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from Vdare.com
The New Face of Class Warfare
October 09, 2006
By Paul Craig Roberts
"For decades Democrats seemed to have a monopoly on class war with demagogy of "the rich." Today it is the rich who are instigating class war with attacks on middle class jobs. The ladders of upward mobility are being dismantled. America, the land of opportunity, is giving way to polarization between rich and poor.
The assault on jobs predates the Bush regime. However, the loss of middle class jobs has become particularly intense in the 21st century, and, like other pressing problems, has been ignored by President Bush, who is focused on instigating war in the Middle East and a police state at home. The lives and careers that are being lost to the carnage of a gratuitous war in Iraq are paralleled by the economic destruction of careers, families and communities in the U.S. Since the days of President Franklin D. Roosevelt in the 1930s, the U.S. government has sought to protect employment of its citizens. Bush has turned his back on this responsibility. He has given his support to the offshoring of American jobs that is eroding the living standards of Americans. Whether this is an impeachable offense, it is another example of his betrayal of the public trust.
"Free trade" and "globalization" are the guises behind which class war is being conducted against the middle class by both political parties. Patrick J. Buchanan, a three-time contender for the presidential nomination, put it well when he wrote (March 10, 2006, World Net Daily column:) that NAFTA and the various so-called trade agreements were never trade deals. The agreements were enabling acts that enabled U.S. corporations to dump their American workers, avoid Social Security taxes, health care and pensions, and move their factories offshore to locations where labor is cheap.
The offshore outsourcing of American jobs has nothing to do with free trade based on comparative advantage. Offshoring is labor arbitrage. First world capital and technology are not seeking comparative advantage at home in order to compete abroad. They are seeking absolute advantage abroad in cheap labor.
Two recent developments made possible the supremacy of absolute over comparative advantage: the high speed Internet and the collapse of world socialism, which opened China’s and India’s vast under-utilized labor resources to first world capital.
In times past first world workers had nothing to fear from cheap labor abroad. Americans worked with superior capital, technology and business organization. This made Americans far more productive than Indians and Chinese, and, as it was not possible for U.S. firms to substitute cheaper foreign labor for U.S. labor, American jobs and living standards were not threatened by low wages abroad or by the products that these low wages produced.
The advent of offshoring has made it possible for U.S. firms using first world capital and technology to produce goods and services for the U.S. market with foreign labor. The result is to separate Americans’ incomes from the production of the goods and services that they consume. This new development, often called "globalization," allows cheap foreign labor to work with the same capital, technology and business know-how as U.S. workers. The foreign workers are now as productive as Americans, with the difference being that the large excess supply of labor that overhangs labor markets in China and India keeps wages low. Labor that is equally productive but paid a fraction of the wage is a magnet for Western capital and technology.
Although a new development, offshoring is destroying entire industries, occupations and communities in the United States. The devastation of U.S. manufacturing employment was waved away with promises that a "new economy" based on high tech knowledge jobs would take its place. Education and retraining were touted as the answer.
In testimony before the U.S.-China Commission (September 25, 2003:[ PDF ]), I explained that offshoring is the replacement of U.S. labor with foreign labor in U.S. production functions over a wide range of tradeable goods and services. As the production of most tradeable goods and services can be moved offshore, there are no replacement occupations for which to train except in domestic "hands on" services such as barbers, manicurists, and hospital orderlies. No country benefits from trading its professional jobs, such as engineering, for domestic service jobs.
At a Brookings Institution conference in Washington, D.C., in January 2004, I predicted that if the pace of jobs outsourcing and occupational destruction continued, the U.S. would be a 3rd world country in 20 years. Despite my regular updates on the poor performance of U.S. job growth in the 21st century, economists have insisted that offshoring is a manifestation of free trade and can only have positive benefits overall for Americans.
Reality has contradicted the glib economists. The new high tech knowledge jobs are being outsourced abroad even faster than the old manufacturing jobs. Establishment economists are beginning to see the light. Writing in Foreign Affairs (March/April 2006) Princeton economist and former Federal Reserve vice-chairman Alan Blinder concludes that economists who insist that offshore outsourcing is merely a routine extension of international trade are overlooking a major transformation with significant consequences. Blinder estimates that 42-56 million American service sector jobs are susceptible to offshore outsourcing. Whether all these jobs leave, U.S. salaries will be forced down by the willingness of foreigners to do the work for less.
Software engineers and information technology workers have been especially hard hit. Jobs offshoring, which began with call centers and back-office operations, is rapidly moving up the value chain. Business Week’s Michael Mandel (September 15, 2005: ) compared starting salaries in 2005 with those in 2001. He found a 12.7% decline in computer science pay, a 12% decline in computer engineering pay, and a 10.2% decline in electrical engineering pay. Marketing salaries experienced a 6.5% decline and business administration salaries fell 5.7%. Despite Sarbanes-Oxley, a make-work law for accountants, even accounting majors were offered 2.3% less.
Using the same sources as the Business Week article (salary data from the National Association of Colleges and Employers and BLS data for inflation adjustment), Professor Norm Matloff at the University of California, Davis, made the same comparison for master degree graduates. He found that between 2001 and 2005 starting pay for master degrees in computer science, computer engineering and electrical engineering fell 6.6%, 13.7%, and 9.4% respectively...."
vdare.com/roberts/061009_newface.htm
The New Face of Class Warfare
October 09, 2006
By Paul Craig Roberts
"For decades Democrats seemed to have a monopoly on class war with demagogy of "the rich." Today it is the rich who are instigating class war with attacks on middle class jobs. The ladders of upward mobility are being dismantled. America, the land of opportunity, is giving way to polarization between rich and poor.
The assault on jobs predates the Bush regime. However, the loss of middle class jobs has become particularly intense in the 21st century, and, like other pressing problems, has been ignored by President Bush, who is focused on instigating war in the Middle East and a police state at home. The lives and careers that are being lost to the carnage of a gratuitous war in Iraq are paralleled by the economic destruction of careers, families and communities in the U.S. Since the days of President Franklin D. Roosevelt in the 1930s, the U.S. government has sought to protect employment of its citizens. Bush has turned his back on this responsibility. He has given his support to the offshoring of American jobs that is eroding the living standards of Americans. Whether this is an impeachable offense, it is another example of his betrayal of the public trust.
"Free trade" and "globalization" are the guises behind which class war is being conducted against the middle class by both political parties. Patrick J. Buchanan, a three-time contender for the presidential nomination, put it well when he wrote (March 10, 2006, World Net Daily column:) that NAFTA and the various so-called trade agreements were never trade deals. The agreements were enabling acts that enabled U.S. corporations to dump their American workers, avoid Social Security taxes, health care and pensions, and move their factories offshore to locations where labor is cheap.
The offshore outsourcing of American jobs has nothing to do with free trade based on comparative advantage. Offshoring is labor arbitrage. First world capital and technology are not seeking comparative advantage at home in order to compete abroad. They are seeking absolute advantage abroad in cheap labor.
Two recent developments made possible the supremacy of absolute over comparative advantage: the high speed Internet and the collapse of world socialism, which opened China’s and India’s vast under-utilized labor resources to first world capital.
In times past first world workers had nothing to fear from cheap labor abroad. Americans worked with superior capital, technology and business organization. This made Americans far more productive than Indians and Chinese, and, as it was not possible for U.S. firms to substitute cheaper foreign labor for U.S. labor, American jobs and living standards were not threatened by low wages abroad or by the products that these low wages produced.
The advent of offshoring has made it possible for U.S. firms using first world capital and technology to produce goods and services for the U.S. market with foreign labor. The result is to separate Americans’ incomes from the production of the goods and services that they consume. This new development, often called "globalization," allows cheap foreign labor to work with the same capital, technology and business know-how as U.S. workers. The foreign workers are now as productive as Americans, with the difference being that the large excess supply of labor that overhangs labor markets in China and India keeps wages low. Labor that is equally productive but paid a fraction of the wage is a magnet for Western capital and technology.
Although a new development, offshoring is destroying entire industries, occupations and communities in the United States. The devastation of U.S. manufacturing employment was waved away with promises that a "new economy" based on high tech knowledge jobs would take its place. Education and retraining were touted as the answer.
In testimony before the U.S.-China Commission (September 25, 2003:[ PDF ]), I explained that offshoring is the replacement of U.S. labor with foreign labor in U.S. production functions over a wide range of tradeable goods and services. As the production of most tradeable goods and services can be moved offshore, there are no replacement occupations for which to train except in domestic "hands on" services such as barbers, manicurists, and hospital orderlies. No country benefits from trading its professional jobs, such as engineering, for domestic service jobs.
At a Brookings Institution conference in Washington, D.C., in January 2004, I predicted that if the pace of jobs outsourcing and occupational destruction continued, the U.S. would be a 3rd world country in 20 years. Despite my regular updates on the poor performance of U.S. job growth in the 21st century, economists have insisted that offshoring is a manifestation of free trade and can only have positive benefits overall for Americans.
Reality has contradicted the glib economists. The new high tech knowledge jobs are being outsourced abroad even faster than the old manufacturing jobs. Establishment economists are beginning to see the light. Writing in Foreign Affairs (March/April 2006) Princeton economist and former Federal Reserve vice-chairman Alan Blinder concludes that economists who insist that offshore outsourcing is merely a routine extension of international trade are overlooking a major transformation with significant consequences. Blinder estimates that 42-56 million American service sector jobs are susceptible to offshore outsourcing. Whether all these jobs leave, U.S. salaries will be forced down by the willingness of foreigners to do the work for less.
Software engineers and information technology workers have been especially hard hit. Jobs offshoring, which began with call centers and back-office operations, is rapidly moving up the value chain. Business Week’s Michael Mandel (September 15, 2005: ) compared starting salaries in 2005 with those in 2001. He found a 12.7% decline in computer science pay, a 12% decline in computer engineering pay, and a 10.2% decline in electrical engineering pay. Marketing salaries experienced a 6.5% decline and business administration salaries fell 5.7%. Despite Sarbanes-Oxley, a make-work law for accountants, even accounting majors were offered 2.3% less.
Using the same sources as the Business Week article (salary data from the National Association of Colleges and Employers and BLS data for inflation adjustment), Professor Norm Matloff at the University of California, Davis, made the same comparison for master degree graduates. He found that between 2001 and 2005 starting pay for master degrees in computer science, computer engineering and electrical engineering fell 6.6%, 13.7%, and 9.4% respectively...."
vdare.com/roberts/061009_newface.htm