Nov 042010

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Some economists, based on faulty thinking, have preached that globalization, implemented through trade agreements, would be a In 2010 Americans have the feeling that many jobs are never coming back.winning proposition for Americans. They took an outdated economic theory and applied it to a completely different world. The December 6, 2004 Business Week report shows that pro-globalization economists were having second thoughts about their predictions of  good jobs for American workers. Or for that matter, any jobs at all. Their concerns have become a reality over the last six years.

“Ever since Americans began fretting about globalization nearly three decades ago, economists have patiently explained why, on balance, it’s a boon to the U.S. Yes, some Americans lose their jobs, either  to imports or because factories move to labor-cheap countries such as China or India. But the bulk of this work is labor-intensive and lower-skilled and can be done more efficiently by countries that have an abundance of less-educated workers.

“In return, those countries buy more of our higher-valued goods made by skilled workers-for which the U.S. has a comparative advantage. The lost jobs and lower wages in the U.S., economists say, are more than offset when countries specialize like this, leading to more robust exports and lower prices on imported goods.” (Aaron Bernstein, Business Week)

These experts didn’t consider that third world countries would make wise decisions and learn from the west. Now China, India and other countries have highly educated citizens entering the work force, offering both skills and cheaper labor.

Business Week:

“Today…advances in telecommunications such as broadband and the Internet have led to a new type of trade that doesn’t fit neatly into the theory. Now that brainpower can zip around the world at low cost, a global market for skilled workers seems to be emerging for the first time–and has the potential to upset traditional notions of national specialization.”

That’s why, really, there is no reason to hire Americans at all in a global market. See free trade and funny math.

Chinese workers are educated, skilled and work cheap.“Now this long-held consensus is beginning to crack. True, China is emerging as a global powerhouse, realigning many economic relationships. But in the long run a more disruptive trend may be the fast-rising tide of white collar jobs shifting to cheap-labor countries. The fact that programming, engineering, and other high-skilled jobs are jumping to places such as China and India seems to conflict head-on with the 200-year-old doctrine of comparative advantage. With these countries now graduating more college students than the U.S. every year, economists are increasingly uncertain about just where the U.S. has an advantage anymore-or whether the standard framework for understanding globalization still applies in the face of so-called white-collar offshoring.

“Now we’ve got trade patterns that challenge the common view of trade theory, which might not be true anymore,” says Gary C. Hufbauer, a senior fellow at the Institute for International Economics (IIE), a Washington 9DC) think tank. A leading advocate of free- trade pacts, he still thinks white-collar job shifts (losses) are good for the U.S.”

Bernstein wonders “how much of the gains from trade will flow through to U.S. consumers…If blue- and white-collar employees alike are thrown into the global labor pool, a majority of workers could end up losing more than they gain in lower prices. Then the benefits of increased trade would go primarily to employers.” According to Harvard University trade economist Dani Rodrik, “It’s entirely possible that all workers will lose and shareholders will gain.”  (Workers are not even part of the equation.)

Something to consider:

“As skill levels improve in cheap-labor countries-for example, the new engineering class in India-competition is coming on in the very products for which the U.S. has had a global advantage, such as software. If the new competition drives prices down too much, U.S. export earnings will suffer, and the entire U.S. economy could end up worse off.”

Fast forward 6 years to now, November 2010, and see how great globalization has been for America.

Presidents Bush and Obama both boasted about our growing level of trade with our trading partners. But they never tell Americans that most of the trade consists of products we import. Before NAFTA, we maintained a surplus in our trade with Canada and Mexico. After NAFTA, the U.S. has consistently wound up with deficits. The same with China and other countries. Since we made that agreement to trade with China, our yearly deficits have gone up and we amassed a huge and growing debt with them. And soon we’ll have nothing to sell and our unemployment numbers will dwarf our current level. See Economy in Crisis, a clear and concise explanation.

Oct.17, 2010 – “Though some American firms are bringing overseas work back home, evidence is growing that companies are moving more jobs than ever to China and other countries-a trend that could exacerbate efforts to bring down the nation’s stubbornly high unemployment rate. (Don Lee, Tribune Washington Bureau)

“One sign of increased offshoring is the rising number of applications for federal Trade Adjustment Assistance…[provided] “to factory workers who lost their jobs because their work was sent overseas or was undercut by cheaper imports.”

From April to Sept. 30, 2010, employees from “about 1,200 offices and plants nationwide were approved for federal Trade Adjustment Assistance…20 percent more approvals than in the same period in 2009. (U.S. Labor Department)

But  employment at the overseas sites of U.S. multinational companies, from 2006 to 2008, were up significantly while at these corporations’ U.S. plants and offices, domestic employment was down. Many of these people will remain permanently out of work. Foreign workers, cheap wages, long hours, short contracts and no benefits are the reasons why America’s multinational corporations have a healthy bottom line. They are rolling in the money. Given the choice, American corporations would never again hire an American worker. See Bush, CEOs use global workforce to replace American workers.

John Challenger, chief executive of an outplacement and consulting firm:

“The paradigm has shifted…Most companies see the next phase or era of growth as global. That’ll still create jobs here, just not on the scale when they were focusing on growth in the U.S.

Corporations wanting to take on more labor costs? When was that? It means that most of the jobs in the next phase will be, as usual, for foreigners.

“That trend could further stall the recovery, which many economists believe will continue to lack vigor while unemployment remains at current levels-9.6 percent nationally.”

Transferring American jobs to third world countries is going strong, with Hewlett-Packard, Hilton Worldwide and JP Morgan Chase leading the way. HP is laying off employees in 10 states and moving jobs to Panama.

“The offshoring of American production and jobs has been going on for more than two decades, with service firms more recently pushing the trend. Experts say more offshoring could help U.S. firms better compete in the global economy, thus boosting sales and profits that will sustain them and generate new business.” Thus another group of workers is kicked to the curb. (Lee)

Lee confirms this:

“Eventually, stronger, expanding firms could create more opportunities for American workers, though that’s not a sure thing. More and more, for example, upscale engineering and development for products manufactured in China are being done in China_not in the U.S._near the centers of production.”

Chinese wind turbines are used for projects in the United States.Right now China is the place to go for everything; R&D, manufacturing, even green jobs, all done by cheap labor. Mexico is nice, too. Whirlpool just moved it’s Indiana plant to Mexico this summer, the land of peace and contentment, firing 1100 American workers.

And now green jobs, the second great job classification mentioned by experts on globalization that would replace the service sector, which replaced the manufacturing sector, is also a casualty of cheap labor. The Chinese are the leaders in green projects and manufacturing, followed by Germany, South Korea, Brazil, Japan, and the U.S. “Some 70 percent of the parts in renewable energy installations are manufactured overseas…” Many of these new jobs are going to China. Even if we could make wind turbines and parts on a par with China, cheap labor will continue to receive the world’s business.

From the article, China winning race for green jobs:

Is Mexico the next China?

“Even if the U.S. could shrink China’s green jobs lead, it would have to contend with a rising Mexico…”

“With a combination of cheap labor and geographic proximity, the United States third-largest trading partner is attracting attention from those looking for low-cost access to the North American clean-tech market…” Stacy Feldman.

According to AP business writers Christopher S, Rugaber and Michael Liedtke, job creation could be years away. And those jobs will be:

  • Professional fields with higher pay. Think lawyers, research scientists and software engineers.
  • Lower-skill and lower-paying jobs, like home health care aides and store clerks.

Andy Grove, former CEO of Intel, “is worried that the Silicon Valley innovation engine that people have come to rely on to offset the offshoring of other jobs is no longer there…[and] there are fewer manufacturing jobs in the US computer biz now than when the first PC was assembled in 1975.”

There are now 250,000 Chinese making Apple products and only 25,000 Americans doing the same. Grove asked, “What kind of a society are we going to have if it consists of highly paid people doing high-value-added work-and masses of unemployed?”

Experts are telling us that we are living in a global environment, soon to be a world without borders. Americans must change their worldview. In the future you may not be able to get a job in your own country, since anyone from Indonesia to Gabon could be competing for your job. The fact that you are an American means nothing. The number of people looking for jobs are in the billions and that’s the way corporations prefer it. That’s the way they planned it.

You are told that to have any chance to compete, you will have to become more educated. But there will be no job security and your pay will diminish as our nation becomes inundated with cheap labor.  You can forget about the American dream. That’s not in the plan.

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