JOB DROUGHT CONTINUES (Paul Craig Roberts; he's wrong, right? The US isn't losing steam, is it?)

Creators ^ | Ap 6 05 | Paul Craig Roberts

[churchillbuff]

In March, the U.S. economy created a paltry 111,000 private sector jobs, half the expected amount. Following a well-established pattern, U.S. job growth was concentrated in domestic services: waitresses and bartenders, construction, administrative and waste services, and health care and social assistance.

In the 21st century, the U.S. economy has ceased to create jobs in knowledge industries or information technology (IT). It has been a long time since any jobs were created in export and import-competitive sectors.

The Bureau of Labor Statistics forecasts no change in the new pattern of U.S. payroll job growth. Outsourcing and offshore production have reduced the need for American engineers, scientists, designers, accountants, stock analysts and other professional skills. A college degree is no longer a ticket to upward mobility for Americans.

Nandan Nilekani is CEO of Infosys, an Indian software development firm. In a Feb. 18 interview with New Scientist, he noted that outsourcing is causing American students to "stop studying technical subjects. They are already becoming wary of going into a field which will be 'Bangalored' tomorrow."

Bangalore is India's Silicon Valley. A 21st century creation of outsourcing, Bangalore is a new R&D home for Hewlett-Packard, GE, Google, Cisco, Intel, Sun Microsystems, Motorola and Microsoft. The New Scientist reports: "The concentration of high-tech companies in the city is unparalleled almost anywhere in the world. At last count, Bangalore had more than 150,000 software engineers."

Meanwhile, American software engineers go begging for employment, with several hundred thousand unemployed. I know engineers in their 30s with excellent experience who have been out of work since their jobs were outsourced four or five years ago. One is moving to Thailand to take a job in an outsourcing operation at $875 a month.

A country that permits its manufacturing and its technical and scientific professions to wither away is a country on a path to the Third World. The mark of a Third World country is a labor force employed in domestic services.

Many Americans and almost every economist and policymaker do not see the peril. They confuse outsourcing with free trade, and they have been taught that free trade is always beneficial.

Outsourcing is labor arbitrage. Cheaper foreign labor is being substituted for more expensive First World labor. Higher productivity no longer protects the wages and salaries of First World employees from cheap foreign labor. Political change in Asia has made it easy to move First World capital and technology to cheap labor, and the Internet has made it easy to move cheap labor to First World capital and technology. When working with First World capital and technology, foreign labor is just as productive -- and a lot cheaper.

This is a new development. It is not a development covered by the case for free trade.

Outsourcing's apologists claim that it will create new jobs for Americans, but there is no sign of these jobs in the payroll jobs data. Moreover, it doesn't require much thought to see that the same incentive to outsource would apply to any such new jobs. By definition, outsourcing is the substitution of foreign labor for domestic labor. It is impossible for a process that replaces domestic employees with foreigners to create jobs for domestic labor.

Now biotech and pharmaceutical jobs and innovation itself are being moved offshore. The Boston Globe reports that Indian chemists with Ph.D. degrees work for one-fifth the pay of U.S. chemists. American chemists cannot give up 80 percent of their pay to meet the competition and still pay their bills. Rising interest rates will make it difficult enough for Americans to make their mortgage payments, and the dollar's declining exchange value will raise the prices of the goods and services that have been moved offshore.

Americans are unaware of the difficult adjustments that are coming their way. By the time Americans catch on to outsourcing, its proponents will have changed its name to "strategic sourcing" or "partnering."

Corporations, economists and politician have written off American labor. No end of the job drought is in sight.

[Toddsterpatriot]

But Japan is not dead. It can live off USTreasury interest and principal for a LONG time.

Japan has about $720 billion in US treasuries. 10 year bond yields about 4.5%. So, that's about $32.4 billion a year in interest. Japan has about 127 million people so we're talking about $255 per person per year. If they cash in the entire principal, they'd get about $5670 per person.

I think you were wrong when you said they can live off US Treasury interest and principal for a LONG time. Unless you think a couple of months is a LONG time?

[Jerr]

When no value is put into American R&D, then everything is based on cost and becomes a commodity product. Of course, you can always find some place else to be cheaper, but growth is built on R&D.

If no value is given to American R&D, then why give any value to American management. Obviously, if their only solution is to offshore production, they have failed. But why are we paying American CEOs and sr. executives such enormous salaries, if they are just failures. Anybody canabalizing a once valuable company can increase short-term earnings to record numbers. The problem is developing a company beyond that point.

With such a failure in American management, why aren't we offshoring their positions as well. Offshore the large companies and their steadily declining stocks. Sell off the NYSE and invest in developing American companies.

Let them offshore the NYSE and put American consumer money back into the American economy.