead.

Near-Term Outlook: Been Down So Long It Looks Like Up to Me
The good news is that we may well have hit bottom. The bad news is that it was a deeper hole than we thought. Press reports have emphasized the small recent job declines in the new payroll employment data. However, Chart 1 shows that the main message from the revised data is that job losses since March 2001 have been substantially larger than previously estimated (2.5 million versus 2.1 million jobs). The double-dip pattern we saw in the data for 2002 and 2003 is now largely gone, replaced by a steadier, gradual decline.

Chart 1

Chart 2 plots real retail sales and industrial production through May. Note the absence of any recent significant break in the now three-year-old upward trend in consumer demand. In sharp contrast, industrial production has followed an obvious double-dip pattern similar to the one present in the old employment data.

Chart 2

Man Bites Dog
Some analysts rely on initial claims for unemployment insurance for early warning of improvement or deterioration in employment growth. The usual rule of thumb is that payroll employment is rising or falling, depending on whether initial claims are below or above 400,000. Regression analysis confirms the validity of the 400,000-claims threshold. However, all is not well with the conventional wisdom. The highest correlation between initial claims and employment growth occurs when employment growth is lagged by about three months relative to claims. In other words, jobs growth leads claims, not the other way around. Chart 3 shows the link between initial claims and jobs growth three months earlier.

Chart 3

Longer-Term Outlook: The Spirit Is Willing, but the Flesh Is Weak
Leading indicators that reflect consumer and investor attitudes have generally painted a brighter picture than indicators physically linked to future output growth. For example, two-thirds of May’s 1 percent increase in the Conference Board’s leading index was accounted for by indicators measuring financial conditions and consumer expectations (Table 1). During the prior six months, when the leading index was essentially flat, a strong positive contribution from financial/expectations indicators was nearly offset by a strong negative contribution from “real” indicators.

Table 1

Deconstruction of Changes in the Conference Board’s Leading Index
	Horizon
Contributions to change in the Index (percentage points, not annualized)	May '03/April '03 (percent)		April '03/Oct. '02 (percent)
Financial/Expectations Indicators	0.7		1.0
Real Indicators	0.3		–0.8
Total Change	1.0		0.2
NOTE: Financial/expectations indicators include consumer expectations, stock prices, the spread between the long- and short-term interest rates, and real M2. Real indicators include building permits, ISM vendor performance, initial unemployment claims, average weekly hours in manufacturing, new orders for nondefense capital goods, and new orders for consumer goods and materials.
SOURCE: The Conference Board

What explains the real/financial dichotomy? Partly, it results from unusually strong productivity gains that have improved the profit outlook for businesses (strengthening financial indicators), while simultaneously adversely affecting the labor market (weakening real indicators). Partly, the real/financial dichotomy results from intense import competition that has had an especially strong adverse impact on the goods-producing sector. Four of the six real-side leading indicators included in the Conference Board index are drawn from this sector.

The recent behavior of the Conference Board index implies that we will see only a modest pickup in growth over the next few months. However, longer-leading financial indicators—such as the junk-bond spread, the real short-term interest rate and changes in stock prices—suggest that the pace of growth will accelerate significantly late this year and on into early 2004.

Inflation: As Good As It Gets?
Chart 4 shows that the gap between spending growth and the short-term interest rate has been a strong predictor of year-ahead inflation changes. Roughly speaking, a 1-percentage-point gap between spending growth and the interest rate translates into a 0.3-percentage-point increase in the inflation rate over the subsequent four quarters. The additional predictive power of the unemployment rate for inflation is small. Since growth in sales to domestic purchasers is currently running over 3 percentage points above the level of short-term interest rates, core inflation is more likely to increase than to decrease over the next year, despite slack in the labor market.

Chart 4

Net Exports a Big Drag
Most analysts believe that the economy’s real growth potential is about 3.5 percent per year. If that estimate is accurate, then a long-run inflation rate of between 1 and 2 percent (effective price stability) requires spending growth of between 4.5 and 5.5 percent. Domestic purchases have been increasing at a rate just slightly below the lower end of this range (Chart 5).

Chart 5

If spending growth is nearly on track, how is it that output and employment growth have been so weak? A big part of the answer is the unusually large 1-percentage-point gap that currently separates growth in domestic purchases from growth in sales of domestic product. This gap reflects a rapidly increasing trade deficit: Domestic purchases are increasing faster than sales of domestic product because a larger and larger fraction of spending is on foreign-produced goods and services. Presumably, this trend cannot continue.

[dljordan]

I just don't trust Kissinger. The guy is a globalist, Nazi, sleazebag.

[lelio]

Bravo on your letter. I'm not thinking this is going to make it into their next newsletter though.

[snopercod]

Early in the last century, the English working class were starting to grumble about their condition - and with good reason. The grumblings continued to the point of imminent action against the government.

In response to what he saw as big trouble for the landed classes, Winston Churchill - about as conservative as you can find - ushered in a number of purely socialist programs to improve things for the workers.

I am beginning to sense similar grumblings in America. Perhaps some of the elites have noticed that us working people are not at all happy?