Thursday, October 29, 2015

Paul Craig Roberts — US On Road To Third World

On January 6, 2004, Senator Charles Schumer and I challenged the erroneous idea that jobs offshoring was free trade in a New York Times op-ed. Our article so astounded economists that within a few days Schumer and I were summoned to a Brookings Institution conference in Washington, DC, to explain our heresy. In the nationally televised conference, I declared that the consequence of jobs offshoring would be that the US would be a Third World country in 20 years.
That was 11 years ago, and the US is on course to descend to Third World status before the remaining nine years of my prediction have expired.…
Paul Craig Roberts
US On Road To Third World

11 comments:

Ryan Harris said...

I think the party line is that it is inevitable (TINA), and those jobs are never coming back anyway so you should just shuddup and get back to school for another degree. We don't want to do that sort of thing anyway (always someone employed with fat wages in finance, government or academe saying it!) The humorous part is that the implication is that there is no point in competing because we are not productive enough to compete against unproductive employees in the third world. Where productivity is defined in the double-speak economic manner, where productive really means you get paid alot but don't actually produce much real. And unproductive means you don't get paid alot but you produce alot of real goods that other people steal all the profit from. And so you go back to school to get another degree until you can figure out a way to abandon your morality and learn to extract rents from the 'unproductive'. Bizarro BS.
Until they expunge the orthodoxy from Universities and jail the ones in government, there is no hope of better labor, industrial, monetary or economic policy. TINA.

Can't beat them, join them. The funniest BS in the entire game is now that Chinese are raising wages and prices for all that unproductive stuff they do, American's are completely dumbfounded as to what to do. They blame it on the 1% as to why they can't compete and their quality of life is falling as they no longer have the means of production. Even with two people working in a family, they can't afford the same basic quality of life their single income grandparents did. But we're told the opposite, how great everything is. Look at your iphone, all that technology. wooo. And that healthcare, the quality. Wooo. A year's salary for a half hour with a doctor, but the quality! wooo wooo. 500 sq ft flat in a subdividved single family home, 20 years of your salary. Welcome to Orthodoxy. Woohoo.

Ignacio said...

Without the out of paradigm stuff this article is pretty good. Liking PCR more and more, but they should have thought better before trying to exterminate Russian population (the real goal of taking down the USSR) and by extension destroying the USSR.

Now you can have two cups of 'free markets' former Reagan supporters.

Peter Pan said...

The US is still competitive in manufacturing, it just doesn't employ as many people. That's an example of increased 'productivity'.

Ignacio said...

These jobs are not coming back... unless done by robots. White collar jobs are next on the line for automation, specially everything related with data processing and analysis can be already done much better by machines.

Data processing and generation of data for management is an area that will increase in the next 3 decades eliminating a lot of jobs, doing to the (business) service sector what automation did for agriculture and industry before.

Meanwhile management and capital will benefit from managing and owning (receptively) the means of production while the underclass (as the middle class disappears) struggles to pay tribute to the feudal lords in corporations and the state. Unless there is a fight back politically against the status quo off course.

Tom Hickey said...

The US is still competitive in manufacturing

The US is heavily dependent on its own weapons purchases and the US is also the numero uno weapons exporter. Without the military-industrial-political complex, and the military might to exact tribute, the US economy would be playing catch-up.

Ryan Harris said...

"The US is still competitive in manufacturing"

Of course they are! That's why all the companies rush to make low margin, labor intensive goods in the United States. The amazing productivity of US mfr workers ensures that low labor inputs into every unit keep labor costs down and prices competitive with intl mfrs. Not really. Is it labor costs are so high in the US? Adjusted for our amazing worker productivity, they are much, much lower.
Hard to think of a manufacturer that isn't opening factories in the US to take advantage of our amazing productivity. Not really though.

We do well in Pharma, Software, Tech as these sort of exports have been given regulatory monopolies and are by definition, non-competitive. Agriculture is given subsidy. Chemicals and fuels are protected from competition by regulatory barriers to entry, regulatory barriers to raw material exports and is non-competitive. Military and aviation are subsidized and protected. I'm sure there is some example out there of a competitive manufactured good where US workers are a good value. I just can think of one.

Ignacio said...

Which one? Curious... No one can beat zombiland (EU) on competitiveness, yet all you hear over hear is that we have to be more competitive (maybe they want to eport everythign we produce and import just paper!?). Is insane...

IMO in the US there are just too many people bleeding each other with schemes to be competitive, something like health-care with all the rip off and scams that go on cannot be competitive internationally. Is not like the American worker is uncompetitive (I'm pretty sure the average worker is hard working and competent at what they do), is that the American managerial class is too corrupt and scummy to be competitive in a fair marketplace. Maybe the American worker is too gullible?

Number one as scheming though... you gotta give them that (specially finance guys, the most useless parasitic of the economy).


The managerial class (and heir masters) is destroying the economy worldwide with their corruption and mediocrity.

Peter Pan said...

https://en.wikipedia.org/wiki/Manufacturing_in_the_United_States

"...The United States is the world's second largest manufacturer, with a 2010 industrial output of approximately $1,696.7 billion. In 2008, its manufacturing output was greater than that of the manufacturing output of China and India combined, despite manufacturing being a very small portion of the entire U.S economy, as compared to most other countries."

As I said, it does not employ as many people. Low margin, labour intensive manufacturing has been off-shored, leaving an industry that produces higher margin goods with fewer workers.

"...The United States produces approximately 21 percent of the world's manufacturing output, a number which has remained unchanged for the last 40 years. The job loss during this continual volume growth is explained by record-breaking productivity gains. In addition, growth in telecommunications, pharmaceuticals, aircraft, heavy machinery and other industries along with declines in low end, low-skill industries such as clothing, toys, and other simple manufacturing have resulted in U.S. jobs being more highly skilled and better paying."

Why do you think they are not competitive? Not all industries are protected, and for those that are, it is common to find similar policies in different countries.

Keep in mind that a good portion of manufacturing is not exported. This brings additional benefits to the domestic economy. The emphasis on exports, exports, and exports is misguided.

Ryan Harris said...

My beef isn't with industry. My beef is with economists and their goofy MFP models.

You've got to understand how value gets reported along the supply chain and why with manufacturing and accounting.

I am an apparel mfr. I sell nice shirts for $100 retail.

I open a plant in Vietnam, and produce shirts that cost me $8.00 to make. I pay $2.00 for shipping. I put $8.00 on the customs paperwork reported to US Treasury. It's the real number. My tariffs and taxes are kept to minimum and I don't end up with money stuck in Vietnam.

They arrive in the United States my staff put the shirts in a fancy package, take pictures of models wearing the items, we draw pictures of items for the vietnam factory to produce and select colors. We report our value added as being $50.00 when we sell them to a retailer for $60.00.

The retailer sells them for $100.00.

Now the 4 people in the US office look incredibly 'productive.' The 100 people in Vietnam not so much. This is how US manufacturing looks 'productive.' It is mostly a mirage of accounting gimmicks. The true cost of the shirt coming out of vietnam doesn't reflect the value of the shirt. The value added in the US office doesn't reflect the value added either. The rules are squishy.

Now our snappily dressed accountant points out that all the piles of money accumulating are leading to large tax bills! So we open a subsidiary in Ireland and transfer 'intellectual property' into the company for a nominal price. Now we say that value is created in Ireland instead of the United States and money flows to ireland. We float a small bond to determine market rates of interest and loan money from ireland subsidiary back to the US operations to avoid taxes. So according to economic MFP models, Irish workers are creative/innovators, US workers are kicking a&& and vietnam needs better governance! But it is all a sham. The only one that actually manufactured anything was Vietnam. The US marketed and distributed and Ireland was a tax haven. But not to economists!

Tom Hickey said...

A lot of the US heavy manufacturing is being off-shored through FDI. Transnational ops are becoming larger than the US national ops and exporting from the US.

Some US companies are also switching their HQ's to Qatar for tax advantages and lighter (no) regulation. Are they still US companies?

Apple is a US company, but it doesn't actually make anything in the US. The supply chain is global and manufacturing is, too. Ford manufactured and sold more vehicles in China in the most recent period than in the US. Same with FDI in the US. How to draw these lines?

The US is also facing much stronger competition in technology and heavy manufacturing as the ROW has been catching up after WWII. Same with UK, France, and Germany.

Russia is coming back on line industrially, and China and India are catching up fast technologically. They are increasingly partnering with Russia, too, not only because of the fx rate advantage but also greater willingness to share technology.

Peter Pan said...

How to draw these lines?

The Bureau of Labour Statistics has stats indicating employment numbers per sector. They indicate that fewer Americans are engaged in manufacturing.

The US, along with many other countries, will protect those industries that are deemed vital to their interests. Due to a lack of political representation, good paying jobs are not deemed vital.