Skip to comments.Globalization Creates Unemployment, American Job Losses Are Permanent
Posted on 10/28/2010 6:37:50 PM PDT by blam
Globalization Creates Unemployment, American Job Losses Are Permanent
Politics / Employment
Oct 28, 2010 - 04:59 AM
By: Paul Craig Roberts
Now that a few Democrats and the remnants of the AFL-CIO are waking up to the destructive impact of jobs offshoring on the US economy and millions of American lives, globalisms advocates have resurrected Dartmouth economist Matthew Slaughters discredited finding of several years ago that jobs offshoring by US corporations increases employment and wages in the US.
At the time I exposed Slaughters mistakes, but economists dependent on corporate largess understood that it was more profitable to drink Slaughters kool-aid than to tell the truth. Recently the US Chamber of Commerce rolled out Slaughters false argument as a weapon against House Democrats Sandy Levin and Tim Ryan, and the Wall Street Journal had Bill Clintons Defense Secretary, William S. Cohen, regurgitate Slaughters claim on its op-ed page on October 12.
I sent a letter to the Wall Street Journal, but the editors were not interested in what a former associate editor and columnist for the paper and President Reagans Assistant Secretary of the Treasury for Economic Policy had to say. The facade of lies has to be maintained at all costs. There can be no questioning that globalism is good for us.
Cohen told the Journals readers that the fact is that for every job outsourced to Bangalore, nearly two jobs are created in Buffalo and other American cities. I bet Buffalo and other American cities would like to know where these jobs are. Maybe Slaughter, Cohen, and the Chamber of Commerce can tell them.
Last May I was in St. Louis and was struck by block after block of deserted and boarded up homes, deserted factories and office buildings, even vacant downtown storefronts. Detroit is trying to shrink itself by 40 square miles. On October 25, 60 Minutes had a program on unemployment in Silicon Valley, where formerly high-earning professionals have been out of work for two years and today cannot even find part-time $9 an hour jobs at Target.
The claim that jobs offshoring by US corporations increases domestic employment in the US is one of the greatest hoaxes ever perpetrated. As I demonstrated in my syndicated column at the time and again in my book, How The Economy Was Lost (2010), Slaughter reached his erroneous conclusion by counting the growth in multinational jobs in the U.S. without adjusting the data to reflect the acquisition of existing firms by multinationals and for existing firms turning themselves into multinationals by establishing foreign operations for the first time. There was no new multinational employment in the U.S. Existing employment simply moved into the multinational category from a change in the status of firms to multinational.
If Slaughter (or Cohen) had consulted the Bureau of Labor Statistics nonfarm payroll jobs data, he would have been unable to locate the 5.5 million jobs that were allegedly created. In my columns I have reported for about a decade the details of new jobs creation in the U.S. as revealed by the BLS data, as has Washington economist Charles McMillion. Over the last decade, the net new jobs created in the U.S. have nothing to do with multinational corporations. The jobs consist of waitresses and bartenders, health care and social services (largely ambulatory health care), retail clerks, and while the bubble lasted, construction.
These are not the high-tech, high-paying jobs that the New Economy promised, and they are not jobs that can be associated with global corporations. Moreover, these domestic service jobs are themselves scarce.
But facts have nothing to do with it. Did Slaughter, Cohen, the Chamber, and the Wall Street Journal ever wonder how it was possible to have simultaneously millions of new good-paying middle class jobs and virtually the worst income inequality in the developed world with all income gains accruing to the mega-rich?
In mid-October Treasury Secretary and Goldman Sachs puppet Tim Geithner gave a speech in California in the backyard, or former backyard, of 60 Minutes Silicon Valley dispossessed upper middle class interviewees in which Geithner said that the solution is to educate more engineers.
We already have more engineers than we have jobs for them. In a recent poll a Philadelphia marketing and research firm, Twentysomething, found that 85% of recent college graduates planned to move back home with parents. Even if members of the boomeranger generation find jobs, the jobs dont pay enough to support an independent existence.
The financial media is useless. Reporters repeat the lie that the unemployment rate is 9.6%. This is a specially concocted unemployment rate that does not count most of the unemployed. The governments own more inclusive rate stands at 17%. Statistician John Williams, who counts unemployment the way it is supposed to be counted, finds the unemployment rate to be 22%.
The financial press turns bad news into good news. Recently a monthly gain of 64,000 new private sector jobs was hyped, jobs that were more than offset by the loss in government jobs. Moreover, it takes around 150,000 new jobs each month to keep pace with labor force growth. In other words, 100,000 new jobs each month would be a 50,000 jobs deficit.
The idiocy of the financial press is demonstrated by the following two headlines which appeared on October 19 on the same Bloomberg page:
Dollar Index Appreciates as Geithner Supports Currency Strength
Geithner Weak Dollar Seen as U.S. Recovery Route
To keep eyes off of the loss of jobs to offshoring, policymakers and their minions in the financial press blame US unemployment on alleged currency manipulation by China and on the financial crisis. The financial crisis itself is blamed by Republicans on low income Americans who took out mortgages that they could not afford.
In other words, the problem is China and the greedy American poor who tried to live above their means. With this being the American mindset, you can see why nothing can be done to save the economy.
No government will admit its mistakes, especially when it can blame foreigners. China is being made the scapegoat for American failure. An entire industry has grown up that points its finger at China and away from 20 years of corporate offshoring of US jobs and 9 years of expensive and pointless US wars.
Currency manipulation is the charge. However, the purpose of the Chinese peg to the US dollar is not currency manipulation. When the Chinese government decided to take its broken communist economy into a market economy, the government understood that it needed foreign confidence in its currency. It achieved that by pegging its currency to the dollar, signaling that Chinas money was as sound as the US dollar. At that time, China, of course, could not credibly give its currency a higher dollar value.
As time has passed, the irresponsible and foolish policies of the US have eroded the dollars value, and as the Chinese currency is pegged to the dollar, its value has moved down with the dollar. The Chinese have not manipulated the peg in order to make their currency less valuable.
To the contrary, when I was in China in 2006, the exchange rate was a little more than 8 yuan to the dollar. Today it is 6.6 yuan to the dollar--a 17.5% revaluation of the yuan.
The US government blames the US trade deficit with China on an undervalued Chinese currency. However, the Chinese currency has risen 17.5% against the dollar since 2006, but the US trade deficit with China has not declined.
The major cause of the US trade deficit with China is globalism or the practice, enforced by Wall Street and Wal-Mart, of US corporations offshoring their production for US markets to China in order to improve the bottom line by lowering labor costs. Most of the tariffs that the congressional idiots want to put on Chinese imports would, therefore, fall on the offshored production of US corporations. When these American brand goods, such as Apple computers, are brought to US markets, they enter the US as imports. Thus, the tariffs will be applied to US corporate offshored output as well as to the exports of Chinese companies to the US.
The correct conclusion is that the US trade deficit with China is the result of globalism or jobs offshoring, not Chinese currency manipulation.
An important point always overlooked is that the US is dependent on China for many manufactured products including high technology products that are no longer produced in the US. Revaluation of the Chinese currency would raise the dollar price of these products in the US. The greater the revaluation, the greater the price rise. The impact on already declining US living standards would be dramatic.
When US policymakers argue that the solution to Americas problems is a stronger Chinese currency, they are yet again putting the burden of adjustment on the out-of-work, indebted, and foreclosed American population.
Hasn't the 'off-shoring' of jobs accomplished the same thing?
Who is orchestrating this crap? Is it all the 'linked' groups that Glenn Beck talks about?
India spends a LOT of money on lobbyists in Washington. Perhaps us Americans should start doing the same.
What we have allowed to happen to this country with our manufacturing base has been an absolute disaster. Only a koolaid drinker of some kind could look around at what has happened during the past 15-20 years and tell you otherwise.
That's where the jobs are going. It's even happening in China!
Creators and manufacturers would much rather stay where the legal system protects property rights, including intellectual property, but they are guaranteed to be stripped of their wealth if they remain here, so they gamble and leave.
No one in their right mind would manufacture anything other than a high end skill based product in the US.
We are lucky that the auto and aero mfg. operations are still here (logistics).
The epa, osha, ins, irs, and a whole buttload of others prove this sad fact daily.
Ross Perot tried to warn us.
The giant sucking sound is getting louder every day.
PCR off his meds again. American jobs leave because of American Unions, American tort lawyers, American EPA regulations, etc. Free trade is the only thing that can save us as it is the only thing capable of imposing discipline on our government. PCR wants to erect trade barriers to protect inefficient jobs. His prescription would condemn us to permanent decline.
According to what is available he is a Senior Fellow at the CFR. Seems pretty well acceptable to the usual suspects.
He is the type Zero loves, NO REAL WORLD EXPERIENCE and no common sense.
It is technology that is the primary culprit.
In a few years, about 50 million workers will be able to make all the goods the world requires, including food.
Then what will everyone else do?
BS, off-shoring is caused by unskilled labor which cost around 5% of what it costs in the US, and by higher skilled and degreed workers available for 20% and less of US pay scales.
When the US achieved sole super power after WW2 she should have studied the Story of Silk vs leaving the US economic strategy to private corporations/banks. American business men practice short term profit and concentrate solely on corporate/self interest at exclusion to all other long term issues. Everything and anything will be off shored if possible based just on cost. I remember during the energy crisis of the 1970’s Americans were waiting in gas lines, oil companies were exporting US oil because on the oil exchanges, overseas markets were willing to pay more for the oil. China is pushing a different business model that a number of emerging nations are looking at. China practices capitalism tempered by strategic needs. This is in line with China’s historical past with silk and how they managed this unique technology bringing centuries of wealth (and with it social stability and means to support a powerful military). China intends to guard her technical and resource advantages, while the US elites would sell it to the highest bidder to benefit the few at the top of society leaving the rest in society endangered if a crisis should happen. There are freepers who would pooh pooh this notion, but let us compare. After twenty short years of narrowly focused US capitalism in the hands of corporations/bankers versus Chinese capitalism tempered by strategic needs, which nation has the cash surplus, which nation is fully employed and which nation has secured resources for their industries? Let me throw another issue on the table, how long will US democracy last if their people are impoverished and how long can the Chinese authoritarian state last as the Chinese middle class grows with the economic expansion? It would be ironic the US becomes less free due to declining wealth and China is under pressure to be more free as her population is well fed, fully employed and growing richer each year.
Yeh, another one of those who thinks it intellectually honest to impugn the integrity of others without a shred of evidence. All those other economists, you see, did not just make mistakes or misunderstood something --- they are on the take of spooky corporations! Trust me, however, I am brilliant and honest. Pathetic.
“American Job Losses Are Permanent...”
IMHO..that depends entirely upon when We the People decide we are going to bring jobs back to America.
EXACTLY! Only those who simply don't think about it still demand "no outsourcing!" It's not jobs shipped overseas, it's jobs replaced with machines and automation. More jobs are lost to robotics and automation than to overseas competitors.
Protectionism will ONLY hurt the US, we need to let businesses compete on better footing and jobs will continue to move upscale in capability and income. Those at the bottom will get left at the bottom, in predominantly service positions. Not because some guy in India or China is running a press, but because a Tomasa or Jenkins auto-press is doing the work of 20 men.
Automation is taking over all the world's manufacturing. I see it a huge amount here in China. Ten years ago, factories had thousands of men each working their own lathe or press or mill or drill. Now you have dozens of men feeding and servicing a floor full of multi-tool CNC machines, and the products are higher quality, more consistent, and lower cost.
It's machines, not people, that are eliminating the need for US manufacturing jobs.
How many actual jobs has he created?
Suppose that is true. This brilliant "economist" appears unaware that offshoring is not new, and "outsourcing" is just a new word for the old phenomenon: great many American companies had foreign subsidiaries. Globalization too is nothing new: there was a similar increase in the interconnectedness of nations at the turn of the XX century. And, when we exported so much of our output, was it not globalization?
Why is it now that globalization is hurting America whereas before it did not? This alone shows that globalization cannot be the cause.
Finally, if he had any intellectual honesty, he would ask the real question: what is that makes our companies move abroad? But he is too leftist to do that: the Wall Street is at fault. Having fallen in love with ideas, he manipulates facts to prove them.
If that were true, it would not be economically feasible to employ the tiny number of workers in China or India to run the machines to produce products for sale in the US, and then incur all the handling and shipping cost to the US.