Monday, September 27, 2010

50 years too late

Please read this post in conjunction with my basic position paper "What is this blog all about?".

We have had a 50-year experiment, beginning in 1960, of allowing our manufacturing jobs to be sent to China and other overseas locations.   Sending our manufacturing jobs overseas was initially a trickle but gradually increased to flood proportions.

Various claims were made that our economy and in fact the United States of America could survive the loss of manufacturing jobs.  One claim was that we don't need manufacturing because we can offer the more-modern knowledge-based services and financial services. 

We now have the results of the experiment.  The absolutely clear conclusion from the experiment is that our economy cannot survive and has not survived the loss of millions of manufacturing jobs.  The above claims that we don't need manufacturing have been proven to be completely incorrect. 

Furthermore, if one hundred ordinary working men and women had been consulted in the early 1960s, when the jobs started to go overseas, they would have predicted the above result.  It was not necessary to go through the 50 year experiment, seriously damage our manufacturing base, and create hardship and despair for many tens of millions of our people.  Anyone with a grain of common sense would have advised that it is insane to voluntarily send our jobs overseas.

However, looking very superficially at the United States of America during the 1960s, the 1970s, the 1980s, the 1990s, even into the first part of the new century, everything looked OK.  But the stock market and financial crash of Fall 2008 revealed the true fragility of our economy.  Too many manufacturing jobs had been sent away, resulting in too much damage to our economy.  The crash was the proverbial straw that breaks the camel's back, a back that was already almost broken. 

The Fall 2008 crash was basically only about banks, insurance companies, and investment houses making very stupid and risky investments, all the while claiming to be able to advise their customers on investment strategies.  If our economy had been robust before the crash, the long term effects would have been small.  But since our economy was not robust before the crash, recovery is difficult, with experts saying it will take 5 to 10 years for employment to recover.

I want to further emphasize that the crash of Fall 2008 did not create the present unemployment problem.  The present  unemployment problem is fundamentally the result of 50 years of criminally negligent management of our country by successive Democratic and Republican administrations, and by generations of politicians in the House and the Senate.  The single most insane and criminally negligent action was to send, or allow to be sent, millions of manufacturing jobs to China and other overseas locations.   As I say numerous times in this blog, you can't have a viable economy without the value-added effect of manufacturing employment.
Let's look at some actual figures on job losses.  According to "Manufacturing & Distribution USA", 4th edition, volume 3, page xi, Figure 2, there was a loss of 4.41 million manufacturing jobs between 1982 and 2004.  Further, this publication states that "80.2% of these jobs were lost between 1999 and 2004".

So the really major job loss began in the Clinton administration and continued into the Bush administration.  Toward the end of the Clinton administration, there was a strong appearance of close relations with China.  Both President Clinton and Vice-President Gore, especially Vice-President Gore, appeared to have frequent contact with Chinese officials.

Consider the following table, which presents some relevant data:

Year     Column 2        Column 3

1982    7.7%               Small positive balance
2004    4.6%               Negative balance of $170 billion

Column 2.  Percent of American population employed in manufacturing.  Column 3.  Balance of trade with China

Conclusions from the table:

There was a decline of 40% in participation of Americans in manufacturing employment, over the period 1982-2004. 

Apologists may claim that there was a great increase in productivity over the same time period, and thus we could do with 40% fewer Americans working in manufacturing.  If this claim were correct, why would we have needed to import from China, in 2004, manufactured goods valued at $170 billion more than we exported?  And an approximately equal amount from other foreign countries?

It is simple common sense that even with increased efficiency and productivity of our remaining manufacturing sector, we would need many more manufacturing workers here at home to avoid having to import manufactured goods.  The magnitude of our negative balance of trade in manufactured goods is a direct measure of how many manufacturing jobs were transferred to overseas locations.

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