A Suicidal Country

Townhall.com ^ | 02-26-03 | Paul Craig Roberts

[semaj]

In case you haven't noticed, America is not loved by everyone. What happens if the world is ever plunged into chaos by another World War? Will we be able to depend on extended supply lines of distant trading partners? I kind of doubt it.

Should critical industries such as steel production, electronic component manufacturing, textiles, value-added timber production, be allowed to remove themselves offshore? If so, shouldn't the average American enjoy some the cost savings the manufacturers are also enjoying? I personally think it is national suicide to allow these and other strategic industries to disappear from our shores.

[Buckeye Bomber]

I think AK Steel and Cisco Systemsmight be able to add a few words about the disappearance of these industries. Textiles? Look, I'm sure we did some great things in textiles in the past. But I'm far more interested in steel and aircraft engines than clothes and value-added timber.

Look, my idea is simple: the more free trade we have, the less we need to worry about massive wars to begin with. So your question about relying on distant trading partners is wasted. Sure, if China attacks us we won't have the stuff manufactured in China. But why would they attack us when we're both getting rich off of each other, (mostly) without any loss of life or infrastructure?

Even if they don't love us, they respect us. I'd prefer that anyway. But they'll like us a little more when we're all rich together. And free trade will let that happen.

[al_possum39]

It's funny that you speak as if American consumer spending is in a tailspin. Do you ever pay attention to financial news?

I believe I qualified my reply with "if they keep outsourcing jobs". Didn't say that we couldn't buy now. Do you ever read the post that you reply to?

[Willie Green]

I think you either are under a false impression about the state of manufacturing in this country, or being deceitful to advance a protectionist agenda.

Manufacturing employment peaked at 18,805,000 in 1998.
At the end of 2002 it dropped off the bottom of the chart at 16,457,000.
A 13% drop in 4 years, and the decline continues.

So rather than remove the government regulation on our companies to even the playing field, we put government regulations on companies in other countries. Beautiful idea. I've always thought we could use a little regulation in the world economy.

I'm sorry you believe that. IMHO, sovereign nations are entitled to implement whatever trade, tax and regulatory policies they choose for the benefit of their own citizenry, subject to the approval of the citizenry. In our case, we should be lowering the internal tax and regulatory burden while deriving federal revenues from a flat-rate revenue tariff placed on all imports.

The issue of immigration reform is far different from the issue of free trade.

No, for the most part, globalists favor border eradication on both trade and immigration issues. The two are intertwined.

The wealth of the buildings was converted into liquid assets via insurance money.

The owner may have been compensated for his loss by insurance, but that is not the same as "converting" the buildings into liquid assets.

So I am just replying to his blatant emotional appeal with a knife I call logic.

It's a pretty dull knife.
May I suggest that you request a refund of your college tuition?
It's becoming blatantly obvious that you're not getting your money's worth.

[Buckeye Bomber]

Alright, here is my point: wouldn't consumer spending be at least heading downward if your prediction had merit? Since we are already outsourcing some jobs, some decrease should be seen.

Or is there some critical level of outsourcing where bam! consumer spending drops through the floor? Economics is a matter of trends. I see no long-term downward trend in consumer spending as outsourcing goes up. Perhaps you ought to check this site out:

http://www.economicindicators.gov/

[weikel]

Willie the Bolshevicanite says, im for less government but, im for tax cuts but, im not a supporter of the Democrats but, I am not a sympathizer with radical Islam but, I am not a communist but...

[Buckeye Bomber]

So it dropped off the bottom of a poorly made chart, what's the big deal? Gains in GNP are worth some frictional (temporary) unemployment. Oh, and one more thing: correlation does not equal causation.

Just because "globalists" (sounds so evil and menacing) intertwine those issues doesn't mean you have to. If everyone jumped off of a bridge....

Where was wealth destroyed in the 9-11 attacks? It was altered, not destroyed. And you insult my college education. You have the trifecta of bad debate techniques down tonight: misleading data, emotional appeals, and insults.

[Willie Green]

Where was wealth destroyed in the 9-11 attacks? It was altered, not destroyed. And you insult my college education.

If you're too dense to comprehend that wealth is destroyed when property is destroyed, then you're dumber than Michael Moore.

[Nick Danger]

Manufacturing employment peaked at 18,805,000 in 1998

Willie, you're mostly hurting yourself with that argument. What you're showing us is a graph of rising manufacturing employment between recessions. This is during a period when -- if you were right that U.S. manufacturing is being hollowed out -- we would expect to see a decline.

We've been hearing about this movement of manufacturing jobs overseas since at least the 1970's. By now we ought to have nothing left. Instead you bring us a graph of record-high manufacturing employment throughout the 1990's. That tells us that for every textile or steel industry that goes overseas, some new thing replaces it. Not only that, but manufacturing employment is increasing in the face of ever more sophisticated automation.

We all know there's a recession, and we all know it started in the late 1990's. To haul that out now and say, "Look! Long term irreversible decline!" is bogus. The "attack of the Japanese manufacturers" took place in the 1970's, so you can't tell us that this all started in 1998. You're showing us a recession, and that's all you're showing us. The rest of your graph demolishes the idea that there is any kind of long-term secular decline in manufacturing employment.

[Willie Green]

Not only that, but manufacturing employment is increasing in the face of ever more sophisticated automation.

It's in severe decline with respect to our population growth over the same period.

[meadsjn]

"A Harvard study which examined data from developing nations over the period 1970 to 1990 found that those with open trade policies registered economic growth at an average rate of 4.5 percent annually -- compared to only 1 percent among those with closed borders."

"Developing nations" means third world nations. Of course, the USA will fully fit that description in a few months at the rate we are shipping our wealth overseas.

[Nick Danger]

I think you are underestimating the political impacts. In the long run, everything you say is true. The day will come when we, the Chinese, and the Indians will all get rich together. That day might be twenty to forty years away however, and in the interim we are going to see declining standards of living in the United States.

There is no way to avoid this. Communications and transportation technologies are such that work can now move anywhere that has access to the technologies. So there is an inevitable world-wide leveling of incomes and standards of living on the way. We are going to meet these guys halfway, by us going down and them coming up, before the "lifts all boats" effect kicks back in. We are in for a generation or so of Economic Hell.

That's a very dangerous political problem. Blaming foreigners for domestic woe is a field-proven solution to the problem of acquiring political power in tough times, and I think it's a mistake to underestimate how powerful the pull will become to implement some ultimately harmful but politically-appealing nostrum that promises to halt the tides.

In fact nothing can halt the tides, but people don't want to hear that. They want quick fixes from their politicians, and there is always a politician who will promise them one. I think it's still early in this process, but the bubbles are starting to form around the rim of the pot. It'll be boiling by 2012.

[Nick Danger]

It's in severe decline with respect to our population growth over the same period.

Those are words. You got numbers? I just ran over to census.gov and ran a few myself. I didn't see any severe declines.

[Willie Green]

Those are words. You got numbers?

Of course I do.

Year	1960	1965	1970	1975	1980	1985	1990	1995	2000	2002
US Population (thousands)	179,300		203,300		226,500		248,700		281,400	290,349
Mfg. Employment (thousands)	16,796	18,062	19,367	18,323	20,285	19,248	19,076	18,524	18,473	16,724
Mfg. Employment as % of Population	9.4		9.5		9.0		7.7		6.6	5.8

Annual average Manufacturing Employment data ("Not seasonally adjusted") is available at the Bureau of Labor Statistics here: Employees on nonfarm payrolls by industry
US Population Data was obtained from the Census bureau website.

Basicly, even though our population has grown by over 60% since 1960, manufacturing employment is at it's lowest level since 1961 (when it was 16,326K)

[M 91 u2 K]

" No one with a steady job will strap a bomb to themselves and kill Israelis."

Free trade solves nothing other than giving away American jobs. All the 9/11 hijackers were wealthy Saudis so it has nothing to do with poverty. Look at your history, Germany and Britain had free trade , and yet they were bitter enemies.

[Buckeye Bomber]

Oh my friend, you are so very wrong. The 9-11 highjackers were not wealthy! Just because they come from an oil rich country does not make them wealthy. They were perhaps pawns of very rich oil men in Saudi Arabia. That country is so religiously repressed that the people have no means with which to express themselves but with violence, especially towards the West and Israel.

Germany and Britian had free trade? When are we talking about? Germany and Britain were major practitioners of colonialism, also known as mercantilism. The basic goal of mercantilism is to conquer as many colonies as possible, take natural resources from the colonies wherever possible, have extremely high tariff rates to protect national industries, and then sell national products in the home country and in the colonies. This continued through the first world war for Germany, and through the second for Britian. After the first world war, Germany's economy was crippled by the Versailles Treaty,s o they weren't exactly free to trade. After the second world war, Britian went straight from mercantilism to something near socialism. It wasn't until Maggie Thatcher that they started to dismantle that rigmarole and open up their economy.

Germany and Britian weren't really that bitter of enemies, by the way. Germany and France would be a much better example of bitter enemies. England was a country with which the Germans had many ties, especially between royal families.

[Tauzero]

"A Harvard study which examined data from developing nations over the period 1970 to 1990 found that those with open trade policies registered economic growth at an average rate of 4.5 percent annually -- compared to only 1 percent among those with closed borders."

Perfectly true, but correlation is not cause. The causaution runs just as well the other way: confident countries with expanding economies tend to trade more freely, while countries in economic trouble enact protective measures. Recent steel tariffs are a case in point. They were enacted after, not before the slowdown in the economy began.

Governments are always the last institution in society to react to events; it is more useful to view the markets as leading indicators of legislation, rather than the reverse.

[Tauzero]

"Blaming foreigners for domestic woe is a field-proven solution to the problem of acquiring political power in tough times, and I think it's a mistake to underestimate how powerful the pull will become to implement some ultimately harmful but politically-appealing nostrum that promises to halt the tides."

True (as was everything else in that post.)

I would only add that protectionist measures, particularly uniform measures, actually do perform a useful function in a time of economic crisis: While it is true that they worsen aggregate economic conditions, by diffusing economic pain in a roughly egalitarian fashion they increase social cohesion. A society can bear greater stresses the more evenly those stresses are shared, while it might fail under smaller, but more acute and concentrated stresses.

[SevenDaysInMay]

The hostile and treacherously vague regulatory swamp the USA has become makes business start-up/expansion expensive, even before the tax traps and litigation risk circus.

We have exported manufacturing, IT prefessional, and financial services industries.

We import criminal aliens to degrade our trade workers wage rates and flooded with foreign goods priced below our costs of production, often by quasi-slave camp labor in fascist China.

For over one generation, our children graduate from highschool with a near worthless, defective education, expecting an upper-middle class career with out earning it. Most college degrees now have been so watered down as to fail to qualify as an education compared to even two generations earlier.

Our nation will not maintain itself with its politically planned Balkanization, and the service economy wherein hardly anyone can afford those same services. It is too much to expect that we can effectively teach economics and economic history; our political class is willfuly ignorant of what can save save this nation.

We now find ourselves at war into the foreseeable future. Our mortal enemies want to do to us what our politicians have not been able to do. The days of the first American Republic are numbered unless we all change.

[Nick Danger]

Using "population" there messes things up. In 1960, you have a baby boom generation in grammar school. So the fraction of "population" that is actually in the labor force is smaller than it will be as time goes on. By 1970 the baby boomers are entering the labor force in huge numbers, plus we have this new phenomenon that a much larger fraction of the female population than ever before is entering the labor force most of that in non-manufacuturing and non-construction occupations by preference. There is no reason to expect any particular sort of employment -- manufacturing or otherwise -- to grow as fast as the fraction of population that is in the labor force, at a time when an unusually large generation is entering adulthood, and at a time when an unusually large percentage of women are entering the labor force. In fact the women alone would tend to drive an increase in non-manufacturing employment, which would reduce the percentage of "population" involved in manufacturing, even if manufacturing were growing rapidly (which in fact is what your numbers show from 1960 to 1980).

There's so much going on over this period -- automation, the electronics revolution (which killed a whole bunch of skilled gears-and-springs type manufacturing), female labor-force participation -- that I think it's very hard to back out "here's what off-shore manufacturing did to us."

I don't doubt there is an effect... there had to be. What I question is whether we should care. At one time people must have had this discussion about agricultural employment -- look at all the jobs we've lost raising food! What's more important than food? Only a hundred years ago, 55% of our labor force was employed in agriculture; where did all the jobs go? Today nobody even thinks about that. Today agriculture is not so many people, and a whole lot of machines. Well, so is manufacturing. It may be that in another hundred years, only 2% of the population will be involved in manufacturing, just as only 2% now are involved in agriculture. But no one will care.

I'm much more concerned about the movement of the so-called "knowledge worker" jobs. That's where everybody was going to go hide from the machines. Now we have a bunch of white- and pink-collar jobs moving to India etc. There is going to be political trouble over this. There's no fix for it, so the politicians will be lying when they say they can fix it, but we'll have the trouble anyway.