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Monday, October 27, 2003

Only Known Export Jobs: Part I

This, it seems, is going to be the title of a new series here at Bonobo. The title is plagiarised: former US Treasury Secretary Paul O'Neill (or was it GWB himself, help, someone?) once said of Argentina that it was a country with no known export industry, and it didn't seem to care. This was before the crash. Well I'm now throwing the jibe back: the only unambiguously successful US export industry right now is the jobs one (if you don't count the dollar bill one that is). Of course the US has enormously successful companies. Of course the US can generate products that are world beaters. But how do you do this at prices that the rest of the world can afford? This is the problem. If you look at the US current account deficit the situation is clear.

In some ways there is analogy here with the energy situation. Energy resources may or may not become depleted before alternatives are available, everything is a question of timing. The jobs market and economic development have been tied to a progressive evolution from agriculture to bottom-end manufacturing, to hi-tech manufacturing to services, to services/information. Now it is these high-end services and intellectual property producing activities that are starting to be outsourced, and the OECD world needs to move to the next-generation activity (whatever that may be, and we are talking structurally here). The question is again one of timing. And just as with the energy tech-fix there is no guarantee, so with the labour market evolution there is none either. This is the point I am making. I could tie all this in to the laxity of attitudes in the present US administration, since I think that with another administration in the White House all of this would be being treated five times more seriously as a problem.

A couple of interesting inks. One I picked up from Fons Tuinstra which, incredibly, describes the outsourcing situation over at Palm, the other a link that Macromouse LLoyd sent me from 'Last Remaining Radical' Ed Strong . Now apart from understanding why he is concerned, and recognising his right to say what he says, I dont go down Ed's road at all. I have already commented at length on Ed's post (comment reproduced below). Nonetheless one detail is worthy of note, and it relates to the notorious Singapore issues. One 'hot topic' among these issues was opening government procurement (transparency I think it is called) to free competition. Well, if you look at what is happening in the US (and I'm sorry this is NOT a US-only issue, it is an OECD issue) you will see that 'procurement' is becoming an 'issue du jour'. Take Shirley Turner, eg:

"After Shirley Turner, a Democratic state senator from New Jersey discovered that a program from her state, Families First, which provides welfare recipients with grocery debit cards had been outsourced to Mumbai, India, she proposed bill No. 1349.Her bill, which was approved unanimously by the New Jersey Senate in December 2002, would require all state contracts to be performed by either US citizens or foreign citizens who work legally in the United States. Following her lead, Connecticut, Maryland, Missouri, and Wisconsin all have similar bills under consideration."

Now for my comments on Ed's post:

Hi Ed.
Interesting post. I'm both for you, and I'm against you I'm afraid. I'm for you since I am convinced you are right to be pre-occupied by what is happening. This is, and is going to be, an enormous issue for the US.

The key to the problem: the value of your currency and the trade deficit. The key to the value of your currency: the reserve role of the dollar. So it seems somewhere deep-down, behind all this we may need to address questions of financial architecture.

You see moving from manufacturing into services isn't (in principle) a problem. It's when you start moving out of high value services and into relatively lower value ones (as you indicate) like the low-tech 'human' end of health, looking after gardens and old people etc, construction attached to all the deficit spending which will be seen as the solution etc etc: it's in this move downstream that the problem starts. This then becomes a historic first, and the 'usual arguments' seem to have less validity.

One intersting side issue is that of procurement and the Singapore issues. Normally the accusation of using restrictive practices to avoid competition is a jibe that is thrown at the third world but here we have your very own Shirley Turner demonstrating just how rife this practice probably is even in the 'good ol' US of A.

I see the US today as very much in the same situation as the UK post WWI (in fact NY university historian Niall Ferguson made just this point in a very perceptive article 'To the Debtor the Spoils' in the NYT just after the Iraq war).

Why this isn't really being picked up inside the US I don't know. The Bushies obviously aren't interested, and the 'opponents' lead by 'road runner' Krugman (who was last seen painting an entrance in the wall to lead the pack down a dimly-lit cul-de-sac) seem obsessed with demonstrating that everything is a consequence of the 'dreaded tax cut'. This leads him (in his recent 'lump of labour' piece) to the absurd extreme of suggesting that those who are pointing to the structural problem are trying to defend Bush!

Another area where I'm not exactly with you is over the accent on the telephone. I got over this as a child in Liverpool trying to make long distance contact via an operator in Scotland! I don't think it matters what accent someone has - or what colour their skin is - if they are doing a good job. And since the American ideal of competition is that who does the best job cheapest wins, looking at you from the outside, I think it's kinda hard to cry 'foul'.

My proposal. Accept the new reality. Asia is on the rise. We in Britain had, eventually to accept the rise of the US. In the end it was good for us, you helped us out in 1939. So accept the reality and learn to live with it. We in Britain may not have the world influence we once had, but we're hardly poor. We are also more mature about money. Despite Ms Thatchers best attempts we still don't value money as much as you do. Come on over, it's not as bad as it looks. And, anyway, at the end of the day I really can't believe that reducing poverty in other parts of the world isn't something important to you as a person.

In case you're interested, here is a recent link to , Monbiot in the Guardian to show how the British seem to be looking at this.


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