Roberts' "How The Economy Was Lost" is a collection of short, sensible columns on the American economy - most previously posted on '[...].' The material is well-written, free of jargon, and backed by credible data. It's only shortcoming is that material written as long as five years ago, in this case, quickly becomes vulnerable to charges of 'dated.' Thus, readers impressed with the author's logic have to laboriously update and re-document Roberts' data. Nonetheless, the newly-released book is well worth reading - his conclusions are probably still valid, and his documentation of errors in others' analyses helps readers see how economic data are often misinterpreted.
Roberts' overall thesis is that free market zealots have already hollowed-out America's former middle-class manufacturing sector, and have begun doing the same with our service sector. Results include rising personal credit-card and home-equity loan debt, a federal deficit and unfunded liabilities totaling nearly $60 trillion, and trillions more in accumulative trade deficits. Manufacturing job losses total (when written) about 4 million, a University of California study estimates 14 million service jobs will follow, and Alan Blinder (former Federal Reserve Vice-Chairman) estimates that 40-50 million jobs are vulnerable. McDonald's drive-thru order-taking as already occurred. Obviously, none of this bodes well for tax revenues, long-term trends in real-incomes or home values.
America's cherished 'upward mobility' is also fast fading. Roberts points out by outsourcing manufacturing jobs, we unwittingly largely eliminated the rationale for associated high-paying management, engineering, and R&D jobs.'The Boston Globe' reports that Indian PhD chemists work for one-fifth the pay of Americans, and are closer to the subject their work. 'Chemical and Engineering News' reported in its 11/6/06 issue that 8.7% of its U.S. members lacked a full-time job. (I know one - working part-time for H&R Block.)
Where did these attractive white-collar jobs go? Bangalore, in 2005 had over 150,000 software engineers - serving H-P, Boeing, Rolls-Royce, G.E., Google, Cisco, Intel, Sun, Motorola, Microsoft - all told, about 780 multinationals. Think these are all small potato operations - in 2009 G.E. opened a new in Bangalore to accommodate 2,000 new researchers; it now has 2,800 worldwide, including 1,900 in the U.S. Then there's Shanghai - new R&D centers for Motorola, G.E., Google, L'Oreal, Novartis, GlaxoSmithKline (will rank as one of its largest), Microsoft (6,000 staffers, added to its already 1,200), DuPont and Dow Chemical, Honeywell, and about 1,100 others. I could continue with Beijing, etc., but you already get the picture.
Good jobs that remain in the U.S. are increasingly filled with foreign workers brought in on work visas (463,000, as of 2002), while their employers claim a shortage of qualified U.S. workers. That claim, however, is belied by the frequent practice of having existing American employees train the lower-paid foreigners who take their jobs. (Why do the exiting Americans do it - not doing so results in no severance pay.) Roberts even cites examples where U.S. job advertisements explicitly ask for an H-1B or TN work visas. Meanwhile, starting salaries, adjusted for inflation, are declining in these same areas. Studies also show that those here on work visas are often illegally paid less than comparable Americans, and produce fewer patents.
American economists all 'know' that this is all for our own good, telling us that better jobs are on the way- yet, mostly can't identify what they'll be. (Some have identified biotech as the new source of jobs - ridiculous, given the numbers of new jobs required, and the fact that even that work is subject to outsourcing.) The top ten sources of new jobs in America, per the Bureau of Labor Statistics, include home health aides, customer-service representatives, food preparation and serving workers (including fast food), personal and home care aides, retail sales-persons, office clerks, and nursing aides and orderlies - none of which require a college education, and all vulnerable to filling by the 12 million or so low-cost illegal aliens already here. The #1 projected source for new jobs, RNs, only requires two years of college. Guess what the next 'crash' will be - college educations, and the colleges and educations that provide them.
Another 'benefit' of all this off-shoring, per American economists, is attracting foreign direct investment. Unfortunately, Roberts tells us that when you look behind the numbers, 90% is for the acquisition of existing U.S. assets, not building anew. As for claims like 'we've added two jobs for every one outsourced,' Roberts points out that this is mostly miscounting due to existing U.S. firms expanding payrolls overseas.
At least inflation has been tamed. Not so, says Roberts - instead we revised how inflation is calculated and assume that eg. when apple prices go up, we buy something else and thus are unaffected.
So how do those economists get it so wrong? Roberts says its from their confusing 'absolute advantage' (China's low-cost advantage across the board) with 'comparative advantage' (eg. Italy making wine because its climate is more conducive to doing so than eg. Iceland). Roberts says David Ricardo and Adam Smith endorsed 'Free Trade' based on comparative advantage.
Bottom-Line: Roberts believes 'the end is near,' and will occur when China et al get tired of assuming the risk of holding U.S. dollars and T-bills. At that point the dollar will no longer be accepted as the reserve currency (some already are trying to change to the Euro), and current holders will either rush to buy up U.S. hard assets, or convert their dollar-denominated assets into the new reserve currency - making the dollar worth . . . ?
