The Truth Always RisesAnother instance where Conservatives and Liberals agree.There has been a lot of banter on this blog about the benefits and pitfalls of free trade, global capitalism, or what I like to call– turbo capitalism. Turbo capitalism is a form of capitalism that seeks growth at all costs regardless of socio-economic, environmental and personal consequences. I learned the term from a speech given by Naomi Klein and it stuck with me.
Beyond the semantic value, turbo or laisse-fair capitalism is a form of fundamentalism which can be as dangerous to democracy as any of the religious sects that plague our world with violence and intimidation. Terrorists are not the only ones who believe that all of life can be encapsulated into a set of rigid, humanity defying rules. The obvious difference is that turbo capitalists do not use violence to demand our attention. Instead they use trade agreements, the IMF, the World Bank and international treaties to win concessions, to bend their opponents will and impose thier own.
Whether it’s a literal reading of the Koran, the Old Testament or an unmoving fidelity for the tenants of trickle down economics, fundamentalism is dangerous for democracy.
Whether fundamentalism is on the left or on the right, religious or secular, we must always resist its destructive movement.
It’s also argued by many that our economy is changing from an archaic industrial society where our workers make most of the goods that we consume to a society where we use our knowledge of engineering and productivity to create the products that we use but those goods will be assembled and materialized by others off our shores.
If this is true, then we should be witnessing resurgence in the growth rate of engineers. But sadly this is not the case. As many of us in the new economy suspected, our counterparts in Asia, who until recently have only taken orders to make our products, are now designing products for American companies and will soon have total ownership of the innovation process.
There is little reason to suggest otherwise.
A consequence of this shift will be increased competition, rising inflation, a falling dollar and growing disparity due to under and unemployment in the United States.
Americans seem relatively clueless to the coming jobless crisis. Most of us are completely unaware, and uninterested, as to where our products are made, let alone who makes them. As a matter of fact, just last week Congress debated whether or not to increase the corporate friendly H1-B visa from its current 65,000 limit to 115,000 visa’s per year.
The H1-B visa is a program that imports cheap foreign engineers into the U.S. while displacing American workers. The infamous visa has no provisions, at least none with any teeth, to pay the imported talent the prevailing wages. Companies who apply for these visa's are aware of this shortcoming and capitalize on its inadequacy. This program not only erodes our tax base and our national spending power, it altogether discourages Americans from studying engineering.
How can this happen? How can we allow our government to facilitate policies that cause good paying industrial jobs as well as middle-class white collar engineering jobs to vanish or go to the lowest bidder? How can we allow our economy to race to the bottom?
We the people are asleep at the wheel and our represenatives have no fear of reprisal.
The following article will illustrate the imposition that turbo capitalism is having on our economy, our jobs, our college graduates and our children’s future. It’s time we all take a good look at where we are moving as a country and what we expect to accomplish out of theses corporate friendly trade agreements which have more authority on some levels than our own national Constitution.
March 16, 2005Outscourcing Innovation...And Everything ElseAmerica's Has-Been EconomyBy PAUL CRAIG ROBERTS
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 US corporations outsourced manufacturing. Today many US 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 passé."
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 US 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 US corporations into a brand name with a sales force selling foreign designed, engineered, and manufactured goods. Whether or not they realize it, US corporations have written off the US 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 US 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 US 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 US higher education. The advantages of a college degree are erased when the only source of employment is domestic nontradable services.
According to the Los Angeles Times (March 11), the percentage of college graduates among the long-term chronically unemployed has risen sharply in the 21st century. The US 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 US economy can also be seen in the exploding trade deficit. As more employment is shifted offshore, goods and services formerly produced domestically become imports. Nothink economists and Bush administration officials claim that America's increasing dependence on imported goods and services is evidence of the strength of the US economy and its role as engine of global growth.
This claim ignores that the US 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 US assets since 1990 as a result of US 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 Bloomberg (March 10), Japan's unrealized losses on its dollar reserve holdings have reached $109.6 billion.
The Asia Times reported (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% in the third quarter of 2001 to 67% in September 2004. India reduced its dollar holdings from 68% of total reserves to 43%. China reduced its dollar holdings from 83% to 68%.
The US 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 US 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 counry's fall.
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:
pcroberts@postmark.net