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HAY MAKER

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CounterPunch

June 3, 2005

Welcome to a Has-Been Country

The US Labor Force: One Foot in the Third World

By PAUL CRAIG ROBERTS

In May the Bush economy eked out a paltry 73,000 private sector jobs: 20,000 jobs in construction (primarily for Mexican immigrants), 21,000 jobs in wholesale and retail trade, and 32,500 jobs in health care and social assistance. Local government added 5,000 for a grand total of 78,000.

Not a single one of these jobs produces an exportable good or service. With Americans increasingly divorced from the production of the goods and services that they consume, Americans have no way to pay for their consumption except by handing over to foreigners more of their accumulated stock of wealth. The country continues to eat its seed corn.

Only 10 million Americans are classified as "production workers" in the Bureau of Labor Statistics nonfarm payroll tables. Think about that.

The US with a population approaching 300 million has only 10 million production workers. That means Americans are consuming the products of other countries’ labor.

In the 21st century the US economy has been unable to create jobs in export and import-competitive industries. US job growth is confined to nontradable domestic services.

This movement of the American labor force toward third world occupations in domestic services has dire implications both for US living standards and for America's status as a superpower.

Economists and policymakers are in denial while the US economy implodes in front of their noses. The US-China Commission is making a great effort to bring reality to policymakers by holding a series of hearings to explore the depths of American decline.

The commissioners got an earful at the May 19 hearings in New York at the Council on Foreign Relations. Ralph Gomory explained that America's naïve belief that offshore outsourcing and globalism are working for America is based on a 200 year old trade theory, the premises of which do not reflect the modern world.

Clyde Prestowitz, author of the just published Three Billion New Capitalists: The Great Shift of Wealth and Power to the East, explained that America's prosperity is an illusion. Americans feel prosperous because they are consuming $700 billion annually more than they are producing. Foreigners, principally Asians, are financing US over-consumption, because we are paying them by handing over our markets, our jobs, and our wealth.

My former Business Week colleague, Bill Wolman, explained the consequences for US workers of suddenly facing direct labor market competition from hundreds of millions of Chinese and Indian workers.

Toward the end of the 20th century three developments came together that are rapidly moving high productivity, high value-added jobs that pay well away from the US to Asia: the collapse of world socialism which vastly increased the supply of labor available to US capital; the rise of the high speed Internet; the extraordinary international mobility of US capital and technology.

First world capital is rapidly deserting first world labor in favor of third world labor, which is much cheaper because of its abundance and low cost of living. Formerly, America's high real incomes were protected from cheap foreign labor, because US labor worked with more capital and better technology, which made it more productive. Today, however, US capital and technology move to cheap labor, or cheap labor moves via the Internet to US employment.

The reason economic development in China and some Indian cities is so rapid is because it is fueled by the offshore location of first world corporations.

Prestowitz is correct that the form that globalism has taken is shifting income and wealth from the first world to the third world. The rise of Asia is coming at the expense of the American worker.

Global competition could have developed differently. US capital and technology could have remained at home, protecting US incomes with high productivity. Asia would have had to raise itself up without the inside track of first world offshore producers.

Asia's economic development would have been slow and laborious and would have been characterized by a gradual rise of Asian incomes toward US incomes, not by a jarring loss of American jobs and incomes to Asians.

Instead, US corporations, driven by the short-sighted and ultimately destructive focus on quarterly profits, chose to drive earnings and managerial bonuses by substituting cheap Asian labor for American labor.

American businesses' short-run profit maximization plays directly into the hands of thoughtful Asian governments with long-run strategies. As Prestowitz informed the commissioners, China now has more semiconductor plants than the US. Short-run goals are reducing US corporations to brand names with sales forces marketing foreign made goods and services.

By substituting foreign for American workers, US corporations are destroying their American markets. As American jobs in the higher paying manufacturing and professional services are given to Asians, and as American schoolteachers and nurses lose their occupations to foreigners imported under work visa programs, American purchasing power dries up, especially once all the home equity is spent, credit cards are maxed out and the dollar loses value to the Asian currencies.

The dollar is receiving a short-term respite as a result of the rejection of the European Union by France and Holland. The fate of the Euro, which rose so rapidly in value against the dollar in recent years, is uncertain, thus possibly cutting off one avenue of escape from the over-produced US dollar.

However, nothing is in the works to halt America's decline and to put the economy on a path of true prosperity. In January 2004, I told a televised conference of the Brookings Institution in Washington, DC, that the US would be a third world economy in 20 years. I was projecting the economic outcome of the US labor force being denied first world employment and forced into the low productivity occupations of domestic services.

Considering the vast excess supplies of labor in India and China, Asian wages are unlikely to rapidly approach existing US levels. Therefore, the substitution of Asian for US labor in tradable goods and services is likely to continue.

As US students seek employments immune from outsourcing, engineering enrollments are declining.

The exit of so much manufacturing is destroying the supply chains that make manufacturing possible.

The Asians will not give us back our economy once we have lost it. They will not play the "free trade" game and let their labor force be displaced by cheap American labor.

Offshore outsourcing is dismantling the ladders of America's fabled upward mobility. The US labor force already has one foot in the third world. By 2024 the US will be a has-been country.

Paul Craig Roberts has held a number of academic appointments and has contributed to numerous scholarly publications. He served as Assistant Secretary of the Treasury in the Reagan administration. His graduate economics education was at the University of Virginia, the University of California at Berkeley, and Oxford University. He is coauthor of The Tyranny of Good Intentions. He can be reached at: [email protected]


Say Cal,before you start calling me a democrat,rember this, I have never voted for a democrat,their stance on affirmitive action,gun control & capital gains tax makes it impossible.
 

Bill

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"The reason economic development in China and some Indian cities is so rapid is because it is fueled by the offshore location of first world corporations."

Where are the majority of the shareholders of these corporations from?

The good ole US of eh! (North America)
They have two concerns. #1 that their investments continue to show a decent return and #2 that the goods they buy are reasonably priced. Quality is secondary to the majority of consumers as we live in a throw away (recyclable) society.
 

Silver

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One might also wonder how many more jobs can actually be created with an unemployment level of 5%. Of those 5% how many are actually employable or want to be? Doesn't appear as though there is a shortage of jobs down there.
 

Cal

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Okay HAYMAKER, the number of manufacturing jobs as a ratio to total jobs has been in steady decline since 1944, yet our GDP continues to grow, as does our wealth and standard of living! Can you comprehend that? So we have one more doomsday predictor, what's new?? You want to shut off the boarders and start manufacturing everything at home? Of the 5% unemployed that we have, do you think that there are quality people just itching to work in factories? We'd probably have to import workers as well! At least until the economy tanked from the protectionist policies. Do you think people in the US are eager to buy more expensive, and not necessarily higher quality goods because they don't want imported goods? Don't you think that that scenario would be capitalized on should it exist?
In May the Bush economy eked out a paltry 73,000 private sector jobs: 20,000 jobs in construction (primarily for Mexican immigrants), 21,000 jobs in wholesale and retail trade, and 32,500 jobs in health care and social assistance. Local government added 5,000 for a grand total of 78,000.
You're article even points out that we can't fill manual labor jobs available from our domestic workforce.

But just for the fun of it, we'll pretend that you have a point. So are you suggesting that people go out and invest in foreign markets for the majority of their investment portfolio? Wouldn't that be the logical thing to do for a "has been" nation?
 

agman

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HAY MAKER said:
CounterPunch

June 3, 2005

Welcome to a Has-Been Country

The US Labor Force: One Foot in the Third World

By PAUL CRAIG ROBERTS

In May the Bush economy eked out a paltry 73,000 private sector jobs: 20,000 jobs in construction (primarily for Mexican immigrants), 21,000 jobs in wholesale and retail trade, and 32,500 jobs in health care and social assistance. Local government added 5,000 for a grand total of 78,000.

Not a single one of these jobs produces an exportable good or service. With Americans increasingly divorced from the production of the goods and services that they consume, Americans have no way to pay for their consumption except by handing over to foreigners more of their accumulated stock of wealth. The country continues to eat its seed corn.

Only 10 million Americans are classified as "production workers" in the Bureau of Labor Statistics nonfarm payroll tables. Think about that.

The US with a population approaching 300 million has only 10 million production workers. That means Americans are consuming the products of other countries’ labor.

In the 21st century the US economy has been unable to create jobs in export and import-competitive industries. US job growth is confined to nontradable domestic services.

This movement of the American labor force toward third world occupations in domestic services has dire implications both for US living standards and for America's status as a superpower.

Economists and policymakers are in denial while the US economy implodes in front of their noses. The US-China Commission is making a great effort to bring reality to policymakers by holding a series of hearings to explore the depths of American decline.

The commissioners got an earful at the May 19 hearings in New York at the Council on Foreign Relations. Ralph Gomory explained that America's naïve belief that offshore outsourcing and globalism are working for America is based on a 200 year old trade theory, the premises of which do not reflect the modern world.

Clyde Prestowitz, author of the just published Three Billion New Capitalists: The Great Shift of Wealth and Power to the East, explained that America's prosperity is an illusion. Americans feel prosperous because they are consuming $700 billion annually more than they are producing. Foreigners, principally Asians, are financing US over-consumption, because we are paying them by handing over our markets, our jobs, and our wealth.

My former Business Week colleague, Bill Wolman, explained the consequences for US workers of suddenly facing direct labor market competition from hundreds of millions of Chinese and Indian workers.

Toward the end of the 20th century three developments came together that are rapidly moving high productivity, high value-added jobs that pay well away from the US to Asia: the collapse of world socialism which vastly increased the supply of labor available to US capital; the rise of the high speed Internet; the extraordinary international mobility of US capital and technology.

First world capital is rapidly deserting first world labor in favor of third world labor, which is much cheaper because of its abundance and low cost of living. Formerly, America's high real incomes were protected from cheap foreign labor, because US labor worked with more capital and better technology, which made it more productive. Today, however, US capital and technology move to cheap labor, or cheap labor moves via the Internet to US employment.

The reason economic development in China and some Indian cities is so rapid is because it is fueled by the offshore location of first world corporations.

Prestowitz is correct that the form that globalism has taken is shifting income and wealth from the first world to the third world. The rise of Asia is coming at the expense of the American worker.

Global competition could have developed differently. US capital and technology could have remained at home, protecting US incomes with high productivity. Asia would have had to raise itself up without the inside track of first world offshore producers.

Asia's economic development would have been slow and laborious and would have been characterized by a gradual rise of Asian incomes toward US incomes, not by a jarring loss of American jobs and incomes to Asians.

Instead, US corporations, driven by the short-sighted and ultimately destructive focus on quarterly profits, chose to drive earnings and managerial bonuses by substituting cheap Asian labor for American labor.

American businesses' short-run profit maximization plays directly into the hands of thoughtful Asian governments with long-run strategies. As Prestowitz informed the commissioners, China now has more semiconductor plants than the US. Short-run goals are reducing US corporations to brand names with sales forces marketing foreign made goods and services.

By substituting foreign for American workers, US corporations are destroying their American markets. As American jobs in the higher paying manufacturing and professional services are given to Asians, and as American schoolteachers and nurses lose their occupations to foreigners imported under work visa programs, American purchasing power dries up, especially once all the home equity is spent, credit cards are maxed out and the dollar loses value to the Asian currencies.

The dollar is receiving a short-term respite as a result of the rejection of the European Union by France and Holland. The fate of the Euro, which rose so rapidly in value against the dollar in recent years, is uncertain, thus possibly cutting off one avenue of escape from the over-produced US dollar.

However, nothing is in the works to halt America's decline and to put the economy on a path of true prosperity. In January 2004, I told a televised conference of the Brookings Institution in Washington, DC, that the US would be a third world economy in 20 years. I was projecting the economic outcome of the US labor force being denied first world employment and forced into the low productivity occupations of domestic services.

Considering the vast excess supplies of labor in India and China, Asian wages are unlikely to rapidly approach existing US levels. Therefore, the substitution of Asian for US labor in tradable goods and services is likely to continue.

As US students seek employments immune from outsourcing, engineering enrollments are declining.

The exit of so much manufacturing is destroying the supply chains that make manufacturing possible.

The Asians will not give us back our economy once we have lost it. They will not play the "free trade" game and let their labor force be displaced by cheap American labor.

Offshore outsourcing is dismantling the ladders of America's fabled upward mobility. The US labor force already has one foot in the third world. By 2024 the US will be a has-been country.

Paul Craig Roberts has held a number of academic appointments and has contributed to numerous scholarly publications. He served as Assistant Secretary of the Treasury in the Reagan administration. His graduate economics education was at the University of Virginia, the University of California at Berkeley, and Oxford University. He is coauthor of The Tyranny of Good Intentions. He can be reached at: [email protected]


Say Cal,before you start calling me a democrat,rember this, I have never voted for a democrat,their stance on affirmitive action,gun control & capital gains tax makes it impossible.

His number of U.S producing workers for starters is incorrect. Manufacturing production workers total nearly 14 million or 11% of the current workforce. This is down from 32 million workers in manufacturing in 1940. My God the sky has already fallen. If you do not already have a hard hat on you are already dead!! OOPS, they forgot to tell you that each manufacturing worker today produces 11 X more production today than in 1940. Why would a fact so crucial to proper analysis be overlooked? Annual productivity gains during the past three years have been unequaled in any three year period. Thus, manufacturing jobs have been slow to rebound. Please note that U.S. manufacturing output is at record levels. Once again fact overrides fiction. Yes sir, the Good Ole USA can compete-just not in low paying labor intensive jobs.

Per the U.S. Labor Department this mass exodus to outsourcing is approximately 100,000 jobs per year. That is a far cry from the millions of lost jobs being claimed by some in the press and for that matter some ill informed economists who just never seem to get it right. Also, I wonder why he failed to mention the 376,000 jobs created per the Household Employment survey. Being esteemed economists I would assume they know the difference between the Payroll Survey and its shortfalls and the Household Employment Survey.

They tell you about the positive gains from net foreign investment into the third world countries. I wonder why they fail to tell you about the net foreign investment into the U.S. Could it be that to expose you to the truth would expose the contradition of their own doomsday outlook and commentary!! This is so much fun I should charge a fee for this type of rebuttal!!!
 

Big Muddy rancher

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Haymaker your worried about the small towns but how did they even come to be. Wasn't it west built on immigration and expansion. Based alot on trade with the old country.
 

agman

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Cal said:
Okay HAYMAKER, the number of manufacturing jobs as a ratio to total jobs has been in steady decline since 1944, yet our GDP continues to grow, as does our wealth and standard of living! Can you comprehend that? So we have one more doomsday predictor, what's new?? You want to shut off the boarders and start manufacturing everything at home? Of the 5% unemployed that we have, do you think that there are quality people just itching to work in factories? We'd probably have to import workers as well! At least until the economy tanked from the protectionist policies. Do you think people in the US are eager to buy more expensive, and not necessarily higher quality goods because they don't want imported goods? Don't you think that that scenario would be capitalized on should it exist?
In May the Bush economy eked out a paltry 73,000 private sector jobs: 20,000 jobs in construction (primarily for Mexican immigrants), 21,000 jobs in wholesale and retail trade, and 32,500 jobs in health care and social assistance. Local government added 5,000 for a grand total of 78,000.
You're article even points out that we can't fill manual labor jobs available from our domestic workforce.

But just for the fun of it, we'll pretend that you have a point. So are you suggesting that people go out and invest in foreign markets for the majority of their investment portfolio? Wouldn't that be the logical thing to do for a "has been" nation?

Cal, the year of peak manufacturing jobs versus total jobs is 1944 as you indcated. Is it not alot more exiting understanding the positives and facts as opposed to all these failed Domesday comments. Some of these folks belong in the side show of a circus.
 

agman

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Silver said:
One might also wonder how many more jobs can actually be created with an unemployment level of 5%. Of those 5% how many are actually employable or want to be? Doesn't appear as though there is a shortage of jobs down there.

At a 5% unemployment level we are essentially near a full-employment economy. At any point in time we have approximately 5% of the workforce in transition. We cannot overlook that VITAL fact.
 

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