U.S. Productivity Gains Misleading

by Dustin Ensinger on March 31, 2010 - 9:26am

While data shows that American productivity has increased exponentially in the past three decades, that is nothing more than a façade given that most of those production gains are driven by offshoring, according to two fair trade advocates.

Writing in The New York Times, Alan Tonelson and Kevin Kearns, members of the U.S. Business and Industry Council, claim that for years the U.S. Labor Department has been leading the American people to believe that the productivity of its workers has been skyrocketing.

The problem is, the Labor Department fails to differentiate between American and foreign workers when calculating productivity.

“Labor productivity figures, which are calculated by the Labor Department, count only worker hours in America, even though American-owned factories and labs have been steadily transplanted overseas, and foreign workers have contributed significantly to the final products counted in productivity measures,” they write.

According to the U.S. Labor Department, from 1980 to 2009, the productivity of the American worker increased by 40 percent.

The “grossly overstated,” productivity gains have provided free trade proponents with ammunition. Claiming productivity gains are a result of greater efficiency and technological advancements, they have hailed free trade as the reason for greater output among American workers. However, that is simply not the case.

“Above all, if offshoring has been driving much of our supposed productivity gains, then the case for complete free trade begins to erode,” they write. “If often such policies simply increase corporate profits at the expense of American workers, with no gains in true productivity, then they don’t necessarily strengthen the national economy.”

A recent research paper by the Federal Reserve found as much. It found that, as productivity continues to grow through cost containment policies - outsourcing - the unemployment rate will continue to rise.

“Anecdotal evidence suggests that efforts to contain costs and remain nimble in the face of uncertainty have become a fixture in business strategy,” the paper said. “If productivity keeps on growing at an above-average pace, then unemployment forecasts…could continue to be overly optimistic.”

The only way to fix the problem is to overhaul America’s fail trade policies and restore the nation’s once-proud manufacturing base, which is responsible for many of the nation’s technological gains and increased efficiency. To do that, America must combat currency manipulation by economic competitors and the effects of the value-added tax, utilized by over 150 of America’s trading partners, but not America.

“Manufacturing, long slighted by free-market extremists, needs to be promoted, not pushed offshore, since it has historically accounted for the bulk of research and development spending and employs the bulk of American science and technology workers — who in turn spur further innovation and real productivity,” they write.

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Submitted by dustime5 on March 11, 2010 - 9:32pm. #

Economists return to the same books teaching the same princiles learned in the past, perhaps using variations but the core philosophy hasn't changed, there I believe lies the problem. We keep returning to our mistakes looking for solutions.
What should be done is a search for a new economic philosophy but we can not do that if we are no longer a Nation of production.
Greed has driven production from America and in so doing has seperated the soul of this Country from it's meal ticket.
Poor and corrupt leadership has defiled the foundation of Democracy from this land and allowed the Elite and Corporate society to take the wheel holding the certificate of greed in one hand while steering blindly into the future and into the hands of our enemies.
Aside from that America has been a welfare state from top to bottom for generations. Every institution, corporation and individual has been sucking the teat of the treasurey and in so doing brought America to it's bankrupt knees.
We really do need a miracle to pull us out of this mess and we do not have much "if any" time.

Submitted by gspencer on March 9, 2010 - 2:01pm. #

I believe that Economics, Trade Deficit, Government Spending Deficit, Jobs for Americans, and the Buying Power or value of the US Dollar are all interrelated. Each of these principles affect each of the others, and each is very important. These subjects need to be understood by the General Public. Economics is not that complicated. It is interlocked with understandable cause and affect principals of various economic action options that can be totally understood by almost any High School Graduate, and/or most High School Drop outs.

Real wealth and real monetary value is created and/or acquired ONLY when the members of a family (or a nation, tribe, city-state, etc.) plant, grow and/or harvest something of commercial value from the earth, extract something of commercial value from the earth, provide professional services (medical, legal, dental, engineering, architecture, accounting, land surveying, technology, etc.) to others outside of that family, and/or manufactures or constructs something of commercial value that is consumable (or permanently useful for income or rent) and then SELLS, LEASES OR RENTS these items and/or services to parties outside of their family, IN RETURN FOR A NET TRANSFER OF GOLD, CURRENCY OR COMMODITIES from other parties outside of their family into their own family.

The members of that family can reflect their real wealth with the accumulation of grain, gold, cattle, jewels, land, buildings, commodities and/or other marketable products for reserve use in times of emergency and/or also to raise the standard of living for the members of that family.

Various US government environmental and economic laws have encouraged the US companies to cease manufacturing things for US consumption and export US citizen jobs in order to generate national wealth, and instead encouraged US citizens to import these consumer items in exchange for titles to existing US wealth such as privately owned land, hotels, farms, businesses, casinos, stocks, equities, securities and other wealth and assets of monetary value that are located in the USA and were created by previous generations of US citizens. This wealth is then transferred to foreigners and governments in industrialized foreign nations where foreign governments elected to industrialize and generate wealth by making and exporting consumer items to the USA and other countries.

Did the Biblical Jacob squander his wealth and assets unwisely and then became hungry when a famine occurred? Did Jacob sacrifice all of his cattle to his god? Or sell his wealth and assets for food & wine to have a bunch of parties? Did Jacob burn his tents, grain and other wealth and assets as sacrifice to his god? When the Jacob's family faced starvation, Jacob took his family to Egypt where there was grain stored and hoarded by the greedy Egyptians to insure the survival of Egyptians during times of drought and famine. Jacob and his descendants probably submitted themselves to be slaves of the Egyptians in return for food and shelter. Is the US government repeating these actions?

Submitted by gspencer on March 9, 2010 - 1:57pm. #

Without extremely high import tariffs, US workers must compete with foreign workers at very low foreign wage scales.

The US government should build manufacturing plants to make various consumer products in sequence one product at a time, i.e. refrigerators, washing machines, clothing, TV's, electronics, tires, auto parts, hand tools, power tools, machine tools, appliances, and etc. How about passing laws to prohibit the export of service jobs such as accounting, telemarketing, customer service, computer aided drafting, engineering, etc. that are now provided by workers overseas through the internet.

Eventually all of the consumer goods that we import could be made in the USA. We should then impose extremely high import taxes that are high enough so that these US made products are always less expensive to the consumer than the same imported product.

These plants should periodically and/or constantly be for sale based upon periodic open public competitive bidding, but at a minimum sale price at least equal to as much as the government investment, and with terms of cash only without any creative financing. There should not be any leveraged or other creative financing for purchase allowed by the government. Only cash sales should be allowed.

The management should know about making the products, not creative accounting and/or creative financing.

Yes, the consumer will pay several times the price for the particular US manufactured product, but maybe this might avert a second bloody American revolution.

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