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Watching Greed Murder the Economy
Paul Craig Roberts
Counterpunch
Thursday, July 10, 2008
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.
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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@yahoo.com
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12 Responses to “Watching Greed Murder the Economy”
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July 10th, 2008 at 6:49 pm
I am beggining to think that the only solution for Americans is to live huddled together 8-10 people in a traler, or 20 people to a two bedroom house like immigrants who illegaly enter our country do. That way, when you divide all the bills, we would only each have to pay an extremely small amount for rent and utilities etc. That is how the immigrants can afford starve Americans out of out their jobs. Meanwhile, the immigrants send all the money they make back to their home countries instead of pumping it back into the American economy, and Americans subsidize the immigrants (our competition) with taxpayer social programs.
The other thing is that Americans will eventually have to become slave workers like in China, working for 30 cents an hour in a factory. I guess that is what you call a true free market.
There will be no safe place on Earth, no place free from economic slavery.
God help us.
July 10th, 2008 at 7:16 pm
first post! haha looks like no one comments here
July 10th, 2008 at 9:26 pm
I love when the idea of raising taxes or tariffs is mentioned in the same breath as helping the economy. Taking wealth away from the people is never going to be a viable solution. This is the view of the Hamiltonians.
The problems with our economy are numerous. We have a central bank with the power to increase the money supply without restrictions. The government heavily regulates nearly every industry, causing higher prices and lower wages for the people. The tax burden felt by everyone is enormous. Ben Franklin once wrote ” It would be thought a hard government, that should tax its people one-tenth part of their time, to be employed in its service;”, I wish we were so lucky. Taxes drain the wealth of a nation and should not be redistributed by policy makers.
We need to return to a more jeffersonian tradion that is being presented by Ron Paul(campaignforliberty.com), lewrockwell.com, mises.org, and all other freedom loving austrian economists.
July 10th, 2008 at 9:49 pm
The USA’s worship of liassez-faire Capitalism is destroying the USA. As ‘The Simpsons’ character Nelson would say: “Ha, ha!”
July 10th, 2008 at 9:54 pm
Not to mention that most who do complete college will be in debt from their loans for the rest of their lives, so most of the wages they make working at Wal-Mart after they graduate will be gone as soon as they get their biweekly check. I know because I’m already there. All this REALLY makes me wish I’d learned something useful in school, like maybe survivalist training or subsistence farming. But even if I had those skills, I also have epilepsy. What happens when I can’t afford to pay for my medication anymore, which is somewhere around $350 without health insurance, which Wal-Mart doesn’t provide? A mental institute or death by tasering from the police state for having a seizure and causing a disruption? Maybe I’ll make this sites “Greatest Hits of the Police State”, like Frederick Williams, if they get it on video…
July 10th, 2008 at 11:35 pm
“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.” ”
This guys assumptions are so wrong. “Upward mobility” has never been provided by the large corporations for the majority. A big part of what made Americans so upwardly mobile in the past is entrepreneurs; first generation business owners. Why don’t we have more of them? That’s the important question. Where are all the new small manufacturers? There aren’t that many. Why? There should be 10x as many small manufacturers as there are.
Also, upward mobility of the kind he’s talking about hasn’t existed for a couple decades, at least. There’s data collected by sociologists that shows this. It’s what John Taylor Gatto means when he talks about the American Caste system that public schools have brought. The lack of upward mobility for American’s isn’t new.
His use of the car industry as and example industry is odd. The car industry is pretty heavily regulated and subsidized. As well, it has some of the strongest and most corrupt unions in the country. Using them as an example of the evils of off-shoring just seems weird.
July 10th, 2008 at 11:40 pm
AND murdering us while they spy on us!!!
Do you want to learn more about the EVIL governments and what they’re REALLY doing, who’s SPYING on you right now??
Come here:
https://www.intl-alliance.com/forum/index.php
This forum is private. It’s on private, secure, off-shore servers so everything is ANONYMOUS. You cannot be tracked. YOUR right to Privacy is their priority! (It’s legal, don’t worry)
Come express your views.
Your views are valuable.
We need to hear from you there.
Please? Check it out.
People need to know the truth and share the truth.
Thank you!
July 10th, 2008 at 11:46 pm
RE: Gregory Fegel
America may preach laissez-faire, but it sure don’t practice it. America hasn’t had an economy resembling laissez-faire since before Lincoln.
July 11th, 2008 at 12:12 am
Take for instance me, I have an associates degree in business management, a bachelors degree/magna cum laude, deans list, honors, alumni as with the first as well, and a bachelors in human resources. I have not had a decent paying job all my life and all I hear is “your too qualified ” or nothing at all. NO hiring unless I act like I have no eduation and that is for sweat jobs paying 7.00 an hour with unrealistic expectations for job completion. If I work the time it takes to complete the job, sorry too many hours worked, your not getting paid for 3 days.
Now I was always told that if you go to college, you would make more money. I got fired for being too qualified 2 days after I graduated college with my associates degree for being too qualified.
If I put in for a job, I don’t get hired for having the experience they say when when no one will give me the time to get experience. I have worked full time since I started college at a convient store just to pay to have a roof over my head and now, I still have no money and bill collectors call all the time, but ya know what, If they really cared, they would give me a job. Oh yeah, I almost forgot, your too qualified, or you have no experience. Bull sh*t. The whole economy is rigged. I can get a degree (bachelors) any way in anything in 2 classes but I am out of money and my credit is screwed from not having a decent paying job. When I do have some money, it is taken away for gas, food, housing, and whatever else that is normal. I don’t have an entertainment budget or anything because I am broke. I was once hired to be a manager but guess what, they paid me 6.50 an hour and that is bull ****. How the hell can someone live on 7 an under an hour when they tried to better themselves (college) but then when they get out, get screwed?
July 11th, 2008 at 3:41 am
the goverment has been bought and payed for….
as the saying goes….. Even a great king will not refuse a gift.
someone bought you for $70,000 a year… and the rest of the 300 million americas… you work for someone… you sell your labour to them…. so that means they have bought you… you work for them……
just like mr bush… someone has payed him…
when you allow politicians to mix with wealthy industilists,,, then expect them politicians bought and payed for…
yes it is corruption….
so make a new law that prohibits politicians and wealthy elite
from meeting and dealing…
the president is just a sales person,, just persuding you to buy into his scams…
July 11th, 2008 at 6:01 am
maybe when enough yuppies are living out of their volvos they’ll come to their senses and revolt.
July 11th, 2008 at 11:04 am
get government grants to start your own business the only way we can keep jobs here is create jobs here. and stop buying non american products. get training in jobs that are high demand like machinists and welders. Read the book natural cures they dont want you know about to save on health insurance.