No question Ann is right again, whether you can stand Romney-vision or not.
Maybe if Mitt makes liberals mad and the Left livid enough, I might take a likin' to the boy.
Go Mitt! Sik em'
I will try and stay on topic but I could not help noticing your avatar, the good old F-4 Phantom. There were many of days that I would get Phantom bites working up and under door 22, that till it was replaced by the F-15. Talk about going from dark to light! In the world in which I and my family reside, ObamaRomney is considered a massive tool, heck my wife can not even look at that huge head of his. I am with veterans for Ron Paul. You may ask yourself why would veterans support him, well their are several compelling reasons and I have only the time to list a few, 1) Our wonderfull gov. shells out billions of dollars to Pakistan for one and many others, they turn around buy bullets that shoot us and our children down dead!!! Dr. Paul would like to put a stop to that, and guess what, every vet I know is really pissed! The next reason I would hope you would take a look at and get back to me on, I really would like your opinion on this, thank you.
US gripped with offshore economy. Max Keiser Interview with Paul Graig Roberts
Posted by smeddum on July 20, 2010
Sun, 18 Jul 2010
Jobs are becoming scarcer and scarcer particularly in the United States. Is it cyclical or is it structural? Is it something that America has completely turned its back on in a way that could potentially be a factor for decades going forward?
Max Keiser discusses this issue with Dr. Paul Craig Roberts who was in the Regan treasury, a former editor at the Wall Street Journal. He was inducted into the French legion honor. He is also an author; his latest book is How the economy was lost.
The following is the transcript of the interview:
Keiser: Andy Grove, the co-founder of Intel has just written an opinion piece for Bloomberg that has totally vindicated your long held argument against outsourcing American jobs, how to make American jobs before its too late, why don’t you start by telling us your history of arguing publicly against outsourcing jobs and what is it that Andy Grove is now saying that supports your argument?
Roberts: The offshoring of jobs started in a big way after 1990. It required the collapse of socialism and the opening of Chinese and Indian labor to the so-called first world corporations. What occurred was that corporations found that workers in China were just as productive as the Americans worked for us if they were working with American capital and technology.
So they began moving the jobs in manufacturing industry and now of course in professional services such as engineering, research, development; and over there, in China for example, the excess supplies of Chinese labor are so large that it holds the wages down far below the productivity of the workers so what was wages paid to Americans is transferred into returns to shareholders and returns to executives in the form of performance bonuses.
So this is one of the reasons for the much worse in the income distribution in America though the income is transferred from labor to shareholders and management. Though as this process got going, more and more was transferred and they kept the idea that somehow we were going to create new jobs to take the place of the old rusty manufacturing jobs that we would have new jobs and that we would have the innovating, with desire and financing.
Well the trouble with all of this is the former chairman of Intel has made clear, you can’t innovate if you don’t make, because you don’t know what’s going on. Innovation is done with things that are produced and new products grow up out of the production process. The unemployment rate is currently 20 percent. There is a myth that still exists that this is due to insufficient consumer spending and they still have the idea that with government deficits and easy money they can provoke the consumer into spending more and if this would revive the economy but the problem is that there are no jobs to call the work force back to.
Keiser: So the way this was sold to the American population, was this phrase: knowledge-economy and was somehow you don’t really need manufacturing jobs anymore, those can be outsourced, those can be shipped overseas and the knowledge of innovation and creating idea stays in the US and these are high paying jobs and this is going to make a robust economy. But what you told people, warned people about and what Andy Grove is talking about is that if you move the manufacturing away from the innovation, the innovation suffers because there is an institutional and cultural value added or the sum of the whole is greater than the parts when you have got all of the innovators and the manufacturers together and when you put those apart, what we are finding is that you lose both the jobs and the innovation because now much of the innovation in new technologies like green technologies, battery technologies, car technologies, are not coming from America but for this very reason, is that correct?
Roberts: That’s correct, and as Andy Grove won’t stop, you use the entire scaling up process. Suppose you do some innovation in Silicon Valley for example, it doesn’t result in any American jobs because when the product is taken to production, it’s taken to production offshore so the whole scaling up process going from the public eye into mass production for large markets that’s where the jobs are; that’s where the economic growth is and all of that has moved offshore, so even if for some limited period the Americans are still able to do a good innovation, all the scaling up is done offshore , so the jobs, are where the scaling up happens.
I thought that Andy Grove made an excellent example pointing that out. So what we are faced with now is, the economy has been moved offshore and American firms are now essentially sales firms, marketing firms and market to Americans that their products are produced in other countries. Now what this does obviously is that it separates the Americans from the income associated with the production of the business services that they consume and therefore they haven’t got the income to be the markets.
Keiser: Right and they replace that with debt, so they go deeper and deeper into debt, to buy in to these manufactured goods that are manufactured overseas and as a result not being able to service the debt and not having a job to service the debt and having wages that are competing now with folks in Asia and around the world, you find this systemic job loss in the US. Let me ask a question here, you have got a recognition of the problem, where Barack Obama, back in 2008 instead of dumping $10 or $15 trillion into the banking system to bail out Geithner and his buddies on Wall Street; what if Obama had put the money to work rebuilding America’s job infrastructure , well, it would still take a long time to see any results because you would have to educate the population, America’s educational infrastructure is not very competitive anymore around the world, you then would need to rebuild a manufacturing base because all the factories are out of date and not competitive with around the world plus America the brand has been tarnished with the Iraq invasion, with Abu Ghraib prison scandal, with Guantanamo Bay, with open torture by the administration, so to rebuild all of this would take decades but they haven’t even started yet. If Barack Obama suddenly woke up and said the banks are not my friends, we need to actually create real jobs for real people in America, how long will it take to rebuild real manufacturing competitive countries?
Roberts They wouldn’t be able to do it unless they change the incentives that the corporations face. Just let me say you touched an important part when you pointed out that when consumer incomes stop growing; they kept their economy going for almost a decade with the expansion of consumer debt, the low interest rate, they created real estate double let people refinance their houses.
The credit cards that they maxed out, any time they maxed out one they moved to another credit card, and it was this debt fuelled consumption that disguised the adverse effects of offshore for almost a decade; that’s one of the reasons why no one paid attention because the economy is looking good; look at all this consumption and they couldn’t comprehend that what was happening was a substitution of debt or what had been growth in real incomes. Well now that that debt has run its course, they’re all so in debt they can’t max out any more credit cards, they can’t refinance any more homes and spend the equity and so now we have this situation where they try to rely on traditional monetary policy to call people back to work when all the jobs have been sent offshore.
So how could they reverse this process? Well one way they can reverse it would be to change the way they tax the corporations. If corporations produce their value added domestically in the US, they can have a very low tax rate; if they produce the value added of the product offshore then they will have a very high tax rate. So with this kind of tax policy you can all set the advantage of the very cheap labor that they can hire in countries with large excess supplies and labor such as China and India and perhaps they are the reversal of the process.
Now one of the real problems with trying to do that is that now so many of the corporations are so heavily invested overseas that they wouldn’t see this in their interests and they may simply say well its better to leave the US entirely and reform as a company somewhere else so we are not subject to this taxation.
So I don’t know that anything much can be done at this point when you consider the enormous power of the business lobby and how this is just now sort of the conventional wisdom which is in people that you have to be a global company, it would be very difficult.
Keiser: You talk about incentives and using the tax rate as an incentive and you’re lowering the tax burden for domestically manufactured goods; for those companies that are hiring people domestically. Now what we will hear from folks over there at the New York Times like Paul Krugman and others is that what you’re talking about is protectionism and this is what happened in the 1930s during the depression; why is this not the case?
Roberts: Well its not the case because the Great Depression was caused by one third shrinkage in the supply of money.
This was one of the great achievements of Milton Friedman and Anna Schwartz; they went through all federal reserve, examined the records, the minutes and what they discovered was that we had a great depression because the federal reserve failed in its job and permitted the money supplied to shrink by one third, so with such a shrinkage in the money supply you can not maintain a same level of sales and prices and employment.
Now there’s another myth that was recently expressed in the Wall Street Journal by somebody who says “Andy Grove is my hero, I don’t understand why he is a protectionist; what is he talking about? We have always benefited from free trade!” Well that’s not true, the United States is not based on its success, and it’s not based on free trade. Our industrial development was a result of tax.
Keiser:Does America need an industrial policy to save American jobs?
Roberts:That’s right; we can’t have an economy without jobs.
Keiser:Now why is it so difficult, because even the word “jobs” in America has become a dirty word. People seem to think that only poor people have jobs, as a matter of fact if you have tried to get a job in America today, if you are currently unemployed, they wont even talk to you, so there’s a total disconnect between what makes an economy in terms of fundamental piece, that is to say jobs, how did this happen?
Roberts: Because of the very clever propaganda that economists conduct for the global corporations.
If you say protectionist, it’s a way of turning off debate or shedding up somebody who has some facts and also they have learned that being concerned with some jobs might be dangerous to their profits because at some point Americans will catch that all their jobs are exported . The biggest export is our jobs, so people who keep saying “protectionist”, what are they willing to do? Have a jobless economy so they can say we have free trade in the United States? But you see there’s a huge confusion because offshoring is not a free trade.
David Ricardo, who developed the theory of free trade, made it very clear that absolute advantage is totally different from comparative advantage. Free trade is based on comparative advantage which requires a country’s capital to remain at home, find its best use, employ its own workers and make products its best trade to other countries that are doing the same thing.
Keiser:How do you fight for jobs? What is left in the arsenal to fight for jobs?
Roberts:Nothing, one of the reasons they like offshoring is to destroy the unions so that’s one of the reasons free market economists and corporations are so keen on offshoring, it destroys the unions.
Even if monetary policy works; let’s suppose the banks were heavily indebted and the consumers were not so heavily indebted; and the banks could actually lend and the consumers could actually borrow; it still doesn’t lead to American jobs, maybe to retail clerks, but what the Americans would be buying with their credit would be the goods made offshore, so it doesn’t transfer into American jobs.
If you look at the job reports, the only jobs that have been created in the 21st century in America are domestic service jobs like waiters, bartenders, hospital orderlies, construction workers, real estate, they are continuing to lose manufacture jobs, and not creating jobs for scientists and engineers and this has now been going on for a decade.
There’s so much loss, so many skills, so much infrastructure. When you move the main factory offshore, you destroy all the suppliers all the way down to the foundry levels. What the US is going through is a process of disdevelopment of becoming an undeveloped economy; it’s the opposite of economic development going on in the US. I predicted it through the beginning of this century that if this continued in 20 years the US would be a third world country and we are now taking on attributes of a third world country, such as large scale unemployment.