Re: [OPE-L] "Resurrecting Karl Marx" by economist appointed by Ronald Reagan

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Wed Sep 07 2005 - 00:56:45 EDT

What does Marx have to do with this (including the rant against
foreign born teachers) other than it is written by a person who once
wrote a bad book on Marx? Perhaps this should have been sent to a
list dedicated to the completion of List's poltical economy?
What a way to celebrate the tenth anniversary of this list.

At 7:37 AM -0400 9/6/05, glevy@PRATT.EDU wrote:
>Labor Day Edition
>September 5, 2005
>The Vicious Downward Cycle of the American Economy
>Resurrecting Karl Marx
>Libertarians and free trade economists don't realize it, but they are
>pulling Marx out of his grave.
>Free traders are resurrecting class war, not because they are
>Marxists but because they confuse free trade with global labor
>arbitrage. Free traders turn cold shoulders to US job losses from
>offshore outsourcing, because they mistake the losses for the
>beneficial workings of comparative advantage. Committed to a 200 year
>old theory that they no longer understand, free traders are cheering
>on the destruction of middle class jobs and the dismantling of the
>ladders of upward mobility that make large income disparities
>politically acceptable.
>The destruction of the stabilizing middle class is occurring
>simultaneously with an extraordinary increase in income inequalities.
>Not so long ago CEOs were paid 20 times more than the average
>employee; now some are paid hundreds of times more. The "gilded age"
>is returning while the value of a college degree is declining.
>According to the Bureau of Labor Statistics' 10-year jobs forecast,
>the majority of US jobs that will be created in the coming decade
>will be in domestic services that do not require a college education.
>This is a strange job outlook for a high tech economy allegedly
>benefitting from free trade. Domestic services are nontradable. The
>US economy has not created a net new job in tradable goods and
>services in the 21st century.
>Free trade economists have forgotten that not all trade reflects the
>beneficial workings of comparative advantage. For comparative
>advantage to function, a country's capital must stay at home and be
>allocated to activities in which the country has comparative
>advantage. The other necessary condition is that countries have
>different internal cost ratios of producing different goods.
>When the principle of comparative advantage was discovered, capital
>was mainly kept at home under the watchful eye of the owners and
>protected by the country's laws. Tradable commodities were primarily
>products influenced by climate and geography, guaranteeing that the
>cost of a yard of wool in terms of a bottle of wine would vary among
>Today capital is more mobile than tradable goods. Modern production
>functions are based on acquired knowledge and produce identical
>results regardless of location. When a US corporation closes a
>factory in Ohio and relocates its production for US markets to China,
>the loss of US jobs is not the result of a Chinese firm gaining a
>comparative advantage over the Ohio one. It is the result of US
>capital seeking absolute advantage in lower cost Chinese labor.
>Free trade economists have completely forgotten that the flow of
>resources to where they have absolute advantage does not result in
>mutual benefit. The country that receives the resources gains and the
>other country loses.
>When capital and technology flow from the US to China and India, the
>productivity of labor in China and India rises. In the US it falls.
>Outsourcing is eliminating entire American occupations in engineering
>and information technology. As there are fewer jobs for graduates,
>engineering enrollments in the US are declining. Libertarians and
>free traders are so emotionally enamored of the market that they have
>forgotten that markets can as easily work against a country as for
>it. In the US, markets are working to reduce the supply of American
>engineers as US corporations lay off their American employees and
>replace them with cheaper Chinese and Indians.
>Product development, or research and development, follows
>manufacturing. As US manufacturing moves offshore, so does R&D.
>Innovation follows R&D, with the consequence that US science is also
>in relative decline. In brief, the US is developing the labor force
>characteristics of a third world country in which jobs are available
>only in lower productivity, lower paid "hands on" domestic services.
>For engineering and IT jobs that remain in the US, fewer are filled
>by Americans. US firms have learned that they can pay foreigners on
>H-1B and L-1 work visas lower salaries, force their American
>employees to train their foreign replacements, and then discharge
>their American workers. Consequently, there is double-digit
>unemployment among American software engineers, IT professionals and
>computer programmers.
>As Lou Dobbs exposed recently on CNN, the US Department of Labor is
>currently reserving some 52,000 high tech job openings in US firms
>for H-1B visa holders. "Bodyshops" use the visas to bring in
>foreigners who take Americans' jobs by undercutting their pay.
>American firms advertise openings for H-1B visa holders only. No
>Americans need apply. Gene Koprowski in TechNewsWorld (August 20)
>reports that "in excess of 600,000 new visas have been granted during
>the last five years. Thirty-nine percent of H-1B visas were for
>workers in computer-related occupations."
>In other words, 600,000 Americans lost the occupations in which they
>have invested their human capital. You can be assured that these
>600,000 did not move up to better jobs.
>As bad as it is for the individuals, it is even more costly for the
>country. The outsourcing of jobs and the importation of foreigners on
>work visas are emptying the pipeline of qualified Americans and
>destroying US technical occupations. It is paradoxical to hear the
>very executives who replaced their US employees with foreigners now
>complain about the declining interest of Americans in science and
>engineering. Last July Bill Gates expressed his worries about the
>precipitous decline in the number of students entering computer
>science. Why is Bill surprised when he helped to lead the offshore
>outsourcing movement?
>Obviously, it is a vicious cycle. As Americans are discouraged from
>the occupations, the corporations lobby for more work visas, which
>discourages more Americans.
>Seeking to protect their careers from being outsourced, Americans are
>turning to domestic services, such as nursing and teaching. However,
>H-1B visas threaten these occupations, too. Hospitals struggling with
>costs and school systems struggling with budgets are importing lower
>cost foreigners to teach American kids and care for American patients.
>In Nevada the Clark County School District has imported teachers from
>the Philippines. Arizona has imported teachers from New Delhi, India.
>The New York Department of Education has brought teachers in from
>Jamaica. Cleveland, Ohio, has imported teachers from India. It goes
>on and on.
>Joe Guzzardi has a good article posted on about the use of
>foreign teachers in US schools. This practice raises many questions:
>Does the money saved on teachers' salaries go to administrators as
>bonuses for cost-cutting? How can foreigners from outside our culture
>enculturate American students? What happens to enrollments in US
>education and nursing curriculums as imported foreigners fill
>available positions? What happens to the laid off US engineers and
>technical people who are displaced again, this time from teaching
>math and science in our schools?
>The pressure on school budgets comes from the lost middle class jobs.
>As manufacturing and now white collar work move out of US
>communities, tax revenues become more scarce. Administrators seek
>foreign employees who will work for less.
>Eventually, all Americans will be working for less except the fat
>cats at the top, who will earn large bonuses by substituting
>foreigners for Americans.
>What occupations will be left to native citizens? This question comes
>to me from many frustrated parents who are trying to give their
>children some career counseling. It is possible for Americans still
>to earn good incomes from being dentists and lawyers (if they are in
>the top 20% of their class). Next one thinks of skilled trades such
>as electrician, plumber and auto mechanic. However, Mexican
>immigrants are crowding Americans out of the construction trades and
>may soon dominate other trades as well.
>Opportunity for native born Americans is collapsing. The loss of
>opportunity is showing up in declining median household income and
>rising poverty rate. On September 1, Edwin Rubenstein reported
>( that according to the Census Bureau's August 30 report,
>"median household income declined for an unprecedented fifth straight
>year in 2004." The main reason for declining household income, says
>the Economic Policy Institute, is "ongoing weakness in the job
>HIgher paying jobs are being lost to outsourcing and to work visas.
>Lower paying jobs are being lost to Mexicans. With real income
>falling for five years (despite an economic recovery), the US poverty
>rate has climbed from 11.3% in 2000 to 12.7% in 2004, adding 5.4
>million more persons to the poverty roll.
>Yet, nothink free trade economists and libertarians--like LBJ who
>promised us light at the end of the tunnel in Vietnam and Bush who
>promises light at the end of the tunnel in Iraq--still promise that
>outsourcing and H-1B visas mean increased wealth for Americans.
>Economic science no longer exists in America. Its place has been
>taken by emotional commitments to dogmas. Americans and their hopes
>are daily paying the price for this great failure of economic
>The August payroll jobs report from the Bureau of Labor Statistics
>repeats the consistent pattern of 21st century America--no net job
>creation in high productivity sectors. The only jobs created are in
>nontradable lower paid domestic services.
>Of the 154,000 private nonfarm jobs created in August, 25,000 are in
>construction and are filled primarily by legal and illegal Mexican
>immigrants; 20,000 are in wholesale and retail trade; 16,000 in
>administrative and waste services; 43,000 in education and health
>services; 34,000 in leisure and hospitality (primarily waitresses and
>bartenders). Manufacturing lost another 14,000 jobs.
>Brand name companies that once were symbols of US manufacturing are
>today assemblers of foreign made parts. An industry of assemblers has
>no need for engineers or scientists. The dismantling of the US
>economy cannot be corrected by education and job retraining. The US
>is on its way to becoming a third world country.
>It is detrimental to the future of freedom that at this time, when
>our civil liberties are under attack by the Bush administration and
>diminishing economic opportunity is breathing new life into class
>war, libertarians and market economists are demonstrating more
>commitment to ideology than to the welfare of fellow citizens. By
>associating freedom and market solutions with policies that are
>eroding Americans' prospects, freedom's defenders are unwittingly
>stabbing freedom in the back.
>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:
>Attachment converted: general:untitled-2 12 (TEXT/ttxt) (00215F1B)

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