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What Will Job Exports and Trade Deficits
Mean to the Future USA?
This month an International Monetary Fund report warned that the colossal U.S. trade deficit is a noose around the neck of not only the U.S. economy, but of a global economy "already too dependent on the willingness of American consumers to live beyond their means."
The U.S. annual trade deficit with other countries is expected to exceed $500 billion in 2003 and with jobs hemorrhaging out of the country and no tourniquet in sight, where is the economic miracle that will restore a healthy American economy?
Production jobs, once the ladder out of poverty into the middle-class and the foundation of the U.S. economy, have been disappearing at the rate of 61,000 per month for the last 37 months. They are now at their lowest level since 1941. The Christian Science Monitor reports that towns are being wiped out as manufacturing businesses from textiles, to electronics to furniture and fishing lures are closing their doors or moving production to China.
6,500 employees of the Pilllowtex towel factory were laid off in Kannapolis, North Carolina. Ten plants operated by the Hooker Furniture Corporation were shut down this summer. Mercury Marine of Wisconsin is shifting production to China. Magnequench of Indiana, an electronics firm partly owned by Chinese industrial interests, plans to relocate in China. Shockingly, Magnequench makes 80 percent of rare earth magnets used in smart bombs.
The August, 2003 issue of National Defense, says the erosion of the U.S. industrial base "has enormous national security implications. The U.S. is now so dependent on foreign countries for critical components and systems that it may have lost its ability to control its supply chains."
"The U.S. industrial base is being taken apart piece-by-piece and relocated to other nations," say trade analysts Pat Choate and Edward Miller. "In the process, much of America's industrial and military production base is being sold to foreign interests, and more importantly a significant portion of it is being physically relocated into other nations, including our most likely strategic rival. John McCoy, owner of Omnitech Technical Associates in Bellingham, Washington, says "China, with its huge supply of both educated and non-skilled cheap labor, cheap power and very modern production facilities, is being set up as the center of global manufacturing."
"Present American policy has lost touch with knowledge of how goods are produced," McCoy says. America without the capacity to renew and invent products will perish.
A September, 2003 article in New American by William Norman Grigg says that an academic study for the U.S. China Security Review Commission and the U.S. Trade Deficit Review Commission reports: "In the months since the enactment of Permanent Normal Trade Relations (PNTR) legislation with China in 2001, eighty American corporations announced intentions of shifting production to China. Since 1992, almost 800,000 U.S. job losses are a direct result of the U.S.-China trade deficit." A comparative number of lost jobs were the result of outsourcing to Mexico, says Griggs.
Hooker Furniture CEO Paul Toms says "most companies don't want to move their production, technology and finances offshore, but the scramble for cheap labor has taken on a life of its own. In order to compete and survive under today's policies and conditions, they have to move. Toms says he doesn't blame countries (such as China and India) for aggressively seeking employment for their own people.....but at some point, this country has to think about what's best for us."
Roger Chastain, president of Milliken & Co. textiles, told New American: "We're basically liquidating our whole middle class, polarizing people on the two extremes, haves and have-nots." If present trends continue, "we¹ll be a third world country."
A third world country is one where only a minority of the people can afford to buy lots of things. America has been different because for much of the last century its wealth has been widely dispersed and almost everybody could afford to buy things that most of the world's population could only dream about. Americans are still buying and basically fueling the global economy, but how long will that last with jobs flooding out of the country and debt-ridden U.S. consumers running out of steam at last?
In her new book, "Betrayal of Work," Beth Shulman says that adjusted for inflation the U.S. minimum wage has fallen by $2 since 1968 and that there has been a continual increase since the 1970s of workers earning a poverty wage. Almost one third of American employees now earn wages at the poverty level or below ($8.70 for a family of four).
Canadian financial analyst and money manager Leonard Melman says the publicized anemic upturn of the U.S. economy is "mostly illusory, being brought about not by vigorous economic activity, but rather primarily by cost-cutting measures that cannot be sustained." Melman says, as a group, corporations are not hiring new workers but are actually still trimming payrolls at a brisk pace. For example, companies such as high-tech giant Cisco Systems report positively that their earnings doubled. In actuality, Cisco Systems sales declined in the past year. All the improvements came from cost-cutting, including the elimination of 10,000 jobs! Yet the government issues reports on improved productivity. When the stock market surges or the government applauds higher productivity, it has now become common to hear the quip: "Gee, I wonder how many people lost their jobs today!"
In an editorial titled "The Job-less Recovery," the Washington Times says non-farm employment plummeted by 93,000 jobs in August alone. Especially disturbing, the piece notes, is that 67,000 jobs were lost in the service sector. It is now admitted that the private sector economy has lost at least 3.3 million jobs in the last two years!
Stock market activity is deceptive, too, Melman says. Company executives are SAYING that the outlook for their companies is not as bad as they thought, or even quite good. But what they are DOING is remarkably different. As a group, Melman says, corporate officers and directors have been unloading their own shares, as Barron's Alan Abelson put it, "like there's no tomorrow." According to Lon Gerber, director of Insider Research for Thomson Financial, America's corporate insiders bought $73 million worth of their own stock during June.
In the same period of time, they sold $2.4 BILLION of their own shares!
So, while they were saying conditions were generally improving, what they were doing was selling their own shares at a rate 33 times faster than they were buying.
"That doesn't sound much like confidence in the future to me," Melman wrote. "It sounds more like a confidence game."
I'm a compulsive gatherer of information. A little bit here and a little bit there, because that's the only way it ever comes. I'll put pieces together like my version of a jigsaw puzzle and, as Bill O'Reilly says, you decide.
Payson.cc © 2004 Carrol Cox
Payson Arizona Editorial and Opinions on National USA / World / and Local News Issues