Offshoring American Jobs: An Ongoing Economic Catastrophe

The real war underway right now isn't being fought with terrorists. It's being waged by the wealthy on the middle class and poor.

PL Editorial

There's a tremendous, and rapidly growing, gap in the distribution of wealth in American society. While there will always be some gap in any meritocratic society, most of the current yawning chasm isn't due to differences in merit between the ultrawealthy and the middle class and poor. Rather, it's due to an ever-increasing imbalance of political and economic power, which has dramatically shifted since the mid-70s to favor the wealthy. Secondarily, it's due to the capture of almost the entirety of the mass media by the ultrawealthy, and its transformation in their hands into an incredibly effective instrument of propaganda on their own behalf.

PL Editorial

What's Wrong With This Idea?: "We'll Create Good American Jobs by Offshoring Them All "

This is what Americans were told some time ago when good manufacturing jobs were offshored (largely courtesy of the National Association of Manufacturers).

We were told that we were entering a new economy that had nothing to do with manufacturing. The offshoring was part of the "maturation of our economy." And so we were handed a promissory note that read as follows:

"Dear American: We don't like unions or high-paying union jobs, so we're sending manufacturing jobs offshore. We're not going to support the communities that this will disastrously impact when all those jobs are lost. We're going to do little or nothing to retrain the individuals who have lost those jobs due to offshoring. But don't worry. The stock market will do better, and trickle-down theory tells us that someday, somehow, good jobs, different jobs, will come back to America.

"Signed,
Mr. Nobody"

What happened? Well, those jobs didn't come back, and they weren't replaced with anything. Of course, the stock market hasn't been exactly booming, either, and job losses continue apace despite the "stimulus" package. The result: Mr. Nobody has gotten off scott free for the economic carnage that he wrought. Of course, that was predictable. No one is offshoring jobs to the United States, and "Mr. Nobody" runs the government, even under Obama (largely due to the fact that the worst American politicans weren't voted out in the 2008 election cycle). To this day, many of those areas of America that were involved in manufacturing remain blighted (Detroit has become a virtual ghost town). And if that doesn't make you mad, it should. No matter what you do for a living, chances are you'd be earning more now if it hadn't happened. We'll explain that point more fully in a moment.

For the millions of unemployed or underemployed, and for the many millions more who are fearful for their jobs, improvements in the performance of the stock market mean nothing at all, unless that improvement also entails an increase in jobs and job security. And stock market profitability can't be sustained without consumer demand. ("Consumer" currently meaning, in large part, "an individual who is unemployed, underemployed, or fearful of losing his or her job".) Job creation in the service sector of the economy, which was much trumpeted by the Bush administration, was no solution either. In fact, those jobs were a problem: they paid badly, and offered little in the way of benefits. In short, they amounted to a way of creating greater numbers of underemployed. Even those lousy jobs didn't exactly pour in. For example, in July, 2005, 207,000 jobs were created, virtually all of them in the service sector. The better part of them were in sales. (Ever done commission sales? Sometimes you have a paycheck. Sometimes you don't.) But 150,000 new jobs are needed each month just to keep pace with the increased needs resulting from immigration and new workers entering the workforce. And not only was this hyper-modest level of growth not sustained, we instead plummeted into massive job losses. (You can keep up with the latest developments at this url: http://www.americanprogress.org .) Now, of course, existing jobs continue to leave the economy at about the same rate that new ones are needed.

Bush Economic Policies Were Directly Responsible

Of course, it's not much of a secret that the American economy was a catastrophe for the entire course of the Bush administration. What does seem to be something of an open secret is the fact that economic policies embraced by Bush, and not coincidentally endorsed by transnational corporations (= Wall Street) and the financial sector, exacerbated that poor performance, and, as we predicted some years back (in 2005), helped transform it into an economic meltdown. (The sub-prime mortgage fiasco was only the tip of the iceberg, and wouldn't have been nearly as virulent as it has been if Americans had had better jobs.).

As we just noted, the economy has nowhere to go when consumers have no money to spend. Consumers have no money to spend when they're unemployed, and are much less likely to spend when they're underemployed or fear for their jobs. This kind of scenario sets the stage for a deflationary economy, in which consumers with less to spend reduce demand, which reduces prices, which reduces profit margins, which results in layoffs, which results in even greater fears of job loss. A stimulus package can't reverse this dynamic indefinitely. Only robust job creation can do that.

Bad? You bet. But the Worst may be Yet to Come.

The year and a half prior to 9/11 saw the loss of 1.6 million American jobs. The six months following 9/11 saw the loss of an additional 2.5 million American jobs. Obviously, Americans are right in believing they have a lot to fear; but the truth is that they have far more to fear than they have yet realized. That's because, if offshoring isn't reversed, millions and millions and millions more American jobs are going to be lost in the decade ahead, particularly better-paying jobs. How many more millions? A good question. Incredibly, the government still isn't even keeping track of the jobs already being lost to offshoring, nor is the media doing much of anything to report that rate (a state of affairs that must be intentional). But one estimate is that one-third of all US jobs are offshorable, and many of these are the kind of jobs that underpin the American middle-class, upon which the entire economy depends. This would, of course, mean that there would never be a true recovery from the meltdown of 2008.

How Did We Get Here?

Certainly not by accident. Most of this job loss is due to the process euphemistically known as "globalization", and globalization is no blind force of history or economics. You've heard of NAFTA and the WTO? They're part of the globalization framework. And the FTAA Bush so strongly endorsed was more of the same — but much worse.

Globalization has deep historical roots. The process has been aggressively fostered by the wealthy for years through the corporate corruption of governments all over the world, including that of the US, and through the corruption of international institutions like the World Bank and the IMF which, in effect, utilize a vicious version of economic blackmail on behalf of large corporations with no loyalty to any nation. While globalization is a complex phenomenon with many aspects, one of the simplest to understand is this: when American-based companies are subsidized for shipping American jobs overseas, they will. (Despite Obama rhetoric, nothing has yet been done about this.) Indeed, the only jobs that aren't likely to be so exported are those tied directly to local economies — mostly the badly paying service jobs we mentioned earlier. This situation is wonderful, certainly, for those already wealthy (since the mid-70s the only real winners in the globalizing economy), but the process of job exporting can only crush the middle class, because there will always be immense pools of cheap labor overseas.

The Fantasies of Wall Street

Absurdly, Americans have been urged to "retrain" or acquire "additional skills" in the face of the trend to send jobs offshore — as if the vast majority of jobs they might retrain for couldn't just as easily be sent offshore, too, no matter what "additional skills" they might acquire. Too, the exporting of any job from any sector increases pressure on all the remaining sectors, because it increases the labor supply and drives down wages for everybody. Worst of all, the offshoring trend, though slowed for the moment in the face of public outrage, may well begin accelerating again, possibly even faster; and if this occurs it will continue to make for tremendous economic turbulence, which will make it difficult to even guess what to retrain for. No, what Wall Street has really meant all along is this: "Americans should retrain themselves, at their own expense, of course, for less skilled jobs for lower pay and fewer benefits."

As we noted above, some have claimed that the savings corporations realize by offshoring jobs are ultimately returned to investors and are thereby eventually pumped back into the economy. This argument no longer has a leg to stand on. If it had been true, the events of 2008 would have been far less dire, which makes it clear that the argument was simply another version of long discredited trickle-down economics. How much in the way of goods can, say, a Bill Gates possibly buy? We've already seen in the clearest possible terms that that the process doesn't automatically entail domestic job creation, and globalization weakens labor unions, by far the most effective force (indeed, very nearly the only one) for promoting wage increases. Since jobs that are offshored are gone for good, the very likely fate of a person who has lost a manufacturing job is to eventually get a lower-paid job after a long period of unemployment — and that represents a permanent or semi-permanent loss of income. And other troubling questions remain: whose economy, and which investors profit? When the products that are purchased are increasingly overseas imports, who ends up with most of the that profit? Today, incredibly, the US has piled up more debt with China than any other country in the world. Moreover, even today, most US stock is held by those already wealthy. The truth is that of the total gain in marketable wealth from 1983 to 1998, more than half went to the richest 1 percent, and they don't buy much in the way of goods (rather, they tend to place that money in the stock market, thereby creating economic bubbles of the kind we saw in 2001). Of course, even if it were true, trickle-down theory doesn't address the massive problems of environmental degradation, the loss of national sovereignty, and the assaults on democracy also engendered by globalization.

The Reality on Main Street

The upshot of all of this is that you can run, but you can't hide.

The corporate cure for accelerating unemployment due to globalization and offshoring is so much snake oil, and was never more than a very deliberate effort to obscure the deadly seriousness of the problem. Neither retraining nor re-education are, or even conceivably could be, the answer for most Americans; and trade imbalances and job loss and career destabilization and environmental and community destruction vitiate whatever little benefit might be derived from globalization for working Americans. The "wall" that most politicians are telling us we can't build around the American employment market is the dike that must be built if we are to retain quality jobs. Or, to change metaphors, it's the compression bandage that should have been applied years ago when we began hemorrhaging manufacturing jobs.

What Can Be Done?

For better or for worse, this is one issue that, in the short term, can only be addressed by political action and/or massively increased unionization.

The transnationals, who have been anticipating this response for some time, continue to scream (as they always scream) that regulation and unionization aren't the answer (again, they suggest retraining). But aside from economic logic, history also makes it clear that these are the only possible answers.

Why Does Wall Street Hate Americans?

For half of the existence of America, slavery, the ownership of another human being for purposes of economic exploitation, was legal. Why? Because the slaveowners were addicted to cheap labor. Even child labor was legal in the United States until the agitation of Progressives (especially that of Mother Jones) finally forced businessmen to eliminate the practice in 1938. How could an institution as pernicious as child labor have remained legal for so long? Because businessmen were addicted to cheap labor. And all of this is to say nothing of the horrific conditions of employment that Upton Sinclair wrote of, or the incredibly long working weeks and low wages that were endemic until Americans organized, unionized, and legislative reforms were passed over the vociferous objections and treacherous backroom maneuvering of businessmen. Indeed, it was in large part unionization and regulatory legislative reform, and emphatically not trickle-down, that set the stage for a prosperous post World War II middle class.

Now, we have globalization and the offshoring of jobs. The addiction is no less gripping, and is vastly more far-reaching; and this is why the need for reform legislation hasn't been so urgent since the 1930s. The sooner we curtail this latest addiction, the better the chances of effective control.

The alternative, continued offshoring, the impact of which has already contributed immensely to something close to the outright destruction of the American middle class, would have truly catastrophic consequences for the American economy; and since the US economy is the workhorse of the international economy, the consequences would unquestionably be global, affecting virtually all of humanity. Some have said there's no going "back". The truth, however, is the world can't go "forward" with policies desired almost exclusively by the CEOs of self-interested transnational corporations. If there is to be globalization at all, it must look radically different from anything currently on the table, and it must proceed at a far slower pace.

What steps, then, to take?

• First, we suggest that you further educate yourself regarding the nature of globalization. The most indispensable reading here is David Korten's When Corporations Rule the World. You might also consider subscribing to the Nader-founded Multinational Monitor, which will keep you abreast of more current developments. So will Public Citizen's Global Trade Watch. A book that focuses a little more narrowly on jobs and on how offshoring came about is America: What Went Wrong? by Donald Barlett and James Steele. Conservatives take note (and everyone else, too): Chapter 11 of NAFTA is an end-run around the US constitution. So is Chapter 10 of CAFTA. Get the details.
• The US should return to steeply progressive income taxes. When the ultrawealthy have nothing to gain from the process of globalization, the process will soon slow. This would also set the stage for desperately needed, and effective, trickle-up economics. When you put more money in the hands of working Americans, that money finds its way into the economy quickly.
• American voters should be very, very wary of voting Republican. While the Democratic track record on globalization is poor, it is nevertheless enormously better than the dismal record of the Republicans. (Most continue to aggressively promote globalization.) No matter how the economy performs under Obama, it has nowhere at all to go except collapse under Republican leadership.
• Work to oppose Republican trade policies. There was never a president more pro-globalization and pro-offshoring than George Bush. Even with Republican majorities in the House and Senate, CAFTA was very nearly defeated because of pressure from American voters. For all of his patriotic posturing, Bush was the most virulently anti-American president in US history, if by "America" we mean working Americans.
• H-1B and L1 visa programs were responsible for the loss of more than a million American jobs to overseas workers, even as American IT workers searched for work. It's time to eliminate provisions for job shortages that don't exist (and never did). Keep a close eye on immigration plans, which can, in effect, be job giveaway programs.
• Incredibly, even in late 2009, US taxpayers are still funding numerous Federal programs that provide incentives for US corporations to relocate their jobs offshore by way of providing loans, subsidies, credits, or loan guarantees. All such funding and all such incentives must cease immediately. (Again, Obama has promised action that hasn't materialized.) Funding and incentives to keep jobs in the US should take their place. Penalties for offshoring should receive study. Fines or taxes levied on job-exporting corporations could be devoted to extending unemployment compensation benefits, funding for small business creation by the unemployed, and so forth.
• US funding of the World Bank (which brokers many deals that result in job exporting) and the IMF should be tapered off and eventually eliminated. Both institutions should be scrapped and alternative institutions created from scratch.
• The FTAA, CAFTA, and other globalization-promoting accords must be scuttled. Organizations promoting globalization, such as the National Association of Manufacturers, should receive greater media scrutiny, and their position, and its dismal implications for US employment, should be exposed.
• Corporations exporting the largest number of jobs should be identified and boycotted.
• Americans must cure themselves of their addiction to television and newspaper news. Very nearly all of the mass media are very much in favor of globalization, and, although they're careful to hide it well, are rabidly opposed to unionization. Instead, we suggest that you consider subscribing to one of the news sources mentioned in our political field guide or our guide to legitimate, democratic media.
• Oppose further media consolidation. The implications of globalization aren't being adequately reported. Support media diversification (PBS and NPR are doing by far the best job among the mass media, but are still under-reporting most globalization-related issues). The Media Access Project is doing good work in the area of diversification.
• Since the corporate media are flatly opposed to the interests of ordinary Americans on this issue, it's up to working people to get the word out. Share this editorial with your friends and family.
• If your workplace is unionized, consider joining. If it's not unionized, consider organizing one. Work to remove all barriers to union organizing.
• Write the media and write your representatives regarding your concerns about globalization and offshoring. Here are the basic tools:
  Write your congressperson here: http://www.house.gov/writerep/
  Write your senator here: http://www.senate.gov/general/contact_information/senators_cfm.cfm
  Determine who's telling your representatives to vote against working Americans here: http://www.opensecrets.org . Don't spend your money with those companies.
• Support organizations working to get corporate money out of government. The standard bearer for years has been Common Cause: http://www.commoncause.org/ Organizations working for publicly funded elections also merit your support.
• Corporate capitalism is in urgent need of fundamental reforms. The point is made devastatingly in Marjorie Kelly's critique "The Divine Right of Capital." The biggest, best-kept political and economic secret today is the fact that other forms of capitalism are possible, have been immensely successful, and some give working people a much fairer shake. See our section on economics for details of Mondragon capitalism. There's a link below. You can also read our essay "Capitalism, Socialism, and Communism: What They Are, Why They Don't Work, What Works Better".
• Some web links dealing with the offshoring of jobs are as follows:
  http://www.washtech.org/wt/ (high tech jobs are being particularly hard hit by offshoring practices - and that affects everyone, no matter what they do for a living)
  http://www.hireamericancitizens.org
• Local economic self-sufficiency should be maximized instead of global economic dependency. Numerous practices for greening the global economy can be found in our economics field guide.
• Tips for who to vote against can be found in our Field Guide to American Politicians.

If working Americans don't take immediate steps to stop globalization, who will? And if globalization isn't stopped, the consequences will be dire indeed.

The Editors
Progressive Living