The Offshored Economy
Bio: Economist
In the 20th century, Detroit, Mich., symbolized American industrial might. Today it symbolizes the offshored economy.
Detroit’s population has declined by half. A quarter of the city--35 square miles--is desolate with only a few houses still standing on largely abandoned streets. If the local government can get the money from Washington, urban planners are going to shrink the city and establish rural areas or green zones where neighborhoods used to be.
President Obama and economists provide platitudes about recovery. But how does an economy recover when its economic leaders have spent more than a decade moving high productivity, high value-added middle class jobs offshore along with the Gross Domestic Product associated with them?
Some very discouraging reports have been issued this month from the Bureau of Labor Statistics. There have been record declines in both jobs and hours worked. At the end of last year, the U.S. economy had fewer jobs than at the end of 1997, twelve years ago. Hours worked at the end of last year were less than at the end of 1995, fourteen years ago.
The average workweek is falling and currently stands at 33.1 hours for non-supervisory workers.
In a major problem for economic theory, labor productivity or output per man hour and labor compensation have diverged markedly over the last decade. Wages are not rising with productivity. Perhaps the explanation lies in the productivity data. Susan Houseman found that U.S. labor productivity statistics might actually be reflecting the low wages paid to offshored labor. An American company with production in the U.S. and China, for example, produces aggregate results in labor output and labor compensation. The productivity statistics thus measure the labor productivity of global corporations, not that of U.S. labor.
Charles McMillion has pointed out that unit labor costs actually fell during 2009, but that non-labor costs have been rising throughout the decade. The rise in non-labor costs perhaps reflects the decline in the dollar’s foreign exchange value and the increased dependence on imported factors of production.
Economists and policymakers tend to blame auto management and unions for Detroit’s fall. However, American manufacturing has declined across the board. Evergreen Solar recently announced that it is shifting its production of solar fabrication and assembly from Massachusetts to China.
A U.S. Department of Commerce study of the precision machine tool industry has found that the U.S. comes in last. The U.S. industry has a shrinking market share and the smallest increase in export value. The Commerce Department surveyed American end-users of precision machine tools and found that imports accounted for 70 percent of purchases. Some U.S. distributors of precision machine tools do not even carry U.S. brands.
The financial economy which was to replace the industrial economy is nowhere in sight. The U.S. has only five banks in the world’s top 50 by size of assets. The largest U.S. bank, JPMorgan Chase ranks seventh. Germany has seven banks in the top 50, and the United Kingdom and France each have six. Japan and China each have five banks in the top 50, and together the small countries of Switzerland and the Netherlands have six with combined assets $1.185 trillion more than the five largest U.S. banks.
Moreover, after the derivative fraud perpetrated on the world’s banks by the U.S. investment banks, there is no prospect of any country trusting American financial leadership.
The American economic and political leadership has used its power to serve its own interests at the expense of the American people and their economic prospects. By enriching themselves in the short-run, banksters and politicians have driven the U.S. economy into the ground. The U.S. is on a path to becoming a Third World economy.
Dr. Roberts was Assistant Secretary of the Treasury in the Reagan administration. His latest book, "How The Economy Was Lost," has just been published by CounterPunch/AK Press.
To find out more about Paul Craig Roberts, and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.
COPYRIGHT 2009 CREATORS.COM
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This Work, The Offshored Economy, by Paul Craig Roberts is licensed under a Creative Commons Attribution-No Derivative Works license.
Copyright © 2010 Creators.com
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9 hours 57 min ago - Here's my suggestion: We
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18 hours 33 min ago
If you are new to this web site, please pay attention to the date stamp at the top of each reader posted comment.
The site is constantly recycling articles from months back, but with a new date stamp. If you notice, the reader comments carry the original date stamp.
If you notice that my tone has changed, it is because I no longer trust this web site. I don't trust them because they often contradict themselves (whether they realize it or not, I'm not sure.)
They seem to be in favor of saving or bringing back American manufacturing jobs, but then they have an elitist attitude toward manufacturing and a socialist attitude toward the free market.
I was excited at first, and was flogging this website for all it was worth. Now, I don't visit very often, and I no longer bother to tell anyone about it. I still find my old comments posted under the recycled articles and I haven't changed my mind about anything I have said, except that I now consider this to be a "hostile," environment and would not be surprised to find myself banned and my posts deleted.
Bruce Bishop
The internet & media is full of old people that cheered on all sorts of stuff the last 30 plus years that are trying to blame everything on something besides themselves. Some of them are disgruntled they got kicked aside by the machine, others just are trying to stay relavent because they don't want to fad away and go away and become some nobody. The desperate stars do it all the time, they had their day in the spotlight and will do anything to once again be the center of attention. Miley Cyrus is the latest one desperate for attention, she could move on with life but needs the next fix because it becomes like a drug to people to be the center of attention. Newt is another one who had his day and just can't fad away and move on with life.
It's killing the old people to see the likes of Obama & Palin getting attention, the old people don't want to hand over the keys and go sit on a park bench, I wish they would considering the damage they have done and their lack of real solutions to anything.
Dear Mr Roberts, thank you very much for telling truths rarely told.
We, in Europe, appreciate so much your analyses.
We know from past mistakes that we cannot count our "leadership", political or economic, to do what in this country's best interest. SO, we the people have to realize how much control WE have with our buying power. The American public could and absolutely should begin (I did over 10 years ago) BOYCOTTING anything that is made in China number one and actually looking for products made in USA. There are products out there, one just has to look. If we the largest consumers on the planet begin to leave these imported items on the store shelves and buy American, there will be a very clear message. There is power in numbers, it's about all the power we have left
Judy,
I don't want to rain on your parade, but, unless you are living in a mud hut in the wilderness and eating only roots and berries, you must be buying Chinese products. I appreciate your sincerity, but you might as well try to boycott water.
The truth is -- for you, Harry Dingey and all the other well-meaning folks who are trying to "wake up our government," -- THEY ARE ALLOWING OUR ECONOMY TO SINK! They want the middle-class (that's us) to go away. They have a plan -- it's called socialism.
The plan is for the self-annointed elites to run the country and for the rest of us to be obedient and passively productive (like cattle), because they think they know what's best for us.
The folks running this web-site are apparently well meaning, but they are low-level elites themselves. I still haven't figured out what their angle is. They seem to be for the restoration of American jobs, but they spend a lot of time bashing the free market and propping up the very people who are bent on destroying our economy and our future.
Bruce Bishop
EIC does not bash free market. Only the so called "free market" that destroyed this country. Sugar candies are not good for health anyway!
But how does an economy recover ?
It does not. Time to move to Canada. At least, they know what they are doing!
Excellent article. Thanks to Dr. Roberts for caring and for sharing his thoughts with us.
I spent twenty years in manufacturing, with six Fortune 500 firms.
I saw the first Chinese products in 1985. The delivered cost was one third of our manufactured cost. There was no way we could compete with that sort of differential. I left manufacturing in 1989 when I realized that the big companies had little choice but to import from China if they wanted to stay in the game. The "experts" were saying that the future was in small and mid-sized firms.
Next, I spent ten years with an industrial development center where I visited over 500 small and mid-sized manufacturers to assess their problems and to help them stay competitive. When it became obvious that only a few niche industries were safe from the Chinese onslaught, I left manufacturing for good and started over in a service company. The "experts" were saying that we didn't need manufacturing. We were going the become a "service economy."
Three years into my service career, I read Thomas Friedman's book,"The World is Flat," and realized that my service career was going to India. I resigned and took a job in retail. I didn't want to be caught on another sinking ship before I was ready to retire.
This I believe: Fifteen years ago, any economist who gave a damn about our country could have predicted what was going to happen. Our government, had they cared about our future, could have stopped it from happening. The implications for the future are so much greater than just jobs. Our wealth is being drained away. Our government will survive and maintain their lavish lifestyles by confiscating and selling private property when it comes down to that. The rest of us will be serfs in a third world country. We are ill-prepared for that, and I am sick when I look at my grandchildren and think about what we are leaving them.
We could still save our country if we had people in Washington who 1. Cared -- (the Progressives don't,) and 2. Had the strength of character -- (the Conservatives don't,) to begin reversing the outflow of jobs to China and India. A new industrial policy would mandate that strategic industries and the supporting service firms would be located on home soil. One of the reasons the South lost the war was the fact that all of the cannon factories were in the North. Sometimes the obvious is overlooked with disastrous results.
WHY IS IT HARRY DINGEY THE ONLY PERSON IN AMERICA TO FIGURE THIS OUT?
Make no mistake about it the International Trade Deficit must be balanced if America is to SURVIVE. There is only three ways to correct this humongous Trade Imbalance.
1. Increase the American Exports by $450.6 Billion Dollars per year. This is absolutely impossible.
or
2. Decrease the American Imports by $450.6 Billion Dollars per year. Then manufacture the merchandise in America.
or
3. Pull out of NAFTA and the WTO. Then Close the Largest Consumer Market in the World to all Imports. Do not worry about Exports and this will create well over 15.02 million Jobs instantly and maybe ever more.
I am suggesting we do number three. This will be done by the new American Congress to be elected in November 2010 and will automatically bring the large American Manufactured Goods Trade Deficit into BALANCE almost over night.
Where Exports + Imports = a Balance of ZERO.
Here is exactly what would happen. Toyota of Japan would be forced to totally manufacture in America, every car sold in America.
Every item sold in every store in America would be required to be manufactured right here in America. America would be swimming in newly Created Jobs almost over night.
I can remember this large sign posted in Wal-Mart: “EVERYTHING SOLD IN THIS STORE WAS MADE IN AMERICA”.
Sam Walton said: “Everything sold in all Wal-Mart stores will be made in America”.
I CAN CREATE 15 MILLION JOBS ALMOST OVER NIGHT right here in America !!!
Here is my Job creation Computations:
+++++++++++++++++++++++++++++++++++++++++++++++++
Total USA Imports in 2006:
----------------------------------
$ 2,211.7 billion ----- Total Imports.
$ - 309.4 billion minus -(Money spent on Imported Crude Oil)
--------------------------------------------------
$ 1,902.3 billion / 30 billion=63.41 million jobs lost from Imports.
==================================================
Total USA Exports in 2006:
----------------------------------
$ 1,451.7 Billion / 30 billion=48.39 million jobs America Created from Exports.
If USA Pulls out of NAFTA and WTO right now:
USA would absolutely gain a total of 63.41 million Jobs by Manufacturing all IMPORTS right here in the USA.
So, 63.41 minus 48.39 = 15.02 million NET JOBS GAIN. But, a lot of Exports must be purchased in the USA. That would mean an even larger number of jobs created in America than I have estimated.
Also, I should note that I have subtracted out the $309.4 billion dollars that America spent on Import Crude Oil in 2006. This is another problem that must be solved later.
My calculation means an ABSOLUTE 15.02 million Jobs gained if the rest of the world did not buy even one penny of USA EXPORTS.
SO MOTE IT BE. . . . .
Do you truly want to help straighten out the United States Government now? Then, copy and post this article everyplace on the Internet you can post.
BY: Harry Dingey
Have a good day my friends.
Excellent response, Harry Dingey. I'm going to take you up on the offer to post your response every place on the Internet that I can.
I'm going to start with my own forum, the Economic Populist Forum, which I'd like to invite you to join. We have 241 members who mostly agree with you, and who'd love to read your posts. (Non-members can also post freely on the Economic Populist Forum.)
I came up with a somewhat smaller number of the jobs lost from outsourcing, but mine is a lowest possible estimate, based on a formula using a larger dollar amount per job (~$70K/job), and then dividing the trade deficit by that dollar amount.
I'm in complete agreement with you about getting out of NAFTA & the WTO. I'd also end PNTR with China, and ban all Chinese imports. American workers cannot compete with 50¢/hour Chinese workers, nor should they have to. The US consumer market would disappear if American worker wages even approached the level of Chinese workers.
The only way our workers have maintained their spending power is by offsetting their declining wage-financed spending with increased debt-financed spending. This is not sustainable, and every thinking person knows it.
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