04/02/2002
At birth, a fresh idea encourages thought, but not all ideas age well. Some turn into shibboleths that block debate.
Today shibboleths rule over thought. Consider the idea of "the public interest." This idea was once useful to restrain the arbitrary power of kings. But today every self-serving politician and interest group claims to be advancing the public interest, thus justifying the growth of government and spending programs.
Yet, as the clamor for "campaign finance reform" proved, no one can find a public interest that is served. We hear instead that money buys influence and that government is sold to the highest bidder. The solution — to take money and, thereby, the debate it finances out of politics — is itself a shibboleth.
Even "free trade" has become a shibboleth. Adam Smith in 1776 explained that productivity was enhanced by specialization and division of labor. The limit to specialization was the extent of the market. Thus, expanding trade beyond national borders would produce mutual benefit from each country specializing in areas where it was most productive and meeting its other wants through international trade.
Today "free trade" has come to mean opening U.S. markets to those who do not open their markets to the U.S. To meet this competition U.S. firms locate factories in low wage countries in order to be able to compete in the American consumer market.
Free traders think this is fine as long as the American consumer is benefiting from a lower price. But, of course, if specialization and division of labor means shifting production to low wage countries, the U.S. population will find itself "specialized" in selling and servicing imported goods.
A just released study, "Divergent Paths," from the Russell Sage Foundation shows a shift in U.S. white male employment from high wage manufacturing jobs to low wage retailing jobs.
Comparing white males who entered the job market in the mid-1960s with those who began working in 1980, the study finds that "workers in the recent cohort are less likely to rely on goods-producing jobs and more likely to hold service sector jobs."
Moreover, "job growth has been concentrated at the lower end of the service sector, with poor wages and career prospects, rather than in the professional, high-tech, and financial sectors more commonly associated with postindustrialism in the popular press."
As the U.S. begins to specialize in low wage jobs, it is not surprising that "wage attainment has deteriorated." Median real wages of white males in their early to late thirties who began working in 1980 declined by 21 percent compared to those who entered the job market in the mid-1960s.
Adam Smith did not think of free trade in terms of British industrialists shipping their capital and technology to low wage countries from which to produce for their home market. He meant that the British should not subsidize the production of wine and perfume in order to compete with France but, instead, focus where Britain had advantage and trade with France for wine and perfume.
Consider the way the U.S. "free trades" with China. The Chinese can sell to U.S. consumers goods made in China with Chinese labor. The U.S. can sell to Chinese consumers goods made in China with Chinese labor.
U.S. firms "export" to their subsidiaries in China unfinished or semi-finished goods where Chinese labor adds value. The goods are then "imported" back to the U.S. and sold to the American consumer.
The upshot is that both American and Chinese firms produce for the U.S. and Chinese markets with Chinese labor. U.S. labor is not in the picture.
Free traders are out to lunch when they say things like: "Oh, let the Chinese have the low wage textile jobs," implying that the U.S. retains the high tech jobs. The reality is that the U.S. has had a trade deficit with China in advanced technology goods since 1995.
How could free trade result in a high-tech first world country having an advanced technology goods deficit with a third world country?
Perhaps a 1999 U.S. Department of Commerce report has the answer: "Technology transfer is both mandated in Chinese regulations or industrial policies (with which U.S. companies wishing to invest in China must comply) and used as a deal-maker or sweetener by U.S. firms seeking joint venture contracts in China."
The Commerce report looked at three industry sectors: automotive, aerospace and consumer electronics. Findings in each sector were the same. Establishment of technology development centers is the key to gaining permission to locate plants in China.
Free trade with China boils down to U.S. firms purchasing Chinese labor to produce for the U.S. market. Wage attainment of U.S. white males will continue to deteriorate as the proportion of U.S. labor involved in the production of high wage advanced technology goods declines. Having shipped out the jobs that pay, U.S. consumers won’t be able to pay for the products they are accustomed to consuming.
The U.S. already has the export profile of a Third World country. The massive influx of poor immigrants from the Third World and the outflow of advanced technology will complete the transformation of the U.S. from a superpower into a colony.
Paul Craig Roberts is the author of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice.
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