Unfair Competition equals Free Trade

All I Want in Life is an Unfair Advantage

Hank Greenberg

CEO AIG

Tax breaks. Donated land. Free education for the workforce. Free roads and sewers. Sound like government intervention? Sound like Socialism? No, it’s normal interaction between state and local government and the suitor they woo, American business.

570 jobs coming to New Albany if aid is approved

Wednesday, November 17, 2010 02:50 AM

By Dan Gearino
THE COLUMBUS DISPATCH

Three companies plan to bring a combined 570 jobs to New Albany, according to plans presented to the village council yesterday.

The companies would move to the village’s business park, contingent on receiving state aid.

www.dispatch.com/live/content/business/stories/2010/11/17/570-jobs-coming-to-new-albany-if-aid-is-approved.html

Free trade is an ideology that posits government intervention in the regulation of economic activity is anathema and defacto un-American. Another term for this ideology is laissez-faire. This lame set of beliefs continues to be a convenient myth which licenses crooks (ENRON, WorldCom, Savings and Loan crisis) to collapse lives and disrupt the economy. After World War I, the Navy created RCA, the Radio Corporation of America, which led to broadcast radio. The internet originated with the Defense department. Land-grant colleges were established by the Morrill Act in 1862 to teach agricultural and mechanical arts along with military tactics, which gave birth to ROTC in 1916. Americans don’t realize that our government developed the internet and supported railroads by giving away land in the nineteenth century. Tracks became a more efficient means of moving goods and people than man-made channels, canals. The government did not pick a winner — the market and common sense performed that task.

China engages in free trade by forcing venture partners to give up technology? Boeing… Joint ventures in China require Western transfers of technology, an idea they copied from Singapore. China, The Party, practices mercantilism, economic nationalism, through control and regulation of its economic affairs. Quoting from The Betrayal Of American Prosperity: “By making China an export platform for multinational companies that already had distribution capabilities and brand-name recognition in overseas markets, China hoped greatly to accelerate its development.” By the end of the 20th century, China had developed into the world’s fourth largest economy. In the 21st century, scrap metal and waste paper are more important exports to China from America rather than consumer goods or steel.

AK Steel chief wants to help revive industry, get U.S. back to making things

ANOTHER ISSUE IS foreign competition. In your speech you were pretty general – did you [James L. Wainscott] mean China?

I call China the dragon in the room instead of the elephant in the room. It’s really as if we’re competing not against Chinese companies but against the Chinese government. We can compete with anybody in world – we have the greatest workforce and innovation – but we cannot effectively compete against the Chinese government when it is subsidizing or even providing equipment for free. …

I acknowledge that it is tough to face facts when they own so much of the U.S. debt. But we have to face the dragon and try and slay it or at least get along with it. If not, we will continue to see double-digit declines in American manufacturing or risk the loss of all American manufacturing. That’s really what’s at stake.

news.cincinnati.com/article/20101218/BIZ01/12190333/1055/NEWS/AK-Steel-chief-wants-to-help-revive-industry-get-U-S-back-to-making-things

Japan closed its markets to American products such as steel, electronics, and rice in the 1950s. Shut out of an emerging post war market, American companies were compelled to transfer technology to enter the Nippon market. For $25,000 SONY acquired a license from Bell Laboratories for the transistor in 1954. This led directly in the 1960s and 1970s to Japanese-made consumer electronics capturing market share in the American market through the illegal practice of dumping. Prices were high in Japan for stereos and TVs but low in the United States, less than cost. Presidents Nixon and Ford failed to stem the tide of cheap consumer goods coming to America. President Carter and his trade representative Robert Strauss did not act and American TV manufacturers such as Magnavox and Philco went out of business. There was a time when “made in Japan” meant low quality.

Our fierce competitors throughout Asia do not practice free trade. Traditionally, the Four Tigers, South Korea, Taiwan, Singapore, and Hong Kong, have economies directed by their governments instead of market forces. Governments provide low cost loans and subsidies to their businesses and they also target industries. Japan became the largest economy in Asia for a reason and nothing describes the loss of American manufacturing jobs more accurately than the decline of the American machine tool industry.
.

Never mind that no nation will remain a world power if it is unable to build the machines that build machines. And never mind that, in one decade Washington and Wall Street — through corporate restructuring that went out of control — managed to wipe out centuries of skills.

The above quote, taken from America: Who Stole the Dream?, tells the strategic outcome of the story. Tactically, the American market was attacked by foreign competitors who played by different rules. Without reciprocity, there is no free trade, no open markets, and globalization is a one way street.

In 1949, the Japanese government established the Ministry of International Trade and Industry. Beginning in the 1950s, Japanese bureaucrats closed their market to foreign competition and investment, which meant American. By doing so, American companies were compelled to license their technologies for quarterly profits. During the 1960s, Japanese machine tools were exported in increasing quantities due to our open, free-market, policies. The Japanese had closed their market and dumped their quality machine tools at lower than the cost to produce them because the government made up the difference. By the 1980s, American machine tool manufacturers were seeking relief in Washington from unfair Japanese trade practices. In February 1984, President Reagan refused import restrictions because that would impede competition and its cousin, free trade. Between 1980 and 1995, employment in the machine tool industry dropped more than 50 percent.

Since the crisis of the 1980s, the U.S. machine tool industry has descended to new lows, now ranked seventh in the world with an output last year of $3.8 billion.

Year	Metal Cutting	Metal Forming	Total
1996	$4,252,641	$565,751	$4,818,392
1997	$4,873,443	$598,127	$5,471,570
1998	$4,578,421	$627,329	$5,205,750
1999	$3,396,100	$500,157	$3,896,257
2000	$3,566,064	$458,184	$4,024,248
2001	$2,445,056	$223,455	$2,668,511
2002	$1,926,965	$236,865	$2,163,830
2003	$1,790,413	$189,515	$1,979,928
2004	$2,657,861	$185,308	$2,843,169
2005	$2,870,938	$195,912	$3,066,850
2006	$3,761,939	$182,443	$3,944,382
2007	$4,066,378	$217,258	$4,283,636

http://mrzine.monthlyreview.org/2009/labotz240709.html

Once the world leader, Japan and Germany surged ahead of US in the 1980s. In 2008, America ranked seventh, behind Taiwan. Our government allowed this strategic and crucial defense industry to wither into economic irrelevance, oblivion. Like 9/11 they let it happen because of blind faith in an ideology. Additional factors contributed to the decline of this industry including the inability to acquire capital for innovation, the high value of the dollar and the relatively low skill level of the work force in comparison to foreign workers. Every one of these reasons is attributable to the failure of government and business to cooperate and coordinate on the local and national level.

They ought to listen to the successful executives at that technology park I visited, who credit their partnership with government in helping them create so many good jobs in the following ways: quick action on permits; low-interest loans, especially when the credit markets are difficult; planning the clustering of companies making up the supply chain; and investment in a high-quality transportation infrastructure.

Adam Smith, the patron saint of free-traders, never stated government involvement in the economy was detrimental. In fact, he supported higher wages for workers to reduce poverty and distribute wealth throughout society. Consumerism would benefit workers and the owners of capital. Henry Ford knew this when he paid his workers sufficient wages to allow them to afford the cars that came off his assembly lines in Detroit. The number Americans employed in manufacturing peaked in 1979. In the golden decades of the 1950s, 1960s, and 1970s when dirty sweaty jobs provided high wages and benefits that effectively built the middle class. In 1960, 29 percent of employed American worked in manufacturing. By 2009, this percentage had plummeted to less than 10. Between 1999 and 2005 manufacturing jobs declined by 3.1 million.

German economist Friedrich List recognized that any society is defined by what it makes rather than what it consumes. Twice in his writings, Adam Smith mentioned the invisible hand free-traders worship. Smith probably referred to self-interest, not market forces that government should not interfere with. He also argued that domestic investment created more employment than overseas trade, globalization. Happy singers on USPS commercials who chirp logistics mean globalization. Adam Smith also observed: With the greater part of rich people, the chief enjoyment of riches consists in the parade of riches. The Big House.

THAIN’S HOME IS HIS CASTLE

By JAMES DORAN
Last Updated: 5:00 AM, November 18, 2007

John Thain’s country estate is so big that the new Merrill Lynch CEO has five different addresses for one palatial property that spans three separate towns.

Employers used to reward workers with higher wages because of productivity. Through the 1980s productivity rose 3.6 percent. Hourly wages between 1980 – 1989 fell almost 2 percent. Globalism generated wealth for the connected class by lowering wages. Wal-mart might help you live better with their low prices to bake cookies but those money-savers also mean lower wages. Writing in 1991, Susan Dentzer reported:

For generations Americans have considered a brighter future a birthright, and for much of the period after World War II the U.S. Economy delivered. But today’s global economy is reserving its richest rewards for the well-educated or for those working jobs sheltered from foreign competition. The result is that millions of workers in the bottom one half to three quarters of America’s labor force are butting up against a ceiling. They are doing worse than they once did, or than their parents did, and working harder than ever while falling behind the better-off.

Retail workers, restaurant workers, cashiers, truck drivers, custodians, and security guards can not be outsourced. IT professionals, engineers and systems analysts, along with HR professionals with degrees, the “back office,” can now be outsourced through the internet. Even flower growers have been impacted by globalization. “Foreign imports [in the 1990s] have risen to 61.7% of the $13-billion U.S. market, from 0.2% in 1973.” Thirty years ago there were over a hundred flower growers in California. Now, there are around a dozen. Writing in 1996, Donald Barlett and James Steele predicted: “…low-tech, low-paid occupations…will dominate the import-based American economy of the 21st century as foreign-made goods continue to supplant domestic-made goods. In other words, instead of American workers in a variety of occupations making things with their hands or growing things, they will take the same products and move them around warehouses and ship them to market.”

The United States ventured upon the road of globalization in 1944. The Bretton Woods agreement formulated financial and commercial rules between forty-four countries. By the late 1950s, America’s trade surplus had diminished. By the end of the Vietnam War, our country imported more than we exported. According to Clyde Prestowitz: “We have evolved from a country that wanted no foreign entanglements and saw the business of American government as business into a country in which the business of government has become trading America’s productive and technological base for military and geopolitical advantage.” Globalization is the unrestricted movement of capital technology, labor, goods and services across oceans and borders. True believers subscribe to the notion that multinational corporations compete and countries do not.

The myth that free trade produces prosperity for the many rather than the few is a recent narrative. Before the Depression, tariffs protected American industry. Alexander Hamilton promoted tariffs to protect American industry following ratification of the Constitution in 1788, five years after the Treaty of Paris. Tariffs were prominent in national economic policy throughout the nineteenth century but were generally opposed by agricultural interests. Support for a tariff to protect Pennsylvania industry in the Republican Party platform was crucial to Abraham Lincoln’s election in 1860. When the South seceded, tariffs rose sharply. Following World War II, when the USA emerged as the unchallenged global economic and military superpower, politicians, the media, and the investor class promoted free trade.

Business owners began to off shore jobs in the 1960s. Corporate loyalty to communities and workers shrank as the interests of shareholders replaced stakeholders. From 1984 – 1989, the amount of assets held by American companies in Asia rose 2.6 percent. By 1990, capital investment overseas was rising while domestic investment declined. Prior to the 1993 vote on NAFTA, 40 percent of corporate executives planned to move production to Mexico. Lobbyists and their corporate checks became more important to politicians than their constituents who could not provide sufficient capital for re-election: the 24×7 electronic jungle.

Globalists once proclaimed that high-tech, making the components, servicing the networks, and programming computers, was the wave of the future. Asian countries recognized this also. The percentage of Malaysia’s computer exports nearly quadrupled from 1993 – 2001.

The service economy has decreased the American standard of living. Manufacturing is more important to the Gross Domestic Product than casinos. Cashiers can not raise a family, buy a home, fund a child’s education and save for retirement. Line workers in factories and mills can. Solutions to our economic ills will not be implemented through complacency. Change we can believe in will not take place until the American people wise up and wake up; until the Wall Street crowd and the politicians begin to see beyond bonuses and the next election. Leadership consists of more than sound bites. Viable solutions exist yet the will to act in concert for the common good is lacking.

“The investment manager and guru Jeremy Grantham” believes “[d]ebt-fueled growth ‘is, in an important sense, not the real world,’…’ In the real world, growth depends on real factors: the quality and quantity of education, work ethic, population profile, the quality and quantity of existing plant and equipment, business organization, the quality of public leadership (especially from the Fed in the U.S.), and the quality (not quantity) of existing regulations and the degree of enforcement.’”

“This strikes me [Fareed Zakaria] as the common-sense view of economics. We can push and pull fiscal and monetary policy all we want, but long-term growth depends on these broader and deeper factors.”

Americans are imbued with common sense. When we know the score, Americans can draw the proper conclusions…Vietnam was unnecessary, Iraq was unnecessary, globalization equals decline.

While what you say is true, what those “big box” stores sell are mostly products made in other, low labor-cost countries. The sad fact is that American labor is competing with Chinese/Indian/Bangladeshi labor (this is the real meaning of the global economy).
The temporary holiday jobs carry no benefits other than the paycheck itself. And the probability of the job lasting past January are slim (temporary, remember?).
This is another “jobless recovery” (remember 2001?) and as our manufacturing base continues to disappear, the economy will have more and more difficulty recovering.
While the stock market may be showing signs of recovery, the stock market is just that – a marketplace; not the economy.
Posted by: mberke | November 26, 2010 10:44 PM

http://voices.washingtonpost.com/postpartisan/2010/11/support_american_jobs_this_tha.html

Adam Smith: “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.”

SOURCES: U.S. News & World Report, April 22, 1991; Clyde Prestowitz, The Betrayal Of American Prosperity: Free Market Delusions, America’s Decline, and How We Must Compete in the Post-Dollar Era; Sherrod Brown,Myths Of Free Trade: Why American Trade Policy Has Failed; Donald L. Barlett and James B. Steele, America: Who Stole the Dream?; Greg LeRoy, The Great American Jobs Scam

Statistics vary, depending on the source. For an incredibly comprehensive statistical summary for employment, production, and income for the past 40 years, see:

www.whitehouse.gov/sites/default/files/microsites/economic-report-president-appendix-b.pdf

October 8, 2010 at 14:04:28
America’s Third World Economy

By paul craig roberts

For a number of years I reported on the monthly nonfarm payroll jobs data. The data did not support the praises economists were singing to the “New Economy.” The “New Economy” consisted, allegedly, of financial services, innovation, and high-tech services.

This economy was taking the place of the old “dirty fingernail” economy of industry and manufacturing. Education would retrain the workforce, and we would move on to a higher level of prosperity.

Time after time I reported that there was no sign of the “New Economy” jobs, but that the old economy jobs were disappearing. The only net new jobs were in lowly paid domestic services such as waitresses and bartenders, retail clerks, health care and social assistance (mainly ambulatory health care services), and, before the bubble burst, construction.

The facts, issued monthly by the US Bureau of Labor Statistics, had no impact on the “New Economy” propaganda. Economists continued to wax eloquently about how globalism was a boon for our future.

The millions of unemployed today are blamed on the popped real estate bubble and the subprime derivative financial crisis. However, the US economy has been losing jobs for a decade. As manufacturing, information technology, software engineering, research, development, and tradable professional services have been moved offshore, the American middle class has shriveled. The ladders of upward mobility that made American an “opportunity society” have been dismantled.

The wage and salary cost savings obtained by giving Americans’ jobs to Chinese and Indians have enriched corporate CEOs, shareholders, and Wall Street at the expense of the middle class and America’s consumer economy.

The loss of middle class jobs and incomes was covered up for years by the expansion of consumer debt to substitute for the lack of income growth. Americans refinanced their homes and spent the equity, and they maxed out their credit cards. Consumer debt expansion has run its course, and there is no possibility of continuing to drive the economy with additions to consumer debt.

Economists and policymakers continue to ignore the fact that all employment in tradable goods and services can be moved offshore (or filled by foreigners brought in on H-1b and L-1 visas). The only replacement jobs are in nontradable domestic services, that is, those jobs that require “hands-on” activity, such as ambulatory health services, barbers, cleaning services, waitresses and bartenders — jobs that describe the labor force of a third-world country. Even many of these jobs are now filled with foreigners brought in on R-1 type visas from Russia, Ukraine, Thailand, Romania, and elsewhere.

The loss of American jobs and the compression of consumer income by low wages has removed consumer demand as the driving force of the economy. This is the reason expansionary monetary and fiscal policies are having no effect.

The latest jobs report issued today shows that America’s transformation into a third world economy continues. The economy lost 95,000 jobs in September, mainly due to cuts in local education and federal employment. Part of the loss of 159,000 government jobs was offset by 64,000 new private sector jobs.

Where are the new jobs? They are in nontradable lowly paid domestic services: 32,000 were in health care and social services, and 33,900 were in food services and drinking places.

There you have it. That is America’s “New Economy.”

GLOBALIZATION HAS NOT BEEN GOOD FOR THE U.S. ECONOMY

Georgie Anne Geyer

10/07/2010

The popularly accepted theory for the past quarter century has been that globalization has brought us nothing but prosperity. If you have any common sense, you realize that just isn’t true. There has been little real discussion between these conflicting opinions.

But I begin to see a new mood in the country. Americans at various points on the ideological spectrum are beginning to ask the pertinent questions.

Here’s one example: For years, Americans who gave any thought to the future of the nation had to realize that illegal immigration, conservation of natural resources and preservation and care of the environment were intimately linked.

Yet, in terms of nongovernmental organizations and/or nonprofit interest groups, few organizations even attempted to bring these important issues together. Indeed, when one sector within the Sierra Club tried to make immigration control a necessary component several years ago, the ensuing contretemps ended with the immigration-interest people leaving the club. Liberals, in particular, have tended to see immigration control as a conservative trap.

So it was with considerable interest that this week I attended a small but provocative conference in Washington sponsored by a new liberal group, Progressives for Immigration Reform. It was titled “The First National Conference on Immigration, Conservation and the Environment,” thus wedding the three concerns.

One of the major themes of the conference was the globalization of the economy. Had the moving of so many American industries overseas in the 1960s and afterward, in particular to the wildly growing China, really helped the United States, as the popular doctrine would have it? Their answer, new in America, is “No.”

“The only way for America to grow is to change from an economy of outsourcing to growth at home.” So said Alan Tonelson, a research fellow at the U.S. Business and Industry Council and author of the revealingly titled book The Race to the Bottom. “We need to create new wealth, if only because we have so much debt we can’t walk away from it.”

Like more and more economists, including those such as Alan Greenspan who were struck dumb by the economic collapse of the past three years, Tonelson blames China’s much-touted economic progress and prowess squarely on American multinational companies. “The path was built by our multinational companies,” he went on. “This progress did not come accidentally – the result came by plan. American companies transferred valuable technology as if there were no tomorrow.

“The Chinese and Indian prosperity was made in the USA – and the technology was then transferable to their military might. People say, ‘China came online.’ But this was only because of the U.S. policy to open to exports and for its industries to go offshore. It is a no-brainer.”

But as we were waving goodbye to industries and technology that took generations to develop – and which kept America strong and superior – Wall Street was issuing authoritative reports claiming that a strong manufacturing sector was not a prerequisite for a prosperous economy.

So now, as China forges ahead and Americans cannot find work at home, we return to the old story: We finally can see that globalization will not make America prosperous with only a service economy. But now we wonder just exactly howto rebuild manufacturing.

I remember being in China years ago and asking the American ambassador who would be the best person, a Chinese economist perhaps, to talk with about the bills then before the U.S. Congress that would help the Chinese economy.

“Oh, that’s easy,” he said cheerfully. “Just go to the U.S. Chamber of Commerce – they’re lobbying on behalf of China for the bills in Washington.”

I also remember, 13 years ago, talking to the president of DuPont in Delaware after a commencement where I was the speaker. When I asked him how much American companies were earning in China, he just shook his head and said: “Well, the truth is nobody is making money in China yet. We meet every month and talk about it.”

The hopeful supposition was that American companies had to be on the “ground floor” as China modernized, so that, with China’s immense population, they could “get into the market.”

Instead, as the Financial Times recently wrote in a major piece on China and its “competitive” economy, foreign companies spent years transferring or selling technology to state-backed partners in exchange for that precious market access. But now those companies find their high-speed technology has been “digested” by former oh-so-willing Chinese partners.

“Digested” in this case means a “multistep process of buying foreign technology, innovating on that existing platform, then selling it under a domestic brand by those very same partners,” according to the Times. Including underselling U.S. companies abroad.

All it took to see what the Chinese were doing so cleverly was common sense. But American companies who looked longingly abroad had no common sense; it had been buried by their greed.

http://endoftheamericandream.com/archives/the-shockingly-high-cost-of-free-trade-10-reasons-why-globalism-is-bad-for-middle-class-americans

Unfair Competition equals Free Trade