Nobel Economist Michael Spence - Offshoring has Destroyed the US Economy

Offshoring has Destroyed the US Economy

Nobel Economist Michael Spence Says Globalism Is Costly For Americans

Article by Dr. Paul Craig Roberts (Assistant Secretary of the Treasury in the Reagan Administration)

A Nobel prize-winning economist, assisted by Sandile Hlatshwayo, a researcher at NY University took a careful empirical look at jobs offshoring and concluded it has ruined the income and employment prospects for most Americans.

Dr. Paul Craig Roberts writes

"For a decade I have warned that US corporations, pressed by Wall Street and large retailers such as Wal-Mart, to move offshore their production for US consumer markets, were simultaneously moving offshore US GDP, US tax base, US consumer income, and irreplaceable career opportunities for American citizens.

Among the serious consequences of offshoring are the dismantling of the ladders of upward mobility that made the US an “opportunity society,” an extraordinary worsening of the income distribution, and large trade and federal budget deficits that cannot be closed by normal means. These deficits now threaten the US dollar’s role as world reserve currency.

I was not alone in making these warnings. Dr. Herman Daly, a former World Bank economist and professor at the University of Maryland, Dr. Charles McMillion, a Washington, DC, economic consultant, and Dr. Ralph Gomory, a distinguished mathematician and the world’s best trade theorist, understand that it is strictly impossible for an economy to be moved offshore and for the country with the offshored economy to remain prosperous."

GlobalResearch

Spence and Hlatshwayo report

“This paper examines the evolving structure of the American economy, specifically, the trends in employment, value added, and value added per employee from 1990 to 2008. These trends are closely connected with complementary trends in the size and structure of the global economy, particularly in the major emerging economies. Employing historical time series data from the Bureau of Labor Statistics and the Bureau of Economic Analysis, U.S. industries are separated into internationally tradable and non-tradable components, allowing for employment and value-added trends at both the industry and the aggregate level to be examined. Value added grew across the economy, but almost all of the incremental employment increase of 27.3 million jobs was on the non-tradable side. On the non-tradable side, government and health care are the largest employers and provided the largest increments (an additional 10.4 million jobs) over the past two decades. There are obvious questions about whether those trends can continue; without fast job creation in the non-tradable sector, the United States would already have faced a major employment challenge.

“The trends in value added per employee are consistent with the adverse movements in the distribution of U.S. income over the past twenty years, particularly the subdued income growth in the middle of the income range.

The tradable side of the economy is shifting up the value-added chain with lower and middle components of these chains moving abroad, especially to the rapidly growing emerging markets. The latter themselves are moving rapidly up the value-added chains, and higher-paying jobs may therefore leave the United States, following the migration pattern of lower-paying ones. The evolution of the U.S. economy supports the notion of there being a long-term structural challenge with respect to the quantity and quality of employment opportunities in the United States.

A related set of challenges concerns the income distribution; almost all incremental employment has occurred in the non-tradable sector, which has experienced much slower growth in value added per employee. Because that number is highly correlated with income, it goes a long way to explain the stagnation of wages across large segments of the workforce.”

Nobel Economist Michael Spence is saying that only jobs in government, education and health care and the like have grown in the USA while tradeable jobs that produce tangible goods and services have been exported leading to a lack of jobs in manufacturing and the like, which has caused wages to flat-line.

The article also points out that Michael Spence is saying that high value jobs which are being exported overseas (for instance manufacturing) are being replaced with low value jobs (for instance a job in McDonalds) and acknowledges that the change in the structure of American employment from higher productivity to lower productivity jobs is the reason both for the flat-lining in US consumer income and for the rising inequality of income.

Sending jobs abroad raised the earnings of capital but has led to lost jobs in manufacturing being replaced by jobs which pay much less in the service sector such as supermarkets and fast food restaurants, thereby causing the rich to get much richer and everyone else to compete for the fewer and fewer remaining high value jobs.

It is interesting to see a Nobel Economist effectively stating (using the language of an economist) what everyone else is seeing with their own eyes.

Globalisation and the offshoring of jobs does have winners and losers in the USA. The super rich win. Everyone else loses.

Income Gap Widens: Census Finds Record Gap Between Rich And Poor

In dollar terms, the rich are still getting richer, and the poor are falling further behind them.

The income gap between the richest and poorest Americans grew last year to its largest margin ever, a stark divide as Democrats and Republicans spar over whether to extend Bush-era tax cuts for the wealthy.

The top-earning 20 percent of Americans – those making more than $100,000 each year – received 49.4 percent of all income generated in the U.S., compared with the 3.4 percent made by the bottom 20 percent of earners, those who fell below the poverty line, according to the new figures. That ratio of 14.5-to-1 was an increase from 13.6 in 2008 and nearly double a low of 7.69 in 1968.

At the top, the wealthiest 5 percent of Americans, who earn more than $180,000, added slightly to their annual incomes last year, the data show. Families at the $50,000 median level slipped lower.

Three states – New York, Connecticut and Texas – and the District of Columbia had the largest gaps between rich and poor. Big gaps were also evident in large cities such as New York, Miami, Los Angeles, Boston and Atlanta, home to both highly paid financial and high-tech jobs as well as clusters of poorer immigrant and minority residents.

Alaska, Utah, Wyoming, Idaho and Hawaii had the smallest income gaps.

"Income inequality is rising, and if we took into account tax data, it would be even more," said Timothy Smeeding, a University of Wisconsin-Madison professor who specializes in poverty. "More than other countries, we have a very unequal income distribution where compensation goes to the top in a winner-takes-all economy."

HuffingtonPost

The rich are getting richer and the poor are getting poorer. A natural consequence of globalisation.

'Dismal' prospects: 1 in 2 Americans are now poor or low income

WASHINGTON - Squeezed by rising living costs, a record number of Americans — nearly 1 in 2 — have fallen into poverty or are scraping by on earnings that classify them as low income.

The latest census data depict a middle class that's shrinking as unemployment stays high and the government's safety net frays. The new numbers follow years of stagnating wages for the middle class that have hurt millions of workers and families.

University of Michigan public policy professor states

"The reality is that prospects for the poor and the near poor are dismal," he said. "If Congress and the states make further cuts, we can expect the number of poor and low-income families to rise for the next several years."

USNews

US census data confirms that the US middle class is now becoming part of the poor.

Yet US politicans support carrying on as before with outsourcing jobs.

Did you really think we needed a Nobel Prize winner to tell us something we already know???

Originally posted by LDragonFire
Did you really think we needed a Nobel Prize winner to tell us something we already know???

A very good point.

The sad fact is however that economists and their unquestioning dogma that globalisation is good, have been a main driving force for governments pursuing globalisation over the last 30 years without question.

The more economists who reject globalisation, the better. You need to be a Nobel economist however not to destroy your own career by questioning the orthodoxy. Everyone else is committing processional suicide.

I apologize ahead of time if I get somewhat off track. I do agree to a certain extent that shipping jobs overseas has been an issue.However, when looking at the cause of jobless rates in the U.S. it's the first and main reason people and groups point at. I honestly think it is shortsighted in a sense, in other words it's not being able to see the forest for the trees.I think one of the biggest issues that is often overlooked is how much technology is beginning to cut into the jobs sector. Take this article for example

But Autor also has his worries. He says machines used to take over work that was physically hard or dangerous or just monotonous. But now, he says, we're losing higher-skill, better-paying jobs to machines — like bank tellers, airline check-in agents, accountants and whole floors of actuaries in insurance companies.

Meanwhile, computers still aren't very good at many menial labor jobs like cleaning bathrooms and other janitorial work; we still need humans for that. So it turns out that for many very low-skill jobs, there's still demand. For high-skill and high-touch jobs like being a good manager at a company, a doctor or a nurse, we need humans. But many middle-skill, middle-class jobs are where we're seeing the squeeze.

Source Now it's not the greatest source, but if I were so inclined to look a little deeper I could site more sources. The Idea is that it illustrates the point I'm trying to make. Now we can call it job outsourcing all we want, and it is a very valid and strong argument. With that being said, those jobs are never coming back. Give it another five to ten years and those people in Asia are going to start feeling the employment issue as well. The way technology is advancing our archaic monetary and financial policies can't hand it. You have large part of the middle class that is being displaced employment wise with no answers to fix it because we're tied to these monetary policies. It's the belief that you do your part and you get paid. Now machines do a lot of the work people used to do for a fraction of the cost and higher output. It's all about profit now.

I completely and wholeheartedly agree with this viewpoint. I want to see the government actually do something to help the American people when it comes to major corporations and businesses taking advantage of people for profit. Of course, the government will not regulate any of these organizations, because they are the ones who give the big campaign contributions, as well as the other perks, payoffs, insider information, etc. under the table. Many politicians gain quite a lot from these unethical relationships, as is evidenced by the sheer number of corporate big-shots who have occupied high positions within the US government.

This is why they want to keep the government out of business, so they can continue their illegal and unethical practices to make more money for themselves and their cronies. Decent politicians are hard to come by these days. Since these corporations care about nothing but profit, every single thing they do is aimed at efficiency and reducing cost. They could care less about the economy or the average citizen, as long as they are still able to purchase their goods and services.

These businesses are directly responsible for the future revolution, which seems inevitable at this point, due to the massive corruption and lack of ethics, morals, and character. But they aren't ashamed of themselves, because they are getting richer and richer. When the revolution happens, they will be nowhere to be found in the US. I would love to see revolution averted, but it cannot happen with these same sociopaths in power in government and business.

Originally posted by GD21D
However, when looking at the cause of jobless rates in the U.S. it's the first and main reason people and groups point at. I honestly think it is shortsighted in a sense, in other words it's not being able to see the forest for the trees.

I think one of the biggest issues that is often overlooked is how much technology is beginning to cut into the jobs sector.

I agree with you but only to an extent.

The less automated manufacturing jobs are still out there. They are just now in China.

In the past, young people could join the job market and work in unskilled manufacturing jobs after leaving school.

Since those jobs have been exported overseas, that has proved impossible.

It will be very difficult to rectify the situation. Cost of local manufacturing vs imported products is prohibitive.

A strong sustainable economy requires a good balance. I can not see how it can be fixed

The person who finds a real solution will be the leader of the country.

reply to post by ollncasino


There just isn't any incentive for a country like China, or India, or the Philippines to pay a wage that would be similar to a wage earned in America. That's why we are seeing wages in America head south, instead of increasing wage earners pay and buying power worldwide we are seeing wage earners pay dwindle in the western world. They are intentionally creating a two class system worldwide, mainly a elite class and a slave class, calling it globalization.

Originally posted by JiggyPotamus
I completely and wholeheartedly agree with this viewpoint. I want to see the government actually do something to help the American people when it comes to major corporations and businesses taking advantage of people for profit.

I would love to see revolution averted, but it cannot happen with these same sociopaths in power in government and business.

As you say, the politicians have been bought and paid for.

You talk of revolution. It could be speculated that the only force that will stop globalization is Nationalism.

Yet the elites, if we use the UK as an example, have been working hard to destroy that with mass third work immigration and the creation of a climate of political correctness through the media which they have bought and paid for.

Originally posted by magma
It will be very difficult to rectify the situation. Cost of local manufacturing vs imported products is prohibitive.

A strong sustainable economy requires a good balance. I can not see how it can be fixed

The person who finds a real solution will be the leader of the country.

There is nothing wrong with trading with other countries as long as the wages in those other countries are similar. Globalization can even work as long as factories are not exported to the third world.

The problem is, if factories are allowed to close down in the West and be exported to China, India and Brazil, then on a wage cost basis, few if any manufacturing jobs will remain in the US.

Who will buy the cheap oursourced goods then?

Outsourcing to save money is perhaps good for an individual company. It is very bad for a whole national economy.

reply to post by ollncasino


The problem at hand though is the factories are in lower wage earning countries. So in order to balance national economies a blend of local production and manufacturing is required.

The problem is that is can not be fixed. Local workers are not going to work for 3rd world wages.

So as the offshore manufacturing cripples what is left of local productions, you are correct in that , nobody locally is employed and can not by the imported products

But who is going to fix the problem?

Originally posted by magma
reply to post by ollncasino

 

The problem at hand though is the factories are in lower wage earning countries. So in order to balance national economies a blend of local production and manufacturing is required.

The problem is that is can not be fixed. Local workers are not going to work for 3rd world wages.

They don't need to if tariffs are imposed on imports, thereby equalizing the cost of cheap labor countries exports to balance the advantage of cheap labor.

The EU, the USA and other high wage countries can trade with each other without tariffs. Only cheap wage countries need be equalized.

Not only will it stop the hemorrhaging of jobs to Asia, it will also encourage manufacturing in the West. Of course there would be losers. China and Brazil for instance would find it increasingly difficult to follow an export led economic model and would be forced to further manipulate their currency to stay competitive.

Gloablization can be reversed. It has happened before.

reply to post by JiggyPotamus
Now this is a discussion that is going somewhere.The second big economic issue that people misinterpret is the idea that wealth redistribution is bad. It's not wealth redistribution that I'm worried about, it's wealth hoarding that seems to be a very serious problem. Now I've done this before. How many billionaires do you think are in the world today? According to Forbes there were around 1,200 in 2011 Forbes That's 1,200 people that have more money than they could ever spend. And we're still not even talking about the true heavy hitters of the financial world. Now how many Americans do you think live under the poverty level? 46.2 million people in just the U.S. You read that right. NY TIMES I wouldn't necessarily promote taking away from people who have earned what they have. But, there seems to be an underlying issue nobody wants to touch. The argument could be made that a good amount of those billionaires create jobs for others, and they do. But who is really benefiting from those jobs. I would say the financial issues are very touchy subjects with a lot of people because the are intrinsically tied to the system from birth, and it's hard for most to think outside the box. I apologize to the OP as it wasn't my intention to overtake their thread. The financial systems of the world interest me because of something so simple being made so complicated. Sometimes it just seems to be made complicated so average people give up trying to understand it.

Originally posted by GD21D
Now this is a discussion that is going somewhere.

The second big economic issue that people misinterpret is the idea that wealth redistribution is bad. It's not wealth redistribution that I'm worried about, it's wealth hoarding that seems to be a very serious problem.

I apologize to the OP as it wasn't my intention to overtake their thread.

No, not at all. No need to apologize. I value your contribution and it is directly relevant to the Opening Post.

One point I would make however is that while the poor and to a lesser extent have savings, the rich have assets. How true is it to say that rich people hoard wealth? I'm not sure.

Even people who just put money in the bank are making those funds available for reinvestment in the real economy. The rich usually just cut out the middle man - the banks and invest directly in stock and bonds.

I do agree however that the poorer people are the more they spend their income while the rich tend to save and invest much more, so you are perhaps making a very important point.

Originally posted by ollncasino

Originally posted by magma
reply to post by ollncasino

 

The problem at hand though is the factories are in lower wage earning countries. So in order to balance national economies a blend of local production and manufacturing is required.

The problem is that is can not be fixed. Local workers are not going to work for 3rd world wages.

They don't need to if tariffs are imposed on imports, thereby equalizing the cost of cheap labor countries exports to balance the advantage of cheap labor.

The EU, the USA and other high wage countries can trade with each other without tariffs. Only cheap wage countries need be equalized.

Not only will it stop the hemorrhaging of jobs to Asia, it will also encourage manufacturing in the West. Of course there would be losers. China and Brazil for instance would find it increasingly difficult to follow an export led economic model and would be forced to further manipulate their currency to stay competitive.

Gloablization can be reversed. It has happened before.

In a utopic world the notion of tarrifs will provide equalization. This is not a utopic world. People actually want to buy $300 Led televisons. People want to buy cheap products. Put tarrifs and those products and throw more pain into the already painful system. China consumes raw minerals to produce those cheap products. Iron ore as an example. So suddenly we have just shot ourselves in the foot.

Originally posted by magma
In a utopic world the notion of tarrifs will provide equalization. This is not a utopic world. People actually want to buy $300 Led televisons. People want to buy cheap products. Put tarrifs and those products and throw more pain into the already painful system. China consumes raw minerals to produce those cheap products. Iron ore as an example. So suddenly we have just shot ourselves in the foot.

You make a valid point.

A major crisis such as a China vs. USA war would however provide the politcal capital to introduce such tariffs over night.

WWI put an end to the first era of globalisation. Many people felt that a UK/France war with Germany was impossible because the trade ties were so deep and the UK and France imported so many important German goods.

They were wrong.

reply to post by ollncasino


But it's been great for corporations!

And that's all that matters to Globalist...

Originally posted by Rockpuck
But it's been great for corporations!

And that's all that matters to Globalist...

Those global corporations also have a lot of money to spend to destroy the only force that can stop globalisation - nationalism.

Mass immigration and political correctness serve that purpose rather well.