Was it all hype?
Was it all hype?
Date: Monday, February 17, 2003 5:47 PM
H-1B and JOB DESTRUCTION NEWSLETTER
www.ZaZona.com
http://www.townhall.com/columnists/paulcraigroberts/pcr20030212.shtml
Paul Craig Roberts (back to story)
February 12, 2003
Was it all hype?
Was the "new economy" merely hype designed to sell overpriced stocks
and globalism? Many Americans think so. "Do something about it," their
email missives urge.
That so many Americans still believe that the pen retains its power in
our corrupt society governed by organized interest groups indicates a
refreshing lack of cynicism. But there is frustration, too, on the part
of many Americans, who believe fellow citizens are impervious to the
connection between globalism and declining job opportunities and income
growth in the United States. The following paragraph, which has made
its way around the Internet, sums up the frustration:
Joe Smith started the day early, having set his alarm clock (made in
China) for 6 a.m. While his coffeepot (made in China) was perking, he
shaved with his electric razor (made in Hong Kong). He put on a shirt
(made in Sri Lanka), designer jeans (made in Singapore) and tennis
shoes (made in Korea). After cooking his breakfast in his electric
skillet (made in India), he sat down with his calculator (made in
Mexico) to check his budget for the day. After setting his watch (made
in Taiwan) to the radio (made in India), he got in his car (made in
Japan) and continued his search for an AMERICAN job. At the end of yet
another discouraging and fruitless day, Joe decided to relax. He put on
his sandals (made in Brazil), poured himself a glass of wine (made in
Chile), turned on his TV (made in Indonesia) and wondered why he cannot
find a job in America.
U.S. communities are losing manufacturing jobs. Americans who used to
make things for a living now have part time jobs at Wal-Mart selling
things made abroad. Taught not to worry by "new economy" reassurances,
Americans have maintained their consumption by taking the equity out of
their homes with refinancings. In the past five years, mortgage debt
has risen by 55 percent. Total personal debt now stands at 100 percent
of personal income. The United States has made the transition from the
accumulation of wealth to the consumption of wealth.
What is true for the individual in this case is also true for the
country. Massive U.S. trade deficits are being financed by giving
foreigners our assets. Every day, we hand over to foreigners another
billion dollars in Treasury bonds, corporate bonds, and real estate,
and corporate equities.
When we hand over our assets to pay for our consumption of manufactured
goods, we also hand over the incomes that these assets produce. The
interest incomes from Treasury and corporate bonds, the profits,
dividends and capital gains from equity ownership, and the rents and
capital gains from real estate pass from American hands to Chinese,
Japanese and other hands. Thus, Americans are not only losing the
incomes associated with the production of the goods they consume, but
also the incomes from the assets that they no longer control.
When I attempt to discuss this issue with my fellow economists, they
cite the case for free trade that Adam Smith made two and one-quarter
centuries ago and accuse me of being in the pay of corporate
protectionists who want to gouge consumers with high prices.
These responses tell me that free traders have ceased to think. First
of all, there are no corporate protectionists. Corporations oppose
protection, because tariffs and quotas would reduce or eliminate the
gains to their bottom lines from their use of inexpensive foreign labor
to manufacture goods for the American market. High- and low-tech U.S.
firms are not moving to Asia because the U.S. government refuses to
protect their American markets. They are moving their plants to Asia
because they can drive up their earnings by hiring efficient Asian
labor at a lower price per week than Americans demand per hour.
Second, Adam Smith directed his free trade argument against the belief
that countries should be self-sufficient and produce all of their own
needs. Smith said that incomes would be higher in every country if each
specialized in areas where they were most capable and satisfied demands
for other goods by trading.
Smith said that the British should not subsidize the production of wine
and perfume with tariffs, but should concentrate where the British had
advantage and trade with the French for wine and perfume. Smith did not
say that British industry should relocate abroad and use cheap foreign
labor to produce for their home markets.
For globalism to work, there needs to a single currency and a single
tax system -- a one world political system. Trade between countries is
not like trade within a country. Trade between countries involves
different currencies whose values change if there are persistent trade
deficits or surpluses. A country that runs up a large trade imbalance
due to its importation of cheap manufactured goods suddenly finds the
goods are no longer cheap when the value of its currency declines. The
companies that outsourced to benefit from cheap labor suddenly find
their profits impacted when the currency in their home market devalues.
For the United States, globalism has meant outsourcing. U.S.
manufacturers use Chinese labor to produce goods for the American
market. American firms locate their clerical and back-office operations
in India, and so on. When these goods and services flow back into the
United States, they arrive as imports. The United States is not
building up manufacturing sectors, agricultural sectors or service
sectors capable of restoring balance between imports and exports.
There is nothing to bring the massive trade imbalance into balance
except currency collapse. As fewer and fewer things are actually
produced in the United States, even dollar collapse cannot spur exports
sufficiently to pay for our import dependence. The United States is
being reduced to indebted Third World status, a country that retails
foreign made goods.
Recently, I asked if the United States would be a Third World country
in 20 years. Many emails arrived from Americans saying that their
communities had already been reduced to Third World status by the loss
of jobs and the arrival of Third World refugees and immigrants. They
said I was optimistic to believe that the United States had 20 years
left as a superpower.
Who is right, the American people who are experiencing globalism and
its effects or Washingtonians who hide behind theories while our
country is sold?
)2003 Creators Syndicate, Inc.
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