End of the American Empire?

Politics International Politics
41

I didn’t reply to Ishmael’s post because it wasn’t relevant to my broad historical comparison of U.S. unemployment rates. The point is not whether the unemployment rate understates or overstates the problem (although I agree with Screaming Jesus that the unemployment rate probably understates it), the point is that it’s a relatively consistent measure over time, and that there’s no reason to believe that U.S. jobs are currently any scarcer than they’ve been in general over the last twenty-five years.

Economists do have a way to measure more broadly the number of jobs a national economy supports. It’s called the labor force participation rate While it doesn’t track the difference between retirees, students focusing on their studies, trust fund babies, on the one hand, and those who genuinely want work but can’t find it on the other, it’s still of some utility.

According to this site at Depaul University (requires Excel to view), the U.S. has the highest labor force participation rate among the largest national economies in the developed world:

Year 2000 (percentage of those 16 and older employed in the work force)

U.S. – 67.2%

Canada – 65.9%

Australia – 64.7%

Japan – 61.6%

France – 56.4%

Germany – 57.5%

Italy – 48.1%

Netherlands – 63.5%

Sweden – 63.8%

United Kingdom – 63.3%

Now compare these rates to the most recent unemployment data for the same countries in this week’s economist:

U.S. – 6.1%

Canada – 8.0%

Australia – 5.8%

Japan – 5.3%

France – 9.6%

Germany – 10.6%

Italy – 8.7%

Netherlands – 5.3%

Sweden – 5.4%

United Kingdom – 5.1%

Why the large discrepancies between some countries? Italy’s unemployment rate is only 2.7% behind the U.S., but its labor force participation rate is almost 20% behind. The reason is that in some countries (Japan, Italy) women do not want to enter the work force to the same degree you find in other countries (U.S., Sweden). In other countries (Germany, France), early retirement is strongly encouraged so those countries governments can ease their extremely high youth unemployment rates.

42

This discussion has thank goodness remained quite interesting, especially thanks to Coldfront:

I would like to pose a question (my original intent for this thread). I was a big fan of Thucydides History of the Peloponnesian War and one of the interesting things in it was that despite Athens greater “civilization” city states and colonies eventually came to resent it actually siding with the far more “barbaric” and “militaristic” Sparta and Corinth (as well as thebes). Is this occurring now in Europe? Is the level of resentment so high at the King of the Hill that weak, jealous, fallible humans will knock the US off its perch with any means fair or foul including noncooperation on important areas of mutual strategic interest just to spite it despite the fact that all possible alternatives are infinitely worse? So cutting off their noses to spite their faces while ending what essentially has been a very beneficial system for all parties concerned since World War II sort of like the Greek states supporting Athens following its defeat of Persia only to fall to squabbling later?

43

On the contrary, I don’t think it would make a difference. “Free trade” doesn’t affect whether a job is “offshored” to India or not; it just affects whether Chinese-made antenna balls have a tariff applied against them.

The jobs are leaving no matter what. May as well allow the hairdressers to buy cheap combs.

Nobody wants to corner the market on it, but these are jobs that used to be located in rural areas of the U.S., providing SOMETHING for locals to do. Now these jobs are sent to India, and rural areas have lost yet another option.

If you want numbers, ask elsewhere; I’m not going to bother digging them up. But the evidence is everywhere around me. My last employer “offshored” the entire department I worked in to India. A friend (and her whole department) lost her bank IT job (some sort of mainframe stuff) as of last January 1, after training her Indian replacement – again, the work is going offshore to India. Three of the last four job prospects I’ve had here in Seattle all ended up not happening because the client decided to have the work done in India (well, actually, in one of those they somehow managed to finagle an H1-B for the Indian, and imported him instead of exporting the work).

You can sneer all you want that some of the work is “not much better than grunt work”, but at least it’s work.

Considering that you’re apparently in Taipei, I think it’s awfully presumptuous of you to assume that it’s “not substantial”. I know a LOT of techies who have run out of their unemployment benefits while looking for work – and in Washington state right now, that takes nearly a year and a half.

Yeah, there will always be low-wage jobs available. (In fact, my next-door neighbor, who lost her job as a floor manager with Sears, has been trying to find one for a year and a half with no luck. The woman who lost her job in the bank IT department – as did everyone else in the department, by the way – is talking about putting up flyers offering to do yardwork for people. Entrepeneurship in the post-bubble era.) On the other hand, these jobs depend on there being people willing to pay money for them. I can do my own cleaning; I haven’t had a haircut in five years; I wash my own car; I eat out a lot less than I used to. (Oh, and I can do my own yardwork, too; sorry, Susan.)

Fat fifty-year olds can’t invest in the economy? The U.S. national economy is run by fat fifty-year olds. :wink:[/quote]
Of course I can invest in the economy. I can’t make enough to live off that, though, although I’ve been making pocket change off short-term stock and options trading for the last two years.

Shortly I’ll be competing against you (I presume) for teaching work. It’ll be interesting.

44

[quote=“fred smith”]This discussion has thank goodness remained quite interesting, especially thanks to Coldfront:

I would like to pose a question (my original intent for this thread). I was a big fan of Thucydides History of the Peloponnesian War and one of the interesting things in it was that despite Athens greater “civilization” city states and colonies eventually came to resent it actually siding with the far more “barbaric” and “militaristic” Sparta and Corinth (as well as thebes). Is this occurring now in Europe? Is the level of resentment so high at the King of the Hill that weak, jealous, fallible humans will knock the US off its perch with any means fair or foul including noncooperation on important areas of mutual strategic interest just to spite it despite the fact that all possible alternatives are infinitely worse? So cutting off their noses to spite their faces while ending what essentially has been a very beneficial system for all parties concerned since World War II sort of like the Greek states supporting Athens following its defeat of Persia only to fall to squabbling later?[/quote]

I also love to read Thucydides. His book was the first real history in the modern sense of the word: a detailed look at past events with a sceptical and somewhat balanced eye. His observations about the Classical world of his time remain a part of the conceptual basis for international relations even today. If you take an international relations class, Thucydides Melian dialogue is almost always the first thing covered. Thucydides’ most important observation was that war is about the competition for power and that men go to war out of fear and interest.

Thucydides would undoubtably agree with most of Fred’s insight: U.S. power causes resentment, not because the U.S. is evil, unjust or undemocratic, but because power inevitably causes resentment. The end of the Cold War did not create this resentment of the U.S. among Europeans; it was there before. But resentment of U.S. power was almost always balanced by a greater fear of the Soviet Union.

45

On that note:

I am outta here. Heading over to buy another copy of Thucydides History. Have a real craving to read someone who despite the millenia that have passed, has a real message for us today.

freddy

46

On the contrary, I don’t think it would make a difference. “Free trade” doesn’t affect whether a job is “offshored” to India or not; it just affects whether Chinese-made antenna balls have a tariff applied against them.

The jobs are leaving no matter what. May as well allow the hairdressers to buy cheap combs.[/quote]

Jobs are not leaving. The U.S. has far more jobs now than it did even five years ago. (And, no, they’re not mostly hamburger flipping jobs.) It will have far more jobs in five years than it does now. You seem to have this idea jobs are a finite commodity that are mostly dependent on other countries.

Trade in services is still trade, by the way. If those jobs are outsourced to India or the Philippines in order to serve the U.S. market, they are still subject to trade agreements, such as the WTO’s General Agreement on Trade in Services (GATS).

The General Agreement on Trade in Services (GATS) is among the World Trade Organization’s most important agreements. The accord, which came into force in January 1995, is the first and only set of multilateral rules covering international trade in services. It has been negotiated by the Governments themselves, and it sets the framework within which firms and individuals can operate. The GATS has two parts: the framework agreement containing the general rules and disciplines; and the national

47

Job outsourcing is a large and still growing trend that WILL have large impacts (both positive and negative) on the US economy. It is beginning to be felt all over the US. In fact, Doonesbury makes note of outsourcing in the Sunday comics today.

48

From the Bureau of Labor Statistics:

August 1999: 133.4 million
August 2000: 134.9 million
August 2001: 134.4 million
August 2002: 134.5 million
August 2003: 137.6 million

A modest increase of 4.2 million jobs in the past five years, then. Each year 3 million people are added to the U.S. population. Seventy percent of the United States’ annual population growth (and 95% of California’s) results from immigration. So, do the math and you’ll see that job growth is not keeping pace with population growth. That is why that even though there are more jobs, there are also more unemployed. Again from the BLS site:

Monthly employment change 1993-2003

Notice the consistent trend in the past couple of years?

49

Job outsourcing is just another word for losing your job because someone else overseas can now do it. In that sense, it is nothing new for American workers. Those in manufacturing have understood about jobs moving overseas for many years now.

50

[quote=“mod lang”][quote=“Cold Front”]
Jobs are not leaving. The U.S. has far more jobs now than it did even five years ago. (And, no, they’re not mostly hamburger flipping jobs.) It will have far more jobs in five years than it does now. You seem to have this idea jobs are a finite commodity that are mostly dependent on other countries.

[/quote]

From the Bureau of Labor Statistics:

August 1999: 133.4 million
August 2000: 134.9 million
August 2001: 134.4 million
August 2002: 134.5 million
August 2003: 137.6 million

A modest increase of 4.2 million jobs in the past five years, then. Each year 3 million people are added to the U.S. population. Seventy percent of the United States’ annual population growth (and 95% of California’s) results from immigration. So, do the math and you’ll see that job growth is not keeping pace with population growth. That is why that even though there are more jobs, there are also more unemployed.[/quote]

As I was the one who provided the annual U.S. unemployment data from the last twenty years a few posts back, I’m not quite sure why you think I need to be told that there are more unemployed now than a few years back.

Yes, the unemployment rate has gone up recently. The U.S. just had a recession. The unemployment rate goes up during recessions since, by definition, the economy contracts during a recession. For some unknown reason, this recession – like the last recession in the early 1990s – has had a weak job recovery (see the chart). The current unemployment rate, however, is still lower than the average U.S. unemployment rate over the last twenty-five years and even during this recession we are still adding jobs to the economy. The U.S. economy’s last recession was in 1991. The unemployment rate peaked that year at just under 8%. Prior to that, there was a recession in 1982. That year, unemployment rate peaked at 10.8%. Given those figures, I’m surprised the current unemployment rate isn’t much higher than 6.1%.

[quote=“mod lang”]Again from the BLS site:

Monthly employment change 1993-2003

Notice the consistent trend in the past couple of years?[/quote]

You can’t chart a meaningful trend of an economy by looking at two years of employment figures during a downturn. That’s like looking at a winning baseball team’s record during a bad week, and saying you see a consistent trend. To measure any sort of meaningful trend for a national economy, measure from peak to peak or trough to trough. It doesn’t take much skill to measure from a economic peak to an economic trough and notice an ominous trend.

51

Recessions are natural (meaning unavoidable) in a capitalist economy. Businesses tend to overinvest during good times and then need to scale back when the good times don’t continue. However, a recession is not a harbinger to the end of U.S. empire. The U.S. has had recessions before and it will have them again. This recession is nowhere near as bad as the one the U.S. experienced in 1982, when unemployment shot up to its worst rate (10.8%) since the Great Depression. From 1980 to 1983, the average U.S. unemployment rate for those four years was 8.5%. Workers at that time would have been pissing their pants with joy to have an unemployment rate at 6.1%

52

Hey Cold Front:

Did I write, anywhere, “Damn it, I deserve a job for life in my chosen profession of buggy-whip braider!”??

Did I write, anywhere, “Techies deserve high-paying secure jobs no matter what!”??

Did I write, anywhere, “Waaaaaaah! I deserve better than this!”??

Funny, I didn’t think I wrote any of that either. Nice straw-man, though.

So what have I mentioned on the forums for the last, oh, six months or so that I’ve been reading/posting here? Let’s see, I think it’s been something like: “Life sucks, I haven’t been able to find work, I’m selling my house and moving to Taiwan, at least temporarily, to look at a different career path.”

Wow. Isn’t that sump’n?? It sounds positively . . . free market! Gasp. Rush would be proud (if he weren’t such an asshole, ranting about how anyone who dares to be unemployed, or even worse to collect the “unemployment insurance” we’ve been forced to pay into for years, should be flogged).

Do a quickie search for a thread Tomas started a month or two ago, which referenced an article on Yahoo saying that 10% of computer jobs may be moving to India within the next year. One out of ten jobs, in a single year. Ouch.

Last month, the papers mentioned that homebuilding was starting to slump, partly due to the rise in rates (which are now falling a bit again) but also due to the simple fact that 2/3 of Americans now own their housing and a lot of the rest aren’t in any position to (due to unemployment, low-paying jobs, and so on). Five years ago in Seattle (shortly after I bought my place), that figure was just barely over 50%.

What I am asking is: considering that the recovery isn’t in sight, and that many of the career paths that formerly led to success and high wages are evaporating, what is the next wave? I don’t see one, and neither does anyone else I’ve talked with in the last two years. What they do see is more offshoring and more unemployment and more economic trouble. The feds have been talking about a recovery since mid-2001, but it keeps moving farther and farther away. Now it’s going to be some time in 2004, supposedly.

Anecdotal tales of “gee, I know a cleaning lady who sent her kid to Stanford” is all real nice, but my anecdotal stuff wasn’t about one person, it was about pretty much every technical worker I know, and I know a lot of them. Out of all of them, I can only think of two who haven’t had significant unemployment time in the last three years. I know at least three, including myself, who have sold their homes and gone off to wonder what to do, because there just isn’t any more work in the field within the U.S. I know two more who have left the country, and I’ve been trying to convince a third to give it a shot.

I think the U.S. economy will continue to struggle along until consumers suddenly realize they aren’t staying afloat. At that point, I think the economy will take a drastic hit. And I think the American “empire” will see the same sorts of troubles that the “setting sun” in Japan has lit.

53

[quote=“MaPoDoFu”]Hey Cold Front:

Did I write, anywhere, “Damn it, I deserve a job for life in my chosen profession of buggy-whip braider!”??

Did I write, anywhere, “Techies deserve high-paying secure jobs no matter what!”??

Did I write, anywhere, “Waaaaaaah! I deserve better than this!”??

Funny, I didn’t think I wrote any of that either. Nice straw-man, though.[/quote]

Hey MaPoDoFu, did I say you wrote those things, anywhere? No, I did not. So you appear to be assembling a little straw platoon of your own to avoid responding to the main points of my argument.

I simply pointed out that losing certain types of jobs is nothing new for Americans, and that it’s quite healthy over the long run. I also said that extrapolating from personal experience is not the best way (or even a good way) to measure a national economy’s strength.

Forumosa is hardly the place to be feeling the pulse of the U.S. economy.

Did you see this on Forumosa?: Index of U.S. economy at record high-weekly report

How about this?: <a href=“http://finance.news.com.au/common/story_page/0,4057,7173584%255E14305,00.html” target=New">US productivity soars

And this?: Analysts forecast rebound in U.S. economic growth, jobs recovery

There has been a lot of positive news on the U.S. economy recently. High productivity. Strong growth. The stock market has made strong gains over the last year. And while a recovery in jobs has lagged somewhat, most reports I’ve seen expect hiring to begin again very soon.

I don’t listen to Rush, so I’ll let you be the expert on what a jerk he is. As for my argument, I never mentioned unemployment benefits, so unless you’re building another foot soldier for your straw army, I’m not sure why you’d even mention the subject. You might be surprised to know that the idea of capitalism and free markets predates Rush. Go figure.

There’s been no slump in housing although there probably will be eventually. (One reason housing took off a couple of years ago was that some stock investors were looking for a place to invest their money they took out of the markets. A second home that could be rented out seemed like a safe investment.) U.S. housing market still strong

U.S. housing starts slid in August, but building permits and mortgage applications rose, in reports showing a strong housing market despite a trend of rising interest rates.

``All of the data that we’re seeing in the housing market is incredibly encouraging. It suggests to me that the bump up in rates is not a threat to the housing market,‘’ said Mark Vitner of Wachovia Securities.

Housing starts slipped 3.8 percent last month, the Commerce Department said Wednesday in a report showing generally higher home loan interest rates were cooling the buyer ardor for new homes.

However, Commerce also said permits to break new ground for single-family homes jumped 2.9 percent to a 1.475 million rate

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It’s a bubble, Cold Front, and one that is certain to burst sooner or later – more likely the former than the latter. Bubbles always burst, especially bubbles in asset values. And when it does burst, the housing market will grind to a shuddering halt. Sales, new construction, renovation, et al will all dry up, and very large numbers of people will find themselves unemployed. Banks will lose trillions and be forced to all but stop lending. Millions of home owners will owe more on their mortgages than their properties are worth. The implications are obvious enough. Just look at what happened in Japan. And Hong Kong. And the last housing bubble in the U.K. And in countless other instances in many other places. The U.S. will not be an exception. Its economy is staring down the barrel of that Big Bertha right now, and it’s scaring a lot of politicians and economists shitless.

55

It’s a bubble, Cold Front, and one that is certain to burst sooner or later – more likely the former than the latter. Bubbles always burst, especially bubbles in asset values. And when it does burst, the housing market will grind to a shuddering halt. Sales, new construction, renovation, et al will all dry up, and very large numbers of people will find themselves unemployed. Banks will lose trillions and be forced to all but stop lending. Millions of home owners will owe more on their mortgages than their properties are worth. The implications are obvious enough. Just look at what happened in Japan. And Hong Kong. And the last housing bubble in the U.K. And in countless other instances in many other places. The U.S. will not be an exception. Its economy is staring down the barrel of that Big Bertha right now, and it’s scaring a lot of politicians and economists shitless.[/quote]

It may be a bubble, but it’s not a bubble on the scale you are claiming. A recent Economist magazine survey on the subject said the U.S. housing market was overvalued by about 10%. That’s mild compared to most other countries real estate markets and most financial bubbles.

In the meantime, a bubble provides an opportunity for people to make good money, save a little extra for hard times ahead, and develop skills they may be able to transfer later to other occupations.

Part of the problem of capitalism is that we still haven’t figured out what to do yet with the inevitable overinvestment that periodically occurs in all segments of the market economy. (Overinvestment is nothing more than a bubble.) Yes, real estate will inevitably fall and the market for housing will weaken. But for now, however, it has not. And by the time it does fall, other sectors of the economy will probably be on the rise.

56

Perhaps a more interesting question is whether India can overtake China:

foreignpolicy.com/story/stor … 6897d658a0

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Strange that we have not heard from our resident expert “Rascal” on these subjects. I noticed him lurking in the forum but have not heard from him yet. Maybe he has become wiser during his vacation and will now support US efforts worldwide like his chancellor Gerhard Schroeder?

58

I don’t see India as a serious rival to China in the near-future. The article Tigerman linked to is interesting, and it’s always good to get another educated opinion on a topic, but I don’t find the two authors’ argument convincing.

On nearly every measure one can think of, China leads India. The only exceptions the authors can point to are some highly subjective magazine surveys on the leading businesses in Asia and, more tellingly, China’s messy and questionable financial practices.

The authors write:[quote]If India has so clearly surpassed China at the grass-roots level, why isn

59

Amen Coldfront:

While there is a lot to be skeptical about regarding Chinese “statistics” India has never failed to let me borrow a phrase “miss an opportunity to miss an opportunity.” The sheer incompetence and corruption of India’s politicoes is not to be underestimated. I am with Coldfront on this one.

The economic questions above, I am going to have to give a pass on. Insufficient knowledge to determine what is actually going on. It does seem though that the jobless recovery that the US experienced in 1991 is about to repeat itself but then a few years later the roaring 1990s. So I am optimistic but waiting.

freddy

60

Here is how I see the future competition for geopolitical power:

*The U.S. – it will remain in the top position for the foreseeable future.

*The E.U. – Europe’s future as a superpower depends on well it integrates its various constituent members into a diplomatic and military whole. If it does this, it will be formidable counterweight to the U.S. If it does not, it will continue to need the U.S. for its security in Eastern Europe and the Middle East. I do not see this military and diplomatic integration happening anytime soon. Europe’s economic and cultural power will remain formidable.

*China – everything depends on future growth and domestic stability. If China continues with another twenty years of development resembling its last two decades, then it will be a formidable power and the U.S. will probably have its hands full trying to counter it. But I suspect the next two decades won’t be like the last two and that more cracks in China’s political and economic structure will begin to show.

*Russia – everyone forgets about the Russians. They still have the second most formidable military on the planet. They still have the largest population in greater Europe. And while Russia is hardly a capitalist’s dream, they have rebounded somewhat under Putin. In fact, Russia’s growth tin the second quarter of this year was 7.2%, higher than both China’s (6.7%) and India’s (4.9%). (This is not as positive a sign as it first appears since Russia’s growth is highly dependent on natural resources, especially oil. And natural resources are highly unstable.)

India, Brazil, an integrated Middle East are all pipe dreams, in my opinion. India has the best opportunity of these three, but frankly it has its hands full in the subcontinent feeding its people and fending off a Chinese-backed Pakistan.