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Posted on Fri, Aug. 01, 2003

Globalism threatens U.S. living standards
Jobless recovery is only one sign of sweeping, fundamental change
PAUL CRAIG ROBERTS
Special to The Observer

Despite the economic recovery, the unemployment rate has risen to a nine-year high.

How can this be?

Part of the answer is the decline in U.S. manufacturing jobs. Between January 2001 and May, U.S. manufacturing jobs declined by 13.3 percent. (As of June the loss was 14.1 percent on a seasonally adjusted basis.)

Every state and the District of Columbia lost manufacturing employment during this period. Here are the losses by state:

• 20 percent: New Hampshire.

• 15 to 18 percent: North Carolina, South Carolina, Arizona, Colorado, Massachusetts, Maine, New York, Vermont and Washington.

• 12 to 14 percent: California, Connecticut, Florida, Illinois, Michigan, Mississippi, New Jersey, Oregon, Ohio, Pennsylvania, Tennessee, Texas and Virginia.

Most of the remaining states lost 9 to 11 percent.

Some of these lost jobs might be recovered if the economy gains strength. However, most appear to be jobs that have been moved abroad in order to benefit from lower labor costs.

U.S. labor that costs $26 an hour can be had in China for less than $1.

The United States, with its population of 289 million, only has 14.7 million manufacturing jobs left. If manufacturing job loss continues at the same rate over the next 28 months, only 12.7 million jobs will be left.

As the United States makes less and less of what it consumes, it runs a massive trade deficit. We pay for these foreign-made goods by giving up ownership of our assets -- our companies, real estate, stocks and bonds. Thus, foreigners gain not only the incomes from the manufacturing jobs but also the profits, rents, capital gains, dividends and interest from the assets.

A country that loses income streams from millions of lost manufacturing jobs, and from the trillions of dollars in assets it no longer owns, is a country that is losing a lot of income.

Allegedly, we are gaining it back in lower prices from cheaper foreign-made goods. But once the trade deficit drives down the dollar, the foreign-made goods won't be cheap any longer. We will have the twin evils of high prices and lost incomes.

It requires a lot of economic growth to offset the loss of high productivity manufacturing jobs. Is there a new sector to take the place of manufacturing in driving the economy?

The "new economy" was supposed to be based in "information technology" and services. But those jobs are also leaving the United States at a rapid rate. The Internet makes it possible for "knowledge jobs" to be performed abroad.

These foreign "knowledge workers" are displacing American engineers, designers, radiologists, stock analysts, accountants and researchers, in addition to clerical, customer service and telemarketing workers.

European countries have high unemployment rates among young university graduates, because welfare-burdened companies cannot afford to hire. Is the United States also creating millions of educated unemployables because the jobs for which they are trained go to foreigners?

If Americans wake up one day and discover that their economy is not for them but for foreigners, there will be political hell to pay.

Democrats will blame President Bush for the jobs lost during his term, but Bush is not to blame. Americans have failed to understand that conditions in the world have changed. These changed conditions have implications for their jobs and incomes.

Until recent years, Americans had few competitors outside Japan and West Germany.

Socialism engulfed the rest of the globe. Beginning in the mid-1980s, England, France and Italy privatized their socialized economies. China took "the capitalist road." The Soviet empire collapsed. Mexico undertook reforms.

These developments created investment opportunities abroad that socialism had blocked.

Suddenly vast pools of skilled and unemployed labor were available to multinational corporations. Wal-Mart could abandon U.S. suppliers and stock its shelves with goods made in China.

During the post-World War II period, Americans benefited from high levels of education, technology and capital. This made them highly productive and protected them from competition from cheap foreign labor that had less capital and technology with which to work. High-paid U.S. labor could produce so much more per hour than cheap foreign labor that U.S. employment had nothing to fear.

This has all changed. Today capital and technology can go anywhere, and they go to where labor is the cheapest.

This makes "globalism" a direct threat to U.S. living standards. Americans will continue to lose ground in the global labor market. The "jobless recovery" is one indication of this lost ground.