Watching Greed Murder the US Economy
- From: periodistalibre@xxxxxxx
- Date: Thu, 10 Jul 2008 09:47:21 -0700 (PDT)
A Workforce Betrayed -
By PAUL CRAIG ROBERTS /
The collapse of world socialism, the rise of the high speed Internet,
a bought-and-paid-for US government, and a million dollar cap on
executive pay that is not performance related are permitting greedy
and disloyal corporate executives, Wall Street, and large retailers to
dismantle the ladders of upward mobility that made America an
“opportunity society.” In the 21st century the US economy has been
able to create net new jobs only in nontradable domestic services,
such as waitresses, bartenders, government workers, hospital
orderlies, and retail clerks. (Nontradable services are “hands on”
services that cannot be sold as exports, such as haircuts, waiting a
table, fixing a drink.)
Corporations can boost their bottom lines, shareholder returns, and
executive performance bonuses by arbitraging labor across national
boundaries. High value- added jobs in manufacturing and in tradable
services can be relocated from developed countries to developing
countries where wages and salaries are much lower. In the United
States, the high value-added jobs that remain are increasingly filled
by lower paid foreigners brought in on work visas.
When manufacturing jobs began leaving the US, no-think economists gave
their assurances that this was a good thing. Grimy jobs that required
little education would be replaced with new high tech service jobs
requiring university degrees. The American work force would be
elevated. The US would do the innovating, design, engineering,
financing and marketing, and poor countries such as China would
manufacture the goods that Americans invented. High-tech services were
touted as the new source of value-added that would keep the American
economy preeminent in the world.
The assurances that economists gave made no sense. If it pays
corporations to ship out high value-added manufacturing jobs, it pays
them to ship out high value-added service jobs. And that is exactly
what US corporations have done.
Automobile magazine (August 2008) reports that last March Chrysler
closed its Pacifica Advance Product Design Center in Southern
California. Pacifica’s demise followed closings and downsizings of
Southern California design studios by Italdesign, ASC, Porsche,
Nissan, and Volvo. Only three of GM’s eleven design studios remain in
the US.
According to Eric Noble, president of The Car Lab, an automotive
consultancy, “Advanced studios want to be where the new frontier is.
So in China, studios are popping up like rabbits.”
The idea is nonsensical that the US can remain the font of research,
innovation, design, and engineering while the country ceases to make
things. Research and product development invariably follow
manufacturing. Now even business schools that were cheerleaders for
offshoring of US jobs are beginning to wise up. In a recent report,
“Next Generation Offshoring: The Globalization of Innovation,” Duke
University’s Fuqua School of Business finds that product development
is moving to China to support the manufacturing operations that have
located there.
The study, reported in Manufacturing & Technology News, acknowledges
that “labor arbitrage strategies continue to be key drivers of
offshoring,” a conclusion that I reached a number of years ago.
Moreover, the study concludes, jobs offshoring is no longer mainly
associated with locating IT services and call centers in low wage
countries. Jobs offshoring has reached maturity, “and now the growth
is centered around product and process innovation.”
According to the Fuqua School of Business report, in just one year,
from 2005 to 2006, offshoring of product development jobs increased
from an already significant base by 40 to 50 percent. Over the next
one and one-half to three years, “growth in offshoring of product
development projects is forecast to increase by 65 percent for R&D and
by more than 80 percent for engineering services and product design-
projects.”
More than half of US companies are now engaged in jobs offshoring, and
the practice is no longer confined to large corporations. Small
companies have discovered that “offshoring of innovation projects can
significantly leverage limited investment dollars.”
It turns out that product development, which was to be America’s
replacement for manufacturing jobs, is the second largest business
function that is offshored.
According to the report, the offshoring of finance, accounting, and
human resource jobs is increasing at a 35 percent annual rate. The
study observes that “the high growth rates for the offshoring of core
functions of value creation is a remarkable development.”
In brief, the United States is losing its economy. However, a business
school cannot go so far as to admit that, because its financing is
dependent on outside sources that engage in offshoring. Instead, the
study claims, absurdly, that the massive movement of jobs abroad that
the study reports are causing no job loss in the US: “Contrary to
various claims, fears about loss of high-skill jobs in engineering and
science are unfounded.” The study then contradicts this claim by
reporting that as more scientists and engineers are hired abroad,
“fewer jobs are being eliminated onshore.” Since 2005, the study
reports, there has been a 48 percent drop in the onshore jobs losses
caused by offshore projects.
One wonders at the competence of the Fuqua School of Business. If a
40-50 percent increase in offshored product development jobs, a 65
percent increase in offshored R&D jobs, and a more than 80 percent
increase in offshored engineering services and product design-projects
jobs do not constitute US job loss, what does?
Academia’s lack of independent financing means that its researchers
can only tell the facts by denying them.
The study adds more cover for corporate America’s rear end by
repeating the false assertion that US firms are moving jobs offshore
because of a shortage of scientists and engineers in America. A
correct statement would be that the offshoring of science, engineering
and professional service jobs is causing fewer American students to
pursue these occupations, which formerly comprised broad ladders of
upward mobility. The Bureau of Labor Statistics’ nonfarm payroll jobs
statistics show no sign of job growth in these careers. The best that
can be surmised is that there are replacement jobs as people retire.
The offshoring of the US economy is destroying the dollar’s role as
reserve currency, a role that is the source of American power and
influence. The US trade deficit resulting from offshored US goods and
services is too massive to be sustainable. Already the once all-mighty
dollar has lost enormous purchasing power against oil, gold, and other
currencies. In the 21st century, the American people have been placed
on a path that can only end in a substantial reduction in US living
standards for every American except the corporate elite, who earn tens
of millions of dollars in bonuses by excluding Americans from the
production of the goods and services that they consume.
What can be done? The US economy has been seriously undermined by
offshoring. The damage might not be reparable. Possibly, the American
market and living standards could be rescued by tariffs that offset
the lower labor and compliance costs abroad.
Another alternative, suggested by Ralph Gomory, would be to tax US
corporations on the basis of the percentage of their value added that
occurs in the US. The greater the value added to a company’s product
in America, the lower the tax rate on the profits.
These sensible suggestions will be demonized by ideological “free
market” economists and opposed by the offshoring corporations, whose
swollen profits allow them to hire “free market” economists as shills
and to elect representatives to serve their interests.
The current recession with its layoffs will mask the continuing
deterioration in employment and career outlooks for American
university graduates. The highly skilled US work force is being
gradually transformed into the domestic service workforce
characteristic of third world economies.
----------------------------------------------------------
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:
paulcraigroberts@xxxxxxxxx
.
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