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15 October 2010

News: Globalization, Unemployment, and the Death of American Industry

Globalization and greed have gutted America’s manufacturing industry and has caused the loss of over 15 million high-paying manufacturing jobs to the Far East in less than two decades.

Our legendary manufacturing base, which laid the foundation of our nation’s strength, is on its death bed with fewer than 10 percent of American workers now employed in manufacturing, the lowest figure since the Industrial Revolution.

By way of comparison, as recently as the 1970s, about 25 percent of American workers were employed in manufacturing. The cause is simple: “cheap” labor costs in the Far East have seen one major manufacturer after another move their plants to that part of the world, leaving American workers high and dry and expected to make a living from service industries alone.

As any sane economist should know, a service-based economy has a limited lifespan. To paraphrase Atlanta lawyer Sam Dickson, we are not going to survive forever by giving each other back rubs.
Sooner or later the reality will have to be faced: an economy that does not manufacture anything is not viable over the long term as a consumer society.

Eventually, disposable income runs out, and when it does, the “service” economy stops being serviced.
So why are manufacturing jobs vanishing to the Far East? The simple reason is cost.

It costs less to manufacture a product in a country where there is an abundant and relatively skilled workforce and where vast overpopulation creates a competition for jobs that forces wages down to a fraction of what they are here.

This manufacturing cost is what corporations call “global competitiveness” and is the reason they proffer for their outsourcing moves.

It is cheaper to employ workers in a country where there are no unions, health benefits, 401Ks, and where people do not have mortgages to pay.

A 2005 study by the universities of Cornell and Massachusetts-Amherst indicated that more than 700,000 jobs which should be in America have been outsourced to India.

The North American Free Trade Agreement (NAFTA), which was supposed to benefit our nation, has instead seen Mexico became a major recipient of outsourced U.S. manufacturing jobs.

This is why Mexico is now a global leader in auto parts manufacturing and one of the world’s largest TV set producers.

The Central American Free Trade Area (CAFTA) has seen another exodus of U.S. jobs. Household names such as Dell, IBM, Sara Lee/Hanes and Maytag have already moved some parts of their operations into Central America.

America now imports twice as much as it exports, which is one of the major reasons for the ballooning trade deficit.

The collapse of the manufacturing industry will therefore make America poorer. As more manufacturers move abroad, the flow of money out of the country will exceed the benefits of cheap imports.

Then, at some point, the trade deficit will become overwhelming and standards of living will start declining. In fact, they already have.

The American Third Position argues that it is wrong to surrender American ingenuity and manufacturing expertise overseas in order that the wealthy elite might profit, selling competitive advantage that belongs to us all - technology and know-how that was built on the backs of generations of American workers and thinkers.

We therefore believe that it is necessary to restrict the importation of certain goods and to protect American industry. Wherever possible, we will take measures to ensure that the goods we consume are made by American hands, in American factories.

This blog is not affiliated with the source of this article.