The American Economy, Socialist Economies, Global Economy, Outsourcing, Insourcing, WalMart, and American Jobs
This is a mouthful, and it is becoming quite a controversy here in the United States. What is the balancing act between keeping the US competitive in a global economy, while at the same time, keeping middle class manufacturing and middle level professional jobs here, and not shipping them overseas? What is the situation, in addition, with the influx of foreign workers under H-1b and L-1 visas? Are these things good for the economy, good for consumers, good for business and profits, or just corporate greed? How do we balance our free market economy, and at the same time prevent people from falling through the cracks economically? Let's look at these issues from both sides of the coin:

First of all, let's look at the American economy. The American economy is huge. It makes up approximately 28% of the entire world's economy. Because we are a free market capitalistic country, none of the socialistic countries can compete with us. This is the reason why there is such hatred and animosity toward the United States from various foreign governments. This animosity toward America started in the 1700s, and continues today. After all, we were the great experiment that was supposed to fail. The European Elites have never understood how a country that has populated itself with their rejects from all parts of the world, could become the greatest and most prosperous country on this planet. This jealous hatred for America has little to do with George W. Bush being the president. However, just like Ronald Reagan and any other Republican president (because Republicans are those evil, money grubbing, rich, insensitive bastards), he is a convenient scapegoat for them and their alliances with the Marxist Far Left both here and abroad.

There was a time when Western Europe had thriving capitalistic economies. After World War II, the Marshall Plan rebuilt war devastated Europe at tremendous cost to US taxpayers. After that, the US kept troops stationed there in order to keep the Soviet Union at bay. We still keep troops stationed in Western Europe and other parts of the world for international security reasons. Because Western Europe didn't need to mount more than a token military defense, they were able to institute large costly social safety nets. Many European countries like Germany, France, Belgium, the Netherlands, and Great Britain were able to become Democratic Socialisms. Nationalized higher education, free national health care plans, and thirty hour work weeks, with six weeks paid vacation time, became the norm. Taxes needed to be high to fund social programs like subsidized housing for the middle class as well as the poor, free medical and dental care for all, and government control of most industries became the norm. For example, in Germany, Switzerland, and France, many musicians are considered to be employees of the state, and that includes many types of freelance musicians. France pays subsidies to musicians when they don't work in order to keep them from having to "compromise" their careers by having to work a day job. Here in the US, they would be considered to be independent contractors responsible for their own safety net.

Here is the downside to socialistic economies. First of all, they cost money, and that money can only come from high taxes and protectionist import tariffs. It is not uncommon for the upper income wage earners in European countries to pay over 70% of their income in taxes. Because of this, many of the best and brightest often choose to leave. In addition, sales and usage taxes are also very high. So are taxes on tobacco and alcohol products. Prices on everything from clothing to food are controlled by the government. This is to perpetuate the elitist caste systems that keep the majority of the population in their place. According to the Swedish Economic Institute, the average upper middle class family of four in Sweden has less discretionary income at the end of every month than the average lower middle class African-American family does here in the US.

Free higher education may look good on paper, but let's look at the other side. Take Germany or Britain for example, or even Australia. The standard education level until recently was the 10th grade. Here was the program: In order to go on to college, you had to have two more years of secondary school past the 10th grade, but you didn't get those two years unless you were in the upper 10% of the student rankings nationwide. This was mandated by law. It was another government controlled caste system tool that was used for social engineering. If you didn't score well on the tests after your 10th grade, you were sent out into the workforce. If you were lucky, you would qualify for some form of vocational education. If your parents were well connected and could pull some strings, there was a possibility that you could receive the necessary schooling so that you could go to college abroad, and guess where you'd go? Most of the time it's right here in the good old US of A. If you stay over there, your career path was chosen for you by the government, and your education and employment opportunities were rationed accordingly.

Fortunately, much of that has changed. Europe, to their credit, recognized that their rationed socialized education system was failing them primarily from an economic point of view. So was their predetermined employment program. Like here in the US, much of their hard industry and trade jobs were disappearing. They too were being moved to Third World countries where labor costs were cheaper. They needed to educate more of their population beyond the tenth grade. A series of conferences were held.. These resulted in the Sorbonne Declaration in 1998, the Bologna Conference in 1999, the Lisbon Summit in 2000, and the Prague Accord in 2001. It was agreed that European higher education needed to become available to more than 10% of the population. These conferences also established reciprocal degree requirements among the 29 signatory nations. Their goal is to have the European Union be the most competitive knowledge based economy in the world by the year 2010. Up to 50% of the population will now be eligible for higher education past high school. How to fund this is still being discussed. How they will pay for this with their Socialist governments is anyone's guess.

Free national health care systems look great on paper, but they cost a fortune, and rationed health care is the norm in order to save the government money. Life saving surgical procedures are routinely denied for some and allowed for others based on their ability to earn certain amounts of income that translate into how much tax revenue the government can extract from that individual. A forty year old needing a heart bypass is more likely to be approved for one, while a retired seventy year old will be routinely denied the procedure. Since the seventy year old is retired and drawing a pension, it is in the government's best interest to have that person die. That way it will save the government money. In Canada, it is not uncommon for someone to have to wait up to two years for a hip replacement, or up to six months for a routine appointment. Hospital equipment and dental equipment in Europe are old and similar to the equipment used in this country forty years ago. Yes, they work, but they are definitely not state of the art.

It is reported that 40 million people in America don't have health insurance. If that is truly the case, that would mean that 14% of the population in the United States doesn't have health insurance. It's actually much less. First of all, many of those claimed 40 million are temporarily between jobs, and temporarily without insurance. It's not the same 40 million every week, and it's not 40 million anyway. Secondly, there are about 12 million illegal aliens in this country. They don't have health insurance. Now we are down to 28 million. There are approximately 1.5 million members of the armed services and about 10 million retired military members. Active duty military and their dependents have a 100% medical benefit. It's called Tricare Prime, and for active duty and their families, it's free. It's not insurance. Dependents may opt for Tricare Plus, or Tricare Standard, which pay up to 80% of care using civilian providers. Military retires and their dependents can opt for Tricare Prime, which covers 100% for $460 per year, or other plans where they will need supplemental insurance to cover the part that Tricare Standard or Tricare Plus won't pay for. Between active duty, retirees, and their dependents, you are looking at about 15 million people. Subtract that, and you are now down to about 13 million people without health insurance for a variety of reasons: Transition between jobs, failure to pay premiums, illegal aliens, or choosing not to have insurance. Yes, this is America. You can choose to not have insurance if that is your desire. Now what about the senior citizens using Medicare, or the poor using Medicaid? While those programs are not the best in the world, they are coverage. Socialized medicine would mean that everyone would have nothing but the bare bones coverage provided by Medicare and Medicaid. Let's add the seniors and the poor into the mix. That means that 283 million people in this country have either insurance or some form of health benefit package. 98% of the people in the US have some form of health coverage. They either have private health insurance or some type of government sponsored health care plan. Some have better coverage than others. In a free market system, you will not have everyone receiving the same "cookie cutter" benefit, but 98% is a far cry from the fear mongering being perpetuated by the Far Left.

Let's compare the US economy with the economies of Western Europe in regards to productivity and efficiency. There is a complacency in Europe in economic matters just like there is complacency in Europe when it comes to national security and terrorism. After all, where is the incentive to get ahead when the more you make, the more you give exponentially to the government in the form of higher taxes? Yes, we too have progressive taxation in this country, but it's nowhere near what they pay in Europe. The Left Elite tout the civility of the European thirty hour work week, and the government mandated six weeks paid vacation per year and paid family leave. Here's what they have forgotten to tell you. First of all, Germany and France both have unemployment rates in the 14% to 18% range. Compare that to the US unemployment rate of 5.6%. Of course, the Left wants you to believe that this is the devastatingly high 5.6% rate that is all to blame because of President Bush, his tax cuts, and his cozying up to big business. What is the difference between the high 5.6% rate and the Left's bragged about low 5.6% unemployment rate under the Clinton Administration? 5.6% is 5.6%. Clinton was also responsible for NAFTA and it's effect on jobs in America. Why the double standard?

Liberals constantly harp about how there was a balanced budget under President Clinton. Yes there was a balanced budget for two years under the Clinton Administration; 1999 and 2000. In fact there have only been nine years since 1930 when we had either a balanced budget or a surplus. They are 1930, 1947,1948, 1951, 1956, 1957, 1960, 1999, and 2000. (Source;www.gpoaccess.gov/usbudget). The rest of the time, we've run at a deficit same as we are now. Yes we have a huge deficit, and frankly, I don't like deficits period. What is important though, is not the amount of the deficit, but what is the percentage of the deficit to the Gross Domestic Product. Currently, it is about 4.8%. In 1943 it was 30.9%, because of World War II. The 2005 deficit is projected to be in the 3.6% range, but will still top over 423 billion dollars.

As far as unemployment, in Europe it doesn't matter if you are unemployed, because unemployment benefits are sufficient enough that you really don't need to be looking for a job. They also continue almost indefinitely. After that, you can collect welfare and live quite nicely on it. The six weeks vacation and thirty hour work weeks are killing their industries. French companies have told the labor unions and the French government that the thirty hour week needs to be increased to forty hours, like here in the US. If they don't reduce the six weeks mandated vacation time to something more reasonable, they are going to close up their plants and move them to the former Eastern Bloc countries. Labor is cheaper there, and there is a workforce willing to work at least forty hours per week for a lot less money. It will be interesting to see if France bucks the unions, or if they keep caving in to union demands and end up losing more jobs just like what happened to manufacturing jobs here in the US. With any company, the bottom line is the bottom line, and if labor costs get too expensive, they are going to ship jobs overseas in order to save money. Here in the US, many manufacturing jobs have been shipped overseas, and many have been relocated into different parts of this country as well to take advantage of a cheaper labor pool. This is nothing new. If you go to places like Lawrence, Massachusetts, or Manchester, New Hampshire, you will see many old abandoned textile factories. These plants moved south many years ago to take advantage of cheaper labor costs.

Today, you have more of a service industry in this country, and that includes high tech jobs in addition to your low wage jobs at McDonalds. You are seeing a hemorrhaging of jobs from the costly North East and West Coast to the less expensive Midwest and Western states like Nevada, Arizona, New Mexico, and Utah. It's a win win situation for most. The company saves money by paying a lot less money in payroll, and the employee willing to move to those locations comes out ahead too. While they are making a lot less money, their cost of living is a lot less. A smaller salary means being in a lower tax bracket, and that $350,000 home in Connecticut costs about $125,000 or less in other parts of the country. With lower overhead all the way around, everything from the cost of fuel to the cost of food is also less. That smaller salary goes a lot farther every month than the higher salary did in the expensive North East.

Along the same line as moving jobs to cheaper parts of the country is outsourcing jobs to countries where the labor market is much cheaper than it is in the United States. This is a double edged sword. You have people losing high paying jobs here in the US to workers in foreign countries making a whole lot less. At the same time, you get cheap high quality merchandise for sale back here in this country. Consequently, you are raising the standard of living in some third world country. This is a good thing. As countries become more prosperous they become more stable politically. They become cleaner and pollute less as they move from the Third World to the Second World to the First World. From a global point of view, this is good. However, try to explain that to the US factory worker who lost his or her high paying manufacturing job to some plant in the Philippines. To them, it's nothing but corporate greed and Capitalism at its worst. This is the downside of free trade. However, you can't become isolationist either. Like it or not, we are in a global economy, and it's going to take a generation or so to shake out the cobwebs, and they are pretty big cobwebs to shake.

One thing that doesn't get mentioned when the doom and gloom crew starts howling about outsourcing, is insourcing. Yes, we ship jobs overseas, but foreign companies come here and open up manufacturing plants here too. This creates jobs for Americans, and not just low paying jobs either. Foreign automakers and electronic manufacturers have plants here in the US employing good hard working American workers at decent salaries, and that trend doesn't seem to be going away. They have hired many of the workers that were displaced when their US companies shipped their jobs overseas. Now let's look at the other side of the coin.

If you've noticed, or maybe you haven't, because there wasn't a whole lot of squawk about it until recently, when white collar jobs started being oursourced. During this time, we were changing from a manufacturing based economy to a service based economy. During the Industrial Revolution we changed from an agrarian economy to a manufacturing one. Just like there were many different levels of income in manufacturing jobs, ranging from basic assembly line work, to specialized assembly line work, to the top blue collar jobs like tool and die maker, there are different levels of service industry jobs. At the low end, you have the minimum wage jobs at places like McDonalds. Next you have your retail sales jobs, and the higher paying sales jobs based on commission and manufacturer's reps. Then you get into the college educated professional class service jobs like educators, engineers, and computer specialists. Your top of the line service jobs include CPA's, lawyers and doctors. You have a full range of service jobs going from low wage working class positions to high six figure or seven figure positions in finance, medicine and law.

We may not make that stereo receiver over here anymore, but we still need that electronic specialist to fix it when it goes wrong, and that specialist makes a very good salary. How about when your foreign made Lexus needs a tune up? Do you ship that car back overseas, or do you take it to either the mechanic at the dealership or that local mechanic that you trust? Do you wince when you get the repair bill? Let's look at the building industry. What do plumbers make? What do carpenters make? How about electricians? How about roofers or sheet metal workers? What about painters, brick masons, stone masons, or dry wall specialists? How about truck drivers, railroad engineers, police officers...Aren't these all good middle class service industry jobs? The point is, the economy has changed again, and this time the world is a lot smaller place due to the technology revolution. Just like there was a shake up with the hard industry manufacturing jobs during the past 20 years or so, there is a huge shake up with the professional level service industry jobs world wide.

The higher end of the service industry is now globally competitive. Countries like China, and India are churning out highly skilled, and highly educated professionals in the information technology and medical fields. This is affecting these high end service industry jobs here in the US. Go to any hospital in the US, and you will be hard pressed to not see Indian or Oriental doctors or nurses. In addition, we are outsourcing radiology work to doctors in India. It's not uncommon today to have a doctor over there read your X-rays and issue a radiology report to your primary health care provider here. This trend started with the HMOs over here as a way of saving money. Of course, that savings wasn't passed on to the consumer, and it won't be regardless if it's an HMO or government run socialized medicine.

While there is still a market for some older technology here in the US, much of it is now being shipped overseas as a cost saving measure. Computer science education programs in Chinese and Indian universities still teach older mainframe programing languages like COBOL, while American computer science programs no longer teach that older technology. They haven't taught mainframe languages in years. While mainframe computers are still used for a variety of applications, their use is slowly disappearing. There are reports circulating that in five to ten years, mainframes will go the way of the dinosaur. You can hook up a whole network of PCs to a server or series of servers, and get more horsepower than you can with a mainframe and get more flexibility at the same time. This has created a very volatile situation in the technology market. You have experienced mainframe programmers making very good salaries desperately trying to hold on to their jobs, while their companies are attempting to save money by outsourcing their work to programmers in India or China. These companies are also letting them go and replacing them with consultants on L-1 visas from India who are brought over here using international consulting firm interoffice transfer rules, and then paid bare bones wages without benefits. Opposition and support for this practice can be heard from both sides of the political spectrum.

One one side of the coin, you have many who oppose outsourcing, because of the loss of good American jobs. On the other side of the coin, you have many who feel that outsourcing is a good thing. Let's look at it from both perspectives.

First let's look at the downside. You have many good hard working middle class American workers who are now losing their jobs as corporations look to save money. This started with our manufacturing jobs. Today, you would be hard pressed to go into any of the middle of the road department stores like Target, Kohl's, WalMart, or other similar retailers, and try to find clothing or other items made here in the the USA. At one time, most of the goods consumed by Americans were made here in America, but that's all changed due to the global economy. Why would a company pay an American worker $25 per hour to work in a factory, when it can open a plant in the Philippines and pay the workers there $2 per hour? Try to explain to the displaced American worker how this is a good thing. We were told when the US transformed from a manufacturing nation to a service economy nation that we didn't have anything to worry about. For a while they were right. Many former manufacturing industry employees found work with comparable salaries in the service industry. However, things started to change in the high salary white collar jobs like computer specialists and engineers. They started to move overseas too, and then foreign workers were brought over here using H-1B and L-1 visas.

Big corporations can hire highly trained workers from China and India for less than a third of what they would have to pay Americans. They can treat them like indentured servants paying them rock bottom wages, work them long hours, and give them no benefits. Under the terms of theses visas, those foreign workers are basically owned by the companies and consulting firms that hire them. Our politicians look the other way, because these big corporations give millions of dollars in political contributions to make sure that laws are passed that keep these practices in place. Let's go back to 1986 and the passage of the Tax Reform Act. Section 1706 of that act requires that engineers, designers, computer programmers, system analysts, and other related workers be classified as employees rather than independent contractors. What this did was open the door for the creation of large consulting firms that hired many of the former independent contractor professionals as employees, and then contract them out to the various companies that needed their services. Then these consulting firms found a way to save money.

These so called "gate keeper" consulting firms started to take advantage of the provisions of the H-1B and L-1 visas, especially the L-1s. These consulting firms could set themselves up internationally, and have unlimited interoffice transfers of their "consultant employees" from their offices in India or elsewhere to their offices here in America. At the same time, they were dumping their highly paid American engineers and computer programmers. They could hire highly qualified Indian programmers for less than one third of what they would have to pay an American, and with this ammunition, they could pass the savings off to the company needing the consultant. With any corporation the bottom line is the bottom line. Loyalty means nothing, except loyalty to their stock holders. Many large companies have even added insult to injury by requiring the laid off workers to train their Indian replacements in order to receive a separation package. While there are a few vocal members of Congress stating their opposition to this practice, the majority are on the take from campaign contributions from these big businesses. Consequently, all that is going to be done about it is lip service. In 2000, these corporations were able to get the number of H-1B visas increased threefold to 195,000. At the same time, the industry was only hiring two percent of the applicants for software positions. The collusion between Congress and big business showed its true colors when on October 3, 2000 the House leadership stated that voting was over for the day. After most members had left the chamber and gone home, the House passed by voice vote the 195,000 increase with only 40 members of Congress present. At the time, the full Congress had 435 voting members.

Now let's look at the plus side. Whether we like it or not, we are in a global economy, and it's not going to go away. The world economy is in a transition period. Third World countries are hungry for Western companies to come there and set up business that will hire their people. It's not just the United States that is doing this. Every Western country is setting up shop in the Third World to take advantage of their cheap labor due to their lower standard of living. Plus, those Third World countries have an eager workforce that is willing to work twelve hours per day for low wages. That can't be done in the First World, because of the higher cost and standard of living. What this is doing, is raising the standard of living in these developing countries. Two of these are China and India. Others are Malaysia, the Philippines, and Bangladesh. The next time you go to the store to buy clothing, look and see where that article of clothing was manufactured. I just looked at two pairs of khaki pants that I own. One of them was made in Mauritius, and the other was made in Honduras. I remember them costing about $15 a piece. If they had been made here in America, they probably would have cost me about $90 to $100 a piece. If the average cost of a pair of pants was $90 and the average cost of a shirt was $60, what would this do to the American standard of living? If that 19 inch color television cost $3,000, what would that do? You hear the Elites scream about places like WalMart, Target, KMart, or COSTCO, and their selling of cheap foreign made goods. The average person in America can now afford more than two pairs of pants, three shirts, one pair of shoes, and a color TV. If everything consumed in America was made in America, the average working class American would be buying their clothing second hand at Goodwill or Salvation Army thrift stores. Only those upper class Elites would be able to purchase new clothing or own anything larger than a 12 inch television. That is the plan. After all, they are better than we are in their opinion, because of their vastly superior education, and socialist views. Therefore, they are entitled to more than we are. They want a system where they can keep us little people in our place while claiming to level the playing field.

Another advantage of the expansion of the economic development of the Third World, is the effect on the environment. Developed countries, as a rule, pollute less. They have the technology to control much of that pollution. Rivers start to clean up as sewage treatment plants are built, and the air gets cleaner as cheap high sulfur brown coal starts being replaced as a heat source by oil and natural gas. I remember being in China back in 1984. China was just starting to emerge as a partner in the global economy, but it was still quite closed off to the western world. Everywhere you went, there was the constant smell of rotten eggs due to the use of a cheap grade of coal as a heat source. People that have traveled there recently tell me that Beijing is no longer the gray dismal city that is was back then. It's now a thriving modern metropolis that is a lot cleaner than it was twenty years ago.

India, once one of the world's most polluted countries, now has a large emerging middle class just like China does. This is due to the expansion of western technology and the consequent development of their economic base. In addition, developed countries become more stable politically. With the rise of radical Islam and their attempt to destroy the western world, we need all the stability we can get. If we can develop the Islamic world away from a theocracy that basically keeps them in Third World slavery, to some form of either a modern democracy or social democracy with an educated and skilled workforce, the world will become a much safer place. As countries become trading partners with other countries, there is a lot less of a chance that they are going to risk biting the hand that feeds them, and that works both ways.

Right now the world is in a major economic transition, just like it was during the Industrial Revolution. Today, however, that transition is not just limited to the First World countries. It's everyone. The key here is to be flexible and be ready to accept and learn new ways of doing things. The buggy makers of old had to learn how to build automobiles if they wanted to stay employed, and it's a similar situation with just about every industry out there, ranging from manufacturing to setting up a computer network. In order to have a fighting chance in this emerging world economy, we need to stay on the cutting edge of everything new, and also be the best at staying on that cutting edge. Things will be changing over the next decade of so, and we have to be willing to adapt to these changes. Those that don't will be pushed aside by those that are hungry enough to have not become complacent.