Sunday, September 5, 2010

What is this blog all about?

America shot itself in the foot in a very big way by sending millions of manufacturing jobs to China and other overseas locations.   How did we get into this insane situation?

Manufacturing activity provides a strong value-added effect to the economy in which it occurs.  In addition, manufacturing employment generates additional supporting employment.  Nevertheless, around 1960, our manufacturing jobs started going overseas, first a trickle and later a flood.  We are now completing a 50-year experiment, 1960 to 2010, to see if our economy can survive with a substantially reduced level of manufacturing.

I believe that the results of the experiment are very clear.  We have a major unemployment problem and related problems of government debt.  The results of the experiment were clear long before the crash of Fall 2008.  Increasing numbers of people were not able to find employment paying a living wage.  These people would not be buying houses, cars, and major appliances in their lifetimes.  So the economy was already starting to contract.

The crash has only made it clearer that our economy cannot survive in a scenario where virtually all our consumer goods, and thousands of items for commercial and industrial applications, are made in China and other overseas locations.

Right from the beginning of the experiment, the ordinary working man or woman understood that it is insane to let our manufacturing jobs go overseas.  Unfortunately our "leaders" did not have this understanding.

At the beginning of the experiment, our nation was prosperous.  There were plenty of jobs.  Factories were busy.  American-made products were in use around the world.  We were a major exporting nation.  Government and personal debt levels were moderate. 

Today we are a large net importing nation.  Our economy is hemorrhaging at the rate of three-quarters of a trillion dollars per year.  This money goes out to cover our negative balance of trade in manufactured goods, interest payments to foreign holders of U.S. Federal government securities, and other items.  We are paying a gigantic price in order to save a few dollars when we buy a toaster made in China rather than a toaster made in U.S.A. 

Every job sent overseas, and especially every manufacturing job sent overseas, is a reduction, a deflation, and a contraction of our economy.  I have been writing about this situation for some years, and I have said, very accurately, that we are committing national economic suicide.  

In this huge movement of manufacturing employment out of the country, our great business "leaders" forgot one thing.  If Americans don't have employment, how are they going to buy the products that used to be manufactured in the United States but are now manufactured in China and other overseas locations?  This phenomenon is starkly real today.  Businessmen, government officials, and economists are moaning about low levels of store sales.    

Our great government "leaders" also forgot one thing.  If factories in the United States are closed, and workers are laid off, where is the tax revenue going to come from?  Factories in China, and workers in China, don't pay taxes to the IRS!

We have economic and trade arrangements with China and other countries.  We have complex arrangements under the auspices of the World Trade Organization.  Are we going to be politically correct and adhere to all these arrangements while our economy goes down and down until it has been totally destroyed?  The only way to solve our debt and employment problem is to get our manufacturing jobs back from China and from other countries with whom we have negative balances of trade in manufactured goods.

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