Posted on 03/20/2005 8:11:01 AM PST by A. Pole
A country cannot be a superpower without a high-tech economy, and America’s high-tech economy is eroding as I write.
The erosion began when U.S. corporations outsourced manufacturing. Today, many U.S. companies are little more than a brand name selling goods made in Asia.
Corporate outsourcers and their apologists presented the loss of manufacturing capability as a positive development. Manufacturing, they said, was the "old economy," whose loss to Asia ensured Americans lower consumer prices and greater shareholder returns. The American future was in the "new economy" of high-tech knowledge jobs.
This assertion became an article of faith. Few considered how a country could maintain a technological lead when it did not manufacture.
So far in the 21st century, there is scant sign of the American "new economy." The promised knowledge-based jobs have not appeared. To the contrary, the Bureau of Labor Statistics reports a net loss of 221,000 jobs in six major engineering job classifications.
Today, many computer, electrical and electronics engineers, who were well paid at the end of the 20th century, are unemployed and cannot find work. A country that doesn’t manufacture doesn’t need as many engineers, and much of the work that remains is being outsourced or filled with cheaper foreigners brought into the country on H-lb and L-1 work visas.
Confronted with inconvenient facts, outsourcing’s apologists moved to the next level of fantasy. Many technical and engineering jobs, they said, have become "commodity jobs," routine work that can be performed cheaper offshore. America will stay in the lead, they promised, because it will keep the research and development work, and be responsible for design and innovation.
Alas, now it is design and innovation that are being outsourced. Business Week reports ("Outsourcing Innovation," March 21) that the pledge of First World corporations to keep research and development in-house "is now passe."
Corporations such as Dell, Motorola and Philips, which are regarded as manufacturers based in proprietary design and core intellectual property originating in R&D departments, now put their brand names on complete products that are designed, engineered and manufactured in Asia by "original-design manufacturers" (ODM).
Business Week reports that practically overnight large percentages of cell phones, notebook PCs, digital cameras, MP3 players and personal digital assistants are produced by original-design manufacturers. Business Week quotes an executive of a Taiwanese ODM: "Customers used to participate in design two or three years back. But starting last year, many just take our product."
Another offshore ODM executive says: "What has changed is that more customers need us to design the whole product. It’s now difficult to get good ideas from our customers. We have to innovate ourselves." Another says: "We know this kind of product category a lot better than our customers do. We have the capability to integrate all the latest technologies." The customers are America’s premier high-tech names.
The design and engineering teams of Asian ODMs are expanding rapidly, while those of major U.S. corporations are shrinking. Business Week reports that R&D budgets at such technology companies as Hewlett Packard, Cisco, Motorola, Lucent Technologies, Ericsson and Nokia are being scaled back.
Outsourcing is rapidly converting U.S. corporations into a brand name with a sales force selling foreign designed, engineered and manufactured goods. Whether or not they realize it, U.S. corporations have written off the U.S. consumer market. People who do not participate in the innovation, design, engineering and manufacture of the products that they consume lack the incomes to support the sales infrastructure of the job diverse "old economy."
"Free market" economists and U.S. politicians are blind to the rapid transformation of America into a third world economy, but college-bound American students and heads of engineering schools are acutely aware of declining career opportunities and enrollments. While "free trade" economists and corporate publicists prattle on about America’s glorious future, heads of prestigious engineering schools ponder the future of engineering education in America.
Once U.S. firms complete their loss of proprietary architecture, how much intrinsic value resides in a brand name? What is to keep the all-powerful ODMs from undercutting the American brand names?
The outsourcing of manufacturing, design and innovation has dire consequences for U.S. higher education. The advantages of a college degree are erased when the only source of employment is domestic nontradable services.
According to the March 11 Los Angeles Times, the percentage of college graduates among the long-term chronically unemployed has risen sharply in the 21st century. The U.S. Department of Labor reported in March that 373,000 discouraged college graduates dropped out of the labor force in February—a far higher number than the number of new jobs created.
The disappearing U.S. economy can also be seen in the exploding trade deficit. As more employment is shifted offshore, goods and services formerly produced domestically become imports. No-think economists and Bush administration officials claim that America’s increasing dependence on imported goods and services is evidence of the strength of the U.S. economy and its role as engine of global growth.
This claim ignores that the United States is paying for its outsourced goods and services by transferring its wealth and future income streams to foreigners. Foreigners have acquired $3.6 trillion of U.S. assets since 1990 as a result of U.S. trade deficits.
Foreigners have a surfeit of dollar assets. For the past three years, their increasing unwillingness to acquire more dollars has resulted in a marked decline in the dollar’s value in relation to gold and tradable currencies.
Recently, the Japanese, Chinese and Koreans have expressed their concerns. According to a March 10 Bloomberg report, Japan’s unrealized losses on its dollar reserve holdings have reached $109.6 billion.
The Asia Times reported on March 12 that Asian central banks have been reducing their dollar holdings in favor of regional currencies for the past three years. A study by the Bank of International Settlements concluded that the ratio of dollar reserves held in Asia declined from 81 percent in the third quarter of 2001 to 67 percent in September 2004. India reduced its dollar holdings from 68 percent of total reserves to 43 percent. China reduced its dollar holdings from 83 percent to 68 percent.
The U.S. dollar will not be able to maintain its role as world reserve currency when it is being abandoned by that area of the world that is rapidly becoming the manufacturing, engineering and innovation powerhouse.
Misled by propagandistic "free trade" claims, Americans will be at a loss to understand the increasing career frustrations of the college educated. Falling pay and rising prices of foreign made goods will squeeze U.S. living standards as the declining dollar heralds America’s descent into a has-been economy.
Meanwhile, the Grand Old Party has passed a bankruptcy "reform" that is certain to turn unemployed Americans living on debt and beset with unpayable medical bills into the indentured servants of credit card companies. The steely-faced Bush administration is making certain that Americans will experience to the full their country’s fall.
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 2005 CREATORS SYNDICATE, INC.
Well they obviously do. Everytime I go to one of these places, they are absolutely mobbed and unless you call ahead, you are waiting for a table for up to an hour. The waitstaff are usually friendly but they are dreadfully overworked as these places are often understaffed (they all have HELP WANTED signs at the door).
I took five people to the restaurant last night...
Five entrees with an average cost of $13 = ($65)
Two appetizers = ($12)
Four margaritas (between three adults) at five dollars each and four softdrinks between the two kids at two dollars each = $28
Desserts (three of us declined) = $8
Total tab was about $113. Add $25 tip (service was excellent) and it was $138 total.
This is not a pricy restaurant but it adds up fast. This place was an absolute madhouse however. People were literally out the door waiting to get in. We had to park in the next parking lot over. We waited nearly an hour for our table. This scene was repeated hundreds and hundreds of times in just about every other eatery in the metro Boston area. EVERY TIME we go out to eat on a weekend night, it is a total mob scene at every place we decide to go.
I guess the point I'm trying to make here is that an enormous amount of families can afford to go out to eat often and they are spending big, big money to do so.
This is not what would be happening if our economy, as is being argued here, is going down the toilet.
"What field would you recommend to the students?
Walmart Greeter, Walmart Cashier, Walmart Stockboy."
lol. that's where we are headed.
Few in America are able to write coherently.
English degree doesn't equal "English jobs." It just means good communication skills, which is more valuable today than any particular skillset.
>> Those cars are manufactured here using exclusively foreign made parts, except maybe for the bodies.
Making it up as you go along? For example, I know Honda has a large engine facility here, and I think Toyota does, as well. And here is a press release about their new transmission plant in GA.
I'd suggest getting informed rather than making easily demonstrably false posts.
http://world.honda.com/news/2004/c041109_b.html
In Georgia, Honda will invest US$ 100 million to construct its 13th major plant in North America, a new 250,000 square foot plant that will begin assembly of automatic transmissions in fall 2006. At full capacity, the plant will employ 400 associates and produce 300,000 transmissions per year. Reflecting Honda’s strategy to base powertrain production near vehicle production for synchronous assembly, the plant will initially support production of Honda Odyssey minivans and Pilot SUVs at Honda Manufacturing of Alabama, LLC (HMA) in Lincoln, Ala., 60 miles west of the Tallapoosa plant.
In Ohio, Honda will invest US$ 100 million and add 100 new jobs to expand Honda Transmission Mfg. of America, Inc., (HTM) in a move that will result in the transfer of the value-added production of high precision gears from Japan to Ohio. As the new Georgia plant begins production, HTM will gradually shift responsibility for transmission production for the Alabama plant to the new Georgia plant and phase-in the new responsibility for gear production. The expansion will increase HTM’s capital investment to more than US$ 261 million, employment to 900 associates and plant size from the existing 361,000 square feet to 631,000 square feet.
In Alabama, HMA will invest US$ 70 million and add 100 new jobs to begin machining additional engine components at its existing engine plant operations. These components are currently supplied by Honda of America Mfg.’s Anna Engine Plant in Ohio and Honda’s Mohka Plant in Japan. HMA began operations in 2001 and, today, has the capacity to produce 300,000 vehicles and V6 engines per year. HMA’s total investment exceeds US$ 1 billion.
Honda currently has an annual production capacity of one million automatic transmissions in the U.S. and has assembled more than nine million transmissions in America since it began producing automatic transmissions at Honda of America Mfg.’s Anna, Ohio, Engine Plant in 1989. HTM assumed responsibility for transmission production in 1996.
And here's a good summary link that discusses auto engine plants, and other Honda vehicle plants, in the U.S. and North America.
http://www.hondanews.com/CatID1020?mid=20010212001257&mime=asc
What you said is true.
But, I hope without sounding confrontational, I ask on this thread a question I've asked many times before.
How come we benefit from foreign companies being outsourced to us? They set up here, hire tens of thousands of Americans, make goods, sell goods to Americans, operate under the same government, some have unions --- I don't get it.
Many American companies, et al. say it's not possible. Production has to be outsourced offshore and the goods imported and sold to Americans else the corporations cannot be competitive.
What percentage of the families can afford it? During the Great Depression more than 70% of workers were employed, the people with money were getting good bargains and New York fancy restaurants had waiting lines.
"I recommend something flexible and useful, like English..."
HA !
Can't just train in one specialization anymore and expect it to last your whole life. ADD Spanish !!
Very few English majors today graduate with critical thinking skills worthy of the name. Most are only able to regurgitate the Leftist/Marxist/Feminist party line.
Communications skills without critical thinking skills are worthless. For a communications-intensive position, I'd rather develop a C-student engineering or accounting or finance major, with good Verbal SAT scores, than try to teach critical thinking to an English major.
Meanwhile, oil and copper prices are at historic highs, and the other natural resource products are increasing in price rapidly. The Japanese just renegotiated with their iron suppliers prices that were 75% higher, if my memory serves. An electrician friend told me copper wire prices have doubled since the summer.
Meanwhile, the government pumps up our confidence with phony economic numbers. The commerce department now uses "hedonics" in its reports. Those are phony made up numbers to make it look like the economy is growing faster than it really is. The government uses a birth-death model when reporting job growth, that basically creates imaginary jobs. All this information is public and easy to find.
The volatility and uncertainty in federal and state tax law, environmental and workplace regulation, and frivolous (but economically life-threatening) lawsuits make planning for the long term a rather meaningless exercise. Thanks, Congress.
The problem with america right now is the hyper-consumerism that we all take part in. A lot of the $100-spending families are using credit to pay for their restaurant bills, and they are paying interest every month to the credit card companies, since they don't actually have the money to pay the bills right off. It seems that the goal in many of our lives is to amass goods or consume, and to buy buy buy (new cars, jewelry, electronics, etc)
I don't think the fact that our restaurants are overcrowded is evidence that we enjoy a robust and healthy economy. Instead, I think it is a indicator that we can't control ourselves in today's hyper-spending hyper-consuming world. And that boils down to Americans going bankrupt, especially as interest rates keep rising, and as a result the state of America's collective checkbook showing a deeper and deeper hue of red.
The American manufacturers don't make many products in that arena, that others want, is my take on things. Fuel economy is a big issue, as is design, build quality, and reliability. Cadillac is making big strides, and Ford is trying with the new 500. What do we have that would appeal in Europe or South America? Think about that, and I think you'll see the issue.
Hehe, good one!
"... to pay for the healthcare of people that have been retired for years. Current employees okay but retirees, no way "
Wooo-Hooo ! Yes - just let them die...
It will solve the social security enigma too.
Does that make sense?
If all manufacturing is off-shore, how do we protect our shore?
A country that makes nothing IS nothing.
In general, how can foreigners outsource to us and make it here by manufacturing and selling here? As I noted above many here seem to be saying that it cannot be done well enough to stay in business. Of course, many American corporations do quite well, thank you. But a lot say it cannot be done, it seems.
I think the proper Terry term is "release." Release them.
As former Colorado governor Lamm said, it is the duty of old people to die and get out of the way. Mr. Lamm is now ten or fifteen years older and I do not know if he still feeeeeeeeels that he should be released.
Maybe so but do you seriously think we are mired in another Great Depression today?
Well speaking for myself, my credit card balances are zero. That is how I justify going out to eat like I do. If others are financing their restaurant meals on credit, then shame on them. It will catch up to them eventually.
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