Newspaper logo  
 
 
  The US Labor Force: One Foot in the Third World

ECONOMIC POLICY:

The US Labor Force: One Foot in the Third World

by Paul Craig Roberts

Americans feel prosperous because they are consuming $700 billion annually more than they are producing. Foreigners, principally Asians, are financing US over-consumption, because we are paying them by handing over our markets, our jobs, and our wealth.
In May the Bush economy eked out a paltry 73,000 private sector jobs: 20,000 jobs in construction (primarily for Mexican immigrants), 21,000 jobs in wholesale and retail trade, and 32,500 jobs in health care and social assistance. Local government added 5,000 for a grand total of 78,000.

Not a single one of these jobs produces an exportable good or service. With Americans increasingly divorced from the production of the goods and services that they consume, Americans have no way to pay for their consumption except by handing over to foreigners more of their accumulated stock of wealth. The country continues to eat its seed corn.

Only 10 million Americans are classified as "production workers" in the Bureau of Labor Statistics nonfarm payroll tables. Think about that.

The US with a population approaching 300 million has only 10 million production workers. That means Americans are consuming the products of other countries labor.

In the 21st century the US economy has been unable to create jobs in export and import-competitive industries. US job growth is confined to nontradable domestic services.

This movement of the American labor force toward Third World occupations in domestic services has dire implications both for US living standards and for America's status as a superpower.

This movement of the American labor force toward Third World occupations in domestic services has dire implications both for US living standards and for America's status as a superpower.

Economists and policymakers are in denial while the US economy implodes in front of their noses. The US-China Commission is making a great effort to bring reality to policymakers by holding a series of hearings to explore the depths of American decline.

The commissioners got an earful at the May 19 hearings in New York at the Council on Foreign Relations. Ralph Gomory explained that America's naïve belief that offshore outsourcing and globalism are working for America is based on a 200 year old trade theory, the premises of which do not reflect the modern world.

Clyde Prestowitz, author of the just-published Three Billion New Capitalists: The Great Shift of Wealth and Power to the East, explained that America's prosperity is an illusion. Americans feel prosperous because they are consuming $700 billion annually more than they are producing. Foreigners, principally Asians, are financing US over-consumption, because we are paying them by handing over our markets, our jobs, and our wealth.

My former Business Week colleague, Bill Wolman, explained the consequences for US workers of suddenly facing direct labor market competition from hundreds of millions of Chinese and Indian workers.

Toward the end of the 20th century three developments came together that are rapidly moving high productivity, high value-added jobs that pay well away from the US to Asia: the collapse of world socialism, which vastly increased the supply of labor available to US capital; the rise of the high speed Internet; the extraordinary international mobility of US capital and technology.

First World capital is rapidly deserting First World labor in favor of Third World labor, which is much cheaper because of its abundance and low cost of living. Formerly, America's high real incomes were protected from cheap foreign labor, because US labor worked with more capital and better technology, which made it more productive. Today, however, US capital and technology move to cheap labor, or cheap labor moves via the Internet to US employment.

The reason economic development in China and some Indian cities is so rapid is because it is fueled by the offshore location of First World corporations.

Prestowitz is correct that the form that globalism has taken is shifting income and wealth from the First World to the Third World. The rise of Asia is coming at the expense of the American worker.

Global competition could have developed differently. US capital and technology could have remained at home, protecting US incomes with high productivity. Asia would have had to raise itself up without the inside track of First World offshore producers.

Asia's economic development would have been slow and laborious and would have been characterized by a gradual rise of Asian incomes toward US incomes, not by a jarring loss of American jobs and incomes to Asians.

Instead, US corporations, driven by the short-sighted and ultimately destructive focus on quarterly profits, chose to drive earnings and managerial bonuses by substituting cheap Asian labor for American labor.

US corporations, driven by the short-sighted and ultimately destructive focus on quarterly profits, chose to drive earnings and managerial bonuses by substituting cheap Asian labor for American labor.

American businesses' short-run profit maximization plays directly into the hands of thoughtful Asian governments with long-run strategies. As Prestowitz informed the commissioners, China now has more semiconductor plants than the US. Short-run goals are reducing US corporations to brand names with sales forces marketing foreign made goods and services.

By substituting foreign for American workers, US corporations are destroying their American markets. As American jobs in the higher paying manufacturing and professional services are given to Asians, and as American school teachers and nurses lose their occupations to foreigners imported under work visa programs, American purchasing power dries up, especially once all the home equity is spent, credit cards are maxed out and the dollar loses value to the Asian currencies.

The dollar is receiving a short-term respite as a result of the rejection of the European Union by France and Holland. The fate of the Euro, which rose so rapidly in value against the dollar in recent years, is uncertain, thus possibly cutting off one avenue of escape from the over-produced US dollar.

However, nothing is in the works to halt America's decline and to put the economy on a path of true prosperity. In January 2004, I told a televised conference of the Brookings Institution in Washington, DC, that the US would be a Third World economy in 20 years. I was projecting the economic outcome of the US labor force being denied First World employment and forced into the low productivity occupations of domestic services.

Considering the vast excess supplies of labor in India and China, Asian wages are unlikely to rapidly approach existing US levels. Therefore, the substitution of Asian for US labor in tradable goods and services is likely to continue.

As US students seek employments immune from outsourcing, engineering enrollments are declining.

The exit of so much manufacturing is destroying the supply chains that make manufacturing possible.

The Asians will not give us back our economy once we have lost it. They will not play the "free trade" game and let their labor force be displaced by cheap American labor.

Offshore outsourcing is dismantling the ladders of America's fabled upward mobility. The US labor force already has one foot in the Third World. By 2024 the US will be a has-been country.


Paul Craig Roberts has held a number of academic appointments and has contributed to numerous scholarly publications. He served as Assistant Secretary of the Treasury in the Reagan administration. His graduate economics education was at the University of Virginia, the University of California at Berkeley, and Oxford University. He is coauthor of The Tyranny of Good Intentions. This article is published in the Chronicle with permission of the author. He can be reached at: paulcraigroberts@yahoo.com.


Copyright © 2005 The Baltimore Chronicle. All rights reserved.

Republication or redistribution of Baltimore Chronicle content is expressly prohibited without their prior written consent.

This story was published on June 8, 2005.

 
Local Gov’t Stories, Events

Ref. : Civic Events

Ref. : Arts & Education Events

Ref. : Public Service Notices

Futurism
Books, Films, Arts & Education
Letters

Ref. : Letters to the editor

Health Care & Environment

06.28 New Drone Plans an Ambitious Mission to Plant 100,000 Trees a Day [1:57 video]

06.28 EPA seeks to scrap rule protecting drinking water for third of Americans [the sociopathic Republican nightmare continues...]

06.27 The Senate’s Disastrous Health-Care Bill

06.27 Most Australians want renewables to be primary energy source, survey finds

06.27 Hundreds of US mayors endorse switch to 100% renewable energy by 2035

06.26 New study confirms the oceans are warming rapidly

06.23 From heatwaves to hurricanes, floods to famine: seven climate change hotspots

06.23 Latest diesel car models remain highly polluting, tests show

06.23 Norway issues $1bn threat to Brazil over rising Amazon destruction [Good!]

06.22 Al Gore: battle against climate change is like fight against slavery [videos]

06.22 Top global banks still lend billions to extract fossil fuels [who holds the debt when the music stops?]

06.22 Australian health groups urge coal phase-out and strong emissions reduction

06.22 Tories aim to block full EU ban on bee-harming pesticides [what could go wrong...]

06.22 Route to recovery: how people overcome an opioid addiction

06.21 U.S. Coastal Cities Will Flood More Often and More Severely, Study Warns

06.21 London mayor issues emergency air quality alert amid heatwave

06.21 Exxon, BP and Shell back carbon tax proposal to curb emissions

06.21 Climate goals: inside California's effort to overhaul its ambitious emissions plan

News Media Matters

Daily: FAIR Blog
The Daily Howler

US Politics, Policy & 'Culture'

06.28 Warren Buffett Makes The Case For Single-Payer Health Care

06.28 Republicans eye billions in side deals to win Obamacare repeal votes [avoided Medicaid 'waste' to help the poor and opioid addicts will be divvied-up as bribes to secure votes for Republicans' sociopathic health care bill]

06.28 Why the Democrats Won't Wake Up

06.28 Onward Toward Socialism: America's Demise, and One Way to Survive [we need a healthier blend of methods, guiding principles, tactics and rules for efficiency and fairness]

06.28 Senate Health Bill Would Kill Essential Homecare Jobs

06.28 Urging Democrats To Go Bold, Warren Says 'The Next Step Is Single Payer'

06.28 Make democracy great again: Rep. Don Beyer’s revolutionary bill could transform how we elect Congress

06.27 Trumpcare isn't about health. It's a tax cut for the 1%

06.27 Trump lawyer's firm steered millions in donations to family members, files show [birds of a feather]

06.27 Senate healthcare bill would increase uninsured by 22 million people – CBO

06.27 Bernie Sanders rallies opposition to Republican healthcare reform plan

06.26 RALPH NADER: THE DEMOCRATS ARE UNABLE TO DEFEND THE U.S. FROM THE “MOST VICIOUS” REPUBLICAN PARTY IN HISTORY

06.26 Kansas' Tax Cuts Are a Spectacular Failure. Meanwhile, in California

06.26 Ire for Democrat Who Pulled Plug on California's Single-Payer Bill

06.26 Civil war has broken out inside the Democratic party. Does the future belong to the populist left or the centrists?

06.26 New Orleans mayor: US climate change policy cannot wait for Trump

06.26 Supreme court justice Anthony Kennedy is focus of retirement rumors

06.26 As Trump moves to privatize America's national parks, visitor costs may rise

Justice Matters
High Crimes?

06.23 'I buried my smallest child under a bush': starvation and sorrow in South Sudan

Economics, Crony Capitalism

06.28 Sovereign Debt Jubilee, Japanese Style

06.27 Koch network 'piggy banks' closed until Republicans pass health and tax reform [the Koch bros. mafia-like organization controls the Republican Party]

06.23 Exclusive: Fake online stores reveal gamblers' shadow banking system

06.22 Top global banks still lend billions to extract fossil fuels [who holds the debt when the music stops?]

International & Futurism

06.28 It Pays to Be Smart

06.28 China’s Tech Moguls Warn of AI’s Troubling Trajectory

06.28 Elon Musk Says SpaceX Rockets Will Be Capable of Indefinite Launches Without Being Serviced

06.27 Africa facing shortfall of 50 million jobs by 2040, report says

06.27 Brazil's president, Michel Temer, charged with corruption

06.27 Three-quarters of world has little or no confidence in Trump, Pew study finds

06.26 What jobs will still be around in 20 years? Read this to prepare your future

We are a non-profit Internet-only newspaper publication founded in 1973. Your donation is essential to our survival.

You can also mail a check to:
Baltimore News Network, Inc.
P.O. Box 42581
Baltimore, MD 21284-2581
Google
This site Web

Public Service Ads: