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"Even Jobs at McDonald's Aren't Safe"
Their Own Economic Reality
By PAUL CRAIG ROBERTS
02/16/06 "ICH" -- -- Who can forget the neocons’ claim that
under their leadership America creates its own reality? Remember
the neocons’ Iraq reality--a “cakewalk” war? After three years
of combat, thousands of casualties, and cost estimated at over
$1 trillion, real reality must still compete with the White
House spin machine.
One might think that the Iraq experience would restore sober
judgement to policymakers. Alas, neocon reality has spread
everywhere. It has infected the media and the new Federal
Reserve Chairman, Ben Bernanke, who just gave Congress an upbeat
report on the economy. The robust economy, he declared, could
soon lead to inflation and higher interest rates.
Consumers deeper in debt and fresh from their first negative
savings rate since the Great Depression show high consumer
confidence. It is as if the entire country is on an acid trip or
a cocaine trip or whatever it is that lets people create
realities for themselves that bear no relation to real reality.
How can the upbeat views be reconciled with the Bureau of Labor
Statistics’ payroll jobs data, the extraordinary red ink, and
exploding trade deficit? Perhaps the answer is that every
economic development, no matter how detrimental, is spun as if
it were good news. For example, the worsening US trade deficit
is spun as evidence of the fast growth of the US economy: the
economy is growing so fast it can’t meet its needs and must rely
on imports. Declining household income is spun as an inflation
fighter that keeps mortgage interest rates low. Federal budget
deficits are spun as letting taxpayers keep and spend more of
their own money. Massive layoffs are spun as evidence that
change is so rapid that the work force must constantly upgrade
skills and re-educate itself.
The denial of economic reality has become an art form. Except
for Lou Dobbs, no accurate economic reporting is available in
the “mainstream media.”
Occasionally, real information escapes the spin machine. The
National Association of Manufacturers, one of outsourcing’s
greatest boosters, has just released a report, “US Manufacturing
Innovation at Risk,” by economists Joel Popkin and Kathryn Kobe.
The economists find that US industry’s investment in research
and development is not languishing after all. It just appears to
be languishing, because it is rapidly being shifted overseas:
“Funds provided for foreign- performed R&D have grown by almost
73 percent between 1999 and 2003, with a 36 percent increase in
the number of firms funding foreign R&D.”
US industry is still investing in R&D after all; it is just not
hiring Americans to do the R&D. US manufacturers still make
things, only less and less in America with American labor. US
manufacturers still hire engineers, only they are foreign ones,
not American ones.
In other words, everything is fine for US manufacturers. It is
just their former American work force that is in the doldrums.
As these Americans happen to be customers for US manufacturers,
US brand names will gradually lose their US market. US household
median income has fallen for the past five years. Consumer
demand has been kept alive by consumers’ spending their savings
and home equity and going deeper into debt. It is not possible
for debt to forever rise faster than income.
When manufacturing moves abroad, engineering follows. R&D
follows engineering, and innovation follows R&D. The entire
economy drains away. This is why the “new economy” has not
materialized to take the place of the lost “old economy.”
The latest technologies go into the newest plants, and those
plants are abroad. Innovations take place in new plants as new
processes are developed to optimize the efficiency of the new
technologies. The skills required to operate new processes call
forth investment in education and training. As US manufacturing
and R&D move abroad, Indian and Chinese engineering enrollments
rise, and US enrollments decline.
The process is a unified whole. It is not possible for a country
to lose parts of the process and hold on to other parts. That is
why the “new economy” was a hoax from the beginning. As Popkin
and Kobe note, new technologies, new manufacturing processes,
and new designs take place where things are made. The notion
that the US can lose everything else but hold on to innovation
is absurd.
Someone needs to tell Congress before they waste yet more
borrowed money. In an adjoining column to the NAM report on
innovation, the February 6 Manufacturing & Technology News
reports that “the US Senate is jumping on board the
competitiveness issue.” The Bush regime and the doormat Congress
have come together in the belief that the US can keep its edge
in science and technology if the federal government spends $9
billion a year to “fund innovative, big-payoff ideas that have
the potential to transform the US economy.”
The utter stupidity of the “Protecting America’s Competitive
Edge Act” (PACE) is obvious. The tremendous labor cost advantage
of doing things abroad will equally apply to any new “big-payoff
ideas” as it does to the goods and services currently
outsourced. Moreover, US research is open-sourced. It is
available to anyone. As the Cox Commission Report made clear,
there are a large number of Chinese front companies in the US
for the sole purpose of collecting technology. PACE will simply
be another US taxpayer subsidy to the rising Asian economies.
The assertion that we hear every day that America is falling
behind because it doesn’t produce enough science, mathematics
and engineering graduates is a bald-faced lie. The problem is
always brought back to education failures in K-12, that is, to
more education subsidies. When CEOs say they can’t find American
engineers, they mean they cannot find Americans who will work
for Chinese or Indian wages. That is what the so-called
“shortage” is all about.
I receive a constant stream of emails from unemployed and
underemployed engineers with many years of experience and
advanced degrees. Many have been out of work for years. They
describe the movement of their jobs offshore or their
replacement by foreigners brought in on work visas. Many no
longer even know American engineers who are employed in the
profession. Some are now working in sawmills, others in Home
Depot, and others are attempting to eke out a living as
consultants. Many describe lost homes, broken marriages, even
imprisonment for inability to make child support payments.
Many ask me how economists can be so blind to reality. Here is
my answer: Many economists are bought and paid for by
outsourcers. Most of the studies claiming to prove that
Americans benefit from outsourcing are done by economic
consulting firms hired by outsourcers. Or they are done by think
tanks or university professors dependent on corporate donors. Or
they reflect the ideology of “free market economists” who are
committed to the belief that “freedom” is good and always
produces good results. Since outsourcing is merely the freedom
of property to act in its interest, and since this self-interest
is always guided by an invisible hand to the greater welfare of
everyone, outsourcing, ipso facto, is good for America. Anyone
who doesn’t think so is a fascist who wants to take away the
rights of property. Seriously, this is what passes for analysis
among “free market economists.”
Economists’ commitment to their “reality” is destroying the
ladders of upward mobility that made America the land of
opportunity. It is just as destructive as the neocons’
commitment to their “reality” that is driving the US deeper into
war in the Middle East.
Fact and analysis no longer play a role. The spun reality in
which Americans live is insulated against intelligent
perception.
American “manufacturers” are becoming merely marketers of
foreign made goods. The CEOs and shareholders have too short a
time horizon to understand that once foreigners control the
manufacture-design- innovation process, they will bypass
American brand names. US companies will simply cease to exist.
Norm Augustine, former CEO of Lockheed Martin, says that even
McDonald's jobs are no longer safe. Why pay an error-prone
order-taker the minimum wage when McDonald's can have the order
transmitted via satellite to a central location and from there
to the person preparing the order. McDonald’s experiment with
this system to date has cut its error rate by 50% and increased
its throughput by 20 percent. Technology lets the orders be
taken in India or China at costs below the minimum wage and
without the liabilities of US employees.
Americans are giving up their civil liberties because they fear
terrorist attacks. All of the terrorists in the world cannot do
America the damage it has already suffered from offshore
outsourcing.
Paul Craig Roberts was Assistant Secretary of the Treasury in
the Reagan administration. He was Associate Editor of the Wall
Street Journal editorial page and Contributing Editor of
National Review. He is coauthor of The Tyranny of Good
Intentions.He can be reached at:
paulcraigroberts@yahoo.com
First published at www.counterpunch.org
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