Faith Based Economics

Whether Bush wins or Kerry, American problems remain. Here's a persuasive article by a prominent economist, focusing on American jobs. The article is taken from Counterpunch.com (Oct 9/10, 2004), and reprinted here for wider dissemination.

September Jobs Report
Faith-Based Economics

By PAUL CRAIG ROBERTS

The US economy has ceased to create jobs in tradable goods and services. The disastrous September payroll jobs data are a repeat of the monthly trend that has held for the nearly four years of the Bush administration.

Of September's 96,000 new jobs, 73% are accounted for by two categories: government jobs and temporary help! There were only 59,000 private sector jobs created in September, and 33,000 of those--56%--are temps! Manufacturing lost another 18,000 jobs. More Americans are employed in accommodations and food services than as production workers.

It is easy to blame the Bush administration, but the real blame lies with outsourcing and offshore production. By locating production for US markets offshore, US firms can substitute much cheaper foreign labor for US labor to make the goods and services sold to Americans. The high speed Internet makes it possible for US firms to hire foreigners residing abroad, where living costs are low, to do knowledge-based jobs formerly performed by US university graduates. The US is losing the ability to manufacture a range of advanced technology products and is now dependent on imports of advanced technology goods from China and Japan. Entire high tech occupations are beginning to disappear in America, with computer engineering enrollments in topflight schools such as M.I.T., Georgia Tech, and UC, Berkeley shrinking by 45%. Last week economist Joseph Stiglitz reported that median US income has fallen by over $1,500 in real terms over the past three and one-half years.

Despite all evidence to the contrary, "free market," "free-trade" economists continue to give assurances that Americans are prospering from outsourcing. This delusion is equivalent to the Bush administration's delusion that the US is winning in Iraq.

US multinational firms, whose top executives and shareholders benefit from outsourcing, hire think-tanks to produce "studies" that conclude Americans benefit from the loss of jobs and careers to foreigners. All the while the American labor force is being redirected into domestic nontradable services, an influx that depresses wages in domestic services. At the same time, illegal aliens are flooding into US construction jobs. Local governments and hospitals, claiming "shortages," import foreign teachers and nurses who will work for less. It is not clear
how many of the jobs created in September went to Americans.

Faced with hard facts, economists take refuge in deceitful nonsense equivalent to the Bush administration's claims that Saddam Hussein had weapons of mass destruction and was involved in the September 11 terrorist attacks.

As high-tech US jobs move offshore, economists chant a lemming-like chorus: the answer is more high-tech education. Bill Gates responds to shrinking job opportunities for American engineers by beating the drums for more engineering majors. Other economists claim that we need more tax cuts to help US firms acquire more capital with which to make US workers more productive and, thus, more competitive. This is a pointless exercise when the capital (and technology) is being used to employ foreigners in place of Americans. Other economists claim that outsourcing can only be a small problem, because 90% of US output produced offshore is sold in foreign markets. This claim overlooks the inherited foreign investment America
built up during its half century dominance of world trade and manufacturing. These foreign investments by US firms were made in order to sell in foreign markets, not as offshore platforms to serve domestic US markets.

Outsourcing and offshore production are new phenomena. They have not been around long enough to comprise a large share of US production abroad. But they have been around long enough to erode American employment and wages in tradable goods and services. When a US multinational ceases to produce in Ohio for its domestic markets, and moves the production abroad, the Ohio jobs disappear. Wages fall or stagnate in similar lines of work that still remain the the US.

When Intel, Microsoft and all the rest hire Asian software engineers, the US engineers are out of work. US careers are sent abroad and given to foreigners, and with them go the incomes that comprise America's ladders of upward mobility. American students are becoming aware of the facts, but economists hold firmly to their fantasy that other new and even better jobs are taking the place of those that have been outsourced. There is no evidence whatsoever in behalf of this claim. Economics has ceased to be an empirical science and has become a religious
faith.

Paul Craig Roberts is John M. Olin Fellow at the Institute for Political Economy and Research fellow at the Independent Institute. He is a former associate editor of the Wall Street Journal and a former assistant secretary of the U.S. Treasury. He is the co-author of The Tyranny of Good Intentions.