Highlighting today's summit between Chinese President Hu Jintao and President Obama is China's agreement to buy $45 billion of American exports. The president says this will create more American jobs. That's not exactly right. It will create more profits for American companies but relatively few new jobs.
Nearly half of the deal is for two hundred Boeing aircraft whose parts come from all over the world. The rest involves agricultural commodities that don't require much U.S. labor because American agribusiness is highly automated, and chemical and high-tech goods that are even less labor-intensive.
General Electric and other companies are signing up for deals with China involving energy and aviation manufacturing. But much of this will be done in China. GE's joint venture with Aviation Industries of China, to develop new integrated avionics systems (which presumably will find their way into Boeing planes) will be based in Shanghai.
Here's the real story. China has a national economic strategy designed to make it, and its people, the economic powerhouse of the future. They're intent on learning as much as they can from us and then going beyond us (as they already are in solar and electric-battery technologies). They're pouring money into basic research and education at all levels. In the last 12 years they've built twenty universities, each designed to be the equivalent of MIT.
Their goal is to make China Number one in power and prestige, and in high-wage jobs.
The United States doesn't have a national economic strategy. Instead, we have global corporations that happen to be headquartered here. Their goal is to maximize profits, wherever they can make the most money. They'll make things in America for export to China when that's most profitable; they'll make it in China and give the Chinese their know-how when that's the best way to boost the bottom line. They'll utilize research and development wherever around the world it will deliver the biggest bang for the dollar.
Meanwhile, Republicans and deficit hawks are cutting publicly-supported R&D. And cash-starved states are cutting K-12 education, and slashing the budgets of their great public research universities, such as the one I teach at.
No contest.
And no hyped-up trade deals are going to change this fundamental imbalance.
Some say all we need to do is put our currencies in better balance. But even if the Chinese upped the value of the yuan and the US (courtesy of the Fed) reduced the value of the dollar -- so everything they bought from us was cheaper and everything we bought from them, far more expensive -- they'd still win. We'd have more jobs than now because our exports would be more attractive in world markets, but those jobs would summon fewer goods from around the world. In other words, we'd be poorer.
Let's get real. We're losing ground. The U.S. labor force is now smaller than it was before the Great Recession began and most American families are worse off. December's unemployment rate dropped to 9.4 percent from 9.8 percent but almost half the improvement was due to 260,000 people dropping out of the labor force.
Average hourly wages grew by three cents in December; weekly wages, by $1.02. And almost all the gains in income occurred at the top. The major assets of rich Americans are financial - whose values have increased as corporate profits have grown. The major assets of the middle-class asset are their homes, whose values continue to drop.
The President now says the answer is to help American business. "We can't succeed unless American businesses succeed," he said recently. "And I'm going to do everything I can to promote their ability to grow and prosper."
But the prosperity of America's big businesses has become disconnected from the prosperity of most Americans.
Republicans say the answer is to reduce the size and scope of government. But without a government that's focused on more and better jobs, we're left with global corporations that don't give a damn.
China is eating our lunch. Why? It has a national economic strategy designed to create more and better jobs. We have global corporations designed to make money for shareholders.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
The reverse is true in the USA. Our gradual (or not so gradual) decline is less freedom to its citizens. We should reverse this. The government has no business "planning an economy". The best it can do is give its citizens as much freedom as possible, in the general framework of safety.
it seems to be working for them
More at http://www.oofdah.com.
1. The US has the 2nd highest corporate tax rate in the world.
2. China has pollution problems that are far worse than what the US ever experienced.
3. Some of the biggest Chinese companies (and hundreds of smaller ones) are owned by the People Liberation Army and not subject to any real regulation.
4. The US has a skilled worker shortage. The huge drop in workers in the US in the past 20 years has been mainly among the unskilled. (note that unskilled includes a lot of college graduates with "fluff" degrees).
I struggle very much with this mentality that somehow prosperity is measured by access to cheap imported goods (as well as potentially unsafe and poor quality goods)
Wealth is created in the manufacture of goods were value is added in processing materials into useful items. Wealth of nations is increased by the exportations of goods and services.
So Prof Reich correctly says that more jobs will be created with domestic manufacture. Isn't that the idea - more people working created more people able to buy the products and services they create thus adding value and creating weatlh? is this not how our economy functioned in its heyday of the 40s thru the 70's? a time when were were much more "protectionist" than today
I really need to see an explanation how this somehow makes us poorer - I havent seen one that makes any sense yet.
makes little sense, it does not add up to borrow money from, shift technology, jobs and capacity to another country, just to buy back all the products we used to make for ourselves (and export as well)
one need look no further than the measure of jobs, wealth and technology leaving the country - the trade deficit - for the evidence.
still have yet to hear an explanation that makes any sense
How much more of our tax dollars are just going to pay for interest with nothing in return? The repubs are on the right path whether you want to admit it or not.
What a laugh!
No, they're not.
It's true that we need to end our borrowing activity, but the timing is wrong. What we need to do is reinstate SMART tarriffs, ones that actually promote FAIR trade. This will get our manufacturing going. Meanwhile, we need government to spend MORE, however, not all spending is equivalent. We need to spend primarily on two things: Investments in our future - infrastructure, basic research, and the like, and spend on the poor, not only to keep them from literally dieing in the streets, but also because when they sget money, they spend ALL of it - and that helps ALL business - there's more churn - wealthy people just squirl most of it away. Helping our poorest helps everyone - fewer burgalries (sp?), lower crime overall, healthier children, etc.
And we can do a lot to reduce the deficit by ending the unnecessar WARS. In fact _just_ doing that saves us so much money that it's insane what we're now spending on war...
I don't get it - when does this poor person/couple get the incentive to work or get an education again?
Where's the down side?
I recently read something like the rulebooks state there can be no economic success when government is involved in things economic. China has confirmed that these rulebooks are wrong.
Especially now when they make first steps to clean up some of their horrible pollution, it is important that government keeps being involved, or you might have debates for ever and a day,but no actions. If I look at America's decline and China's progress the comparison does not come out favourably for the US, country, system, ideology. It is up to you which way you want to go and if your dogma is more important than positive outcomes. (Australian)