The Emerging Third World U.S.
Francis Ferguson
OpEd News
February 26, 2008
I have an expression I present to my economics classes. It has a certain impact: the US is a third world nation, we just haven’t realized it yet. Our emerging status isn’t obvious. Products remain relatively cheap (energy excluded) despite the falling value of the dollar against most foreign currencies. But there are real signs.
Most Americans who are paying attention have noticed a long term decline in manufacturing jobs in the US. Quarter after quarter, year after year, the government reports job gains, but those gains are primarily in service industries: health care (we’re not talking doctors, here), restaurants and bars, retail trade and, until recently, construction. A close examination of the figures will usually reveal a decline in manufacturing jobs. This is not an accident.
The loss of American manufacturing jobs is largely the result of American firms moving their manufacturing off shore, to labor markets in which workers earn a tiny fraction of US wages. Once the globalization process began in earnest, it became impossible for many American firms to maintain US production even if the wished to. Keeping jobs here would render these firm uncompetitive as the rivals moved to take advantage of peasant wages in places like China , India and other developing nations.
Over the past 30 years, American manufacturing has moved offshore at an accelerating rate. Walk through any big box store (or any other for that matter) and look where things are made. Overwhelmingly, it’s China or other developing nations. The process is inexorable. With “Globalization” we have opened the world’s borders to free trade in goods and services. On the one hand, this has presented opportunities for US manufacturers to expand profits by shifting production to countries where wages are a tiny fraction of those in the United States. Goods made abroad can be sold at an attractive price in the US while still allowing producers to increase the difference between price and total cost, otherwise known a profit. Those companies with a sense of national pride and identity are, finally, forced to move some or all of their production offshore in order to survive.
Aside from the short term charm of finding bargains on the shopping rack, there are serious consequences here. Let’s look them. The first problem is the disappearance of the American “living wage”. The only reason Americans have managed to avoid confronting their declining real income per capita it by increasing the number of family members working. There was a time, in American mythology at least, when people accepted that one working family member could support 4 people at a reasonable standard of living. This was the vision of America Nixon and Krushchev debated, famously, at an exhibit of the postulated US living standards presented in the Soviet Union. This was the Ozzie and Harriet version of American life which was broadcast to the world and to the home audience as standard: the norm. It wasn’t, of course, but it was close enough to what middle America saw around them to be at least plausible. The incomes implicit in that early 1960’s view of American life may have improved until the early 1970’s (there was a war going on and war is always good for employment and incomes), but since that time statistics indicate that the real (inflation adjusted) incomes of American working people have actually declined.
Already, young people are finding no jobs, or a universe of job opportunities which pay poverty wages This is a problem that is not going away. It’s going to get worse.
A revealing example of this is the February 12th 2008 decision by General Motors to offer buyouts to all 74,000 union hourly workers. This followed closely a similar action by Ford. This would include severance packages for all employees, varying in terms depending on years of service. Relatively new employee’s would get a lump sum payment for leaving and forfeiting all health and post retirement benefits. The new workers, waiting in the wings, will earn on average $16 and hour as opposed to the current average $28 an hour. That rounds to a 43% reduction in income, and little is revealed about what benefits these new workers will receive, or whether or not the will have union representation—though I expect they will. Here is an example of a central, traditional area of American employment were workers are moving from an average of $58,240 pre tax per year to $33,280 pre tax. Obviously, these people have a surprising readjustment to make. They’re just the prominent tip of the iceberg. Already, young people are finding no jobs, or a universe of job opportunities which pay poverty wages. It’s why so many young workers (and unemployed youngsters) live at home
ASK HILLARY ABOUT NAFTA! What would Hillary’s CHAIN MIGRATION do? Except quadruple the number of illiterate Mexican gang!
This is a problem that is not going away. It’s going to get worse. Several convergent forces are leading to US economic destabilization. One force driving this tragedy is free trade, also called globalization. One of the more profound spokesmen on this subject is Paul Craig Roberts an economist in the Reagan Administration who has written extensively on the topic and lends support to the argument that globalization is on the verge of ruining the US economy.
The loss of American manufacturing jobs is largely the result of American firms moving their manufacturing off shore, to labor markets in which workers earn a tiny fraction of US wages. Once the globalization process began in earnest, it became impossible for many American firms to maintain US production even if the wished to. Keeping jobs here would render these firm uncompetitive as the rivals moved to take advantage of peasant wages in places like China , India and other developing nations. Even signature American enterprises such as Boing are moving larger segments of their airliner manufacturing to other countries. The finished sub assemblies for the 777 Dreamliner, for example, are flown to Seattle for final assembly. Highly skilled professionals, such as radiologists (medical doctors specializing in interpreting X rays) are finding their work sent via high speed communications to much lower paid radiologists in places like India. The effect of allowing the unimpeded flow of capital and goods and services between nations is precisely the same as allowing the free movement of people across borders. In the end, we will experience a relative equalization of wages, world wide. Obviously, those in the current Third World will find wages improving. With billions of impoverished workers waiting in the “wings”, US workers will find their wage declines much more starting and profound than the increases granted to the struggling poor of the developing world.
have financed the war in Iraq and Afghanistan.
The ultimate point, here, is the absolute unsustainability of the US’s position. We cannot expect our trading partners to hold dollars in unlimited quantities, and as we’ve no hope of being able to achieve a positive balance of trade, that’s exactly what we are effectively seeking. That nations are cautiously moving out of dollar holdings is revealed by the rather steady overall decline in the value of the dollar over the past three years. This will continue.
With the falling dollar, rising import prices and declining wages and salaries for American workers, the US is headed for a radically different lifestyle. Until US wages fall far enough to make us competitive with workers in developing nations, our decline will continue. Globalization let this evil genie out of it’s bottle, and it’s not clear that anything can force it back.
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The Washington Times www.washingtontimes.com ARRIVAL OF ALIENS OUTS U.S. WORKERS
By Jerry Seper THE WASHINGTON TIMES Published April 10, 2006An Alabama employment agency that sent 70 laborers and construction workers to job sites in that state in the aftermath of Hurricane Katrina says the men were sent home after just two weeks on the job by employers who told them "the Mexicans had arrived" and were willing to work for less. Linda Swope, who operates Complete Employment Services Inc. in Mobile, Ala., told The Washington Times last week that the workers -- whom she described as U.S. citizens, residents of Alabama and predominantly black -- had been "urgently requested" by contractors hired to rebuild and clear devastated areas of the state, but were told to leave three job sites when the foreign workers showed up. "After Katrina, our company had 70 workers on the job the first day, but the companies decided they didn't need them anymore because the Mexicans had arrived," Mrs. Swope said. "I assure you it is not true that Americans don't want to work. "We had been told that 270 jobs might be available, and we could have filled every one of them with men from this area, most of whom lost their jobs because of the hurricane," she said. "When we told the guys they would not be needed, they actually cried ... and we cried with them. This is a shame." Mrs. Swope said employment agencies throughout Alabama, Louisiana and Mississippi faced similar problems, when thousands of men from Mexico and several Central and South American countries -- many in crowded buses and trucks -- came into the three states after Katrina, looking for employment and willing to work for less money. The number of foreign workers who flooded the area after the hurricane has been estimated at more than 30,000. Many of them have been identified by law-enforcement authorities and others as illegal aliens. The Gulf Coast Latin American Association noted in a report that whether those workers will remain after the cleanup work is completed is not clear, but the longer those jobs last, the more likely it is that the workers will settle permanently. After Hurricane Andrew hit southeastern Florida in 1992, the association said, the construction boom attracted large numbers of Hispanic immigrants to several areas, including Homestead, Fla., where the Latino population doubled during the 1990s. Many of the illegal aliens came into the Gulf Coast states not only from south of the border but also from California, Arizona and Texas, responding to the demand for workers. U.S. Border Patrol officials in the three states have reported an increase in the number of illegals apprehended. Some of the migrants who did get jobs in the Gulf states also were mistreated, records show. Two class-action lawsuits are pending in federal court in New Orleans in which thousands of migrant workers said they never were paid, although many worked 12-hour shifts, seven days a week and were required to remove toxic contamination from hurricane-ravaged buildings. Some of the named companies were working on contracts from the Federal Emergency Management Agency (FEMA) and other government agencies. Government estimates put at 400,000 the number of jobs lost in the Gulf region as a result of Katrina, which displaced more than 1.5 million people, and many of those workers left the area to seek employment elsewhere because available construction, laborer and cleanup jobs in Alabama, Louisiana and Mississippi had been filled by foreign workers, including illegal aliens. President Bush last week signed the Katrina Emergency Assistance Act of 2006, which extended for 13 weeks unemployment compensation benefits to more than 140,000 residents of the Gulf states who were displaced from their jobs by Katrina. Their benefits, funded by FEMA, had expired March 4. Would-be employers in Alabama, Louisiana and Mississippi, awash in cleanup and reconstruction jobs, faced little in the way of legal problems in hiring the illegal aliens after Katrina because the Department of Homeland Security temporarily suspended the sanctioning of employers who hired workers unable to document their citizenship. Mr. Bush also had suspended the Davis-Bacon Act, which requires local contractors to pay "prevailing" wages, in the areas hit by Katrina to encourage reconstruction and cleanup. "The men we sent to jobs in Alabama were local fellows looking for work, men who needed jobs," Mrs. Swope said.
"After driving 50 miles to the work sites where they had been promised $10 an hour, they discovered the employers had found substitutes who were willing to work for less." ................
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