administration's PNAC cabal now fall in behind and approvingly glow
over a domestic economic policy that is outsourcing our own middle
class, the very backbone of our free and independent nation."
America's Middle Class
Posted March 22, 2004 thepeoplesvoice.org
By: Ted Lang
The growing debate over the
burgeoning economic problem of job outsourcing is taking on some odd
characteristics. If there is one dimension of the situation that
is positively negative, it's the complexity of the problem itself.
But even more perplexing, is the proffered solution by the anarcho-capitalist
economics camp. Their solution is to simply get government out of
the job outsourcing question itself. These anarchists offer that
government is the problem and that if the free market were simply left
to its own devices devoid of government meddling, the problem would
solve itself and go away. In other words, if we apply the negative
of removing government, the results would be self-righting and put US
back on a positive track.
Additionally, the anarcho-capitalist free-trade economists believe that
the wealth generated overseas by job outsourcing will reduce Third World
poverty, improve birth rates, raise standards of living, extend life
expectancies, and generate the most worthwhile benefit of all: obviate
and make obsolete the desire for war thereby ensuring world peace.
If this is so, why has the United States invaded Iraq and provoked and
terrorized people all over the world with our wealth and our industrial
and military might?
Capitalism cannot exist without the free market or without the profit
motive unless our economy returns to a totally basic system of
individual barter. And of course, socialism cannot prevail either unless
there exists somewhere in its economic foundation an unlimited supply of
wealth that can be redistributed. The free market theory assumes
unquenchable scarcity - the socialist theory assumes unlimited wealth.
Both are somewhat correct in part, and wrong in total.
The issue is not one that pits the free market against socialism, but
one of a government managed economy of protectionism that approaches a
socialistic solution; government is considered to solve problems of
wealth and income-generating imbalance. Anarcho-capitalistic, or
free market economists, correctly point out the myriad of economic
impediments American businesses are saddled with that increase labor and
operating costs unfairly for US, while at the same time, ensuring lower
labor and business operational costs offshore. And these
economists correctly identify American government as the chief
contributory factor. It would be great if they offered a means to
convince government to butt out, like a phone number possibly: 1-800
They correctly cite occupational and environmental safety laws, child
labor laws, working condition laws, other labor laws, unemployment
compensation, occupational licensing, union membership laws, etc.
Of course, all these rules, regulations and their related costs are
passed to the employer, and this increases his cost of output.
American businesses pass these increased costs of doing business to the
ultimate consumer, but consumer competition forces price stability.
The manufacturer that can reduce his production costs against the
pricing competition will prevail. A manufacturer that can't reduce
costs will fail.
Free market capitalists point to this as a normal economic phenomenon;
namely, it represents the risk factor every entrepreneur is exposed to
thereby justifying his profit taking. No one disputes any part of
this free market economy theory, and anarcho-capitalist free market
economists are the first ones to tell you that there will be some kind
of painful transition as we convert to a global economy devoid of
"artificial borders" created by sovereign states. And
while they to admit this, they carefully avoid opining as regards the
duration and extent of this transition period. But, there are
glaring omissions in their arguments, whether dishonest or utopian, and
these impacts on the people can be long lasting, severe and peace
Consider placing a clean sheet of paper in front of you. Got a
pencil or other writing implement? On this piece of paper, write
down all the free markets you know about. And while you're
thinking about those, take out another sheet of clean paper, and on this
one, write down all the nations in the world you know of that have no
governments. Done already? I'll bet you have two blank pieces of
paper in front of you!
That is precisely the problem with the utopian concept of the free
market! Where is it? And what nation and its economy is not
controlled and managed by politics and government? Perhaps two
more blank sheets of paper are necessary. On one, list all the
human events that have occurred in history over the last 5,000 years.
On the other, list all the governments that have reversed or
relinquished control over time to allow more freedom to both people and
their economic undertakings. Yet one more piece of blank paper,
but no so with the history of Mankind!
National economies are controlled by national governments. If
controlling government and reducing its protectionism or its fascism
were that easy, why haven't we returned to constitutional government and
trashed the USA Patriot Acts I and II? Why are we in Iraq?
And when people took to the streets in Spain to protest their
government's involvement and participation in an unnecessary and unjust
war, neoconservative David Frum [The Right Man] offers this display of
the will of the people as a massive, popular act supporting terrorism,
as opposed to an act of democracy challenging unbridled government.
No wonder Frum believes in a government of one "right" man!
Although additional legislation would artificially constrain and
therefore hamper the so-called free market, there is nothing whatsoever
stopping President George W. Bush from calling together certain captains
of industry, as so many other presidents have done in the past, to rally
American businesses to the most beneficial course of action for all.
During World War II, FDR gently twisted arms to get American industry
motivated and directed away from domestic production in order to focus
on war work. Nothing that drastic is necessary now, but some modicum of
effort or government-led initiatives to challenge the private sector are
definitely in order. Considering our government's heavy
involvement in international trade, some manner of addressing this
growing problem should be attempted.
Some of the work being outsourced is "make work" production,
such as income tax processing and growing legal research projects
necessitated by government regulation. Why should profiteering and
cost cutting be allowed for non-manufacturing, non-production,
non-consumer work generated only to comply with government regulations?
Financial speculation and investment channeled overseas creates new
factories and new production facilities there, while foreign investment
in domestic manufacturing assets acquires those here already in
existence. We are losing equity in our own property and production
facilities. And our transition to an information service economy
that is becoming narrower by the day reduces the choices Americans have
in terms of selecting a means of earning a living.
To really appreciate the threat to the American economy represented by
the narrowing of the employment market to the information technology
sector, consider the admonitions offered by Gerard Jackson writing for
The New Australian as far back as December 1998, commenting on the false
sense of wealth created by John Maynard Keynes' false notion of debt
economics. Evaluating our economy a little over five years ago in his
article entitled, "America: running on empty and heading for
recession," Jackson offers: "Unable to free themselves of
Keynesian thinking, the failure of the Dow to drop to check consumption
was interpreted as meaning that consumers are convinced that the good
times will keep rolling and so maintained their optimism and spending.
Consumers never noticed the Dow. So long as their incomes appear
secure they will just keep on spending. In fact, American
consumers are spending so much the savings ratio has turned negative,
something that has not happened since the depths of the Great
Depression: for this you can thank Lord Keynes and his disciples.
Without savings the American economy - or any other economy, for that
matter - cannot accumulate capital."
Please view this drain on investment capital due to our "negative
savings" and add that to concerns over foreign investment claims
against our existing capital assets. Jackson continues: "And
it is capital that raises living standards, not federal manipulation of
interest rates. In other words, the American economy is running on
empty. Concentrating on consumption spending is a fatal mistake.
Consumption does not drive economies and it is only a small part of
total economic activity. This gross error has led some economic
observers to speculate that the booming service sector will be the
"powerhouse" that will offset slowdowns in any other part of
the economy." Keep in mind this was written five years ago!
Yet it is this very same "booming service sector powerhouse"
that is being outsourced right out from under US! Who will really
benefit from the boom? And as regards consumption and consumer products,
what consumer products heavily purchased by Americans are made here in
the United States and not in China?
Jackson relates, "The Austrian [economists] show that by forcing
down the rate of interest the Federal Reserve misleads businesses,
especially in the higher stages of production, into thinking that the
fund of real capital has expanded. They therefore embark on
projects for which the capital goods necessary for their completion do
not exist. This makes itself felt through various shortages and
bottlenecks. As these start to appear many businesses begin to
suffer a cost-price squeeze as prices are no longer sufficient to
maintain expansion or even cover factory costs. Nevertheless, the
so-called service sector, the one closest to consumption, undergoes a
boom with rising demand and unemployment. There is no paradox
"Factors must be paid," says Jackson. "Companies
that responded to the low interest rates used the additional funds to
bid up the prices of capital goods and specific types of labor, which
obviously raised their costs of production. This additional
expenditure translated into factor incomes, which were then spent on
consumption goods. This in turn raised demand at the consumption
end of the production structure." Jackson offers this vicious
circle as continually bleeding savings and investment thereby creating
Jackson's analysis is based upon an assessment of what was wrong with
our domestic economy well before the job drain hit what he felt was, at
the time, the robust service sector of information technology.
Clearly, the economic situation has worsened considerably. Now
American businesses are exacerbating the destructive effects of negative
savings by seeking to lower the "cost-price squeeze" by
outsourcing. And consumer goods are being manufactured for the
most part outside the United States. And foreign investment by
Americans is creating new capital factors of production overseas.
Dr. Paul Craig Roberts in his essay, "Clarifications on the Case
for Free Trade," posted on Mises.org February 20th, points out the
two fallacies of the Austrian free-market anarcho-capitalist economists:
first, they confuse free-trade with the free-market, and second, they
fail to address the loss and concentration of jobs in the much narrower
context Americans now have to face. Libertarian economists fail to
recognize national sovereignty, and look primarily at the
producer-business advantage in cost reduction translating to lower costs
for the consumer. But Roberts points out that job losses and
narrowing job choices can bring down America's standard of living.
And that lowered standard of living will bite the US again when bloated
American government needs to find new ways of increasing revenues
because of the reduced earnings of American workers.
In his ominous article, "Dark Side of Free Trade," New York
Times columnist Bob Herbert in his February 20th effort offers,
"The classic story of the American economy is a saga about an
ever-expanding middle class that systematically absorbs the responsible,
hard-working families from the lower economic groups. It's about
the young people of each successive generation doing better than their
parents' generation. The plotline is supposed to be a proud model
for the rest of the world."
Herbert points this out without touching upon the outsourcing of capital
investments and our trade deficit in manufactured goods versus raw
materials. "One of the reasons there is so much unease among
voters this year is the fact that this story no longer rings so
true," he says. "Books based on its plotline are
increasingly being placed in the stacks labeled 'fantasy.'"
He warns, "The middle class is in trouble. Globalization and
outsourcing are hot topics in this election season because so many
middle class Americans, instead of having the luxury of looking ahead to
a brighter future for the next generation, are worried about slipping
into a lower economic segment themselves. This is happening in the
middle of an economic expansion, which should tell us that the terrain
has changed. In terms of job creation, it's the weakest expansion
on record. The multinationals and the stock market are doing just
fine. But American workers are caught in a cruel squeeze between
corporations bent on extracting every last ounce of productivity from
their U.S. employees and a vast new globalized work force that is eager
to and well able to do the jobs of American workers at a fraction of the
The very same free-market/free-trade libertarian economists and
political analysts that decry the neoconservative warmongering foreign
policy of the Bush administration's PNAC cabal now fall in behind and
approvingly glow over a domestic economic policy that is outsourcing our
own middle class, the very backbone of our free and independent nation.
Ignoring the damage the Bush administration has already done to our
Constitution and our individual freedoms, along with the world's
revulsion and hatred of US generated by the Bush administration's "Guernica"
in Iraq, our national sovereignty is what has always ensured the freedom
of our citizens. And although we should all rejoice in the
magnificent wealth and improved living standards outsourcing will create
for Third World nations, employment, just as with charity, should begin
© Copyright THEODORE E. LANG 3/21/04 All
rights reserved. Ted Lang is a political analyst and a freelance writer.