“Offshoring has Destroyed the US Economy
Nobel Economist Michael Spence Says Globalism Is Costly For Americans
For a decade I have warned that US corporations, pressed by Wall Street and large retailers such as Wal-Mart, to move offshore their production for US consumer markets, were simultaneously moving offshore US GDP, US tax base, US consumer income, and irreplaceable career opportunities for American citizens.
Among the serious consequences of offshoring are the dismantling of the ladders of upward mobility that made the US an “opportunity society,” an extraordinary worsening of the income distribution, and large trade and federal budget deficits that cannot be closed by normal means. These deficits now threaten the US dollar’s role as world reserve currency.
I was not alone in making these warnings. Dr. Herman Daly, a former World Bank economist and professor at the University of Maryland, Dr. Charles McMillion, a Washington, DC, economic consultant, and Dr. Ralph Gomory, a distinguished mathematician and the world’s best trade theorist, understand that it is strictly impossible for an economy to be moved offshore and for the country with the offshored economy to remain prosperous.
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Tradeable jobs are jobs that produce goods and services that can be exported and thus can be produced in locations distant from their market. Tradeable jobs result in higher value-added and, thereby, higher pay than most non-tradable jobs.
When a country’s tradeable goods and services are converted by offshoring into its imports, it is thrown back on low productivity domestic service jobs for its employment. These domestic service jobs, except for dentists, lawyers, teachers, and medical doctors, do not require a university education. Yet, America has thousands of universities and colleges, and the government endlessly repeats the mantra that “education is the answer.”
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Daly shows that this reasoning is incorrect. If the Gulf of Mexico is destroyed by fertilizer run-offs from agri-business and by oil spills, only nature can correct the problem after many years measured in decades or centuries. In the meantime, humans are without the resource.
Daly’s argument is brilliant in its simplicity. In former times, nature’s capital was enormous, and man’s reproducible capital was small. For example, fish in the oceans were plentiful, but fishing boats were not. Today fishing boats are in excess supply, but ocean fishing stocks are depleted. Thus, the limiting factor is not man-made capital, but nature’s capital. Daly stresses that by leaving ecological and social costs out of the computation of GDP, economists do not have a reliable measure of the effect of economic activity on human welfare.
All of economics is predicated on the notion that resources are inexhaustible, and that the only challenge is to use them most efficiently. But if resources are not inexhaustible and cannot be replicated by human capital, the world economy is being ruthlessly exploited to its detriment and to the detriment of life on earth.
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To find a Nobel prize-winner documenting the high cost of globalism to developed economies is extraordinary. For the Council on Foreign Relations to publish it suggests that the Establishment, or some part of it, suspects that its hubris has run away with its fortunes, and that different thinking is needed to restore the US economy.
We must hope that Spence’s paper will encourage thought. On the other hand, the bought-and-paid-for-economists will confront Spence with their fantasies that the US would be enjoying full employment if only government did not discourage employment with unemployment compensation, food stamps, income support programs, unions, minimum wages, and regulation. “
http://globalresearch.ca/index.php?context=va&aid=25056
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