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Has outsourcing of jobs to other countries made us vulnerable?

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    Matt Stoller's article, How America Could Collapse in AlterNet (August 11, 2011) raises some concerns about how the massive outsourcing of jobs to overseas countries has made segments of our economy vulnerable to natural disasters and poltical events.  Stoller uses the simple example of how the recent Japanese tsunami knocked out much of Sony's manufacturing capacity including certain types of tape used by the television industry in recording events such as NBA games. It appears Sony was the single supplier of this kind of tape worldwide.

    Stoller provides additional examples, none of which appear to be devastating in themselves, but it certainly highlights a potentially much bigger problem on the horizon if, for example, critical electronic components for our communications industry or our military are suddenly in scarce supply or simply removed from the supply chain. Or needed drugs that help fight off diseases...or many many other things that our society needs but are not made or grown in America.

    Republicans have continually championed the "drill baby drill" slogan to ensure America is not vulnerable to OPEC oil supply interruptions. So why doesn't the same logic apply to our manufacturing base including many, many electronic components that drive our every day lives and are manufactured exclusively in China?

    The multinational companies will go where the labor is the cheapest...they don't care one iota about the vulnerability it creates at home. Is that something that the government should care about? Or should we just let the free market take care of everything?

    Matt Stoller concludes, "And while this may not be hitting the elite segments of the economy right now, there will be no escape from a flu pandemic or significant food shortage. The re-engineering of our global supply chain needs to happen—and it will happen, either through good leadership or through collapse. This means that our government and our society needs to reorient our economy toward manufacturing and rededicate our corporations to productive uses. This will require a new conception of antitrust laws to ensure that monopolistic or oligopolistic practices in pivotal industries aren’t placing our culture at risk. It means understanding the networks of suppliers and sub-suppliers. And it means ending the race to the bottom that pushes deflationary pressures on labor and the social safety net."

    Natural disasters can affect anyone and any product...agricultural or manufactured. Some might argue that the complex interrelationship of a global economy ensures more economic and political stability.  For example, would the USA necessarily engage in a war with China now that we are so absolutely dependent on their manufacturing base? Another example is our dependency on the Russians to get astronauts to the space station.  Is this an impediment to the war hawks that see a military solution to every international disagreement?

    I agree with Stoller. We do need to revamp our manufacturing base, both for the jobs they'll create but also to lessen our dependency on other countries to supply us with critical components.  We can never be 100 percent insulated from international disruptions in the supply chain, but we can lessen the impact and at the same time provide a much needed boost to our economy and jobs.
  • Are you sure you want to delete this post?
    Schmidt, refer to:
    the topic “Reduce the trade deficit; increase GDP & median wage”



    or Google: “wikipedia, import certificates “.

    Respectfully, Supposn

    Excerpted from the message “Manufacturing's economic significance”
    Within :

    The production of foreign goods contributes little or nothing to the USA’s economy. Domestic and imported goods do not economically differ after arriving at a USA port of entry or a USA producer’s shipping platform.

    Manufacturing is of greater importance because the goods and services supporting factories are generally great as or greater than what's required for most other industries.

    Manufacturing has a great (multiplier) effect on our GDP. Individual businesses are more or less unique, but a domestic factory's contribution to GDP is generally much greater than that due to a service site such as an administrative office or a retail outlet.

    Excluding the value of unrefined petroleum, manufactured products account for almost our entire global trade deficit.

    I believe there’s a symbiotic relationship between manufacturing and technological knowledge. USA’s deindustrialization has begun to cost us our technological edge. Our colleges and universities are not producing the creators of the globe’s technical future. Due to USA's deindustrialization, we invest less and others more for research and development. Those who sow less, harvest less. As we manipulate materials, and create products, we learn more of the materials, tools and the products. If we do not manufacture today, will we be able to resume manufacturing in the future?

    Many are concerned about our military’s dependence upon foreign manufacturers. There’s of course some concern regarding security of information and prevention of sabotage. If national governments of our suppliers disagree with our policies, will it affect the production and delivery of our strategic needs?
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    Okay. Critical dependency is one thing. Having a trade deficit is another and it is not bad, per se.

    Trade deficit (or a more accurate depiction of net-outflow, the Capital Account balance) means foreigners want our dollars, and they're willing to sell us stuff to get those dollars.

    This adds to consumption, which is a good thing. What's bad is when you run massive trade deficits without proper govt deficits to refill the drain of net-savings from the domestic private sector. 

    Idea is to boost aggregate demand lost by job loss to overseas competition, thereby providing domestic private sector with the demand to sustain new hiring.

    See net-sectoral financial balances: (here)

  • Are you sure you want to delete this post?
    Carlitos Bam-Bam, you message made no mention of the trade proposal I’m a proponent of.  Did you look at any of it?
    I did look at your linked graph.  What’s the point that you’re trying to make?

    The current account and the capital account are not the same thing.  The capital account’s concerned with ownership.  The capital account’s concerned with the production of goods and service products.  I’m more concerned about the trade deficit because I’m a populist that’s more concerned about JOBS.

    [I consider the GDP per capita and the median wage as among if not the primary indicators of the nation’s current economic condition at any given day.  The GDP gives us a clue as to how much we’ve currently been producing.  The median wage adjusted to the U.S. dollar’s purchasing power gives us a clue to our nation’s living standards.  When you compare the per capita GDP to the median wage, you get an idea as to the extent that production is being distributed among our population].

    U.S. wage earning families benefit from cheap foreign goods but they’re dependent upon their U.S. wages each day of every year.  Cheaper goods do not compensate for our trade deficit’s detriment to our GDP which in turn bolsters our median wage.

    Trade deficits’ are ALWAYS detrimental to their nations’ GDPs and the nations’ global trade balances affect within the calculation of GDPs are generally understated.

    You may be among those that notice the nation’s trade deficit moves in the same direction as the GDP.  That does not mean that there’s an economic benefit to a trade deficit. Our domestic markets’ sales volumes move in the same direction as the GDP.  In good times we sell more and in bad times we sell less in our domestic markets.  Sales volumes of both domestic and imported products generally move up and down together within our domestic markets.
    There is no economic benefit due to a trade deficit.

    Refer to:
    topic of “Reduce the trade deficit; increase GDP & median wage”
    or Google: “wikipedia, import certificates “.

    Respectfully, Supposn
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    I had this exact conversation with Buddy Roemer a few months ago.

    Look, the world wants to sell us their stuff to get dollars. US consumers are funding foreign dollar savings.

    Warren Mosler: "Imports are real benefits and exports are real costs. Trade deficits directly improve our standard of living. Jobs are lost because taxes are too high for a given level of government spending, not because of imports."

    Higher levels of non-government sectoral dollar savings means we can have lower levels of taxes for a given level of government spending. Taxes regulate demand. They are a thermostat. They give currency a certain 'base' and 'beginning' value. They don't give government anything it does not already have.

    Remember>>>>the Capital Account surplus is directly equal to the Current Account deficit. They are mirror images of the same thing.

    Still, there are terrible moral and political consequences/problems from trade deficits.

    We import stuff from countries with governments that abuse human rights. Some of that stuff is not safe for our consumers, or produced w/o similar respect for the environment.

    Goal should be regulatory parity, competitive trade, and the allowance of comparative advantages, with government intervening in areas where there is critical dependency, like in energy and with weapons components.
  • Are you sure you want to delete this post?
    Calitos Bam-bam, in response to your message of 12:18PM, March 18, 2012:

    I read Warren Mosler’s discussion of trade deficits within his 7 deadly frauds” and remain in agreement with what I believe to be the majority global majority opinion of economists.

    We believe there’s NO economic benefit due to a trade deficit’s; their detrimental effect's under-employment.
    [Under-employment is the driving down of the median wage and wage scales.  Unemployment is the extreme case of under-employment].
    Reduction of under-employment is the primary justification for the transferable Import Certificate, (IC) proposal.

    The proposal would significantly reduce USA’s trade deficit of goods.  Importers would be required to surrender ICs with sufficient face values to cover the assessed value of their goods.  That requirement is would not nullify any other legal restrictions upon U.S. imported goods.

    I would prefer that any proposed non-economic additions or modifications of imports be handled in a separate legislative bill.  I wouldn’t want to jeopardize passage of this proposal.

    Respectfully, Supposn