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Thread: Excellent article about the Economy

  1. #1
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    Excellent article about the Economy

    Pretty much sums it up:

    Counterpunch

    Outscourcing Innovation...And Everything Else
    America's Has-Been Economy

    By PAUL CRAIG ROBERTS

    A country cannot be a superpower without a high tech economy, and America's high tech economy is eroding as I write.

    The erosion began when US corporations outsourced manufacturing. Today many US companies are little more than a brand name selling goods made in Asia.

    Corporate outsourcers and their apologists presented the loss of manufacturing capability as a positive development. Manufacturing, they said, was the "old economy," whose loss to Asia ensured Americans lower consumer prices and greater shareholder returns. The American future was in the "new economy" of high tech knowledge jobs.

    This assertion became an article of faith. Few considered how a country could maintain a technological lead when it did not manufacture.

    So far in the 21st century there is scant sign of the American "new economy." The promised knowledge-based jobs have not appeared. To the contrary, the Bureau of Labor Statistics reports a net loss of 221,000 jobs in six major engineering job classifications.

    Today many computer, electrical and electronics engineers, who were well paid at the end of the 20th century, are unemployed and cannot find work. A country that doesn't manufacture doesn't need as many engineers, and much of the work that remains is being outsourced or filled with cheaper foreigners brought into the country on H-lb and L-1 work visas.

    Confronted with inconvenient facts, outsourcing's apologists moved to the next level of fantasy. Many technical and engineering jobs, they said, have become "commodity jobs," routine work that can be performed cheaper offshore. America will stay in the lead, they promised, because it will keep the research and development work and be responsible for design and innovation.

    Alas, now it is design and innovation that are being outsourced. Business Week reports ("Outsourcing Innovation," March 21) that the pledge of First World corporations to keep research and development in-house "is now passé."

    Corporations such as Dell, Motorola, and Philips, which are regarded as manufacturers based in proprietary design and core intellectual property originating in R&D departments, now put their brand names on complete products that are designed, engineered, and manufactured in Asia by "original-design manufacturers" (ODM).

    Business Week reports that practically overnight large percentages of cell phones, notebook PCs, digital cameras, MP3 players, and personal digital assistants are produced by original-design manufacturers. Business Week quotes an executive of a Taiwanese ODM: "Customers used to participate in design two or three years back. But starting last year, many just take our product."

    Another offshore ODM executive says: "What has changed is that more customers need us to design the whole product. It's now difficult to get good ideas from our customers. We have to innovate ourselves." Another says: "We know this kind of product category a lot better than our customers do. We have the capability to integrate all the latest technologies." The customers are America's premier high tech names.

    The design and engineering teams of Asian ODMs are expanding rapidly, while those of major US corporations are shrinking. Business Week reports that R&D budgets at such technology companies as Hewlett Packard, Cisco, Motorola, Lucent Technologies, Ericsson, and Nokia are being scaled back.

    Outsourcing is rapidly converting US corporations into a brand name with a sales force selling foreign designed, engineered, and manufactured goods. Whether or not they realize it, US corporations have written off the US consumer market. People who do not participate in the innovation, design, engineering and manufacture of the products that they consume lack the incomes to support the sales infrastructure of the job diverse "old economy."

    "Free market" economists and US politicians are blind to the rapid transformation of America into a third world economy, but college bound American students and heads of engineering schools are acutely aware of declining career opportunities and enrollments. While "free trade" economists and corporate publicists prattle on about America's glorious future, heads of prestigious engineering schools ponder the future of engineering education in America.

    Once US firms complete their loss of proprietary architecture, how much intrinsic value resides in a brand name? What is to keep the all-powerful ODMs from undercutting the American brand names?

    The outsourcing of manufacturing, design and innovation has dire consequences for US higher education. The advantages of a college degree are erased when the only source of employment is domestic nontradable services.

    According to the Los Angeles Times (March 11), the percentage of college graduates among the long-term chronically unemployed has risen sharply in the 21st century. The US Department of Labor reported in March that 373,000 discouraged college graduates dropped out of the labor force in February--a far higher number than the number of new jobs created.

    The disappearing US economy can also be seen in the exploding trade deficit. As more employment is shifted offshore, goods and services formerly produced domestically become imports. Nothink economists and Bush administration officials claim that America's increasing dependence on imported goods and services is evidence of the strength of the US economy and its role as engine of global growth.

    This claim ignores that the US is paying for its outsourced goods and services by transferring its wealth and future income streams to foreigners. Foreigners have acquired $3.6 trillion of US assets since 1990 as a result of US trade deficits.

    Foreigners have a surfeit of dollar assets. For the past three years their increasing unwillingness to acquire more dollars has resulted in a marked decline in the dollar's value in relation to gold and tradable currencies.

    Recently the Japanese, Chinese, and Koreans have expressed their concerns. According to Bloomberg (March 10), Japan's unrealized losses on its dollar reserve holdings have reached $109.6 billion.

    The Asia Times reported (March 12) that Asian central banks have been reducing their dollar holdings in favor of regional currencies for the past three years. A study by the Bank of International Settlements concluded that the ratio of dollar reserves held in Asia declined from 81% in the third quarter of 2001 to 67% in September 2004. India reduced its dollar holdings from 68% of total reserves to 43%. China reduced its dollar holdings from 83% to 68%.

    The US dollar will not be able to maintain its role as world reserve currency when it is being abandoned by that area of the world that is rapidly becoming the manufacturing, engineering and innovation powerhouse.

    Misled by propagandistic "free trade" claims, Americans will be at a loss to understand the increasing career frustrations of the college educated. Falling pay and rising prices of foreign made goods will squeeze US living standards as the declining dollar heralds America's descent into a has-been economy.

    Meanwhile the Grand Old Party has passed a bankruptcy "reform" that is certain to turn unemployed Americans living on debt and beset with unpayable medical bills into the indentured servants of credit card companies. The steely-faced Bush administration is making certain that Americans will experience to the full their counry's fall.

    Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions.He can be reached at: pcroberts@postmark.net
    The widow is gathering nettles for her children's dinner; a perfumed seigneur, delicately lounging in the Oeil de Boeuf, hath an alchemy whereby he will extract the third nettle and call it rent. ~ Carlyle

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  3. #2
    Member 15fan's Avatar
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    Re: Excellent article about the Economy

    " "Free market" economists and US politicians are blind to the rapid transformation of America into a third world economy,"

    :MandJ:

    www.m-w.com

    Main Entry: third world
    Function: noun
    Usage: often capitalized T&W
    Etymology: translation of French tiers monde
    1 : a group of nations especially in Africa and Asia not aligned with either the Communist or the non-Communist blocs
    2 : an aggregate of minority groups within a larger predominant culture
    3 : the aggregate of the underdeveloped nations of the world
    - third world·er /-'w&r(-&)l-d&r/ noun, often capitalized T&W

    Let's get a show of hands.

    If you honestly think that the US economy is going to devolve into a third world economy at any point during your life, sign in and say "aye".

  4. #3
    Team Puffy Leadoff Hitter CbusRed's Avatar
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    Re: Excellent article about the Economy

    Quote Originally Posted by 15fan
    " "Free market" economists and US politicians are blind to the rapid transformation of America into a third world economy,"

    :MandJ:

    www.m-w.com

    Main Entry: third world
    Function: noun
    Usage: often capitalized T&W
    Etymology: translation of French tiers monde
    1 : a group of nations especially in Africa and Asia not aligned with either the Communist or the non-Communist blocs
    2 : an aggregate of minority groups within a larger predominant culture
    3 : the aggregate of the underdeveloped nations of the world
    - third world·er /-'w&r(-&)l-d&r/ noun, often capitalized T&W

    Let's get a show of hands.

    If you honestly think that the US economy is going to devolve into a third world economy at any point during your life, sign in and say "aye".

    Well, I have allready noticed a large outbreak of typhoid and cholera in my neighborhood. Third world here we come!!


    Perhaps "Excellent" was the wrong adjective to describe this article. :MandJ:

  5. #4
    Member Red Heeler's Avatar
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    Re: Excellent article about the Economy

    Way to shoot the messenger while ignoring the message, guys.

    I agree that the conclusions in the article are alarmist. However, the author brings up some very good points. To remain the econonmic powerhouse in the world, America has to be good at something that keeps the pockets of most of the citizens full. If we can't manufacture and we can't design, what can we do?

  6. #5
    Pagan/Asatru Ravenlord's Avatar
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    Re: Excellent article about the Economy

    Quote Originally Posted by Red Heeler
    If we can't manufacture and we can't design, what can we do?
    that's easy...become management.
    the store for all your blade, costuming (in any regard), leather (also in any regard), and steel craft needs.www.facebook.com/tdhshop


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  7. #6
    Be the ball Roy Tucker's Avatar
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    Re: Excellent article about the Economy

    Quote Originally Posted by Red Heeler
    I agree that the conclusions in the article are alarmist. However, the author brings up some very good points. To remain the econonmic powerhouse in the world, America has to be good at something that keeps the pockets of most of the citizens full. If we can't manufacture and we can't design, what can we do?
    My thoughts too. It does seem to be a trend that's starting. If taken to its logical conclusion, the doom and gloom of the article could come true.

    In my little corner of the world, I see signs of it. I work for a large computer storage company in an advanced technology group. We keep our eyes on things that are 6-24 months out so we're can start getting aligned on what's coming down the pike (file patents to stake out turf). We continually get pushed by upper level management (CEO/CTO level) to use India resources for our research and development while US groups are getting whacked. Myself and the guys I work with are somewhat jingoistic in that we'll try very hard to use the good old boys network to get in touch with these groups and give them first shot on new stuff instead of the India track.

    Pay attention to the open sky

  8. #7
    Mod Law zombie-a-go-go's Avatar
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    Re: Excellent article about the Economy

    We need to start colonizing.
    "It's easier to give up. I'm not a very vocal player. I lead by example. I take the attitude that I've got to go out and do it. Because of who I am, I've got to give everything I've got to come back."
    -Ken Griffey Jr.

  9. #8
    The Lineups stink. KronoRed's Avatar
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    Re: Excellent article about the Economy

    Quote Originally Posted by zombie-a-go-go
    We need to start colonizing.
    ...or conquering
    Go Gators!

  10. #9
    Team Puffy Leadoff Hitter CbusRed's Avatar
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    Re: Excellent article about the Economy

    Quote Originally Posted by zombie-a-go-go
    We need to start colonizing.

    Or stop being a nation full of free-loaders looking for a hand-out all the time, and start becoming an innovator.

  11. #10
    Mod Law zombie-a-go-go's Avatar
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    Re: Excellent article about the Economy

    Quote Originally Posted by CbusRed
    Or stop being a nation full of free-loaders looking for a hand-out all the time, and start becoming an innovator.
    Never happen.
    "It's easier to give up. I'm not a very vocal player. I lead by example. I take the attitude that I've got to go out and do it. Because of who I am, I've got to give everything I've got to come back."
    -Ken Griffey Jr.

  12. #11
    Team Puffy Leadoff Hitter CbusRed's Avatar
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    Re: Excellent article about the Economy

    Quote Originally Posted by zombie-a-go-go
    Never happen.

    Unfortunatley

    Instead of having a work-ethic similar to Japan, we have counter-productive labor unions and frivilous lawsuits to make money on!

    God forbid anyone actually work an 8 hour day to make a living.

  13. #12
    Pre-tty, pre-tty good!! MWM's Avatar
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    Re: Excellent article about the Economy

    What's missing in all these arguments from guys like this is what should be done. They're long on telling us how bad these things are for the economy, but short on solutions (and then thy try to place blame of these trends on a President). Tell us what should be done. Should the US government legislate against outsourcing? If so, I'd love to see someone like Roberts explore in the same level of detail the economic implications of such a step. I don't think these guys offer solutions because they know their offering would most likely be a much worse predicament thatn the one thy clain we're heading to.

    FWIW, I've spent every day of the last month working on a consulting project for one the larger ODMs in the country who used to be strictly manufacturing, but now do design work. I've read about everything there is to read about the very subject of the article above and talked to several management level people about this very thing. The reality is that most of the "design" work they speak of is more for commodity-like products and not for truly new and innovative technologies. Most of the new BIG ideas are still coming from American engineers at the OEMs and not foreign engineers at the ODMs. Innovation still takes place right here in the USA. Maybe that will change too, but not any time soon, IMO.
    Last edited by MWM; 03-25-2005 at 10:19 AM.
    Grape works as a soda. Sort of as a gum. I wonder why it doesn't work as a pie. Grape pie? There's no grape pie. - Larry David

  14. #13
    Pre-tty, pre-tty good!! MWM's Avatar
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    Re: Excellent article about the Economy

    Quote Originally Posted by CbusRed
    Instead of having a work-ethic similar to Japan, we have counter-productive labor unions and frivilous lawsuits to make money on!
    Have you taken a look at Japan's economy over the last decade?
    Grape works as a soda. Sort of as a gum. I wonder why it doesn't work as a pie. Grape pie? There's no grape pie. - Larry David

  15. #14
    Team Puffy Leadoff Hitter CbusRed's Avatar
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    Re: Excellent article about the Economy

    Quote Originally Posted by MWM
    Have you taken a look at Japan's economy over the last decade?

    Yes.

  16. #15
    CELEBRATION TIME RBA's Avatar
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    Re: Excellent article about the Economy

    Quote Originally Posted by CbusRed
    Unfortunatley

    Instead of having a work-ethic similar to Japan, we have counter-productive labor unions and frivilous lawsuits to make money on!

    God forbid anyone actually work an 8 hour day to make a living.

    Last I heard, American workers were the most productive workers in the world. Has this changed in the last couple years?

    Does anyone actually work a 8 hour day anymore? I'm not paid by the hour, so I rarely work less than 10 hours a day. And what about the "walmart" workers? The ones working less than 30 hours a week becuase "walmart" like corporation don't want to pay benefits.

    I find your distaste for the average American worker alarming and not really based in reality.
    Last edited by RBA; 03-25-2005 at 10:49 AM. Reason: Taking out "unpatriotic"


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