Thought For Labor Day: Conservative Dogma Pulling Marx Out of His Grave

Libertarians and free trade
economists don`t realize it, but they are pulling Marx
out of his grave.

Free traders
are resurrecting class war, not because
they are Marxists but because they confuse free trade
with global labor arbitrage. Free traders turn cold
shoulders to US job losses from offshore outsourcing,
because they mistake the losses for the beneficial
workings of

comparative advantage.

Committed to a

200 year old theory
that they no longer understand,
free traders are cheering on the destruction of middle
class jobs and the dismantling of the ladders of

upward mobility
that make large income disparities
politically acceptable.


destruction of the stabilizing middle class
occurring simultaneously with an extraordinary increase
in income inequalities. Not so long ago

were paid 20 times more than the average
employee; now some are paid hundreds of times more. The

"gilded age"
is returning while the value of a
college degree is declining.

According to the Bureau of Labor
Statistics` 10-year jobs forecast, the majority of US
jobs that will be created in the coming decade will be
in domestic services that do not require a college
education. This is a strange job outlook for a high tech
economy allegedly benefiting from free trade.

Domestic services are nontradable.
The US economy has not created a net new job in tradable
goods and services in the 21st century.

Free trade economists have
forgotten that not all trade reflects the beneficial
workings of comparative advantage. For comparative
advantage to function, a country`s capital must stay at
home and be allocated to activities in which the country
has comparative advantage. The other necessary condition
is that countries have different internal cost ratios of
producing different goods.

When the principle of comparative
advantage was discovered, capital was mainly kept at
home under the watchful eye of the owners and protected
by the country`s laws. Tradable commodities were
primarily products influenced by climate and geography,
guaranteeing that the cost of a

yard of wool in terms of a bottle of wine
would vary
among countries.

Today capital is more mobile than
tradable goods. Modern production functions are based on
acquired knowledge and produce identical results
regardless of location. When a US corporation closes a
factory in Ohio and relocates its production for US
markets to China, the loss of US jobs is not the result
of a Chinese firm gaining a comparative advantage over
the Ohio one. It is the result of US capital seeking
absolute advantage in lower cost Chinese labor.

Free trade economists have
completely forgotten that the flow of resources to where
they have absolute advantage does not result in mutual
benefit. The country that receives the resources gains
and the other country loses.

When capital and technology flow
from the US to China and India, the productivity of
labor in China and India rises. In the US it falls.

Outsourcing is eliminating entire
American occupations in engineering and information
technology. As there are fewer jobs for graduates,
engineering enrollments in the US are declining.

Libertarians and free traders are
so emotionally enamored of the market that they have
forgotten that markets can as easily work against a
country as for it. In the US, markets are working to
reduce the supply of American engineers as US
corporations lay off their American employees and
replace them with cheaper

Chinese and Indians.

Product development, or research
and development, follows manufacturing. As US
manufacturing moves offshore, so does

. Innovation follows R&D, with the consequence
that US science is also in relative decline.

In brief, the US is developing the
labor force characteristics of a third world country in
which jobs are available only in lower productivity,
lower paid "hands on" domestic services.

For engineering and IT jobs that
remain in the US, fewer are filled by Americans. US
firms have learned that they can pay foreigners on H-1B

L-1 work visas
lower salaries, force their American
employees to

train their foreign replacements,
and then discharge
their American workers.

Consequently, there is double-digit
unemployment among American software engineers, IT
professionals and computer programmers.

As Lou Dobbs

exposed recently on CNN,
the US Department of Labor
is currently reserving some 52,000 high tech job
openings in US firms for H-1B visa holders. "Bodyshops"
use the visas to bring in foreigners who take Americans`
jobs by undercutting their pay. American firms advertise
openings for H-1B visa holders only. No Americans need
apply. Gene Koprowski in TechNewsWorld (August
) reports that "in excess of 600,000 new visas
have been granted during the last five years…
Thirty-nine percent of H-1B visas were for workers in
computer-related occupations…"

In other words, 600,000 Americans
lost the occupations in which they have invested their
human capital. You can be assured that these 600,000 did
not move up to better jobs.

As bad as it is for the
individuals, it is even more costly for the country. The
outsourcing of jobs and the importation of foreigners on
work visas are emptying the pipeline of qualified
Americans and destroying US technical occupations.

It is paradoxical to hear the very
executives who replaced their US employees with
foreigners now complain about the declining interest of
Americans in science and engineering. Last July

Bill Gates
expressed his worries about the
precipitous decline in the
number of students entering computer science.
Why is
Bill surprised when he helped to lead the offshore
outsourcing movement?

Obviously, it is a vicious cycle.
As Americans are discouraged from the occupations, the
corporations lobby for more work visas, which
discourages more Americans.

Seeking to protect their careers
from being outsourced, Americans are turning to domestic
services, such as nursing and teaching. However, H-1B
visas threaten these occupations, too. Hospitals
struggling with costs and school systems struggling with
budgets are importing lower cost foreigners to teach
American kids and care for American patients.

In Nevada the Clark County School
District has imported teachers from the Philippines.
Arizona has imported teachers from New Delhi, India. The
New York Department of Education has brought teachers in
from Jamaica. Cleveland, Ohio, has imported teachers
from India. It goes on and on.

Joe Guzzardi has a good article

posted on
about the use of foreign
teachers in US schools. This practice raises many
questions: Does the money saved on teachers` salaries go
to administrators as bonuses for cost-cutting? How can
foreigners from outside our culture enculturate American

What happens to enrollments in US


curriculums as imported foreigners fill
available positions? What happens to the laid off US
engineers and technical people who are displaced again,
this time from teaching math and science in our schools?

The pressure on school budgets
comes from the lost middle class jobs. As manufacturing
and now white collar work move out of US communities,
tax revenues become more scarce. Administrators seek
foreign employees who will work for less.

Eventually, all Americans will be
working for less except the fat cats at the top, who
will earn large bonuses by substituting foreigners for

What occupations will be left to
native citizens? This question comes to me from many
frustrated parents who are trying to give their children
some career counseling. It is possible for Americans
still to earn good incomes from being dentists and
lawyers (if they are in the top 20% of their class).
Next one thinks of skilled trades such as electrician,
plumber and auto mechanic.

However, Mexican immigrants are
crowding Americans out of the construction trades and
may soon dominate other trades as well.

Opportunity for native born
Americans is collapsing. The loss of opportunity is
showing up in declining median household income and
rising poverty rate. On September 1, Edwin Rubenstein
reported ( that according to the Census
Bureau`s August 30 report,

"median household income declined for an unprecedented
fifth straight year in 2004."
The main reason
for declining household income, says the Economic Policy
Institute, is

"ongoing weakness in the job market."

Higher paying jobs are being lost
to outsourcing and to work visas. Lower paying jobs are
being lost to Mexicans. With real income falling for
five years (despite an economic recovery), the US
poverty rate has climbed from 11.3% in 2000 to 12.7% in
2004, adding 5.4 million more persons to the poverty


free trade economists and libertarians–like

who promised us light at the end of the tunnel
in Vietnam and Bush who promises light at the end of the
tunnel in Iraq–still promise that outsourcing and H-1B
visas mean increased wealth for Americans.

Economic science no longer exists
in America. Its place has been taken by emotional
commitments to dogmas. Americans and their hopes are
daily paying the price for this great failure of
economic thinking.

The August payroll jobs report from
the Bureau of Labor Statistics repeats the consistent
pattern of 21st century America–no net job creation in
high productivity sectors. The only jobs created are in
nontradable lower paid domestic services.

Of the 154,000 private nonfarm jobs
created in August, 25,000 are in construction and are
filled primarily by legal and illegal Mexican
immigrants; 20,000 are in wholesale and retail trade;
16,000 in administrative and waste services; 43,000 in
education and health services; 34,000 in leisure and
hospitality (primarily waitresses and bartenders).
Manufacturing lost another 14,000 jobs.

Brand name companies that once were
symbols of US manufacturing are today assemblers of
foreign made parts. An industry of assemblers has no
need for engineers or scientists. The dismantling of the
US economy cannot be corrected by education and job
retraining. The US is on its way to becoming a third
world country.

It is detrimental to the future of
freedom that at this time, when our civil liberties are
under attack by the Bush administration and diminishing
economic opportunity is breathing new life into class
war, libertarians and market economists are
demonstrating more commitment to ideology than to the
welfare of fellow citizens.

By associating freedom and market
solutions with policies that are eroding Americans`
prospects, freedom`s defenders are unwittingly stabbing
freedom in the back.

Roberts, [
him] a former Associate Editor of the

Wall Street Journal and a
former Contributing Editor of
National Review
was Assistant Secretary of the Treasury during the
Reagan administration. He  is
the author of

The Supply-Side Revolution

and, with Lawrence M. Stratton, of

The Tyranny of Good Intentions : How Prosecutors and
Bureaucrats Are Trampling the Constitution in the Name
of Justice

for Peter
Magazine interview with Roberts about the recent
epidemic of prosecutorial misconduct.