FedUpUSA

Archive for the ‘manufacturing’ Category

The United States is negotiating one of the biggest free trade agreements in history and there is barely a peep about it on the news.  Years ago, Ross Perot warned that if NAFTA was implemented there would be a “giant sucking sound” as millions of jobs left this country. It turns out that he was right. Starting on Tuesday, the next round of negotiations on the Trans-Pacific Partnership (also known as the “NAFTA of the Pacific”) will begin in Chicago.  We have already seen the Obama administration push hard for free trade agreements with Panama, South Korea and Colombia and the administration is making the Trans-Pacific Partnership a very high priority.  Membership in the “NAFTA of the Pacific” already includes Brunei, Chile, New Zealand and Singapore.  The United States, Australia, Peru, Malaysia and Vietnam are scheduled to join.  Canada, Japan and South Korea are also reportedly considering membership.  So once this “free trade” agreement is ratified, will we hear another “giant sucking sound” as millions more of our jobs are shipped overseas?

Look, it is not really that complicated.  If you are a giant U.S. corporation, you can either make stuff here, or you can make stuff overseas where it is far, far less expensive to do so.

To greedy corporate executives, there are a lot of advantages to moving operations out of the country….

*It is legal to pay slave labor wages in many of these other countries.  After all, why pay an American worker 10 or 20 times as much as a worker on the other side of the globe?

*In many of these other countries you do not have to provide any health care for workers.

*In many of these other countries there are virtually no environmental controls to worry about.

*In many of these other countries there are virtually no labor standards to worry about.

*In many of these other countries you only have to deal with a fraction of the “red tape” that you have to deal with in the United States.

By merging our economies with the economies of societies that are far different from our own, we have created a “race to the bottom” that is incredibly destructive to the U.S. economy.

In Vietnam, one dollar an hour is considered to be a very good wage.

So how do you plan to compete against that?

These “free trade agreements” are direct assaults on the big, juicy paychecks of American workers.

If you do not know about the Trans-Pacific Partnership, you need to get educated.

The following is a basic introduction to the TPP from Wikipedia….

The Trans-Pacific Partnership (TPP), also known as the Trans-Pacific Strategic Economic Partnership Agreement, is a multilateral free trade agreement that aims to further liberalise the economies of the Asia-Pacific region; specifically, Article 1.1.3 notes: “The Parties seek to support the wider liberalisation process in APEC consistent with its goals of free and open trade and investment.”[1] The original agreement between the countries of Brunei, Chile, New Zealand and Singapore was signed on June 3, 2005, and entered into force on May 28, 2006. Five additional countries – Australia, Malaysia, Peru, United States, and Vietnam – are negotiating to join the group.

Apparently, one of the goals of the TPP is to reduce all trade tariffs among member nations to zero by the year 2015.  The proponents of “free trade” are absolutely thrilled.

We have all enjoyed the flood of cheap products from overseas.  It is nice to pay a little bit less for things.

But these cheap prices have come at a very high cost.  We are literally destroying the American economy.  If you walk into just about any store today and you start turning over products, you will find that almost all of them are made out of the country.

If our middle class jobs keep getting shipped overseas, our prosperity is going to vanish.  If the American people allow this to continue, the standard of living of American workers is going to continue to fall toward the level of workers in third world countries.

Arthur Stamoulis, the executive director of Citizen Trade Campaign recently had the following to say about why he is opposed to this new free trade agreement….

“They’ve shipped our jobs overseas. They’ve reduced the tax base, they’ve driven down the wages and benefits for the jobs that are left. We’ve had enough”

As you can see from the chart below, we have seen a massive decline in manufacturing jobs in the United States over the last few decades….

It is absolutely amazing that the Obama administration continues to tout more “free trade” agreements as a way to increase employment in the United States.

Sadly, nearly half the country is still going to run out and vote for the guy in the next election.

Between December 2000 and December 2010, 38 percent of the manufacturing jobs in Ohio were lost, 42 percent of the manufacturing jobs in North Carolina were lost and 48 percent of the manufacturing jobs in Michigan were lost.

So the answer is to ship even more of our jobs overseas?

Apparently the Obama administration actually believes that we don’t want those jobs.  The following is what U.S. Trade Representative Ron Kirk told Tim Robertson of the Huffington Post recently….

Let’s increase our competitiveness… the reality is about half of our imports, our trade deficit is because of how much oil [we import], so you take that out of the equation, you look at what percentage of it are things that frankly, we don’t want to make in America, you know, cheaper products, low-skill jobs that frankly college kids that are graduating from, you know, UC Cal and Hastings [don't want], but what we do want is to capture those next generation jobs and build on our investments in our young people, our education infrastructure.

Can you believe that nonsense?  He believes that there are things that “we don’t want to make in America”?

Why is nobody calling for him to resign immediately?

Manufacturing jobs have traditionally been high paying jobs that can support middle class families.

But now we are losing millions of those jobs and the Obama administration simply does not care.

Back in 1970, 25 percent of all jobs in the United States were manufacturing jobs. Today, only 9 percent of the jobs in the United States are manufacturing jobs.

America is being deindustrialized at warp speed and most Americans don’t even understand what is happening.

Look, even if U.S. firms wanted to stay in the United States and try to compete, they face almost insurmountable obstacles….

*Many foreign nations deeply and directly subsidize national industries and the U.S. government lets them get away with it.  That puts our industries at a vast disadvantage.

*The United States has the highest corporate tax rate in the world.  That puts our corporations at a vast disadvantage.

*Many foreign nations do not require businesses to provide health care for their employees.  That puts our businesses at a vast disadvantage.

*Many foreign nations impose very little regulation on businesses.  That puts businesses in the United States at a vast disadvantage.  In the U.S., we have some of the most restrictive regulations in the world.

The truth is that even the “next generation jobs” and the “green jobs” that Obama keeps talking about are rapidly leaving the country.

For example, the third-largest producer of solar panels in the United States, Evergreen Solar, is leaving America.

Evergreen is shutting down its factory in Massachusetts, laying off 800 American workers and moving production over to China.

A recent New York Times article explained why Evergreen is making this move….

Evergreen, in announcing its move to China, was unusually candid about its motives. Michael El-Hillow, the chief executive, said in a statement that his company had decided to close the Massachusetts factory in response to plunging prices for solar panels. World prices have fallen as much as two-thirds in the last three years — including a drop of 10 percent during last year’s fourth quarter alone.

Chinese manufacturers, Mr. El-Hillow said in the statement, have been able to push prices down sharply because they receive considerable help from the Chinese government and state-owned banks, and because manufacturing costs are generally lower in China.

We are losing the “jobs of the future” and Obama is doing nothing about it.

Last year, more than half of all the solar panels in the world were made in China.

China is absolutely killing us on the global economic stage and Obama does not even seem to think that it is a problem.

The U.S. trade deficit with China in 2010 was 27 times larger than it was back in 1990.

Not only that, the United States now spends more than 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States.

So don’t listen to any of the nonsense that Obama is spouting about creating jobs.

Not that most of the Republicans are putting forward any good ideas either.

The reality is that our politicians have lied to us.  Globalism is absolutely destroying our economy.

Do you remember when the United States was the dominant manufacturer of automobiles and trucks on the globe?  Well, in 2010 the U.S. ran a trade deficit in automobiles, trucks and parts of $110 billion.

We are losing ground in almost every industry that you could name.  Even the “jobs of tomorrow” are mostly being created overseas.

Andy Grove, the former CEO of Intel, says that our advanced technology companies are creating far more jobs overseas than they are in the United States….

Some 250,000 Foxconn employees in southern China produce Apple’s products. Apple, meanwhile, has about 25,000 employees in the U.S. That means for every Apple worker in the U.S. there are 10 people in China working on iMacs, iPods, and iPhones. The same roughly 10-to-1 relationship holds for Dell, disk-drive maker Seagate Technology (STX), and other U.S. tech companies.

When is someone going to wake up America?  If we are even losing “advanced technology” jobs, then what kind of jobs are going to be left?

In 2002, the United States had a trade deficit in “advanced technology products” of $16 billion with the rest of the world.  In 2010, that number skyrocketed to $82 billion.

Needless to say, that is not a good trend.

Our politicians promised us that the “global economy” would mean more jobs and more prosperity for us.

Well, that was obviously a giant lie.

Today, if you gathered together all of the unemployed people in the United States, they would make up the 68th largest country in the world.

If we allow all of this “free trade” nonsense to continue, our unemployment nightmare is going to continue to get worse and even more of our formerly great cities will end up looking like total hellholes just like Detroit does.

Sadly, virtually all of our politicians in both political parties are in favor of these “free trade” agreements.  In fact, most of them are pushing these kinds of agreements as one of the “solutions” to our problems.

The U.S. economy is being dismantled and deindustrialized right in front of your eyes.

If you plan on speaking out, you better do it now because it is almost too late to stop what is being done.

It is up to you America.

The Economic Collapse

The Status Quo heavily rewards financialized profiteering and resource extraction while penalizing productive capital investments in manufacturing.

There is so much ideological, quasi-religious fanaticism around “free trade” (there is no such thing as “free trade,” there are only various permutations of managed trade) and “industrial policy” (every nation has one, explicit or implicit) that it is difficult to make any sense of the many intertwined issues.

Ideological purity is not a substitute for knowledge, any more than a superficial admiration of machines equals actually knowing how to assemble, maintain and repair them.

As a background context, we might start by noting that Marx outlined how finance capital comes to dominate industrial capital, as industry comes to depend on the credit extended by the banks/finance capital.

The key takeaway: if you don’t control the banks, then they will end up dominating industrial capital. In the U.S., we have the worst of both worlds: a dominant financial Elite and various cartels (military-industrial, sickcare, agribusiness, etc.) that have captured what little of the Central State that isn’t already beholden to financial capital.

Moving production around the world to exploit cheap labor–also knowns as “wage arbitrage”– is not free trade: it is merely the consequence of free capital flows, and an extension of capital’s dominance of labor. If capital can reap higher returns by flowing elsewhere and abandoning domestic labor, then it will do so, and “lowering the cost to consumers” is the marketing propaganda issued to placate the captive home markets.

Consumers, after all, are not free to travel the globe seeking “higher returns,” i.e. lower prices–that privilege is reserved for capital.

When China sold silk to the Roman Empire in 100 C.E., the cost of capital to produce the silk and the cost of labor was set in China. Traders took the risks of transport and reaped the gigantic profits. The same was true when China sold porcelain made for export to America in the 1800s.

That is “free trade.” Moving capital to China to exploit cheap labor there, then closing the factory and moving production to Vietnam, and so on, is simply free-flowing capital exploiting labor on a global scale.

As further context, we should note the dominance of short-term profiteering as the motivator of management in Corporate America. “Beating quarterly estimates” is basically the only metric of “success” in America, because a corporate management that fails to “beat estimates” won’t last long enough to pursue any long-term capital investments.

The financialization of compensation is also a critical factor: if compensation is mostly stock options, then that creates a huge incentive to boost the stock price and then exercise the options–”pump and dump” on a vast, systemic scale.

This obsessive addiction to boosting short-term profits also leads management to view labor as the “enemy” which is sucking off profits, rather than the partner in the company’s long-term success. Thus relentless cost-cutting and downsizing is heavily incentivized as the one sure way to boost short-term profits, even as the company is being hollowed out.

Management isn’t being rewarded to think about the long-term, any more than a member of the House of Representatives is rewarded for thinking ahead more than two years. Some problems cannot be solved, or even addressed, in short-term thinking. This is one reason why the nation is heading to heck in a handbasket–nothing can be discussed that can’t be “resolved” in 18 months (the election cycle starts six months before every congressional election). Management might only last 18 months, so there is every reason to stripmine the company of assets and know-how, boost the stock price, cash in the millions of dollars in options and hightail it on to the next “opportunity.”

An emphasis on housing as a bedrock of wealth and lending has completely distorted the U.S. economy. The incentives in real estate are massive, and massively perverse: the unlimited mortgage deduction for interest incentivizes borrowing vast sums and “moving up” to ever-larger, ever more wasteful homes, to name just two, and policies aimed at expanding suburbs effectively gutted central cities while heaping subsidies on sprawl and distant exurbs.

The U.S. has a distinct industrial policy: benign neglect, ignorance, favoritism towards real estate development and financialization, and a fanatic devotion to short-term profits and cost-cutting.

What makes any discussion of “free trade” so impossible is the vast ignorance of free trade proponents about our industrial competitors and the history of trade. If you know essentially nothing about industry and industrial policy in China, Japan and Germany, and nothing about the long history of trade in a capitalist framework, then exactly what are you bringing to the discussion other than religious fanaticism to a concept that begs for deep knowledge of other nations and nuanced understanding?

I have studied Japan and China for almost 40 years, both formally in university studies and via visits, research and discussions with my many Japanese and Chinese friends. I have toured many Chinese factories and discussed trade with entrepreneurs and marketing reps, and received inside information from local government sources.

Japan, Germany and China have trade policies which support and encourage specific industrial and export models. For context, please read these two related articles: Outsourcing manufacturing hurts U.S. and a factory that costs $11 million in California costs $5 million in Germany, after tax credits.

If you watched any Japanese television (NHK) after the tsunami and earthquake, and you are a careful observer, you had a rare chance to see industrial Japan from the inside. Japan, Inc, is not just a Toyota factory filled with industrial robots: it’s thousands of small factories producing parts for the global corporations.

For example, one factory affected by the tsunami manufactured special components for satellites. The workers were shown hand-polishing the complex castings by hand.

Let me repeat that, for those who mistakenly think everything can be made by robots or in some Chinese factory by low-skilled workers: by hand, by highly skilled workers.

Industrial robots are costly to buy and maintain; they make no sense on small production runs, or highly skilled, complex tasks. No robot could duplicate the delicate hand-eye coordination required to hand-polish these complex parts.

This is not some outlier, this is standard in Japan, Inc., and also in Germany, Inc. There is a critical need within any broad-based industrial supply chain for skilled labor.

As for automation: yes, it works in producing mass-produced goods, but skilled labor is required to reprogram the robots, maintain them, assemble them, etc. Though the factory floor may have few people present, there is a long supply chain behind the automation that supports multiple levels of value-added labor and manufacturing.

It’s not just moving the assembly offshore, it’s moving the entire value-added chain that feeds it.

As my friend G.F.B. recently noted, the initial invention that is the obsession of America and supposedly its great advantage in the global marketplace leaves off the real value-added proposition, which is the development of the later models and iterations.

Place the production elsewhere and keep the design staff in the home nation is an excellent way to lose the design of the actual parts and workflow–the real value added. Apple has been able to keep ahead of competitors by integrating software that is difficult to copy into hardware, but it not the typical case, it is the outlier, hence its outsized value.

As I repeatedly point out, Apple, Google, Facebook and Twitter together have relatively few domestic employees. As production is overseas, then that’s where the design jobs go, too, eventually.

You have to understand the entire value chain, not just the assembly costs.

The U.S. culture denigrates skilled labor and glorifies the C.E.O. and innovator as god-like heroes. Other nations, notably Germany, maintain a value and education system which recognizes and nurtures technical skills. In the U.S., we fawn over social media companies that generate billions in new wealth for Wall Street and a handful of founders and venture capitalists, and drill into every student’s head the value not of tradecraft skills but of a four-year business degree.

For those not suited for an MBA–sorry, there are few other choices of learning.

In America, we are addicted to the drama of startling, big “innovations,” and we are enamoured with the romance of “instant wealth” from the “hot investment” of the moment.

Extraction is not the same as value-added production. There is temporary value in the equipment set up, but once the resource has been depleted, the wealth is gone and the “gold rush town” dries up and blows away.

The problem with financialization is that it is the gold rush dynamic on steroids. To reap the big gains from financializing, you need ever-greater amounts of credit, leverage, risk and churn–all the elements we saw in the housing bubble and in every stock bubble.

Once the financialization bubble bursts, there is nothing left to extract or leverage. Since productive investments were disincentivized at every turn, then the implosion of the unproductive investments leaves a hollowed-out shell of an economy with a very wealthy layer of managers and financial “winners” and the 90% below them with few prospects in what amounts to a corporate-colonial economy ruled by financial oligarchies and their minions in the Central State.

Of Two Minds

This guest essay by longtime correspondent Kevin Mercadante examines the costs to making short-term profits and government spending the metrics that guide the entire economy.

Political Myopia and America’s Manufacturing Decline
by Kevin Mercadante

For decades voices in the woods have been warning us of impending crises in the foundational systems that make the U.S. economy go. We’ve been advised of impending disasters in Social Security, Medicare, pension funding, the national debt, healthcare, energy and increasingly, employment. Charles and others sounded the alarm on the housing bubble years before it hit.

But as has become our happy little way, we ignore warnings, preferring to dismiss them as the staple fodder of the “gloom-and-doom” crowd.

We should have learned our lesson with the exploding of the real estate bubble, but perhaps we haven’t. It could be that we’re doomed to experience the falling of one domino after another until we come out of our media induced entertainment stupor fully prepared to face more than a few ugly realities.

While the fallout of the housing and mortgage collapse has proven to be a crisis worthy of capturing our attention, other dominos are indeed falling, but doing so with far less fanfare and concern.

A BIG sector where the battle is already lost

Earlier this year, the IMF reported that China has over taken the US as the world’s top manufacturing nation ( IMF Bombshell: Age of America Nears End ). Over the past few decades we’ve had abundant warning that such a transition would occur. Mostly we’ve ignored the signs, contenting ourselves that the service economy and more government spending would more than replace what ever would be lost, and that come what may, America is still No.1!

But manufacturing isn’t just another sector of the economy—it’s the economic foundation of all modern industrial societies. To one degree or another, all other economic sectors rest on the foundation of the nations manufacturing production. It’s preposterous to believe that services and government spending can carry real economic growth in an economy devoid of the production of real goods—certainly not a nation as large as the U.S.

Because manufacturing produces tangible goods, it is the key to exports. Exports, in turn, are the key to trade surpluses and trade surpluses are the source of large international reserves—the kind that produce coveted creditor nation status.

China, Japan and Germany are creditor nations. All have large international surpluses, because all have large manufacturing sectors contributing to outsized exports that produce regular trade surpluses. And while the experts tell us that our manufacturing decline is due to high wages, it’s worth noting that both Japan and Germany have wage levels that are at least as high as the U.S, yet both have thriving manufacturing and export sectors. What is it that they can do that we can’t? We even have far more natural resources than either country!

Is the decline of manufacturing and our status as the world’s biggest debtor nation coincidental? Hardly.

But it gets worse. Manufacturing is also the fulcrum of technology, an area in which the U.S. has long claimed dominance, almost as some sort of birthright. As manufacturing goes, so will military-, computer- and medical-technology—and the high paying jobs they provide. The implications of the manufacturing decline are far more ominous than the collapsing of the housing bubble.

Politics and the manufacturing decline

If manufacturing is so important, we should be asking a critical question: where has our leadership been in the face of our decline?

I’m not talking about the current leadership—but I’m not excluding it either—the blame on this goes back at least a couple of decades. Have we the citizenry been holding our leaders accountable? It appears not.

What’s worse is that there seems be no “good guy” political party on this issue. As much as we might love to believe that there’s a good guy vs. bad guy element behind every issue, alas there isn’t. Both the Republicans and the Democrats have made substantial contributions to the country’s manufacturing decline, albeit from different directions.

What are some of the things Republicans have supported that have had a material negative impact on the nations manufacturing base?

• Advancing favorable tax policies to conglomerates that move manufacturing production overseas.
• Championed brushfire suburban development (“any development is good development”), sucking the life out of urban areas—which once were the very centers of American manufacturing.
• Enthusiastically supported the FIRE economy for its ability to grow and create jobs much more rapidly than capital intensive manufacturing.
• Allowed their patriotism and unbridled optimism over “all things American” to cause them to underestimate the capabilities of foreign competition.
• Demanded balanced budgets when Democrats were in control—but when Republicans are in power they shift to “deficits don’t matter”. Deficit spending creates a false sense that money can be created out of thin air, rather than earned through the production and export of real goods.

And how about the Democrats—the one-time champions of union workers?

• They’re the purveyors of not in “my back yard” (NIMBY)—if it’s ugly, noisy or dirty, move it somewhere else. How does manufacturing grow or even survive in that environment?
• In growing suburban areas, they use “environmental concerns” to keep out manufacturing, businesses with physical inventories and even suburban agriculture (pesticides, animal habitat destruction, etc.)
• They tend to favor “gentrification”, which is code for the elimination of the working class. They want sanitized neighborhoods, clear of work vehicles, chicken coops and physical inventory.
• Though they claim to want to restrict growth in the suburban fringe, many seem to live there anyway.
• Though they tend to cry foul over the corruption of the FIRE economy, they nonetheless tolerate it willingly because it’s “clean”.
• They’re the party of tax-and-regulate. Any tax as a good tax—especially when it’s levied on businesses. That’s a difficult environment for any business to operate in, but more so for manufacturing concerns because they’re capital, inventory and labor intensive.

Not surprisingly, there are common platforms between the parties. For example, both are obsessed with maintaining the escalation of property values. But decades of relentless increases in real estate prices have done more than their share to degrade small business, agriculture and manufacturing. Property becomes so expensive that the land beneath a business enterprise is worth far more than the business itself. The land is then sold to make way for subdivisions, condominiums, office buildings and strip malls—the very nesting grounds of suburban development and the FIRE economy.

Neither party is concerned with true urban renewal or worker retraining—the kinds of efforts that could resuscitate a declining manufacturing base and provide jobs for millions of workers. Generous student loan programs are supported for elite university educations, but little emphasis is placed on community colleges and technical schools training workers for jobs closer to the ground.

What politicians of both stripes have been truly good at is keeping the issue out of public site. They’re as quick to bury the debate as they are to show up at ribbon cutting ceremonies at the opening of brand new (foreign owned) manufacturing plants in their home districts.

Is it at all hard to see why America’s manufacturing base has eroded to second class status?

Our favorite form of political participation: Blame the other party

There’s an article of faith in American politics: what ever is wrong with country is the fault of the other party. It’s not just the leadership of the two parties that engage in the practice either—it’s a common belief of the man on the street. That’s a simplistic belief that shows that we’re not emotionally prepared to face and deal with our problems.

Democrats tend to believe that the nation is in good shape as long as a Dem is in the White House. A March poll on President Obama’s approval rating found that while only 42% of the general population approve of the president’s job, fully 80% of Democrats do. What could explain such an enormous gap in perception?

The Republican faithful are no different. The very economic conditions contributing to Obama’s low approval rating were well in play during 2007-2008 when George W. Bush was at the helm. The economy was heading down the drain while Republicans were in denial—after all, their guy was in and all was well. Now they rail against Obama’s continuation of Bush’s policies as if the economic decline began in January of 2009.

Will that kind of partisanship fix anything?

Charles has written many times that the nation’s ills will not be fixed by tinkering at the fringes, policy adjustments and promises of reform. Yet this is what politicians in both parties promise—and what we choose to believe even as reality screams otherwise. No real sacrifice, no real change—just get rid of the other party and all will be as it should. Is that a solution? Has it saved American manufacturing? Even more important, will that be our strategy for dealing with other major problems?

The truly dark side of ignored problems is that by the time they become front page news, it’s already too late! The task will no longer be to fix a broken system, but to build a new one from the ground up. Will this be the course with deficits, pension funding, healthcare and energy? We can hope not, but the trend is very unsettling.

Kevin Mercadante is a regular reader of Of Two Minds, a professional blogger and the owner of OutOfYourRut.com, a website about careers, business ideas, money and more.

Of Two Minds

From now on, whenever you hear the term “the global economy” you should immediately equate it with the destruction of the U.S. middle class.  Over the past several decades, the American economy has been slowly but surely merged into the emerging one world economic system.  Unfortunately for the middle class, much of the rest of the world does not have the same minimum wage laws and worker protections that we do.  Therefore, the massive global corporations that now dominate our economy are able to pay workers in other countries slave labor wages and import the products that they make into the United States to compete with products made by “expensive” American workers.  This has resulted in a mass exodus of manufacturing facilities and jobs from the United States.

But without good, high paying jobs the U.S. middle class cannot continue to be the U.S middle class.  The only thing that the vast majority of Americans have to offer in the economic marketplace is their labor.  Sadly, that labor has now been dramatically devalued.  American workers now must directly compete for jobs with millions upon millions of workers on the other side of the world that toil away for 15 hours a day at slave labor wages.  This is causing jobs to leave the United States at an almost unbelievable rate, and it is putting tremendous downward pressure on the wages of millions of jobs that are still in the United States.

So when you hear terms such as “globalization” and “the global economy”, it is important to keep in mind that those are code words for the emerging one world economic system that is systematically wiping out the U.S. middle class.

A one world labor pool means that the standard of living for the U.S. middle class will continue falling toward the standard of living in the third world.

We keep hearing about how the U.S. economy is being transformed from a “manufacturing economy” into a “service economy”.  But “service jobs” are generally much lower paying than “manufacturing jobs”.  The number of good paying “middle class jobs” in the United States is rapidly decreasing.  So how can the U.S. middle class survive in such an environment?

What makes things even worse for manufacturers in the United States is that other nations often impose a “value-added tax” of 20 percent or more on U.S. goods entering their shores and yet most of the time we do not reciprocate with similar taxes.

But whenever someone mentions how incredibly unfair and unbalanced our trade agreements with other nations are, they are immediately labeled as a “protectionist”.

Well, someone should be looking out for U.S. interests when it comes to trade, because the current state of the global economy is ripping the U.S. middle class to shreds.

Right now, the United States consumes far more wealth than it produces.  This nation buys much, much more from the rest of the world than they buy from us.  This is called a “trade deficit”, and it is one of the most important economic statistics.  The U.S. runs a massive trade deficit every single year, and it is wiping out our national wealth, it is destroying our surviving industries and it is absolutely shredding middle class America.

We cannot allow tens of thousands of factories to continue to leave the United States.  We cannot allow millions of jobs to continue to be “outsourced” and “offshored”.  We cannot allow tens of billions of dollars of our national wealth to continue to be transferred into foreign hands every single month.

The truth is that the global economy is bad for America.  The following are 23 facts which prove that globalism is pushing the standard of living of the middle class down to third world levels….

#1 From December 2000 to December 2010, the U.S. ran a total trade deficit of 6.1 trillion dollars.

#2 The U.S. trade deficit was about 33 percent larger in 2010 than it was in 2009.

#3 The U.S. trade deficit with China in 2010 was 27 times larger than it was back in 1990.

#4 The U.S. economy is rapidly trading high wage jobs for low wage jobs.  According to a new report from the National Employment Law Project, higher wage industries accounted for 40 percent of the job losses over the past 12 months but only 14 percent of the job growth.  Lower wage industries accounted for just 23 percent of the job losses over the past 12 months and a whopping 49 percent of the job growth.

#5 Between December 2000 and December 2010, 38 percent of the manufacturing jobs in Ohio were lost, 42 percent of the manufacturing jobs in North Carolina were lost and 48 percent of the manufacturing jobs in Michigan were lost.

#6 In Germany, exports account for approximately 40 percent of GDP.  In China, exports account for approximately 30 percent of GDP.  In the United States, exports account for approximately 13 percent of GDP.

#7 Do you remember when the United States was the dominant manufacturer of automobiles and trucks on the globe?  Well, in 2010 the U.S. ran a trade deficit in automobiles, trucks and parts of $110 billion.

#8 In 2010, South Korea exported 12 times as many automobiles, trucks and parts to us as we exported to them.

#9 The U.S. economy now has 10 percent fewer “middle class jobs” than it did just ten years ago.

#10 The United States currently has 7.7 million fewer payroll jobs than it did back in December 2007.

#11 Back in 1970, 25 percent of all jobs in the United States were manufacturing jobs. Today, only 9 percent of the jobs in the United States are manufacturing jobs.

#12 In 2002, the United States had a trade deficit in “advanced technology products” of $16 billion with the rest of the world.  In 2010, that number skyrocketed to $82 billion.

#13 The United States now spends more than 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States.

#14 In China, working conditions are so bad that large numbers of “employees” regularly try to commit suicide.  One major employer, Foxconn, has even gone so far as to install “anti-suicide nets” in an attempt to keep their employees from jumping off of their buildings.

#15 Wages for workers in China are incredibly low.  For example, one facility in the city of Longhua that makes iPods employs approximately 200,000 workers.  These workers put in endless 15-hour days but they only make about $50 per month.

#16 In Bangladesh, manufacturing workers toil in absolutely horrific conditions and make an average of about $38 per month.

#17 In Vietnam, teenage workers often work seven days a week for as little as 6 cents an hour making promotional Disney toys for McDonald’s.

#18 Since 2001, over 42,000 manufacturing facilities in the United States have been closed.

#19 Half of all American workers now earn $505 or less per week.

#20 In the United States today, 6.2 million Americans have been out of work for 6 months of longer.

#21 8.4 million Americans are currently working part-time jobs for “economic reasons”.  These jobs are mostly very low paying service jobs.

#22 When you adjust wages for inflation, middle class workers in the United States make less money today than they did back in 1971.

#23 According to Willem Buiter, the chief economist at Citigroup, China will be the largest economy in the world by the year 2020, and India will surpass China by the year 2050.

Those that promote “free trade” can never explain how the U.S. middle class is going to continue to have plenty of jobs in the new global economy.

By merging our labor pool with the rest of the world, we have also merged our standard of living with the rest of the world.  High unemployment is rapidly becoming “the new normal” in America, and wages are going to continue to decline in many, many industries.

Already, there are quite a few formerly great U.S. cities (such as Detroit) that are beginning to resemble third world hellholes.  If something is not done about our massive trade imbalance, even more cities are going to follow Detroit into oblivion.

Unfortunately, most of our politicians continue to insist that globalism is good for our society.  They continue to insist that we should not be worried that jobs formerly done by middle class American workers are now being done by slave laborers on the other side of the globe.  They continue to insist that having 43 million Americans on food stamps is a temporary thing and that soon our economy will be better than ever.

Well, it is time to stop listening to the politicians that are promoting “the global economy”.  They are lying to us.

Globalism is great for nations such as China and it is helping multinational corporations make huge profits, but for the U.S. middle class it is an economic death sentence.

If you want an America where there are less jobs, where more Americans are on food stamps and other anti-poverty programs and where our cities continue to be transformed into deindustrialized hellholes, then you should strongly support the emerging global economy.

But if you care about the standard of living of the U.S. middle class and you want for there to be some kind of viable economic future for your children and your grandchildren then you had better start caring about these issues and doing something about them.

Please wake up America.

The Economic Collapse

I hope that you enjoy the cheap foreign-made plastic trinkets that you will be exchanging with your family and friends this holiday season, because they are literally destroying the U.S. economy.  As part of the new “one world economy” that both Democrats and Republicans insist is so good for us, millions of good paying middle class jobs have been shipped out of America.  Do you need a job?  Are you wondering where all the good jobs went?  Well, the next time you are out just walk into a store and start looking at the product labels.  Most of the things that are sold in our stores are now made out of the country.  So if you need a good paying job to support your family that is just too bad – you have been merged into a global labor pool where you must compete for jobs with people on the other side of the globe willing to work for less than a tenth of what you usually make.  Welcome to the “one world economy” where big global corporations make a fortune exploiting slave labor on the other side of the world while “overly expensive American workers” get dumped out on the street.

Are you in favor of a redistribution of wealth?  Most of the time when the phrase “redistribution of wealth” is brought up, conservatives and libertarians visibly cringe – as they should.  But did you know that right now the greatest redistribution of wealth in the history of the world is taking place and our politicians are doing nothing about it?

For a moment, imagine a giant map of the world.  On that giant map, put a huge pile of money on the United States, and also put a huge pile of money on China and on the OPEC nations.  Now imagine a big hand coming along once a month that takes tens of billions of dollars out of the U.S. pile and puts it into the piles of China and the OPEC nations.

As this continues month after month after month, what is eventually going to happen?

The U.S. pile of money is going to get far smaller and the other piles of money are going to get much, much larger.

And that is exactly what is happening in our world today.

Back in 1985, the U.S. trade deficit with China was 6 million dollars for the entire year – not really anything to worry about  it.

Well, let’s fast forward to 2010.  For the month of August alone, the trade deficit with China was more than 28 billion (that’s billion with a “b”) dollars.

In other words, the U.S. trade deficit with China in August was more than 4,600 times larger than the U.S. trade deficit with China was for the entire year of 1985.

My, how the world has changed in 25 years.

Oh, but doesn’t China “invest” some of that money they are getting from us back into our country?

Well yeah, our top officials regularly go over there to beg them to lend us more money.  Now we owe China close to a trillion dollars.  We also owe the major oil exporting nations of the Middle East massive amounts of money.

Is this a good idea?  Let us keep in mind the ancient principle that the borrower always ends up the servant of the lender.

Is it wise for the United States to become enslaved to China and to the oil exporters of the Middle East?

Is that any way to run an economy?  Is that any way to run a country?

All over the United States factories are closing down.  If you go to shopping centers in many areas of America you would think that the hottest new store was called “Space Available”.

Since the year 2000, we have lost 10% of our middle class jobs.  In the year 2000 there were about 72 million middle class jobs in the United States but today there are only about 65 million middle class jobs.

What kind of progress is that?

“But oh”, the supporters of the one world economy will declare, “the cheap goods, the cheap goods!”

Yes, I hope you enjoy paying ten percent less for your plastic trinkets.  But you will also support American workers one way or another.  Either you will provide them with good paying jobs, or you will pay for their food stamps and their unemployment checks.

One out of every six Americans is now enrolled in a federal anti-poverty program.  As 2007 began, 26 million Americans were on food stamps, but now 42 million Americans are on food stamps and that number keeps rising every single month.

Can anyone out there please explain how the “one world economy” is supposed to be good for us when 42 million Americans cannot even feed themselves?

Allowing our country to be deindustrialized just so that we can consume more cheap goods from China is like tearing down pieces of your house to keep your fire going.  In the end, you won’t have much of a house left.

Whatever your opinion of Donald Trump is, this next video is worth watching.  Trump certainly should not run for president, but as a savvy businessman he definitely understands what China is doing to us….

It is time for the American people to wake up.

We are being taken advantage of.

The one world economy is going to keep destroying the U.S. middle class.  There is no way that American workers can compete with slave labor on the other side of the globe.  It is impossible.

In fact, just about every kind of job imaginable is being shipped to places where labor is cheaper.  Even engineering and computer programming jobs are being offshored and outsourced.

The United States is even being slaughtered in high-tech industries.  Back in 1998, the United States had 25 percent of the world’s high-tech export market and China had just 10 percent. Ten years later, the United States had less than 15 percent and China’s share had soared to 20 percent.

According to one recent study, China could become the global leader in patent filings by next year.

The United States has become a bloated, slovenly nation that consumes massive amounts of wealth but that produces relatively little.

With each passing year, we make fewer things inside the United States….

*The United States has lost a staggering 32 percent of its manufacturing jobs since the year 2000.

*Since 2001, over 42,000 U.S. factories have closed down for good.

*As of the end of 2009, less than 12 million Americans worked in manufacturing.  The last time that less than 12 million Americans were employed in manufacturing was in 1941.

*Manufacturing employment in the U.S. computer industry is actually lower in 2010 than it was in 1975.

*In 2010, the number one U.S. export to China is “scrap and trash”.

Oh, but won’t “getting more education” solve all of our problems and get the American people back to work?

No.

The truth is that tens of millions of Americans have a “higher education” that is not doing them any good today.

In his article entitled “The Great College-Degree Scam“, Richard Vedder explains that a large percentage of U.S. college graduates are working in jobs that have not historically required college degrees….

Here it is:  approximately 60 percent of the increase in the number of college graduates from 1992 to 2008 worked in jobs that the BLS considers relatively low skilled—occupations where many participants have only high school diplomas and often even less.

Ouch.

Later on in his article, Vedder notes that the number of college graduates that are waiting tables or that are working as cashiers is absolutely exploding….

In 1992 119,000 waiters and waitresses were college degree holders. By 2008, this number had more than doubled to 318,000. While the total number of waiters and waitresses grew by about 1 million during this period, 20% of all new jobs in this occupation were filled by college graduates. Take cashiers as well. While 132,000 cashiers possessed college degrees in 1992, by 2008, 365,000 cashiers were college graduates. As with waiters and waitresses, 20% of new cashiers since 1992 are college graduates.

So do you still think that the “one world economy” is a great idea?

Well, you might want to practice the following two phrases….

#1 “Would you like fries with that?”

#2 “Welcome to Wal-Mart!”

Our economy is turning into a low-wage service economy because we don’t make much of anything in the United States anymore.

So if you need a good job, I am afraid that the joke is on you.

The good jobs are being shipped out of the United States as part of the new one world economy, and millions of unemployed Americans have been left to fight over the low paying service jobs that remain.

So if you are flipping burgers or stocking shelves for a big multinational retail chain, perhaps you should consider yourself to be fortunate.  At least you still have a job.  There are millions of desperate, hungry-eyed Americans that would take your job in a second.

And you know what?  Things are only going to get worse.

The Economic Collapse

By Paul Vigna

Just in case you’re still hung over from the weekend, the Dallas Fed has a bucket of cold water for you. The regional bank came out with its June manufacturing survey this morning, and as bad as the numbers are, and they are bad, the comments are even worse.

The general business activity index fell to negative 4 from 2.9, the company outlook index fell to negative 2.8 from 19.6. The production index fell to negative 1.9 from 20.8 in May; capacity utilization fell to positive 2.7 from 18.7 in May. New orders fell to negative 8.2 from 15.8 in May. Go all the way down the line, the numbers are all down from a month ago. But even more so than the numbers, the comments from businesses surveyed are the real tell here, and it seems to me the Fed wouldn’t have any reason to cherry pick especially bad comments, so this is probably a pretty good take on where things stand.

You really need to read the whole thing to get the total picture:

Comments from Survey Respondents
These comments were selected from respondents’ completed surveys and have been edited for publication.

Wood Product Manufacturing
After skyrocketing in February through April, the North American lumber market has collapsed, indicative of the slowdown at U.S. job sites. Small and medium businesses here in “the trenches” are hurting every bit as much as last year. Much of the downturn is a result of the stimulus ending and the typical midyear slowdown that occurs in the building and construction industry.

Paper Manufacturing
A third price increase on linerboard is a possibility within the next couple of months. If this occurs, it will cause a major uproar with our customers. They will all be going out for bids, causing margins to erode.

Chemical Manufacturing
We are not optimistic about the next couple years.  There are too many negative factors in the world of finance right now.

Plastics and Rubber Products Manufacturing
As a business, we are just trying to hold on until the upturn comes.

The availability of skilled technicians and toolmakers is scarce, particularly in the 20- to 40-year-old age group.

Nonmetallic Mineral Product Manufacturing
Housing activity has had some pullback with the expiration of the home-buyer tax credit. The recovery will be lengthy and slow in coming, and it will be subject to improved employment levels and an upturn in the credit markets.

Fabricated Metal Product Manufacturing
After two consecutive months of increased activity, we have seen a dramatic drop in new business, with no backlog for July and beyond. We are having considerable trouble with our bank; although we are not in default and are making all payments, the bank has not executed a loan facility renewal after almost 90 days past our renewal date. There is a high degree of uncertainty in the marketplace, with owners and their designated contractors and design engineers seeing a dramatic reluctance to initiate planned projects, both maintenance and capital expenditure.

We have yet to see any evidence in Texas or across the country of an economic recovery.

Overall business has improved. There seems to be more onshoring of manufacturing due to risk control, inventory management and short lead times. Increased business expenses created by state tax increases are causing pressure on cost competitiveness. It is still very challenging to obtain financing for capital expenditure and growth.

Economic activity remains tenuous for building materials manufacturers.  Financing and demand for capital goods will determine the strength of the recovery as it relates to construction.

Machinery Manufacturing
We are quite concerned about the trends in general business activity. It feels like we are slowing down, not speeding up. I don’t see much that is encouraging at this point.

Our outlook for the next six months has improved due to our company broadening its product offerings, not necessarily due to improved economic conditions.

Demand for capital goods in the food service industry remains at a very low level.

Computer and Electronic Product Manufacturing
Right now business looks steady, but we’re stepping lightly.

Furniture and Related Product Manufacturing
Business has worsened this month. Retail activity has gone down, damaging the hope for improvement among retailers.

Beverage and Tobacco Product Manufacturing
2009 was great, but the wheels came off a little bit in the first quarter of 2010. The second quarter has been better, but not great.

MarketTalk