The Truth Always Rises
Another 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, 2005
Outscourcing Innovation...And Everything Else
America's Has-Been Economy
By 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
Another 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, 2005
Outscourcing Innovation...And Everything Else
America's Has-Been Economy
By 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
posted by Van at 12:11 PM
10 Comments:
Looking at the current economic indicators; inflation at an incredibly low 0.4%, unemployment down near a record low 4.6%, with Real GDP at a very strong +5.3% annually, it's hard to find any negatives to blame on "globalization."
In the seventies American auto makers and the UAW fought hard against allowing in more imports, especially those from Japan and claimed it would destroy the U.S. auto industry within five years (before 1980, back then).
Well, they were wrong!
The American auto industry survived the competition and thrived during the 1980s and into the 1990s with Ford scoring big with the Taurus back in the 80s and Chrysler and GM both doing well in the small truck and SUV market.
If it weren't for that opened market, the U.S auto industry, which had embarked upon a strategy of "planned obsolesence" back in the early seventies, would've continued to sell large, expensive, gas guzzling cars without any competition to rein them in.
It was foreign competition that eradicated planned obsolesence and forced American auto makers to build cars across the spectrum, from smaller, lighter vehicles to SUVs.
It also helped American auto workers by creating tons opf new jobs, most of them unencumbered by the UAW.
GM's offshoot Saturn is a testament to U.S. worker efficiency. Their plants in Tenn & Alabama are clean, efficient and most of all profit-making...and the workers there are paid well.
Aside from that, there are all the foreign auto-makers with plants throughout America's South and West.
Best thing that ever happened to the American car consumer and whether they know it or not, the best thing to happen to the U.S. auto worker as well.
That was "the experiment" that literally paved the way for all the globalization that's follwed and it's probably why BOTH major political Parties support it.
It can be overdone, but in the case of the H-1B visas, they exploded from 1993 to 2000, when the quta was upped from 60,000/year to almost 200,000/year and over 1 million H-1B visas were given out.
The current administration hasn't abandoned the H-1B visa program, but has reduced the number back to its original 60,000/year, as many American companies scream that they can't fill their positions in the tech sector.
While "cheap labor" is not good for American workers, neither is very expensive labor, because high salaries are passed onto consumers as part of the price of those goods, immediately eroding all that earning power from those higher salaries.
Hi JMK -
You wrote:
"Looking at the current economic indicators; inflation at an incredibly low 0.4%, unemployment down near a record low 4.6%, with Real GDP at a very strong +5.3% annually, it's hard to find any negatives to blame on "globalization."
Yes, the economic indicators are good, so why are real wages down? If productivity is so high, why is the average hourly wage falling?
Becasue the middle-class is not sharing in the wealth. Becasue profit does not necessarily translate into higher wages and higher quality of life.
But this is not the scope of the piece.
The point that Roberts is trying to make is that we cannot expect to innovate if we do not produce engineers. Yet we cannot produce engineers if we do not protect thier jobs.
If we are moving from a industrial economy to a information economy, then wouldn't it seem prudent to at least encourage R&D to stay in the United States?
If Roberts piece is about "jobs protection," then it's also about American consumers getting price gouged, as you can't have one without the other. Worker protections = consumer price escalation.
There are only two ways of protecting jobs - for decades many Labor Unions created artificial labor shortages in certain fields by limiting the number of people who could get into the Union. The other is, in the light of our educational crisis (it IS the current "crisis in American education" that is really responsible for America's shortage of engineers), to limit access by trained engineers from elsewhere (H-1B visas) into that field.
Both those things, like ALL protective measures result in consumers here paying higher prices, often for lower quality goods and services.
The UAW and America's auto makers tried to protect America's auto industry from Japanese competition back in the 1970s...and we should all thank God they failed.
The American auto industry survived nicely, even though the UAW didn't do as well and the American consumer now has a lot more choice and pays lower prices, for better quality thanks, in large measure to our NOT protecting an American industry from foreign competition.
One can argue that right now the pendulum has swung a little too far, with too much outsourcing, just as the pendulum had swung the other way by the mid-seventies (too much Union backed protectionism), but it's too complex an issue to take a stand like "Protecting American jobs is always good," or even "Workers need no protection from cheaper foreign competition."
For the evidence has long shown that both scenarios can be bad.
No one will argue that America would've been better off if it had barred foreign competition in the auto industry in the mid-1970s, because that comes down to arguing that what would've been good for a small number of Americans (auto workers) was good for America in general...and that's obviously NOT true.
Foreign competition in the American auto industry was best for American consumers and best for most, if not all American workers, yes even the auto workers, even though they didn't see that at the time.
America currently HAS an engineering shortage.
It is NOT caused by foreign competition.
It IS caused by the failure of our educational system.
The answer is not limiting access by foreign workers into that field, it's improving our educational system and ridding schools of nonsense time-wasters like "tolerance" and "diversity" therapy sessions and focusing on real education - in the math and hard sciences.
JMK -
If Worker protections = consumer price escalation then That is a price that I am willing to pay to preserve our way of life.
As you know the cost of production is not only the cost of labor, labor is a factor.
Here is Florida we have raised the minimum wage from $5.15 an our to $6.50, yet the cost of goods and services has been marginal.
In fact, in communities where there is a living wage mandage there has not been a huge increase in the cost of goods and services.
In short, I would rather pay $35 for a pair of jeans and know that they are made here by union labor then pay $26 for the same pair made in China.
I think that many Americans did not realize what NAFTA really meant for our nation and communities.
If we had been given the real reason for these internation trade agreements then we would not have gone along with it. NAFTA was nothing more than a constitution to protect the multinationals and the Mexican Oligarchy, the expansion of NAFTA (Gatt and WTO) is more of the same.
Hell, why do you think that it took a special session of Congress and so much arm twisting to pass CAFTA.
As someone here said, there was not a push by the people of the United States for NAFTA, it was forced upon us by our Government.
We were promised certain consessions, but so far, with the exception of cheaper goods, we have not seen the promises met.
Remember? NAFTA was going to boost the Mexican middle class, create more manufacturihg jobs in the U.S., improve our service sector, and open new markets to purchase Mexican goods.
Well, so far the report card is dismal.
I for one would rather pay more if that's what it takes.
Also, I remember the post NAFTA prices for goods. And as I recall, the costs for goods and products was not much higher.
Yes a telvision is cheaper now, but how often does a person need to purchase a television?
Textiles are only cheaper on the discount racks, in fact a pair of Levis (retail) is cost more now than in 1994.
So really, the benefits are a mixed bag.
If Worker protections = consumer price escalation then That is a price that I am willing to pay to preserve our way of life. (Van)
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The cost is NOT an individual one, Van! The cost is a stagnant economy and the loss of jobs as both people and institutions respond to incentives – when the cost of labor goes up, business seeks ways to “increase productivity,” either through increased automation or by getting workers to produce more product in less time – BOTH result in fewer jobs.
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As you know the cost of production is not only the cost of labor, labor is a factor.
Here is Florida we have raised the minimum wage from $5.15 an our to $6.50, yet the cost of goods and services has been marginal.
In fact, in communities where there is a living wage mandate there has not been a huge increase in the cost of goods and services. (Van)
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That’s largely because the minimum wage is NOT a wage most workers receive. In fact, few workers get minimum wage.
No construction workers work at minimum wage, no carpenters, plumbers or electricians, no teachers, cops, firefighters, new lawyers, nor even waiters and waitresses work at minimum wage either.
The Minimum Wage only effects what once were entry level/”trainee” positions, where workers could learn on the job.
Most of those positions have already long been killed by the minimum Wage. Very few, almost no businesses have positions that workers can “learn on the job” for lower pay any more.
I built decks for years and even ten, fifteen years ago, I didn’t take on guys without the basic requisite skills, simply because I couldn’t afford to pay a guy I had to teach the job. We were just too busy.
Thankfully and I’m certain that a huge majority of Americans would support, the many EXCEPTIONS to the minimum wage – agricultural workers, restaurant workers and some others are exempt from minimum wage laws, just as firefighters (which I am one) are exempt from the forty hour work week rule – firefighters can be required to work up to I believe 48 hours in a week, before OT would have to be paid.
Such exemptions are necessary and serve to insure that some basic services don’t cost too much.
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In short, I would rather pay $35 for a pair of jeans and know that they are made here by union labor then pay $26 for the same pair made in China.
I think that many Americans did not realize what NAFTA really meant for our nation and communities.
If we had been given the real reason for these international trade agreements then we would not have gone along with it. NAFTA was nothing more than a constitution to protect the multinationals and the Mexican Oligarchy, the expansion of NAFTA (GATT and WTO) is more of the same.
Hell, why do you think that it took a special session of Congress and so much arm twisting to pass CAFTA.
As someone here said, there was not a push by the people of the United States for NAFTA, it was forced upon us by our Government.
We were promised certain concessions, but so far, with the exception of cheaper goods, we have not seen the promises met.
Remember? NAFTA was going to boost the Mexican middle class, create more manufacturing jobs in the U.S., improve our service sector, and open new markets to purchase Mexican goods.
Well, so far the report card is dismal.
I for one would rather pay more if that's what it takes.
Also, I remember the post NAFTA prices for goods. And as I recall, the costs for goods and products was not much higher.
Yes a television is cheaper now, but how often does a person need to purchase a television?
Textiles are only cheaper on the discount racks, in fact a pair of Levis (retail) is cost more now than in 1994.
So really, the benefits are a mixed bag. (Van)
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The price benefits of Free Trade are decidedly positive. There’s no question about that. Moreover, right now, there are few indicators that Free Trade has harmed our economy at all! GDP growth is a huge 5.6% annually, inflation (0.4%) and unemployment (4.6%) are both at near historic lows.
The argument that “workers would be paid even more,” absent the huge amount of outsourcing and imported labor is flawed speculation. For one thing, businesses would have to react to the “artificial labor shortage” that would theoretically exist, either by creating a new level of specialization, for instance a “para-engineer,” much like a para-medic and get around the problem another way.
Economists would say, and I largely agree, that many jobs are simply no longer viable to be done in a First World economy. Basic manufacturing will always be cheaper in “developing nations,” so that’s where those jobs will increasingly go.
New jobs within the “Information Sector” are being created every day...jobs that didn’t and couldn’t exist just ten years ago. The “Service Sector” creates tens of thousands of new jobs each month.
The smallest part of the “Service Sector” is the most maligned (food service jobs or “fast food jobs), the fastest growing parts of the “Service Sector” are Financial Services (my wife works as an auditing accountant for one of the “Big Four” – there’s a scarcity of accountants and the pay is good) and the Medical Services sector, which also creates many new jobs that pay very well.
Again, our shortage of engineers is entirely due to our current “crisis in American education,” NOT in any way to increased foreign competition.
I’d certainly support eradicating the H-1B visa program, so long as our own schools flooded that field with brand new, minted engineers. Yes, it would have relatively the same effect on wage rates (driving them down) but it certainly wouldn’t “kill the engineering market,” any more than flooding the medical field with thousands more American made physicians would “kill the medical profession.”
WORKERS do NOT “OWN” their jobs, NOR field they work in.
Workers and their Unions (from the Teamsters and Local 3 to the AMA and ABA) have no right to restrict access to the fields they work in.
Those jobs belong to the employers and to the consuming public way before we can say they belong to the employees.
That is ONE of the failures of Socialism, the idea that “workers own their jobs and by extension, the field they work in.”
Capitalism posits that “the consumer is king.” The consumer “owns” the jobs and fields that create the goods and services their demand produces...and that the employers “own” the jobs their businesses create.
That’s one of the reasons why Capitalism ALWAYS works and Socialism ALWAYS fails.
Job shortages create a bad situation for consumers – high demand for labor amidst a limited supply.
That can NEVER stand. It’s bad for consumers and bad for workers as well, as it ultimately kills off jobs.
That’s why employers must be free to flood the market with new employees, either through American schools that are forced to do their bidding, or via things like the H-1B visa that allows trained workers in those fields to enter and work in this country for a limited period of time.
I’d think we’d agree that our current educational crisis is the crux of the problem of our current shortage in fields like engineering and accounting.
We might not agree that our Colleges and Universities must be made, in effect, “lackeys” of the business community. In my view, Big Business should be able to dictate to our educational community – “We need ten new mechanical thousand engineers THIS YEAR. Just DO IT!”
That would be great. Sure, wages would remain fairly static, BUT lots of new jobs would be created cause business would be able to hire more people at those “affordable rates.”
The Catch-22 we’re all in is created by the fact that high labor costs (ie. salaries) cost jobs.
Ley me re-phrase a small portion of the end of that response;
"I’d think we’d agree that our current educational crisis is the crux of the problem of our current shortage in fields like engineering and accounting.
We might not agree that our Colleges and Universities must be made, in effect, “lackeys” of the business community. In my view, Big Business should be able to dictate to our educational community – “We need ten THOUSAND new mechanical thousand engineers THIS YEAR. Just DO IT!”
That would be great.
Sure, wages would remain fairly static, BUT lots of new jobs would be created because business would be able to hire more people at those “affordable rates.”
The Catch-22 we’re all in is created by the fact that high labor costs (ie. salaries) cost jobs.
JMK -
You wrote:
"The cost is NOT an individual one, Van! The cost is a stagnant economy and the loss of jobs as both people and institutions respond to incentives – when the cost of labor goes up, business seeks ways to “increase productivity,” either through increased automation or by getting workers to produce more product in less time – BOTH result in fewer jobs"
Yet history does not support this argument, with the exception of stagflation, and that was largely driven by bad policy, higher wages have been equal to a higher standard of living for all of us.
When the cost of labor goes up, so does spending power, and so does demand - this is a fact with historical precedent.
On the minimum wage - I don't know about NY, but in Florida there are over 350,000 workers earing it, and about 40% are single mothers.
But, I digress.
You wrote:
"The price benefits of Free Trade are decidedly positive. There’s no question about that. Moreover, right now, there are few indicators that Free Trade has harmed our economy at all! GDP growth is a huge 5.6% annually, inflation (0.4%) and unemployment (4.6%) are both at near historic lows."
Positive? For whom? Historically when Real GDP is up and inflation stable, wages increase.
You and I both know this is not happening, and hasn't happened for some time. In fact, total compensation is down and production is up.
No, I don't think that the workers are benefiting from NAFTA to the extent that you suggest. Maybe we have different ideas of the idea of benefit.
Lastly, I'm not suggesting that a job belongs to a person for life. I'm merely suggesting that the middle class way of life is worth protecting.
You mention the information sector and the lack of talented engineers in the United States. But there are many who will disagree (for instance the IEEE) that there is a talent shortage at all.
People like Norman Matloff of UC Berkley have documented the deceptive tactics of the ITAA and the Chamber of Commerce when testifying before Congress to increase the H1-b program. Harris Miller (ITAA) is infamous for this.
It boils down to this, if there is an engineer shortage, then why is unemloyment in that sector so high?
The answer is that there is no shortage, there is no lack of talent in the U.S. There is age discrimination and wage discrimination.
Anyway, no one is suggesting that anyone owns their jobs or their fields, I, as well as Roberts, am advocating that we protect our assets - our middle class lifestyle.
I'd like to say more but my kid needs some attention.
You wrote:
"The cost is NOT an individual one, Van! The cost is a stagnant economy and the loss of jobs as both people and institutions respond to incentives – when the cost of labor goes up, business seeks ways to “increase productivity,” either through increased automation or by getting workers to produce more product in less time – BOTH result in fewer jobs"
Yet history does not support this argument, with the exception of stagflation, and that was largely driven by bad policy, higher wages have been equal to a higher standard of living for all of us. (Van)
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Sure it does.
Labor costs have always been kept in check during the “good times” economically. The 1950s throught the mid-1960s were GREAT economic times and yet wages were low and remained fairly static over that entire period. Inflation kicked in after LBJ’s policies greatly increased the money supply and misguided Liberals (like NYC Mayor John V Lindsey began giving huge raises to Municipal workers).
Stagflation was the natural result of twelve years of unbridled Keynesianism (higher taxes and more social spending, begun with LBJ)...by the mid-1970s the country was a mess. NYC (a Liberal bastion) was on the verge of bankruptcy and the rest of the nation wasn’t far behind.
Reagan’s “Supply Side Revolution” changed that!
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When the cost of labor goes up, so does spending power, and so does demand - this is a fact with historical precedent.
On the minimum wage - I don't know about NY, but in Florida there are over 350,000 workers earning it, and about 40% are single mothers. (Van)
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Only to a point Van.
When wages go up, so do production costs and prices as well...inflation follows as the money supply must be increased.
Restaurant workers are exempt from the minimum wage, as are agricultural workers and some others as well, just as firefighters are exempt from the forty hour work week rule. I’ve always worked two 24 hour shifts per week, though NYC works out vacation time to adjust it back down to close to a forty hour work week.
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But, I digress.
You wrote:
"The price benefits of Free Trade are decidedly positive. There’s no question about that. Moreover, right now, there are few indicators that Free Trade has harmed our economy at all! GDP growth is a huge 5.6% annually, inflation (0.4%) and unemployment (4.6%) are both at near historic lows."
Positive? For whom? Historically when Real GDP is up and inflation stable, wages increase.
You and I both know this is not happening, and hasn't happened for some time. In fact, total compensation is down and production is up.
No, I don't think that the workers are benefiting from NAFTA to the extent that you suggest. Maybe we have different ideas of the idea of benefit.
Lastly, I'm not suggesting that a job belongs to a person for life. I'm merely suggesting that the middle class way of life is worth protecting. (Van)
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Low prices are GOOD for ALL consumers.
ALL Americans are consumers, but NOT all American are workers.
While GDP has grown and both inflation and unemployment shrunk, real wages have gone up...slightly, but they’ve gone up and largely kept pace with inflation.
One could argue that workers deserve better than that and I might even agree to an extent, but it’s to “what extent” (the details) where the debate would arise.
And while YOU may not have asserted that a job belongs to the worker, or the field to the Union, the American Labor movement was predicated precisely upon that very flawed and corrosive viewpoint.
Unions from the Teamsters to Local 3 (the Electrical Workers) to the AMA & ABA have ALL limited access to those fields by limiting access to the Unions or limiting Law & Med School sizes.
Those FIELDS DO NOT belong to the Unions…the could be said to belong to the CONSUMER, but NOT the worker, nor his/her Union.
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You mention the information sector and the lack of talented engineers in the United States. But there are many who will disagree (for instance the IEEE) that there is a talent shortage at all.
People like Norman Matloff of UC Berkley have documented the deceptive tactics of the ITAA and the Chamber of Commerce when testifying before Congress to increase the H1-b program. Harris Miller (ITAA) is infamous for this.
It boils down to this, if there is an engineer shortage, then why is unemloyment in that sector so high?
The answer is that there is no shortage, there is no lack of talent in the U.S. There is age discrimination and wage discrimination. (Van)
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Our educational system HAS FAILED!
We’re simply NOT producing enough math and science majors, not enough engineers and physicians.
Of course the AMA or the IEEE (two Labor Unions) are going to be gleeful about a shortfall of people in those professions, because it means their members can demand higher prices/wages for their work.
Again ALL Labor Unions are in the business of LIMITING ACCESS and creating “artificial labor shortages” in the fields they represent.
Those artificial labor shortages are good for current Union members, but VERY BAD for all those trying to get into that field and flood it with workers, thereby increasing supply and driving down the costs/wages within that field.
We don’t OWN our jobs, even though the Labor movement acts as though the worker owns the job and the “Union owns the field of endeavor.”
If there weren’t a shortage of qualified engineers, companies wouldn’t be lobbying to INCREASE the number of H-1B visas, as they claim that the current base level of 65,000 doesn’t meet their needs!
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Anyway, no one is suggesting that anyone owns their jobs or their fields, I, as well as Roberts, am advocating that we protect our assets - our middle class lifestyle.
I'd like to say more but my kid needs some attention. (Van)
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Yes Van, the entire American Labor Movement is predicated upon the flawed assumption that (1) the worker owns his/her job and (2) the Union owns the field of endeavor. Otherwise the Unions wouldn’t feel entitled to limit access to that field by either limiting access to the Union itself, or by limiting class size, etc to limit those able to practice the professions they represent.
Capitalism posits that the “consumer is King.” It states that the consumer “owns” the jobs and his/her needs are first and foremost...all else, second.
I tend to agree with that.
We have preserved the Middle Class lifestyle in America.
Home ownership, one of the best barometers of the health of the Middle Class is at an all time high!
When the people’s primary complaint is, “I should make more money,” things are pretty damned good.
JMK - OK, here we go.
The period through the 1950's and 1960's were great economic times, yes, but wages were not low, nor were they static.
Wages keep up with inflation, and grew with real GDP. Inflation was lower then, the dollar was worth more, and spending power was higher.
So were taxes, but that's another discussion.
I disagree with you about inflation. But inflation kicked in when the cost for the war in Vietnam caught up with our economy and when gas prices went through the roof. One an element of bad policy, the other an element beyond our control, at least to a degree.
I doubt that welfare played much of a roll, it was the military spending that burdened the tax payer. In fact, for all of it's flaws the welfare program under LBJ decreased the poverty rolls and increased the middle classes.
Now, it did create a large underclass, but there should have been more provisions for education and a time limit for the program.
Taxes were too high through much of the 70's, but social programs were still only a portion of the cost.
When Reaganomics came into play, tax relief was welcomed and played a large roll in stimulating new investment, but it went too far, and placed attitional burdens on the working and middle classes.
According to David Stockma, it wasn't tax relief at all. Reaganomics was a tax deferal program aimed at adjusting taxes from one class to another.
In fact, Paul Craig Roberts confirms that the so-called tax relief under Reagan went way too far, too much of a good thing?
I doubt it. In an interview in the Atlantic Monthly David Stockman stated that, "It was a feeding frenzy, the pigs were all at the troffs"
This is not what JFK did in terms of tax relief. JFK cut the high marginal tax rate from 90% to 70%. He also cut many loopholes so that a rate close to 70% was acheived. I never hear the people who conflate JFK with Reagan say this, make me wonder.
"Low prices are GOOD for ALL consumers"
Low prices are good, but at what cost. If you mean to suggest that low prices are good at all cost then I reply by saying that this is a highly debatable argument and I don't suppose that we will reach a conclusion any time soon, but to state my position again.
Without a job, or income beyond the sustanance level, cheap good are useless.
According a NPR Market Place study real wages have been falling for the past 2 years, and have been stagnant for the past 5. This trend is the reason that so many in our so-called booming economy are not feeling as confident as the financial analysts suggest we should.
The average worker is falling behind.
It's true that home ownership is high, that is in part due to an expansion of sub-prime loans catagories and adjustable interest rate mortgates.
I hope that the trend for home ownership continues.
The facts take isue with the charge that LBJ's reckless social spending "decreased poverty" and "increased the middle class."
No working people benefitted from those programs and those programs were specifically designed to mire those already poor in a quagmire of dependancy...welfare chaed the fathers out of the homes by stipulating that no male could live in a home which received WIC funds.
Moreover, higher wages DOES NOT always mean more prosperity, especially if interest rates, prices, etc all go up and outpace the higher wages, which is what happened during our ill-conceived Keynesian years (1964 - 1980).
Inflation outstripped the earnings power for most working Americans, resulting in a lower standard of living for many Americans.
Lower prices, coupled with lower interest rates are a raise for most working people, because it makes home ownership easier and living cheaper or "more cost effective."
Again, we can't argue that "acertain percentage (say 50%) of the profits of a business belong to the workers, because that's simply UNTRUE.
Look, I'd like to argue that "most Americans are woefully underpaid (including myself) but the facts simply don't bear that out.
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