FSB Author Article
Dude, Where is My Job?
By Peter Navarro and Greg Autry,
Author of Death by China: Confronting the Dragon -- A Global
Call to Action
Now there are reasons that the participation rate could decline,
such as folks deciding to quit work because their spouses' careers
are going great -- probably not. Another might be that many are
retiring early because their 401ks are booming and their pensions
are strong -- again, not so much.
The reality is that many have given up finding work after four
years of the Bush-Obama depression. Cynical economists estimate
the actual unemployment rate is more like 13%. The lost 4% are in
school, in prison, or just sitting at home in their boxers playing
World of WarCraft. Many of the 9.1% officially unemployed have no
hope of finding work, and do little more than hunt video game gold
and draft emails to Congress demanding benefits extensions.
Worse, America has a huge, hidden under-employment problem.
Wages are not growing and adjusted for inflation; they have been
in a decline for a decade. Hard working folks that once worked as
foremen, safety officers and HR directors at manufacturing plants
are now lucky to be feeding their kids with a job selling Chinese
goods at Wal-Mart. Or perhaps they are working two 30-hour shifts
in fast food or struggle with an unprofitable home business, while
the Administration counts up the jobs "created."
This decade of disaster has an obvious cause and a solution
entirely outside the mainstream media's myopic discussion of tax
cuts and stimulus spending. The reason that no amount of
government largess or sub-zero real interest rates can create a
single real job in Milwaukee or Las Vegas is that we are sending
too much of our consumer spending, corporate investment and
interest payments to Wuhan and Guangzhou. The only economy
stimulated is the Chinese one.
America has a lot of domestic issues including decaying
infrastructure and out-of-control entitlements that must be
tackled to secure long-term competitiveness. However, like some
unlucky cancer patient pursued by an armed robber, we must deal
with the obvious, external threat just to live until our national
chemotherapy session. A dragon is chasing us with an economic gun
in one hand and a growing military arsenal in the other.
China accounts for about 70% of our trade deficit outside of oil
and that deficit is sucking nearly a full percent out of our tepid
GDP growth. That's about a million jobs a year or 10 million over
the last decade. It's the difference between 9% unemployment and
6% unemployment and the core cause of our recessionary
predicament.
If you doubt the numbers, then:
2. Type "Pudong" into a search engine and marvel at Shanghai's
sparkling skyline.
3. Run a Google Earth tour of the disaster area called "The
Motor City."
4. Connect those dots.
If this transfer of jobs were due to superior Chinese quality --
give us a break -- or low paid labor working its way toward global
equity, a free trader could hardly object. However, that just
ain't the case at all. China's labor advantage is nearly
meaningless in expensive high-tech devices like iPhones and it
can't possibly outweigh the shipping costs for most heavy goods
like steel pipes or wallboard. And yet these very products flow
across the Pacific as though it's efficient. What gives?
Firstly, labor is not only abundant and cheap in China, it is
conveniently repressed by China's jackboots. Workers demanding
better conditions? Call the cops in and let them break a few jaws.
Thousands die in coal mine accidents every year. Tens of thousands
are maimed, poisoned, blinded and burned in working conditions
that can resemble -- and sometimes are -- prison camps. Workers,
including children and the mentally ill, are sometimes "recruited"
and more often held against their will.
Secondly, there is the fantastic advantage of being able to dump
just about any odious byproduct into the air or waterways. China
has rightfully been designated as the world's most polluted nation
in several studies and any seasoned traveller can tell you that
you really have to see it, and breath it, to understand the
magnitude of this offense. The World Health Organization estimates
that Chinese air alone kills 700,000 each year.
Thirdly, China uses a plethora of trade cheats. There's unbalanced
tariffs, such as the 2.5% for a car entering America vs. 25% for a
car coming into China. Then there's the odd arrangement where
China requires firms to engage a Chinese "partner", who maintains
majority interest, saps most of the profits, and has the real
control. Actually owning anything more sophisticated than a fried
chicken chain is all but impossible. Yet, Chinese firms purchase
American businesses straight out. Worse, for access to its
markets, China requires US firms hand over their technology and
relocate their R&D centers to China.
Finally, there is the ever-present currency peg, which simply
makes every little iPod and every Bay Bridge that China ships out
40% cheaper than a potential American competitor. Anything daring
to go the other way will have a corresponding 40% disadvantage in
the Chinese market -- after clearing all the previously mentioned
hurdles.
Can any manufacture compete with all this? Not bloody likely and
that's why century old parts factories and band new solar panel
plants are being boarded up in cities like Cleveland, Ohio and
Devens, Mass.
If you are in the retail will you find customers to buy your
Chinese inventory? Of all people, Wal-Mart CEO Mike Duke has
commented that his customers are "running out of money!"
If you're a state or municipal government worker, you've seen
the writing on the wall. Closed factories and foreclosed
homeowners can't pay taxes. Struggling retailers contribute less
and less and unemployed citizens demand more and more. Cuts are
sweeping our schools, hospitals and police departments. Federal
civil servants and the military are clearly next on the block.
If you work in the services sector your business depends on
these near-death manufacturers, sickly retailers, or some level of
our bankrupt government and the future doesn't look bright.
It is time to admit the China trade is neither free nor fair and
in any case it's killing us. Let your congressperson know that you
found your stolen job and you want it back. If they don't get
that, the time has come to outsource Washington DC.
© 2011 Peter Navarro and Greg Autry, authors of Death by China: Confronting the Dragon -- A Global Call to Action
Author Bios
Greg Autry is the co-author of Death by China. He
teaches Macro Economics at the Merage School of Business, UC
Irvine. He writes and speaks on China, space, economics,
investing, and business strategy.
Peter Navarro is the co-author of Death by China
and a business professor at the Merage School of Business, UC
Irvine. He holds a PhD in economics from Harvard, is a gifted
public speaker, a CNBC contributor, and is the author of several
best selling books on economics and investments.