Watching The US Economy Crumble

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Thu, 11 Aug 2005 07:54:12 -0700

Watching The US Economy Crumble

 

 

Watching The US Economy Crumble

 

Good News! Soon You'll No Longer Need An Expensive College Education

to Work in the US

 

By Paul Craig Roberts

 

 

 

8-11-5

The US continues its descent into the Third World, but you would never

know it from news reports of the Bureau of Labor Statistics' July

payroll jobs release. The media gives a bare bones jobs report that

is misleading. The public heard that 207,000 jobs were created in

July. If not a reassuring figure, at least it is not a disturbing one.

On the surface things look to be pretty much OK. It is when you look

into the composition of these jobs that the concern arises. Of the

new jobs, 26,000 (about 13%) are tax-supported government jobs. That

leaves 181,000 private sector jobs. Of these private sector jobs,

177,000, or 98%, are in the domestic service sector. Here is the

breakdown of the major categories: * 30,000 food servers and bar

tenders; * 28,000 health care and social assistance: * 12,000 real

estate; * 6,000 credit intermediation; * 8,000 transit and ground

passenger transportation; * 50,000 retail trade; and * 8,000 wholesale

trade. (There were 7,000 construction jobs, most of which were

filled by Mexicans immigrants.) Not a single one of these jobs

produces a tradable good or service that can be exported or serve as

an import substitute to help reduce the massive and growing US trade

deficit. The US economy is employing people to sell things, to move

people around, and to serve them fast food and alcoholic beverages.

The items may have an American brand name, but they are mainly made

off shore. For example, 70% of Wal-Mart's goods are made in China.

Where are the jobs for the 65,000 engineers the US graduates each

year? Where are the jobs for the physics, chemistry, and math majors?

Who needs a university degree to wait tables and serve drinks, to

build houses, to work as hospital orderlies, bus drivers, and sales

clerks? In the 21st century job growth in the US economy has

consistently reflected that of a Third World country--low productivity

domestic services jobs. This goes on month after month and no one

catches on--least of all the economists and the policymakers.

Economists assume that every high productivity, high paying job that

is shipped out of the country is a net gain for America. We are

getting things cheaper, they say. Perhaps, for a while, until the

dollar goes. What the cheaper goods argument overlooks are the

reductions in the productivity and pay of employed Americans and in

the manufacturing, technical, and scientific capability of the US

economy. What is the point of higher education when the job

opportunities in the economy do not require it? These questions are

too difficult for economists, politicians, and newscasters. Instead,

we hear that " last month the US economy created 207,000 jobs. "

Television has an inexhaustible supply of optimistic economists.

Last weekend CNN had John Rutledge (erroneously billed as the person

who drafted President Reagan's economic program) explaining that the

strength of the US economy was " mom and pop businesses. " The college

student with whom I was watching the program broke out laughing.

What mom and pop businesses? Everything that used to be mom and pop

businesses has been replaced with chains and discount retailers. Auto

parts stores are chains, pharmacies are chains, restaurants are

chains. Wal-Mart, Home Depot, and Lowes, have destroyed hardware

stores, clothing stores, appliance stores, building supply stores,

gardening shops, whatever--you name it. Just try starting a small

business today. Most gasoline station/convenience stores seem to be

the property of immigrant ethnic groups who acquired them with the aid

of a taxpayer-financed US government loan. Today a mom and pop

business is a cleaning service that employs Mexicans, a pool service,

a lawn service, or a limo service. In recent years the US economy

has been kept afloat by low interest rates. The low interest rates

have fueled a real estate boom. As housing prices rise, people

refinance their mortgages, take equity out of their homes and spend

the money, thus keeping the consumer economy going. The massive

American trade and budget deficits are covered by the willingness of

Asian countries, principally Japan and China, to hold US government

bonds and to continue to acquire ownership of America's real assets in

exchange for their penetration of US markets. This game will not go

on forever. When it stops, what is left to drive the US economy?

Paul Craig Roberts has held a number of academic appointments and has

contributed to numerous scholarly publications. He served as Assistant

Secretary of the Treasury in the Reagan administration. His graduate

economics education was at the University of Virginia, the University

of California at Berkeley, and Oxford University. He is coauthor of

The Tyranny of Good Intentions.He can be reached at:

paulcraigroberts