Tuesday, August 26, 2014

When America becomes the Next Emerging Market

More economic propaganda — this time, from a recent NBER study, which finds:

"Even before the Great Recession, U.S. employment growth was unimpressive. Between 2000 and 2007, the economy gave back the considerable gains in employment rates it had achieved during the 1990s, with major contractions in manufacturing employment being a prime contributor to the slump ... We find that the increase in U.S. imports from China, which accelerated after 2000, was a major force behind recent reductions in U.S. manufacturing employment and that, through input-output linkages [manufacturing supply lines] and other general equilibrium effects, it appears to have significantly suppressed overall U.S. job growth ... Our central estimates suggest net job losses of 2.0 to 2.4 million stemming from the rise in import competition from China over the period 1999 to 2011."

(This is total B.S.)

Since the NBER study refers to “net jobs”, we might assume their study means all directly-created jobs — including those created with a multiplier effect. When jobs are offshored, Americans also lose the multiplier effect — especially in manufacturing. As factories get "smarter" and more advanced, the multiplier increases significantly. In some advanced manufacturing sectors, such as electronic computer manufacturing (like at Foxconn in China), the multiplier effect can be as high as 16-to-1 (meaning that every manufacturing job could support 15 other jobs).

According the U.S. Bureau of Labor Statistics, manufacturing in the U.S. peaked in 1979 when we had over 19.6 million manufacturing jobs --- but it has been on a downward trend ever since.

Betty Sutton (a former representative for Ohio's 13th congressional district from 2007 to 2013), by using data from the Bureau of Labor Statistics, found that there were 398,887 private manufacturing establishments of all sizes in the United States during the first quarter of 2001. By the end of 2010 however, the number of factories had declined to 342,647, a loss of 56,190 facilities. Over a period of 10 years, that worked out to be an average loss of 5,619 factories a year. Since 2010, that number has fallen even further — from 342,647 in 2010 to 334,800 in 2012 (for an additional loss of 7,847 more manufacturers in those two years alone.)

And since then: The Bureau of Labor Statistics just released a report today saying that, "From January 2011 through December 2013, 4.3 million workers were displaced* from jobs they had held for at least 3 years." (The Bureau of Labor Statistics defines displaced workers as "persons 20 years of age and older who lost or left jobs because their plant or company closed or moved, there was insufficient work for them to do, or their position or shift was abolished." The Bureau of Labor Statistics report goes on to say that, "During the 2011-13 period, 765,000 long-tenured manufacturing workers were displaced from their jobs — 18 percent of all long-tenured displaced workers." This was 3/4 of a million jobs just since the beginning of 2011 to the end of 2013.

As the Wall Street Journal had reported back in 2012, "Thirty-five big U.S.-based multinational companies added jobs much faster than other U.S. employers in the last two years, but nearly three-fourths of those jobs were overseas."

But the NBER claims in their recent study that, at most, only 2.4 million jobs were lost since 1999 — but how can that be? As of 2013 Nike had 777 factories in 43 countries (in China and emerging markets) employing over 1 million workers. And Foxconn (a contract manufacturer in China) also had over 1 million workers doing work for American companies such as Amazon, Apple, Cisco, Dell, Google, Hewlett-Packard, Microsoft, Motorola and Vizio. That alone is over 2 million jobs that many Americas could be doing. (And Foxconn is currently attempting to replace its human workers with robots.)

What's been helping to drive this mass exodus of U.S. manufacturing overseas are basis pointers like Walmart. As a monopsony, Walmart's market power (because of its of economy of scale) is such that, to survive in the face of Walmart's pricing demands, manufacturers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of outsourcing products from overseas.

After recently surpassing Japan as the world's 2nd largest economy, China is now on track to overtake the U.S. to be the world's largest economy in just a few years. China's industrial output in the last year rose six times faster than the U.S. --- As China's industrial growth had been increasing, the U.S. industrial growth had fallen.

And it's not over yet. A study shows that almost 1/3 of all current domestic jobs are still prone to being outsourced or offshored.

And to artificially boost U.S. GDP data — as well as artificially lower the U.S. trade deficit — the government is going to reclassify some imports (such as Apple's iPhones made in China) as American manufactured products.

Now, after offshoring so many jobs, many U.S-based multinational companies are also using a tax scheme called "inversion" to also move their corporate headquarters overseas to avoid paying U.S. corporate taxes.

As America continues its long decline to eventually become another "third world" nation, so goes America's race to the bottom. After Africa, America could very well become the world's next "emerging market".


  1. The study of economics is not a science — there are very few "facts" as to cause and correlation when critiquing economic policies. It's mostly just speculation using macroeconomic "models" and "theories" based on past history. But just by using raw data, even "dummies" without PhDs (or educated in advanced mathematics) can do simple arithmetic. And they can ascertain, using casual observation, where the jobs are and where they're going (and even why they're going there). It doesn't take a genius to realize that many economists interject ideology and/or personal opinions into debates and arguments to reinforce their own "intellectual" assessments (maybe even for personal gain, such as on the topic on taxation) — even when it's at odds with the raw data, and when their opinions and ideas fly completely in the face of basic common sense. Just like when they mislead the public about the REAL number of people who are unemployed, but also want a job (maybe to reinforce their own ideas about job creation; and/or for political reasons — when an administration wants to sugar-coat their poor job performance to stay in power.) This is what some people might call "economic propaganda".

  2. China’s government said last month it will reduce salaries for executives at state-owned companies because “unreasonably high” incomes have become a source of public discontent. The chairman of Industrial & Commercial Bank of China Ltd., earned less than 2 percent of Jamie Dimon’s compensation last year while reporting twice the profit of JPMorgan Chase & Co. Instead of a reward, he is poised for a pay cut.