How the Economy Was Lost: The War of the Worlds (Counterpunch) (3 page)

It is amazing to see free-market economists rush to the defense of H-1B visas. The visas are nothing but a subsidy to U.S. companies at the expense of U.S. citizens. Keep in mind the H-1B subsidy to U.S. corporations for employing foreign workers in place of Americans as we examine the Labor Department’s job projections over the 2004–2014 decade.

All of the occupations with the largest projected employment growth (in terms of the number of jobs) over the next decade are in nontradable domestic services. The top ten sources of the most jobs in “superpower” America are: retail salespersons, registered nurses, postsecondary teachers, customer service representatives, janitors and cleaners, waiters and waitresses, food preparation (includes fast food), home health aides, nursing aides, orderlies and attendants, general and operations managers. Note than none of this projected employment growth will contribute one nickel toward producing goods and services that could be exported to help close the huge U.S. trade deficit. Note, also, that few of these job classifications require a college education.

Among the fastest growing occupations (in terms of rate of growth), seven of the ten are in health care and social assistance. The three remaining fields are: network systems and data analysis with 126,000 jobs projected, or 12,600 per year; computer software engineering applications with 222,000 jobs projected, or 22,200 per year; and computer software engineering systems software with 146,000 jobs projected, or 14,600 per year.

Assuming these projections are realized, how many of the computer engineering and network systems jobs will go to Americans? Not many, considering the 65,000 H-1B visas each year (bills have been introduced in Congress to raise the number) and the loss during the past five years of 761,000 jobs in the information sector and computer systems design and related sectors.

Judging from its ten-year jobs projections, the U.S. Department of Labor does not expect to see any significant high-tech job growth in the U.S. The knowledge jobs are being outsourced even more rapidly than the manufacturing jobs. The so-called “new economy” was just another hoax perpetrated on the American people.

If outsourcing jobs offshore is good for U.S. employment, why won’t the U.S. Department of Commerce release the 200-page, $335,000 study of the impact of the offshoring of U.S. high-tech jobs? Republican political appointees reduced the 200-page report to 12 pages of public relations hype and refuse to allow the Department of Commerce’s Technology Administration experts who wrote the report to testify before Congress. Democrats on the House Science Committee are unable to pry the study out of the hands of Commerce Secretary Carlos Gutierrez. On March 29, 2006, Republicans on the House Science Committee voted down a resolution designed to force the Commerce Department to release the study to Congress. Obviously, the facts don’t fit the Bush regime’s globalization hype.

The BLS payroll data that we have been examining tracks employment by industry classification. This is not the same thing as occupational classification. For example, companies in almost every industry and area of business employ people in computer-related occupations. A recent study from the Association for Computing Machinery claims, “Despite all the publicity in the United States about jobs being lost to India and China, the size of the IT employment market in the United States today is higher than it was at the height of the dot.com boom. Information technology appears as though it will be a growth area at least for the coming decade.”

We can check this claim by turning to the BLS Occupational Employment Statistics. We will look at “computer and mathematical employment” and “architecture and engineering employment.”

Computer and mathematical employment includes such fields as “software engineers applications,” “software engineers systems software,” “computer programmers,” “network systems and data communications,” and “mathematicians.” Has this occupation been a source of job growth? In November of 2000 this occupation employed 2,932,810 people. In November of 2004 (the latest data available), this occupation employed 2,932,790, or 20 people fewer. Employment in this field has been stagnant for four years.

During these four years, there have been employment shifts within the various fields of this occupation. For example, employment of computer programmers declined by 134,630, while employment of software engineers applications rose by 65,080, and employment of software engineers systems software rose by 59,600. (These shifts probably merely reflect change in job title from programmer to software engineer.)

These figures do not tell us whether any gain in software engineering jobs went to Americans. According to professor Norm Matloff, in 2002 there were 463,000 computer-related H-1B visa holders in the U.S. Similarly, the 134,630 lost computer programming jobs (if not merely a job title change) may have been outsourced offshore to foreign affiliates.

Architecture and engineering employment includes all the architecture and engineering fields except software engineering. The total employment of architects and engineers in the U.S. declined by 120,700 between November 1999 and November 2004. Employment declined by 189,940 between November 2000 and November 2004, and by 103,390 between November 2001 and November 2004.

There are variations among fields. Between November 2000 and November 2004, for example, U.S. employment of electrical engineers fell by 15,280. Employment of computer hardware engineers rose by 15,990 (possibly these are job title reclassifications). Overall, however, over 100,000 engineering jobs were lost. We do not know how many of the lost jobs were outsourced offshore to foreign affiliates or how many American engineers were dismissed and replaced by foreign holders of H-1B or L-1 visas.

Clearly, engineering and computer-related employment in the U.S.A. has not been growing, whether measured by industry or by occupation. Moreover, with a half million or more foreigners in the U.S. on work visas, the overall employment numbers do not represent employment of Americans.

American employees have been abandoned by American corporations and by their representatives in Congress. America remains a land of opportunity—but for foreigners—not for the native born. A country whose work force is concentrated in domestic nontradable services has no need for scientists and engineers and no need for universities. Even the projected jobs in nursing and school teaching can be filled by foreigners on H-1B visas.

The myth has been firmly established that the jobs the U.S. is outsourcing offshore are being replaced with better jobs. There is no sign of these jobs in the payroll jobs data or in the occupational employment statistics. When a country loses entry-level jobs, it has no one to promote to senior level jobs. When manufacturing leaves, so does engineering, design, research and development, and innovation itself.

On February 16, 2006, the
New York Times
reported on a new study presented to the National Academies of Science that concludes that outsourcing is climbing the skills ladder. A survey of 200 multinational corporations representing 15 industries in the U.S. and Europe found that 38 percent planned to change substantially the worldwide distribution of their research and development work, sending it to India and China. According to the
New York Times
, “More companies in the survey said they planned to decrease research and development employment in the United States and Europe than planned to increase employment.”

The study and the discussion it provoked came to untenable remedies. Many believe that a primary reason for the shift of R&D to India and China is the erosion of scientific prowess in the U.S. due to lack of math and science proficiency of American students and their reluctance to pursue careers in science and engineering. This belief begs the question why students would chase after careers that are being outsourced abroad.

The main author of the study, Georgia Tech professor Marie Thursby, believes that American science and engineering depend on having “an environment that fosters the development of a high-quality work force and productive collaboration between corporations and universities.” The dean of Engineering at the University of California, Berkeley, thinks the answer is to recruit the top people in China and India and bring them to Berkeley. No one seems to understand that research, development, design, and innovation take place in countries where things are made. The loss of manufacturing means ultimately the loss of engineering and science. The newest plants embody the latest technology. If these plants are abroad, that is where the cutting edge resides.

The denial of jobs reality has become an art form for economists, libertarians, the Bush regime, and journalists. Except for CNN’s Lou Dobbs, no accurate reporting is available in the “mainstream media.”

Economists have failed to examine the incompatibility of offshoring with free trade. Economists are so accustomed to shouting down protectionists that they dismiss any complaint about globalization’s impact on domestic jobs as the ignorant voice of a protectionist seeking to preserve the buggy whip industry. Matthew J. Slaughter, a Dartmouth economics professor rewarded for his service to offshoring with appointment to President Bush’s Council of Economic Advisers, suffered no harm to his reputation when he carelessly wrote, “For every one job that U.S. multinationals created abroad in their foreign affiliates, they created nearly two U.S. jobs in their parent operations.” In other words, Slaughter claims that offshoring is creating more American jobs than foreign ones.

How did Slaughter arrive at this conclusion? Not by consulting the BLS payroll jobs data or the BLS Occupational Employment Statistics. Instead, Slaughter measured the growth of U.S. multinational employment and failed to take into account the two reasons for the increase in multinational employment: (1) Multinationals acquired many existing smaller firms, thus raising multinational employment but not overall employment, and (2) many U.S. firms established foreign operations for the first time and thereby became multinationals, thus adding their existing employment to Slaughter’s number for multinational employment.

ABC News’ John Stossel, a libertarian hero, recently made a similar error. In debunking Lou Dobbs’ concern with U.S. jobs lost to offshore outsourcing, Stossel invoked the California-based company, Collabnet. He quotes the CEO’s claim that outsourcing saves his company money and lets him hire more Americans. Turning to Collabnet’s webpage, it is very instructive to see the employment opportunities that the company posts for the United States and for India.

In India, Collabnet has openings (at time of writing) for eight engineers, a sales engineer, a technical writer, and a telemarketing representative. In the U.S. Collabnet has openings for one engineer, a receptionist/office assistant, and positions in marketing, sales, services, and operations. Collabnet is a perfect example of what Lou Dobbs and I report: the engineering and design jobs move abroad, and Americans are employed to sell and market the foreign-made products.

Other forms of deception are widely practiced. For example, Matthew Spiegleman, a Conference Board economist, claims that manufacturing jobs are only slightly higher paid than domestic service jobs, so there is no meaningful loss in income to Americans from offshoring. He reaches this conclusion by comparing only hourly pay and leaving out the longer manufacturing workweek and the associated benefits, such as health care and pensions.

Occasionally, however, real information escapes the spin machine. In February 2006 the National Association of Manufacturers, one of offshoring’s greatest boosters, released a report, “U.S. Manufacturing Innovation at Risk,” by economists Joel Popkin and Kathryn Kobe. The economists find that U.S. industry’s investment in research and development is not languishing after all. It just appears to be languishing, because it is rapidly being shifted overseas: “Funds provided for foreign-performed R&D have grown by almost 73 percent between 1999 and 2003, with a 36 percent increase in the number of firms funding foreign R&D.”

U.S. industry is still investing in R&D after all; it is just not hiring Americans to do the research and development. U.S. manufacturers still make things, only less and less in America with American labor. U.S. manufacturers still hire engineers, only they are foreign ones, not American ones.

In other words, everything is fine for U.S. manufacturers. It is just their former American work force that is in the doldrums. As these Americans happen to be customers for U.S. manufacturers, U.S. brand names will gradually lose their U.S. market. U.S. household median income has fallen for the past five years. Consumer demand has been kept alive by consumers’ spending their savings and home equity and going deeper into debt. It is not possible for debt to forever rise faster than income.

The United States is the first country in history to destroy the prospects and living standards of its labor force. It is amazing to watch freedom-loving libertarians and free-market economists serve as apologists for the dismantling of the ladders of upward mobility that made the America of old an opportunity society.

America is seeing a widening polarization into rich and poor. The resulting political instability and social strife will be terrible.

September 30, 2006

Chapter 5: Empire on the Brink - Zealots Bring Disaster to America

M
arch 12, 2008. Crude oil for April delivery hit $110 per
barrel. The U.S. dollar fell to a new low against the euro. It now takes $1.55 to purchase one euro.

These new highs against the dollar are the ongoing story of the collapse of the U.S. dollar as world reserve currency and corresponding collapse of American power.

Each new decision from the insane Bush regime pushes the dollar a little further along to oblivion. The same Fed announcement that boosted the stock market on March 11 sent the dollar reeling and the price of oil up. The Fed’s announcement that it and other central banks are going to deal with the derivative crisis by monetizing $200 billion of the troubled instruments signaled more dollar inflation.

Of course, something needed to be done to forestall an implosion of the financial system, but a less costly alternative was at hand. The mark-to-market rule could have been suspended in order to halt the forced sale and write down of assets and to provide time in which to sort out derivative values, which are higher than the fire sale prices.

More pressure on the dollar resulted from the decision to award the European company, Airbus, a $40 billion contract that could reach $100 billion to build U.S. Air Force tankers. In simple terms, that means another $40 to $100 billion added to the U.S. trade deficit, and a loss of $40 to $100 billion in U.S. Gross Domestic Product and associated jobs.

Of course, the Bush regime had to award the contract to Europe as a payoff for Europe’s support of the Bush regime’s wars of aggression in the Middle East. Europe is not going to provide Bush with diplomatic cover for his wars and NATO troops for his war in Afghanistan without a payoff.

Here is the picture: The U.S. economy, which has been kept alive by enormous debt expansion that has over-reached its limit, is falling into recession. The traditional way out by expanding the supply of money and credit is blocked by the impaired banking system, the levels of consumer debt, and the collapsing value of the U.S. dollar.

The Bush regime is attempting to bypass the stalled credit expansion by sending Americans $600 checks, money that will mainly be used to reduce existing credit card debt and not to fund new consumption.

The U.S. is dependent on foreigners not only for energy but also for manufactured goods and advanced technology products. The U.S. is dependent on foreigners to finance our consumption of $800 billion annually more than the U.S. produces. The U.S. is dependent on foreigners to finance its red ink wars, and the U.S. government’s budget deficit is now expanding as tax revenues decline with the declining economy.

The bottom line: U.S. power is enfeebled. U.S. power depends on the willingness of foreigners to finance our wars and on the willingness of foreigners to continue to accumulate depreciating dollar assets. The U.S. cannot close its trade deficit. Oil prices are rising, and offshore production of goods and services for U.S. markets results in a dollar-for-dollar increase in imports, while reducing the supply of domestic goods available for export.

The U.S. cannot close its budget deficit while it is squandering vast sums on wars that serve no U.S. purpose, handing out $150 billion in red ink rebates, and falling into recession.

U.S. living standards, which have been stagnant for years, will plummet once dollar decline forces China off the dollar peg. So far prices of the Chinese-made goods on Wal-Mart shelves have not risen, because the Chinese currency, pegged to the dollar, falls in value with the dollar. In a word, tottering U.S. living standards are being supported by China’s willingness to subsidize U.S. consumption by keeping its currency undervalued.

The U.S. is overextended economically and militarily, just as was Great Britain with the fall of France in the opening days of World War II. The British had the Americans to bail them out. After the chewing gum and bailing wire patch-ups are exhausted, who is going to bail us out?

March 13, 2008