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Dan, how does this equate to 4.7 percent unemployment rate? I really don't
agree with this writers assessment.
Their Own Economic Reality
By PAUL CRAIG ROBERTS
Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions.He can be reached at: [email protected]Who can forget the neocons’ claim that under their leadership America creates its own reality? Remember the neocons’ Iraq reality--a “cakewalk” war? After three years of combat, thousands of casualties, and cost estimated at over $1 trillion, real reality must still compete with the White House spin machine.
One might think that the Iraq experience would restore sober judgement to policymakers. Alas, neocon reality has spread everywhere. It has infected the media and the new Federal Reserve Chairman, Ben Bernanke, who just gave Congress an upbeat report on the economy. The robust economy, he declared, could soon lead to inflation and higher interest rates.
Consumers deeper in debt and fresh from their first negative savings rate since the Great Depression show high consumer confidence. It is as if the entire country is on an acid trip or a cocaine trip or whatever it is that lets people create realities for themselves that bear no relation to real reality.
How can the upbeat views be reconciled with the Bureau of Labor Statistics’ payroll jobs data, the extraordinary red ink, and exploding trade deficit? Perhaps the answer is that every economic development, no matter how detrimental, is spun as if it were good news. For example, the worsening US trade deficit is spun as evidence of the fast growth of the US economy: the economy is growing so fast it can’t meet its needs and must rely on imports. Declining household income is spun as an inflation fighter that keeps mortgage interest rates low. Federal budget deficits are spun as letting taxpayers keep and spend more of their own money. Massive layoffs are spun as evidence that change is so rapid that the work force must constantly upgrade skills and re-educate itself.
The denial of economic reality has become an art form. Except for Lou Dobbs, no accurate economic reporting is available in the “mainstream media.”
Occasionally, real information escapes the spin machine. The National Association of Manufacturers, one of outsourcing’s greatest boosters, has just released a report, “US Manufacturing Innovation at Risk,” by economists Joel Popkin and Kathryn Kobe. The economists find that US industry’s investment in research and development is not languishing after all. It just appears to be languishing, because it is rapidly being shifted overseas: “Funds provided for foreign- performed R&D have grown by almost 73 percent between 1999 and 2003, with a 36 percent increase in the number of firms funding foreign R&D.”
US industry is still investing in R&D after all; it is just not hiring Americans to do the R&D. US manufacturers still make things, only less and less in America with American labor. US manufacturers still hire engineers, only they are foreign ones, not American ones.
In other words, everything is fine for US manufacturers. It is just their former American work force that is in the doldrums. As these Americans happen to be customers for US manufacturers, US brand names will gradually lose their US market. US household median income has fallen for the past five years. Consumer demand has been kept alive by consumers’ spending their savings and home equity and going deeper into debt. It is not possible for debt to forever rise faster than income.
When manufacturing moves abroad, engineering follows. R&D follows engineering, and innovation follows R&D. The entire economy drains away. This is why the “new economy” has not materialized to take the place of the lost “old economy.”
The latest technologies go into the newest plants, and those plants are abroad. Innovations take place in new plants as new processes are developed to optimize the efficiency of the new technologies. The skills required to operate new processes call forth investment in education and training. As US manufacturing and R&D move abroad, Indian and Chinese engineering enrollments rise, and US enrollments decline.
The process is a unified whole. It is not possible for a country to lose parts of the process and hold on to other parts. That is why the “new economy” was a hoax from the beginning. As Popkin and Kobe note, new technologies, new manufacturing processes, and new designs take place where things are made. The notion that the US can lose everything else but hold on to innovation is absurd.
Someone needs to tell Congress before they waste yet more borrowed money. In an adjoining column to the NAM report on innovation, the February 6 Manufacturing & Technology News reports that “the US Senate is jumping on board the compe iveness issue.” The Bush regime and the doormat Congress have come together in the belief that the US can keep its edge in science and technology if the federal government spends $9 billion a year to “fund innovative, big-payoff ideas that have the potential to transform the US economy.”
The utter stupidity of the “Protecting America’s Compe ive Edge Act” (PACE) is obvious. The tremendous labor cost advantage of doing things abroad will equally apply to any new “big-payoff ideas” as it does to the goods and services currently outsourced. Moreover, US research is open-sourced. It is available to anyone. As the Cox Commission Report made clear, there are a large number of Chinese front companies in the US for the sole purpose of collecting technology. PACE will simply be another US taxpayer subsidy to the rising Asian economies.
The assertion that we hear every day that America is falling behind because it doesn’t produce enough science, mathematics and engineering graduates is a bald-faced lie. The problem is always brought back to education failures in K-12, that is, to more education subsidies. When CEOs say they can’t find American engineers, they mean they cannot find Americans who will work for Chinese or Indian wages. That is what the so-called “shortage” is all about.
I receive a constant stream of emails from unemployed and underemployed engineers with many years of experience and advanced degrees. Many have been out of work for years. They describe the movement of their jobs offshore or their replacement by foreigners brought in on work visas. Many no longer even know American engineers who are employed in the profession. Some are now working in sawmills, others in Home Depot, and others are attempting to eke out a living as consultants. Many describe lost homes, broken marriages, even imprisonment for inability to make child support payments.
Many ask me how economists can be so blind to reality. Here is my answer: Many economists are bought and paid for by outsourcers. Most of the studies claiming to prove that Americans benefit from outsourcing are done by economic consulting firms hired by outsourcers. Or they are done by think tanks or university professors dependent on corporate donors. Or they reflect the ideology of “free market economists” who are committed to the belief that “freedom” is good and always produces good results. Since outsourcing is merely the freedom of property to act in its interest, and since this self-interest is always guided by an invisible hand to the greater welfare of everyone, outsourcing, ipso facto, is good for America. Anyone who doesn’t think so is a fascist who wants to take away the rights of property. Seriously, this is what passes for analysis among “free market economists.”
Economists’ commitment to their “reality” is destroying the ladders of upward mobility that made America the land of opportunity. It is just as destructive as the neocons’ commitment to their “reality” that is driving the US deeper into war in the Middle East.
Fact and analysis no longer play a role. The spun reality in which Americans live is insulated against intelligent perception.
American “manufacturers” are becoming merely marketers of foreign made goods. The CEOs and shareholders have too short a time horizon to understand that once foreigners control the manufacture-design- innovation process, they will bypass American brand names. US companies will simply cease to exist.
Norm Augustine, former CEO of Lockheed Martin, says that even McDonald's jobs are no longer safe. Why pay an error-prone order-taker the minimum wage when McDonald's can have the order transmitted via satellite to a central location and from there to the person preparing the order. McDonald’s experiment with this system to date has cut its error rate by 50% and increased its throughput by 20 percent. Technology lets the orders be taken in India or China at costs below the minimum wage and without the liabilities of US employees.
Americans are giving up their civil liberties because they fear terrorist attacks. All of the terrorists in the world cannot do America the damage it has already suffered from offshore outsourcing.
Welcome to the hollowing out of America. Where's John Stousell now?
Dan, how does this equate to 4.7 percent unemployment rate? I really don't
agree with this writers assessment.
I would like to think that jobs at McDonald's aren't safe because more people are cutting greasy fried fat out of their diets.
I'm surprised nobody has blamed illegals yet.
^^^I would like to think that jobs at McDonald's aren't safe because more people are cutting greasy fried fat out of their diets.
What fun is that? A little grease sometimes is nice, especially the
old fashion burgers. You know buns toasted on the grill....made myself
hungry, gotta go.......
Unemployment figures don't factor people who are under-employed, as long as your delivering pizza, your employed. Also, if a unemployed person doesn't find a job by the time his government benefits run out, he simply 'disappears' from these figures. It is estimated that millions of U.S. workers have simply disappeared since 2001.
Dan, these people don't do those jobs the rest of their lives. I drove an
elevator when I was young. Only job I ever got fired from. I know I am
talking about times before yours. But I kinda found something else to do
in life. And so does the rest of these people......please get a life and let
others get on with theirs. Does anyone ever retire from McDonals, except
maybe a manager?
So if your an engineer or some other professional, and your now working at a saw mill because your employer hired a cheaper foreigner, you should just shut up and be happy? No, this article isn't just about the exportation of American jobs to China, India, and Indonesia, it's about the hollowing out of America.
...to the detention camps, right?
Anyways, what's the point of this article? If Americans want to enjoy the benefits of a global marketplace then they're going to have to put up with greater uncertainty. If you are looking for someone to blame, don't look at the Neocons, look at the American consumer. They want the best quality at the cheapest price, protectionist ramblings be damned.
It's the very "Walmart Effect" that Dan posted an article about a few weeks back. We have come to expect all our goods to be as cheap as possible and now we are paying the price.
Um, price compe ion has always been a major factor in the American economy. It's not exactly a new or bad thing.
So what's the solution? If you didn't have a Wal-Mart, then a large number of people would endure a higher cost of living. I mean, it's great to point out that there are some costs due to freer trade, but if you don't have a solution then it's just ing.
edit - I will add that the cost of health care benefits are a not too insignificant issue in regards to why there is greater unemployment certainty among white collar workers.
If you want a solution, start with the educational system in this country. Otherwise, you will have to move towards policies that will limit trade, which is somewhat peverse given that you are supposedly trying to create/save jobs in the US. Other issues would be tax policy and regulatory costs.
Last edited by Peter; 02-16-2006 at 06:46 PM.
Not that giving out jobs to foreigners is bad,
but hey they deserve our jobs. It's the least we can do after we've oppressed them.
Um, I never said it was a bad thing. It is what it is.
Again, where do you get that I am ing from my statement? My statement was that the phenomena is of our own making, so we can't really complain.
Even though you were otherwise a complete and utter prick in your response, I agree whole-heartedly with this statement.
I did not intend to be abrasive to you in particular. It's that we have these reports about how globalization is creating greater job insecurity in the US, yet no one ever seems ready to step up to the plate and offer a solution. The above article is a perfect example. I'll also add that the author was none too clear on what engineering specialties were being affected. I'd imagine that industrial and mechanical engineers are feeling the brunt of the increased compe ion. I think the greatest problem is that Americans are used to getting what they want (cheap, high quality consumer goods and job security) with minimal disruption.
What global market place? Americans borrowing to the hilt and saving less than anytime since the great depression to buy cheap foreign goods? Where do you think all the 'consumers' for this 'global economy' are supposed to get their wages to continue driving the economy if companies can pay a worker in India 16 times less or a worker in China 32 times less than an a American worker? Who's really benefiting?It's that we have these reports about how globalization is creating greater job insecurity in the US, yet no one ever seems ready to step up to the plate and offer a solution.
The one thing that has kept the American economy, and American wages, ahead of other countries economically is our technological productivity. This is why American workers are amongst the most productive in the world. The U.S. once had a 7-1 productivity advantage over other countries, but the leaking of U.S. business technology to 'outsourced countries' has narrowed this U.S. advantage to 5-1.
If we continue exporting our technology, our engineers, or computer scientists, etc, etc, etc, - every time this happens we lose more of our productive advantage and we are hollowed out as a nation. Then what are we all? Waiters?
"more people are cutting greasy fried fat out of their diets."
The low-fat myth was exposed last week.
"The largest study ever to ask whether a low-fat diet keeps women from getting cancer or heart disease has found that the diet had no effect.
The $415 million federal study involved nearly 49,000 women aged 50 to 79 who were followed for eight years. In the end, those assigned to a low-fat diet had the same rates of breast cancer, colon cancer heart attack and stroke as those who ate whatever they pleased, researchers are reporting today."
And USA infatuation with "low-fat" crap hasn't stopped the overweight/obesity epidemic. Now, junk food mfrs can quit playing the low-fat game and start making tasty, fatty junk food so we can get fatter faster and cheaper!
The one we live in.
Individuals make choices on how to spend their money. Those cheap foreign goods allow consumers to spend less.Americans borrowing to the hilt and saving less than anytime since the great depression to buy cheap foreign goods?
The same place they always have, the US. Just because some manufacturing jobs are moving overseas is not a sign of Armaggedon.Where do you think all the 'consumers' for this 'global economy' are supposed to get their wages to continue driving the economy if companies can pay a worker in India 16 times less or a worker in China 32 times less than an a American worker?
Who's really benefiting?
Consumers, first and foremost. You don't want to raise the cost of living for the lower middle class, do you?
Source? Anyways, sure, what matters is the degree to which the American workforce can continue to improve its skills in order to justify higher wages. That ultimately leads back to the quality of K-12 education in the US.The one thing that has kept the American economy, and American wages, ahead of other countries economically is our technological productivity. This is why American workers are amongst the most productive in the world. The U.S. once had a 7-1 productivity advantage over other countries, but the leaking of U.S. business technology to 'outsourced countries' has narrowed this U.S. advantage to 5-1.
Any source for that? Anyways, the US exports technology so that goods come back cheaper to here. Is that a bad thing?If we continue exporting our technology, our engineers, or computer scientists, etc, etc, etc,
- every time this happens we lose more of our productive advantage and we are hollowed out as a nation. Then what are we all? Waiters?
So assuming your doomsday scenario has a touch of reality, what's your solution? Enough ing.
Last edited by Peter; 02-17-2006 at 11:49 AM.
You mean the one we support with record borrowning, right?The one we live in.
Where is the morality in american consumerism. Worldwide slave labor is OK as long as I pay a cheaper price at the register?Individuals make choices on how to spend their money. Those cheap foreign goods allow consumers to spend less.
It's not just manufacturing jobs that are moving overseas. American companies are using the technological advantages that give us our current worker productive advantage and giving it away to outsourced companies, or allowing front companies by the Chinese and others to slowly bleed America, and our politicians are sitting on their hands because they get big contributions from these companies.The same place they always have, the US. Just because some manufacturing jobs are moving overseas is not a sign of Armaggedon.
What employment opportunities would those people have in those locales but for?
By and large it has been.
What is with this economic nationalism? If you want the benefits of free trade then you're going to face open compe ion.American companies are using the technological advantages that give us our current worker productive advantage and giving it away to outsourced companies,
Now that matters, eh?or allowing front companies by the Chinese and others to slowly bleed America, and our politicians are sitting on their hands because they get big contributions from these companies.
Is it a record relative to the value of assets held as well as income? Or just a big number that sounds impressive when devoid of all context?
Individuals make individual choices about what to buy. Do you propose that they have fewer, more expensive choices when they go shopping for necessities?
I'm still waiting for a solution.
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