ARLINGTON, VA — President Obama now says that his primary focus
is on creating jobs. I hope his math is as good as his rhetoric.
In a recent op-ed for The Washington Post, Harold Meyerson cited
the claim of “most economists” that last year’s $787-billion
stimulus package saved or created up to 2 million jobs.
Do the math. That works out to nearly $400,000 of taxpayer dollars
(or borrowed Chinese capital or inflationary paper hot off the Fed’s
printing presses — take your pick) per job saved or created. Since
the average fulltime worker in America is now paid $34,000 per year,
that also means about $366,000 of the dollars spent to save or create
each job escaped into some unidentified ether (or into the pocket of
a bureaucrat or crook). In other words, more than $720 billion of the
stimulus package was wasted as far as job creation is concerned.
Meyerson, confirmed socialist that he is, went on to argue that we
need more such spending, ideally in the direct creation of public jobs.
Meanwhile, adjacent to Meyerson’s op-ed was another by C. Fred
Bergsten that praised the President for the new export strategy he
announced in his State of the Union address. Bergsten claimed that
every $1-billion increase in exports would create 7,000 new jobs.
Do the math again. That is one job for every $140,000, not of Chinese
capital or Fed funny money, but of private sector manufacturing and
export activity. So the expansion of exports is approximately three
times as efficient in job creation as public expenditures. Such activity
also chips away at the size of our annual trade deficit, which is almost
as serious a problem as our spiraling budget deficits.
In all the decades I have been reading The Washington Post, I have
never encountered such a compelling argument in favor of the private
sector over the public sector.
Still, Bergsten, in my view, did not go far enough. He covered exchange
rates, trade liberalization, relaxation of controls that restrict imports,
and border-adjusted taxation as they affect exports. All to the good,
but he ignored the 800-pound gorilla.
In the 1970s, I saw a chart showing the intersection of public sector
employment and manufacturing employment — the former rising, the latter
descending. Ever since, I have tried to understand why this was happening
and what might be done about it.
The main reason, I have concluded, is global wage disparity. Developed
economies in politically liberal countries generally pay their workers
well; underdeveloped countries, especially when ruled by autocratic
elites out to enrich themselves, pay their workers subsistence wages
or worse. Economic globalization, which began in earnest after World
War II, results in a situation in which corporate entities, doing nothing
more dastardly than following the dictates of economic rationality
and carrying out their fiduciary responsibilities to their stockholders,
rush to take advantage of this imbalance.
Now, Adam Smith and David Ricardo, the justly famed apostles of free
trade, were geniuses. The principle of comparative advantage is impossible
to gainsay. In their time and place, however, they were unable to grasp
that great changes would occur and that their theory would eventually
need to be updated to keep it rational.
Worldwide communication is now virtually instantaneous. Industrial
production is on a steady curve away from heavy durables to lightweight
throwaways. Agricultural production and consumption have gone global,
defying seasonal scarcity. Transportation is incomparably cheaper,
faster, and more efficient.
Labor is mobile to a degree impossible to imagine in the 19th century.
Borders and nations are simultaneously more demarcated and more porous
than they were two centuries ago — and globalization creates pressures
to puncture them with illegal immigration.
Smith and Ricardo, accordingly, can be excused for not foreseeing
the situation described above, in which corporations are compelled
by economic rationality to savage their work forces and transfer jobs
and technologies to the globe’s cheap labor sites.
In the long term, their theory will prove its worth, as already shown
by the rise of China. That, however, is not a prospect American workers
can welcome. These workers have a right to expect their government
to do better by them, to update the rules of the game, to ensure that
the cost of international economic development does not transform America
into an economic backwater. It should be the highest priority of the
United States to pursue global wage equilibrium over the next decade,
conditioning access to our market on positive steps in that direction
by our trading partners.
Last October, I predicted that Obama’s even-shot chances of
losing his party’s nomination in 2012 would rise to 90-10 if
he stepped into an Afghan quagmire -- which he promptly did. He has
made a lot of bad decisions since then. The game will be almost over
if he continues to falter on the jobs front and Democrats are decimated
in the November mid-term elections.
Just doing the math. You can bet Hillary and Evan Bayh are, too.
The Unrepentant Traditionalist is copyright © 2010
by Frank Creel and the Fitzgerald
All rights reserved.
Frank Creel, Ph.D., a columnist and author, was an English teacher
in the Peace Corps in Turkey. He is fluent in the Turkish language
and in Arabic script.
See a complete biographical sketch.
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