The US economy
continues its slow death before our eyes, but economists, policymakers,
and most of the public are blind to the tottering fabled land
jobs in goods-producing industries declined by 64,000. The US
economy lost 4,000 jobs overall. The private sector created a
mere 24,000 jobs, all of which could be attributed to the 24,100
new jobs for waitresses and bartenders. The government sector
lost 28,000 jobs.
In the 21st
century the US economy has ceased to create jobs in export industries
and in industries that compete with imports. US job growth has
been confined to domestic services, principally to food services
and drinking places (waitresses and bartenders), private education
and health services (ambulatory health care and hospital orderlies),
and construction (which now has tanked). The lack of job growth
in higher productivity, higher paid occupations associated with
the American middle and upper middle classes will eventually kill
the US consumer market.
rate held steady, but that is because 340,000 Americans unable
to find jobs dropped out of the labor force in August. The US
measures unemployment only among the active work force, which
includes those seeking jobs. Those who are discouraged and have
given up are not counted as unemployed.
industries in long term decline as more and more production of
US firms is moved offshore, the engineering professions are in
decline. Managerial jobs are primarily confined to retail trade
and financial services.
and chains have curtailed opportunities for independent family
businesses, and the US governments open borders policy denies
unskilled jobs to the displaced members of the middle class.
When US companies
offshore their production for US markets, the consequences for
the US economy are highly detrimental. One consequence is that
foreign labor is substituted for US labor, resulting in a shriveling
of career opportunities and income growth in the US. Another is
that US Gross Domestic Product is turned into imports. By turning
US brand names into imports, offshoring has a double whammy on
the US trade deficit. Simultaneously, imports rise by the amount
of offshored production, and the supply of exportable manufactured
goods declines by the same amount.
US now has a trade deficit with every part of the world. In 2006
(the latest annual data), the US had a trade deficit totaling
The US trade
deficit with Europe was $142,538,000,000. With Canada the deficit
was $75,085,000,000. With Latin America it was $112,579,000,000
(of which $67,303,000,000 was with Mexico). The deficit with Asia
and Pacific was $409,765,000,000 (of which $233,087,000,000 was
with China and $90,966,000,000 was with Japan). With the Middle
East the deficit was $36,112,000,000, and with Africa the US trade
deficit was $62,192,000,000.
for three decades about the US oil deficit has created a false
impression among Americans that a self-sufficient America is impaired
only by dependence on Middle East oil. The fact of the matter
is that the total US deficit with OPEC, an organization that includes
as many countries outside the Middle East as within it, is $106,260,000,000,
or about one-eighth of the annual US trade deficit.
the US gets most of its oil from outside the Middle East, and
the US trade deficit reflects this fact. The US deficit with Nigeria,
Mexico, and Venezuela is 3.3 times larger than the US trade deficit
with the Middle East despite the fact that the US sells more to
Venezuela and 18 times more to Mexico than it does to Saudi Arabia.
What is striking
about US dependency on imports is that it is practically across
the board. Americans are dependent on imports of foreign foods,
feeds, and beverages in the amount of $8,975,000,000.
are dependent on imports of foreign Industrial supplies and materials
in the amount of $326,459,000,000 - more than three times US dependency
can no longer provide their own transportation. They are dependent
on imports of automotive vehicles, parts, and engines in the amount
of $149,499,000,000, or 1.5 times greater than the US dependency
to the automobile dependency, Americans are 3.4 times more dependent
on imports of manufactured consumer durable and nondurable goods
than they are on OPEC. Americans no longer can produce their own
clothes, shoes, or household appliances and have a trade deficit
in consumer manufactured goods in the amount of $336,118,000,000.
The US "superpower"
even has a deficit in capital goods, including machinery, electric
generating machinery, machine tools, computers, and telecommunications
it mean that the US has a $800 billion trade deficit?
that Americans are consuming $800 billion more than they are producing.
How do Americans
pay for it?
for it by giving up ownership of existing assets - stocks, bonds,
companies, real estate, commodities. America used to be a creditor
nation. Now America is a debtor nation. Foreigners own $2.5 trillion
more of American assets than Americans own of foreign assets.
When foreigners acquire ownership of US assets, they also acquire
ownership of the future income streams that the assets produce.
More income shifts away from Americans.
can Americans consume more than they can produce?
over-consumption can continue for as long as Americans can find
ways to go deeper in personal debt in order to finance their consumption
and for as long as the US dollar can remain the world reserve
century has brought Americans (with the exception of CEOs, hedge
fund managers and investment bankers) no growth in real median
household income. Americans have increased their consumption by
dropping their saving rate to the depression level of 1933 when
there was massive unemployment and by spending their home equity
and running up credit card bills. The ability of a population,
severely impacted by the loss of good jobs to foreigners as a
result of offshoring and H-1B work visas and by the bursting of
the housing bubble, to continue to accumulate more personal debt
is limited to say the least.
accept US dollars in exchange for their real goods and services,
because dollars can be used to settle every countrys international
accounts. By running a trade deficit, the US insures the financing
of its government budget deficit as the surplus dollars in foreign
hands are invested in US Treasuries and other dollar-denominated
ability of the US dollar to retain its reserve currency status
is eroding due to the continuous increases in US budget and trade
deficits. Today the world is literally flooded with dollars. In
attempts to reduce the rate at which they are accumulating dollars,
foreign governments and investors are diversifying into other
traded currencies. As a result, the dollar prices of the Euro,
UK pound, Canadian dollar, Thai baht, and other currencies have
been bid up. In the 21st century, the US dollar has declined about
33 per cent against other currencies. The US dollar remains the
reserve currency primarily due to habit and the lack of a clear
used in this article is freely available. It can be found at two
official US government sites: http://www.bea.gov/international/bp_web/simple.cfm?anon=71&table_id=20&area_id=3
data and the absence of growth in real income for most of the
population are inconsistent with reports of US GDP and productivity
growth. Economists take for granted that the work force is paid
in keeping with its productivity. A rise in productivity thus
translates into a rise in real incomes of workers. Yet, we have
had years of reported strong productivity growth but stagnant
or declining household incomes. And somehow the GDP is rising,
but not the incomes of the work force.
is wrong here. Either the data indicating productivity and GDP
growth are wrong or Karl Marx was right that capitalism works
to concentrate income in the hands of the few capitalists. A case
can be made for both explanations.
an economist, Susan Houseman, discovered that the reliability
of some US economics statistics has been impaired by offshoring.
Houseman found that cost reductions achieved by US firms shifting
production offshore are being miscounted as GDP growth in the
US and that productivity gains achieved by US firms when they
move design, research, and development offshore are showing up
as increases in US productivity. Obviously, production and productivity
that occur abroad are not part of the US domestic economy.
discovery rated a Business Week cover story last June 18, but
her important discovery seems already to have gone down the memory
hole. The economics profession has over-committed itself to the
"benefits" of offshoring, globalism, and the non-existent
"New Economy." Housemans discovery is too much
of a threat to economists human capital, corporate research
grants, and free market ideology.
have likewise let the story go, because in the 1990s the Clinton
administration and Congress permitted a few mega-corporations
to concentrate in their hands the ownership of the US media, which
reports in keeping with corporate and government interests.
for Marx is that offshoring has boosted corporate earnings by
lowering labor costs, thereby concentrating income growth in the
hands of the owners and managers of capital. According to Forbes
magazine, the top 20 earners among private equity and hedge fund
managers are earning average yearly compensation of $657,500,000,
with four actually earning more than $1 billion annually. The
otherwise excessive $36,400,000 average annual pay of the 20 top
earners among CEOs of publicly-held companies looks paltry by
comparison. The careers and financial prospects of many Americans
were destroyed to achieve these lofty earnings for the few.
realization that Americans are losing their economic future along
with their civil liberties and are on the verge of enserfment.
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: [email protected]
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In The Hole To China
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