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labor force participation rate.
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Freedom, Where Are You? Not in America or Europe — PCR
January 25, 2015 | Original Here Go here to sign up to receive email notice of this news letter
Freedom, Where Are You?
Not in America or Europe
Paul Craig Roberts
When the former Goldman Sachs executive who runs the European Central
Bank (ECB) announced that he was going to print 720 billion euros
annually with which to purchase bad debts from the politically connected
big banks, the euro sank and the stock market and Swiss franc shot up.
As in the US, quantitative easing (QE) serves to enrich the already
rich. It has no other purpose.
The well-heeled financial institutions that bought up the troubled
sovereign debt of Greece, Italy, Portugal, and Spain at low prices will
now sell the bonds to the ECB for high prices. And despite depression
level unemployment in most of Europe and austerity imposed on citizens,
the stock market rose in anticipation that much of the 60 billion new
euros that will be created each month will find its way into equity
prices. Liquidity fuels the stock market.
Where else can the money to go? Some will go into Swiss francs and
some into gold while gold is still available, but for the most part the
ECB is running the printing press in order to boost the wealth of the
stock-owning One Percent. The Federal Reserve and the ECB have taken
the West back to the days when a handful of aristocrats owned
everything.
The stock markets are bubbles blown by central bank money creation.
On the basis of traditional reasoning there is no sound reason to be in
equities, and sound investors have avoided them.
But there is no return anywhere else, and as the central banks are
run by the rich for the rich, sound reasoning has proved to be a mistake
for the past six years. This shows that corruption can prevail for an
indeterminable period over fundamentals.
As I demonstrated in my book, The Failure of Laissez Faire Capitalism,
first Goldman Sachs deceived lenders into over-lending to the Greek
government. Then Goldman Sachs former executives took over Greece’s
financial affairs and forced austerity upon the population in order to
prevent losses to the foreign lenders.
This established a new principle in Europe, one that the IMF has
relentlessly applied to Latin American and Third World debtors. The
principle is that when foreign lenders make mistakes and over-lend to
foreign governments, loading them up with debt, the bankers’ mistakes
are rectified by robbing the poor populations. Pensions, social
services, and public employment are cut, valuable resources are sold off
to foreigners for pennies on the dollar, and the government is forced
to support US foreign policy. John Perkins’ Confessions of an Economic Hit Man
describes the process perfectly. If you haven’t read Perkins book, you
have little idea how corrupt and vicious the United States is. Indeed,
Perkins shows that over-lending is intentional in order to set up the
country for looting.
This is what Goldman Sachs did to Greece, intentionally or unintentionally.
It took the Greeks a long time to realize it. Apparently, 36.5
percent of the population was awoken by rising poverty, unemployment,
and suicide rates. That figure, a little over one-third of the vote,
was enough to put Syriza in power in the just concluded Greek election,
throwing out the corrupt New Democracy party that has consistently sold
out the Greek people to the foreign banks. Nevertheless, 27.7 percent
of the Greeks, if the vote reporting is correct, voted for the party
that has sacrificed the Greek people to the banksters. Even in Greece, a
country accustomed to outpourings of people into the streets, a
significant percentage of the population is sufficiently brainwashed to
vote against their own interests.
Can Syriza do anything? It remains to be seen, but probably not. If
the political party had received 55% or 65% or 75% of the vote, yes.
But the largest vote at 36.5% does not show a unified country aware of
its plight and its looting at the hands of rich banksters. The vote
shows that a significant percentage of the Greek population supports
foreign looting of Greece.
Moreover, Syriza is up against the heavies: the German and
Netherlands banks who hold Greece’s loans and the governments that back
the banks, the European Union which is using the sovereign debt crisis
to destroy the sovereignty of the individual countries that comprise the
European Union, Washington which backs EU sovereign power over the
individual countries as it is easier to control one government than a
couple of dozen.
Already the Western financial presstitutes are warning Syriza not to
endanger its membership in the common currency by diverting from the
austerity model imposed from abroad on Greek citizens with the
complicity of New Democracy.
Apparently, there is a lack of formal means of exiting the EU and the
euro, but nevertheless Greece can be threatened with being thrown out.
Greece should welcome being thrown out.
Exiting the EU and the euro is the best thing that can happen to
Greece. A country without its own currency is not a sovereign country.
It is a vassal state of another power. A country without its own
currency cannot finance its own needs. Although the UK is a member of
the EU, the UK kept its own currency and is not subject to control by
the ECB. A country without its own money is powerless. It is a
non-entity.
If the US did not have its own dollar, the US would be of no consequence whatsoever on the world scene.
The EU and the euro were deception and trickery. Countries lost their
sovereignty. So much for Western “self-rule,” “freedom,” “democracy,”
all slogans without content. In the entire West there is nothing but
the looting of people by the One Percent who control the governments.
In America, the looting does not rely on indebtedness, because the US
dollar is the reserve currency and the US can print all the money
needed in order to pay its bills and redeem its debt. In America the
looting of labor has been through jobs offshoring.
American corporations discovered, and if they did not they were
informed by Wall Street to move offshore or be taken over, that they
could raise profits by moving their manufacturing operations abroad. The
lower labor cost resulted in higher profits, higher share prices, huge
managerial bonuses based on “performance,” and shareholder capital
gains. Offshoring greatly increased the inequality in income and wealth
in the US. Capital succeeded in looting labor.
The displaced well-paid manufacturing workers, if they were able to
find replacement jobs, worked part-time minimum wage jobs at Walmart and
Home Depot.
Economists, if they are entitled to the designation, such as Michael
Porter and Matthew Slaughter, promised Americans that the fictional “New
Economy” would produce better, higher-paying, and cleaner jobs for
Americans than the “dirty fingernail” jobs that we were fortunate our
corporations were moving offshore.
Years later, as I have proven conclusively, there is no sign of these
“New Economy” jobs. What we have instead is a sharp decline in the
labor force participation rate as the unemployed cannot find jobs. The
replacement jobs for the manufacturing jobs are mainly part-time
domestic service jobs.
People have to hold 2 or 3 of these jobs to make ends meet. These part time jobs offer no medical or pension benefits.
Now that this fact, once controversial believe it or not, has proven
completely true, the same bought-and-paid-for spokespersons for robbing
labor and destroying unions claim, without a shred of evidence, that the
offshored jobs are coming home.
According to these propagandists, we now have what is called “reshoring.” A “reshoring” propagandist claims that the growth of
“reshoring” over the past four years is 1,775 percent, an 18 times
increase. http://www.manufacturingnews.com/news/2015/A.T.Kearny-No-Data-Supporting-Reshoring-0112151.html
There is no sign whatsoever of these alleged “reshoring” jobs in the monthly BLS payroll jobs statistics.
What reshoring is all about is propaganda to counteract the belated
realization that “free trade” agreements and job offshoring were not
beneficial to the American economy or its work force, but were
beneficial only to the super-rich.
Like people throughout history, the American people are being turned
into serfs and slaves because the fools believe the lies that are fed to
them. They sit in front of Fox News, CNN, and whatever. They read the
New York Times. If you want to learn how badly Americans have been
served by the so-called media, read Howard Zinn’s A People’s History of the United States and Oliver Stone and Peter Kuznick’s The Untold History of the United States.
The media helps the government, and the private interests that profit
from their control of government, control the brainwashed public. We
have to invade Afghanistan because a faction there fighting for
political control of the country is protecting Osama bin Laden, whom the
US accuses without any proof of embarrassing the mighty US with the
9/11 attack. We have to invade Iraq because Saddam has “weapons of mass
destruction” that he surely has despite the reports to the contrary by
the weapons inspectors. We have to overthrow Gaddafi because of a slate
of lies that have best been forgotten. We have to overthrow Assad
because he used chemical weapons even though all evidence is to the
contrary. Russia is responsible for Ukraine problems, not because the
US overthrew the elected democratic government but because Russia
accepted a 97.6% vote of Crimeans to rejoin Russia where the province
had resided for hundreds of years before a Ukrainian Soviet leader,
Khrushchev, stuck Crimea into Ukraine, at the time a part of the Soviet
Union along with Russia.
War, War, War, that is all Washington wants. It enriches the
military/security complex, the largest component of the US GNP and the
largest contributor, along with Wall Street and the Israel Lobby, to US
political campaigns.
Anyone or any organization that offers truth to the lies is
demonized. Last week the new chief of the US Broadcasting Board of
Governors, Andrew Lack, listed the Russian TV Internet service Russia
Today as the equivalent of Boko Haram and the Islamic State terrorist
groups. This absurd accusation is a prelude to closing down RT in the US
just as Washington’s puppet UK government closed down Iran’s Press TV. http://rt.com/usa/225819-rt-isis-point-view-competition/
In other words, Anglo-Americans are not permitted any different news than what is served to them by “their” governments.
That is the state of “freedom” in the West today.
More Lies from “Our” Government: The Latest Jobs Report
November 10, 2014 | Original Here Go here to sign up to receive email notice of this news letter
More Lies from “Our” Government: The Latest Jobs Report
Paul Craig Roberts
Just as the German media has destroyed its credibility with lies, the US government is consistently destroying Washington’s credibility both with its own citizens and the rest of the world.
Russia and China, the other two significant nuclear powers, no longer believe anything Washington says or any agreement that the US government signs. The Russian and Chinese governments have observed that Washington does not obey its own statutory law, much less international law and treaties that Washington has signed. Russian President Vladimir Putin has criticized Washington for acting as if its will was the only law.
Europeans know that they and their governments are Washington’s vassals and that Europeans are impotent to do anything about it.
Some percentage of the 99 percent understand that Washington is aligned with the one percent against them and that their incomes and economic prospects will continue to decline.
Economists, or rather the few who haven’t sold their souls, know that the government’s economic data are pulled out of a magician’s hat and massaged to produce numbers contradicted by reality. Unemployment is measured according to methodologies designed to prevent its discovery. Inflation is measured according to methodologies designed to deny its existence. Jobs are reported that don’t exist, and GDP growth rates are announced that declines in real median family incomes and consumer credit make impossible.The poverty level income is set artificially low in order to minimize welfare spending.
The lies that Washington and the powerful private interest groups that control the US government tell us go unchallenged by the print and TV media and by NPR. The propaganda that Americans are fed is more extreme than the propaganda of Big Brother in George Orwell’s 1984.
In last Friday’s report the Bureau of Labor Statistics (BLS) tells us that the unemployment rate has declined to 5.8% and that 214,000 new jobs were created in October. Once again let me explain these lies to you. The unemployment rate is low because the one that the government and financial media emphasize does not count those millions of Americans who have become so discouraged from looking for jobs that do not exist, that they have quit looking. If you give up and stop searching for a job, the US government does not count you as a member of the work force. You are unemployed but not counted as unemployed.
The uncounted unemployed can be measured in the sharp 21st century decline in the labor force participation rate. The labor force participation rate has declined because there are no jobs to participate in. But Washington, the financial media, and the bought and paid for economists lie. They say the participation rate is down because the baby boomers are retiring. However, as John Titus, Dave Kranzler, and I documented with the government’s own data in a recent column, the participation rate of baby boomers is the highest of all and the only one that is rising. http://www.paulcraigroberts.org/2014/09/04/lie-serves-rich-roberts-titus-kranzler/
The reason is that with the Federal Reserves sole concern with the welfare of a small handful of mega-banks–the ones that sit on the board of the New York Federal Reserve Bank–real interest rates are negative. Therefore, retirees have no income from their retirement savings. (Generally speaking, retirees avoid stock investments, because they can lose a great deal from a major correction, and it can take more years than they have left for stocks to recover.) To supplement their Social Security pensions (a rigged CPI prevents or minimizes cost-of-living increases), retirees take the temporary, lowly paid jobs that are all that the US economy can produce. These jobs do not provide sufficient income with which to form a household.
As I have pointed out for a decade, or longer, the US economy no longer creates First World jobs. The US economy creates jobs for waitresses and bartenders, hospital orderlies, and retail clerks. The fact that the complexion of the US work force is becoming Third World is not considered a notable problem by the media or financial press, and economists seem immune to the facts.
Let’s look, once again, at the BLS payroll jobs report for October 2014: http://www.bls.gov/news.release/empsit.t17.htm
There are 209 thousand private jobs created and 5 thousand government jobs created.
Where are the private jobs?
Almost all of them–181,000–are in lowly paid private services.
Retail trade with 27,100 jobs, wholesale trade with 8,500 jobs, and transportation and warehousing with 13,300 jobs and 48,900 jobs. With middle class retail stores closing and even dollar stores failing and with consumer income (except for the rich) and credit (except for student loans) shrinking, do you really believe that consumer spending supported almost 50,000 new jobs in October?
Where is the money coming from?
The vast amount of money that the Fed has created has gone into the handful of mega-banks to support the banks. The banks are not buying consumer goods.
The BLS reports that 37,000 new jobs were created in October in professional and business services. Employment services, such as temporary help services, account for 24,000 or 65% of these jobs.
Another old standby is education and health care services, which provided 41,000 new jobs. Health care and social assistance provided 27,200 of these jobs and home health care services provided 7,400 of these jobs. Together lowly paid services provided 84% of the jobs in health care services.
Now we come to the major jobs sector in America: waitresses and bartenders. Waitresses and bartenders are classified under “leisure and hospitality,” which claims 52,000 new jobs in October of which 41,800 or 80 percent are waitresses and bartenders.
If you look at the jobs that the BLS reports the US is creating, they are third world jobs. How is the US “the world’s only superpower” when it cannot create a middle class job.
Amidst the media hype of 214,000 new October jobs, here are some very disturbing facts: In October job cuts rose 68% from the previous month and 12 percent from the previous year. So far there have been 414,591 job eliminations in 2014 with 51,183 of these coming in October.
Where are the job cuts? Retail store closings have produced 38,948 retail job reductions in 2014 with 6,874 of those coming in October. Yet, the BLS reports consistent job growth in retail jobs.
Hewlett Packard cut 5,000 jobs in October, bringing its year’s total to 21,000 lost jobs.
Microsoft eliminated 6,509 jobs in October for a year to date layoff of 55,511, a rise of 92 % from 2013.
In October the electronics industry cut 1,648 jobs, bringing the year to date loss to 18,153.
The telecommunications industry cut 5,217 jobs, bringing the year to date loss to 20,038, an increase of 81% from 2013.
According to Wolf Richter, US job losses in the tech sector have risen 97 % from the previous year. http://wolfstreet.com/2014/11/07/layoffs-explode-in-big-old-american-tech/
My point is: how does consumer demand grow in order to propel the economy when good jobs are replaced by low-paying jobs?
Perhaps one day economists will notice the problem.
The De-industrialization of America
August 11, 2014 | Original Here Go here to sign up to receive email notice of this news letter
Paul Craig Roberts, Dave Kranzler, and John Titus
On January 6, 2004, Paul Craig Roberts and US Senator Charles Schumer published a jointly written article on the op-ed page of the New York Times titled “Second Thoughts on Free Trade.” The article pointed out that the US had entered a new economic era in which American workers face “direct global competition at almost every job level–from the machinist to the software engineer to the Wall Street analyst. Any worker whose job does not require daily face-to-face interaction is now in jeopardy of being replaced by a lower-paid equally skilled worker thousands of miles away. American jobs are being lost not to competition from foreign companies, but to multinational corporations that are cutting costs by shifting operations to low-wage countries.” Roberts and Schumer challenged the correctness of economists’ views that jobs off-shoring was merely the operation of mutually beneficial free trade, about which no concerns were warranted.
The challenge to what was regarded as “free trade globalism” from the unusual combination of a Reagan Assistant Treasury Secretary and a liberal Democrat New York Senator caused a sensation. The liberal think-tank in Washington, the Brookings Institution, organized a Washington conference for Roberts and Schumer to explain, or perhaps it was to defend, their heretical position. The conference was televised live by C-Span, which rebroadcast the conference on a number of occasions.
Roberts and Schumer dominated the conference, and when it dawned on the audience of Washington policymakers and economists that something might actually be wrong with the off-shoring policy, in response to a question about the consequences for the US of jobs off-shoring, Roberts said: “In 20 years the US will be a Third World country.”
It looks like Roberts was optimistic that the US economy would last another 20 years. It has only been 10 years and the US already looks more and more like a Third World country. America’s great cities, such as Detroit, Cleveland, St. Louis have lost between one-fifth and one-quarter of their populations. Real median family income has been declining for years, an indication that the ladders of upward mobility that made America the “opportunity society” have been dismantled. Last April, the National Employment Law Project reported that real median household income fell 10% between 2007 and 2012.
Republicans have a tendency to blame the victims. Before one asks, “what’s the problem? America is the richest country on earth; even the American poor have TV sets, and they can buy a used car for $2,000,” consider the recently released report from the Federal Reserve that two-thirds of American households are unable to raise $400 cash without selling possessions or borrowing from family and friends.
Although you would never know it from the reports from the US financial press, the poor job prospects that Americans face now rival those of India 30 years ago. American university graduates are employed, if they are employed, not as software engineers and managers but as waitresses and bartenders. They do not make enough to have an independent existence and live at home with their parents. Half of those with student loans cannot service them. Eighteen percent are either in collection or behind in their payments. Another 34% have student loans in deferment or forbearance. Clearly, education was not the answer.
Jobs off-shoring, by lowering labor costs and increasing corporate profits, has enriched corporate executives and large shareholders, but the loss of millions of well-paying jobs has made millions of Americans downwardly mobile. In addition, jobs off-shoring has destroyed the growth in consumer demand on which the US economy depends with the result that the economy cannot create enough jobs to keep up with the growth of the labor force.
Between October 2008 and July 2014 the working age population grew by 13.4 million persons, but the US labor force grew by only 1.1 million. In other words, the unemployment rate among the increase in the working age population during the past six years is 91.8%.
Since the year 2000, the lack of jobs has caused the labor force participation rate to fall, and since quantitative easing began in 2008, the decline in the labor force participation rate has accelerated.
Clearly there is no economic recovery when participation in the labor force collapses.
Right-wing ideologues will say that the labor force participation rate is down because abundant welfare makes it possible for people not to work. This is nonsensical. During this period food stamps have twice been reduced, unemployed benefits were cut back as were a variety of social services. Being on welfare in America today is an extreme hardship. Moreover, there are no jobs going begging.
The graph shows the collapse in the labor force participation rate. The few small peaks above the 65% participation rate line show the few periods when the economy produced enough jobs to keep up with the working age population. The massive peaks below the line indicate the periods in which the dearth of jobs resulted in Americans giving up looking for non-existent jobs and thus ceased being counted in the labor force. The 6.2% US unemployment rate is misleading as it excludes discouraged workers who have given up and left the labor force because there are no jobs to be found.
John Williams of Shadowstats.com calculates the true US unemployment rate to be 23.2%, a number consistent with the collapse of the US labor force participation rate.
In the ten years since Roberts and Schumer sounded the alarm, the US has become a country in which the norm for new jobs has become lowly paid part-time employment in domestic non-tradable services. Two-thirds of the population is living on the edge unable to raise $400 cash. The savings of the population are being drawn down to support life. Corporations are borrowing money not to invest for the future but to buy back their own stocks, thus pushing up share prices, CEO bonuses, and corporate debt. The growth in the income and wealth of the one percent comes from looting, not from productive economic activity.
This is the profile of a Third World country.
Defining Away Economic Failure — Paul Craig Roberts
August 4, 2014 | Original Here Go here to sign up to receive email notice of this news letter
Defining Away Economic Failure
Redefinition Is America’s Most Powerful Factor of Production
Paul Craig Roberts
Last week’s government guesstimate that second quarter 2014 real GDP
growth will be 4% seems nonsensical on its face. There is no evidence
of increases in real median family incomes or real consumer credit that
would lift the economy from a first quarter decline to 4% growth in the
second quarter. Middle class store closings (Sears, Macy’s, J.C.
Penney) have spread into the Dollar stores used by those with lower
incomes. Family Dollar, a chain in the process of closing hundreds of
stores is being bought by Dollar Tree, the only one of the three Dollar
store chains that is not in trouble. Wal-Mart’s sales have declined for
the past 5 quarters. Declining sales and retail store closings indicate
shrinking consumer purchasing power. Retail facts do not support the
claim of a 4% GDP growth rate for the second quarter, and they do not
support last Friday’s payroll job claim of 26,700 new retail jobs in
July.
What about the housing market? Don’t the headlines accompanying last
Friday’s payroll jobs report, such as “Hiring Settles Into Steady
Gains,” mean more people working and a boost to the economy from a
housing recovery? No. What the financial press did not report is that
the US is in a structural jobs depression. In the 12-month period from
July 2013 through July 2014, 2.3 million Americans of working age were
added to the population. Of these 2.3 million only 330 thousand entered
the labor force. My interpretation of this is that the job market is so
poor that only 14% of the increase in the working age population
entered the labor force.
The decline in the labor force participation rate is bad news for the
housing market. The US labor force participation rate peaked at 67.3%
in 2000 and has been in a sustained downturn ever since. The rate of
decline increased in October 2008 with the bank bailout and Quantitative
Easing. From October 2008 to the present, 13.2 million Americans were
added to the working age population, but only 818 thousand, or 6%,
entered the labor force. http://investmentresearchdynamics.com/americas-structural-job-depression-is-here-to-stay/
Despite government and financial press claims, the Federal Reserve’s
multi-year policy of printing money with which to purchase bonds did not
restore the housing or job markets.
What about the stock market? It has been down in recent days but is
still high historically. Isn’t the stock market evidence of a good
economy? Not if stocks are up because corporations are buying back
their own stock. Corporations are now the largest buyers of stocks.
Recently we learned that from 2006 through 2013 corporations authorized
$4.14 trillion in buybacks of their publicly traded stocks. Moreover,
it appears that corporations have been borrowing the money from banks
with which to buy back their stocks. Last year there were $754.8 billion
in authorized stock buybacks and $782.5 billion in corporate borrowing.
In the first three months of this year, companies purchased $160
billion of their own stocks. http://wallstreetonparade.com/2014/07/another-wall-street-inside-job-stock-buybacks-carried-out-in-dark-pools/
Borrowing to buyback stock leaves a company with debt but without new
investment with which to produce revenues to service the debt. The
massive stock buybacks demonstrate that American capitalism is now
corrupt. In order to maximize personal short-term financial benefits
flowing from bonuses, stock options, and capital gains, CEOs, boards of
directors, and shareholders are decapitalizing public companies and
loading them up with debt.
Well, isn’t the economy being helped by the return of manufacturing
to America? Apparently not. Data for 1999-2012 indicate that the
offshoring of manufacturing increased by 9%.
One economist, Susan Hester, an economist for the Retail Industry
Leaders Association, has decided to turn the loss of manufacturing jobs
into a virtue. Her argument is that retail employment dwarfs
manufacturing employment and that more American jobs can be created by
selling more imports than by encouraging manufacturing in order to
provide exports.
According to Ms. Hester’s research, the US makes more money from the
retail side than from the production side. She concludes that the value
added to a product by offshore labor is a small percentage of the value
added by “managing offshored production, handling Customs clearances,
managing warehouses and distribution, marketing apparel products, and by
millions of people in the retail sector stocking shelves and working
cash registers.”
In other words, the US manufacturing jobs moved offshore are just a throwaway. The money is made in selling the imports.
Ms. Hester neglects to recognize that when offshored production is
brought to the US to be marketed, it comes in as imports and results in a
larger US trade deficit. Foreigners use dollars paid to them for the
products that they make for US firms to purchase ownership of US bonds,
stocks, and real assets such as land, buildings, and companies.
Consequently, interest, profits, capital gains, and rents associated
with the foreign purchases of US assets now flow to foreigners and not
to Americans. The current account worsens.
It works like this: The excess of US imports over US exports leaves
foreigners with claims on US income and wealth that are settled by
foreign purchases of US assets. The income produced by these assets now
flows abroad with the consequence that income earned by foreigners on
their US investments exceeds the income earned by the US on its foreign
investments.
According to Ms. Hester’s reasoning, Americans would be better off it
they produced nothing that they need and in place of manufacturing
relied on the incomes of US fashion designers and pattern makers who
specify the offshored production for US markets, on the compliance
officers and freight agents, on production planning and expediting
clerks, and on longshore workers and railroad employees who deliver the
foreign-made goods to US consumer markets.
Ms. Hester believes that the value-added by offshored manufacturing
is inconsequential. How then did China get rich from it, becoming the
second largest economy and employing 100 million people in manufacturing
(compared to America’s 12 million), and acquire the largest foreign
reserves of any country?
After Ms. Hester answers that question she can explain why US
corporations go to the trouble to offshore their manufacturing if the
contribution to value-added is so low? The value added is obviously
substantial enough for the labor cost savings to pay for transportation
costs to the US from Asia, for the cost of set-up and management of
foreign based facilities, and for the cost of the adverse publicity from
abandoning US communities for Asia and still leave value-added after
all costs to enlarge profits and drive up stock prices and executive
bonuses.
Ms. Hester fools herself. The low value that she calculates Chinese,
Indian, or Vietnamese labor adds to the price of a shirt reflects the
low foreign labor cost, not a low value of the shirt in US markets or a
low value of an iPhone in European markets. Marketing, warehousing and
distribution are done in the US by more highly paid people, and this is
why it looks like the value added comes from sources other than
manufacturing. Ms. Hester overlooks that the lower cost of foreign labor
does not translate into a less valued product but into higher profits.
Economists assume that the labor cost savings are passed on to the
consumers in lower prices, but I have not experienced declining prices
of Nike and Merrell sports shoes, of sheets and towels, of Brooks
Brothers and Ralph Lauren shirts, of Apple computers, or whatever as a
result of moving US production offshore. The labor cost savings go into
profits, managerial bonuses, and capital gains for shareholders and is
one reason for the extraordinary increase in income and wealth
inequality in the US.
Focused on short-term profit, manufacturers and retailers are
destroying the US consumer market. The average annual salary of a US
apparel manufacturing worker is $35,000. The average salary of US
retail employees is less than half of that amount and provides no
discretionary income with which to boost consumer spending in retail
stores.
The American corporate practice of offshoring manufacturing has made
it impossible for the Obama regime to keep its promises of creating
manufacturing jobs and exports. Unable to create real jobs and real
exports, the US government has proposed to create virtual jobs and
virtual exports made by “factoryless goods producers.” In order to keep
his promise of doubling the growth of US exports, the Obama regime
wants to redefine foreign output as US output.
A “factoryless goods producer” is a newly invented statistical
category. It is a company like Nike or Apple that outsources the
production of its products to foreign companies. The Obama regime is
proposing to redefine companies such as Apple that own a brand name or a
product design as manufacturing companies even though the companies do
not manufacture.
In other words, whether or not a US company is a manufacturer does
not depend on its activity, but on its ownership of a brand name made
for the company by a foreign manufacturer. For example, Apple iPhones
made in China and sold in Europe would be reported as US exports of
manufactured goods, and iPhones sold in the US would no longer be
classified as imports but as US manufacturing output. Apple’s
non-manufacturing employees would be transformed into manufacturing
employment.
Clearly, the purpose of this statistical deception is to inflate the
number of US manufacturing jobs, US manufacturing output, and US exports
and to convert imports into domestic production. It is a scheme that
eliminates the large US trade deficit by redefinition.
The reclassification would leave the government’s Office of
Statistical Lies with the anomaly that products made in China, India,
Indonesia or wherever become US GDP as long as the brand name is owned
by a US corporation, but the payments to the Asian workers who produced
the products remain as claims on US wealth and can be converted into
ownership of US bonds, companies, and real estate.
For example, Chinese workers produced the Apple products, and China
has the claims on US wealth to prove it. How are these claims accounted
for statistically by the Obama regime’s redefinition? The US can add
China’s production of the Apple products to US GDP, but how does the US
deduct the Chinese-produced Apple products from China’s GDP? And how
does the Obama regime’s redefinition get rid of the payments by Apple to
the Chinese labor that produced the products? These payments comprise
claims on US wealth.
In other words, the reclassification would double count the output of
Apple’s products. If every country does this, world GDP will rise
statistically regardless of the fact that no more goods and services are
produced. Perhaps this is the way to define away world poverty.
“Factoryless goods producers” was foreshadowed by Harvard professor
Michael Porter’s 2006 competitiveness report, a justification for jobs
offshoring. Defending jobs offshoring, Porter downplayed the rise in
the US trade deficit and decline in the US GDP growth rate caused by
jobs offshoring. Porter argued, in effect, that ownership of the
revenues and products, not the location in which the revenues and
products are produced, should determine their classification. As I
pointed out in my critique (see The Failure of Laissez Faire Capitalism
and Economic Dissolution of the West), the result would be to raise US
GDP by the amount of US production outsourced abroad and by the output
of US overseas subsidiaries and to decrease the GDP of the countries in
which the manufacturing actually takes place. Consistency would require
that the German and Japanese autos, for example, that are produced in
the US with US labor would become deductions from US GDP and be reported
as German and Japanese GDP.
As I have emphasized for years, the West already lives in the
dystopia forecast by George Orwell. Jobs are created by hypothetical
add-ons to the reported payroll figures and by inappropriate use of
seasonal adjustments. Inflation is erased by substituting lower priced
items in the inflation index for those that rise in price and by
redefining rising prices as quality improvements. Real GDP growth is
magicked into existence by deflating nominal GDP with the understated
measure of inflation. Now corporations without factories are going to
produce US manufacturing output, US exports, and US manufacturing jobs!
Every sphere of Western existence is defined by propaganda.
Consequently, we have reached a perfect state of nihilism. We can
believe nothing that we are told by government, corporations, and the
presstitute media.
We live in a lie, and the lie is ever expanding.
