Manufacturing

SOTU Reviews & Reactions

sotu 2012We've heard many a great speech from President Obama before. Last night's State of the Union was no exception. Here at The Economic Populist we say show me the money. We've heard soaring rhetoric from President Obama too many times, yet behind the words, deeds are either opposite or M.I.A.

Still, Obama gave a lot of lip service to U.S. manufacturing and jobs. To even get U.S. manufacturing on the national policy radar is a feat in and of itself. The actual SOTU transcript is on the White House site with a flurry of videos, social media and round tables to boot. Can't say this administration suffers from a lack of word generation!

That said, we all take President Obama at this point with a strong grain of salt. We've been so disappointed already.

Economic Policy Institute Economist Robert Scott noted China's currency manipulation was sorely absent from SOTU. Yet also noted the administration's hands are often tied by Congress:

Kudos to him for continuing to highlight this important issue, but he failed to mention the main cause of our manufacturing woes in the first place: currency manipulation.

Apple Not So Cool After All

apple made in chinaThe New York Times has a lengthy article, How the U.S. Lost Out on iPhone Work and implies, we, Americans, just can't compete and we should just lay down and die when it comes to advanced manufacturing. Good God, what a sad state of affairs.

In early 2011, President Obama asked what would it take to make the iPhone in the United States instead of China and late Steve Jobs replied:

Those jobs aren’t coming back.

On really? Isn't that the classic CEO speak to get off my case and haven't we heard that one before? Instead of cheap labor being the reason corporations move to China, we have growing, much more sinister, motivations.

It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.

China and India Really Are Cheap Labor in Manufacturing

Everybody has heard the reason manufacturing goes to China and services jobs are offshore outsourced to India is cheap labor. Well, there appears to be more than a grain of truth to this claim. The BLS maintains an international labor comparison statistics site. Manufacturing labor costs in China and India are 4% of the United States for 2009.

manufacturing costs region 2009

At the same time though, European labor costs are much more than the United States and one of the reasons Germany's economy is so strong, is their exports and manufacturing sector. Germany clearly has bucked the trend, yet the below percent change for 2009-2010 in manufacturing unit labor costs graph, shows other nations are lowering wages. The great labor arbitrage race to the bottom looks full on.

Losing the Economy By Saving the Rich

socialism for the rich
Originally published on OpEdNews

Economic policy in the United States and Europe has failed, and people are suffering.

Economic policy failed for three reasons:

  1. Policymakers focused on enabling off-shoring corporations to move middle class jobs, and the consumer demand, tax base, GDP, and careers associated with the jobs, to foreign countries, such as China and India, where labor is inexpensive.
  2. Policymakers permitted financial deregulation that unleashed fraud and debt leverage on a scale previously unimaginable.
  3. Policymakers responded to the resulting financial crisis by imposing austerity on the population and running the printing press in order to bail out banks and prevent nny losses to the banks regardless of the cost to national economies and innocent parties.

Tradable Jobs

The Council of Foreign Relations has released a new study with the benign title, The Evolving Structure of the American Economy and the Employment Challenge. Contained within are some horrifying statistics for American workers. From 1990 to 2008, all of the job growth was in non-tradable jobs. In other words, your suspicions are true, any job that could be offshore outsourced....was offshore outsourced. You were traded for a cheaper offshore counterpart.

China's Five Year Plan

12_5_year.jpgDid you know China has a five year plan? They do and it's a doozy according to a U.S. – China Economic and Security Review Commission. Yup, China has a strategy in play and it's on Indigenous Innovation and Technology Transfers, and Outsourcing. From the opening statement:

Since 1953, the Communist Party of China has used a series of five-year plans to guide China’s economic and social development. In its newly-adopted 12th Five-Year Plan China makes clear that it hopes to move up the manufacturing value chain by making explicit mention of Strategic Emerging Industries, which the Chinese government would like to see dominated by Chinese firms. These industries are: New-generation information technology, high-end equipment manufacturing, advanced materials, alternative-fuel cars, energy conservation and environmental protection, alternative energy, and biotechnology. China’s goal is to take the Strategic Emerging Industries from a current combined share of 3% of Chinese GDP to 8% by 2015 and 15% by 2020.

Anyone name America's 5 year plan? Beyond destroying the U.S. middle class and American workforce, can anyone even think of one? China, on the other hand, is methodically going about dominating a host of advanced technology industries and capturing our jobs in that process.

Outsourcing Is Not Good For America

Who can forget that infamous declaration by Greg Manikiw, Outsourcing is good for America, backed up by fictional economics from an an offshore outsourcing group. gechina Despite the never ending alarming U.S. unemployment rate, the jobs crisis and the stagnant wages, it seems Obama is touting the same philosophy. Economists, on the other hand, refuse to dare challenge this corporate party line and mention the O word, outsourcing.

Where are the jobs? John Bougearel really nails it on fictional CBO and BLS future employment projections.

American policies must take steps to stop the bleeding of jobs overseas, Obama’s new Council on Jobs and Competitiveness should be enacting policies and proposing legislation that repatriates US jobs and disincentivizes further outsourcing of US jobs. These policies would of course be hugely unpopular with Corporate America, but that is the crossroads where we now stand.

Bougearel lists the never ending fiction BLS job growth projections and now similar delusional numbers by the CBO for 2011-2015.

The CBO is projecting 2.5 million jobs will be created annually from 2011 to 2015. From the CBO: “As the recovery continues, the economy will add roughly 2.5 million jobs per year over the 2011–2016 period.”

U.S. Manufacturing, Hire America & Buy American

Want to see some damning statistics? Read this paragraph, taken from The Plight of American Manufacturing.

Manufacturing employment dropped to 11.7 million in October 2009, a loss of 5.5 million or 32 percent of all manufacturing jobs since October 2000.  The last time fewer than 12 million people worked in the manufacturing sector was in 1941.  In October 2009, more people were officially unemployed (15.7 million) than were working in manufacturing.

See what bad trade deals and global labor arbitrage bring us?

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