U.S. Commiting Economic Suicide

America’s ability to competitively manufacture on a global scale is waning fast. Over the past 20 years, America has lost millions of manufacturing jobs, 3 million of them since 1998. Our manufacturing trade deficit contributed to almost 60 percent, or 1.78 million, of those manufacturing jobs lost.

It didn’t happen because we were less qualified manufacturers, or because the world would have no use for our goods. It happened simply because we made it happen. We gave businesses the go-ahead to move jobs overseas, (i.e. to China where hourly pay rates barely make it over 50 cents, and in some cases are as low as 33 cents) and we flatly abandoned capital and knowledge intensive industries.

Due to these low wages offered in China, and many other places, American businesses have left the domestic arena to save money. This is supposed to be mutually beneficial, because Americans theoretically would see reduced prices for goods produced overseas, and therefore enjoy a better standard of living, but as we know in the real world savings are rarely passed onto the consumer, and certainly not to the extent that will allow it to make up for losing our manufacturing infrastructure.

The damage is still continuing to pile up. Forrester Research Inc. predicts U.S. employers will move 3.4 million white-collar jobs and $136 billion in wages overseas by 2015. A University of California at Berkeley report finds 14 million jobs are at risk of being sent offshore, and predicts job losses will exceed the Forrester study’s projections. Gartner Inc., a high-tech forecasting firm, estimates 10 percent of computer services and software jobs will be moved overseas by the end of this year.

A survey by Deloitte Research found the world’s 100 largest financial services firms expect to shift $356 billion worth of operations and about two million jobs to low-wage countries over the next five years. Princeton economist Alan Blinder estimates 42-56 million jobs could potentially be sent overseas overall.

Clearly, something needs to be done. America is in the midst of a recession, or coming out of one, or going back into one, or barely staying out of one (no one really knows for sure), but the point is America’s economy is fragile, if not weak. We cannot sit idly by and let American businesses leave our shores and us without a viable manufacturing economy.

Japan has successfully navigated the problem of China’s low wage rates. China is one of Japan’s biggest trading partners and yet Japan maintains a trade surplus with them. The labor in Japan is leveraged; one person operates equipment that can do the work of 100 ordinary laborers. America used to manufacture this way but now produces little by comparison and increasingly depends on imports at a net cost of $1.5 million per minute ($765 billion per year) to maintain our standard of living.

Auto and other manufacturing industries were once proud centers of American productivity, but have since seen their superiority usurped by technology based economies like that of Japan. The Japanese realized the gains of encouraging industrial growth and with hardly any natural resources turned their economy into an economic superpower that last year alone generated an $88 billion trade surplus with America and a $170 billion current account surplus with the rest of the world, the second largest next to China.

Meanwhile, the U.S. has resigned itself to live on increasing debts. Since 1987 home mortgages have gone from $1.8 trillion to $8.2 trillion, consumer debt from $2.7 trillion to $11 trillion and household debt has quadrupled. Add to that a national debt approaching $9 trillion and you do not have to be an economist to realize that if we don’t take steps to save our economy, we will lose our status as a superpower and our unemployment rate, inflation rate, and cost of living will skyrocket.

The U.S. is increasing debt, decreasing savings and selling off our principal assets (our wealth producing companies) abroad. This is not a sustainable or responsible long-term economic policy. This is barely economic policy at all. It more closely resembles economic suicide.

America can, and must, do better. How do we restore America as a leader in the global economy? The solution is to copy Japan’s model. Taiwan, Korea and many other Asian countries have adopted the Japanese East Asian economic model and are extremely successful.

What if the economy had always operated as it does today with companies being sold abroad whereby they divert wealth, jobs and production to other countries?Imagine the consequences if any international and global strife were to commence. We would be unable to manufacture any significant amount of our own weapons or products. The countries of the world would have no motivation for aiding a country with nothing to offer except massive amounts of debt and little manufacturing capabilities. We would be forced to fend for ourselves, and in doing so would actually be forced to find, or rather implement, the solution we should have used all along. So why should we wait until the consequences are dire? All the signs are there, all the evidence piled up. As rational creatures we have no choice but to restore our manufacturing abilities and invest in innovative technologies and research before the metaphorical tidal wave comes crashing down.