Exporting U.S. Jobs

An engineered exodus of manufacturing and hi-tech jobs threatens to abolish the American middle class — the bulwark of a free society.

‘‘We were middle class," lamented former textile worker Jimmy Bennett in an interview with the Washington Post, before hastily correcting himself: "We still are." Jimmy and his wife Verleen, residents of Kannapolis, North Carolina, were among the nearly 6,500 employees of the Pillowtex towel factory laid off in early August.

Just two years ago, reported the August 9th Washington Post, the Bennetts had bought a modest $100,000 home, "confident their combined wages … would continue to support the comfortable lifestyle that had long eluded their parents." Like many of their former colleagues, the Bennetts, who both work part-time at near minimum wage, quickly sold many of their household amenities to get by on roughly half their previous take-home pay.

Thousands of other former Pillowtex workers "are fending off eviction notices, car repossessions and home foreclosures, and making difficult choices about which prescription drugs to skip and which utilities to turn off," reported the Post. "People are turning off cellphones, cutting cable TV, and pleading with creditors," added the August 5th Christian Science Monitor. "Already, 200 have had their water shut off."

The Monitor describes the Pillowtex closing as an event akin to a natural disaster. But it wasn’t a destructive caprice of nature that shut down the plant. Rather, as the paper observes, the firm was overwhelmed by "a flood of imports from China." Resulting in the largest one-day layoff in the history of North Carolina, the Pillowtex bankruptcy dramatically exemplifies the devastation being wrought throughout America’s manufacturing economy as our trade deficit with Communist China grows.

As the Monitor reports, "Manufacturing businesses, from electronics to furniture and fishing lures, are closing their doors or moving production to China.... Three members of the president’s cabinet on a cross-country jaunt to promote the Bush economic plan have gotten an earful from angry businesspeople trying to compete with Chinese imports made by workers getting 50 cents an hour."

Charles Bremer of the American Textile Manufacturers Institute points out that as textiles from Communist China and Vietnam flood the American market, "People are moving jobs faster than you can count." In 2008, all import quotas on Chinese textiles will be removed. "At that point," predicts Bremer, "the Chinese will completely dominate the market."

Ironically, at least some of the future textile imports from China will probably be produced on looms from Pillowtex’s Kannapolis facility — but those looms will be in China, operated by Chinese workers. The August 7th Charlotte Observer reported that "looms and other machinery [from Pillowtex] likely will be removed from plants, packed and shipped to manufacturers in China, Pakistan, and India...."

Manufacturing in Decline

As the erosion of America’s manufacturing base accelerates, communities across the nation are experiencing economic ruin similar to that of Kannapolis.

This summer, 10 plants operated by the Hooker Furniture Corporation were shut down. These factories were shuttered even though the company’s profits had grown in recent years "largely by outsourcing to cheaper manufacturers abroad," reported ABC News on August 14th.

"Every time we’ve asked them to step up, they’ve done it," commented Hooker CEO Paul Toms of the employees who lost their jobs. "I feel like we’ve let these folks down, and I don’t know what I’d do different.... It’s unlike anything I’ve seen in my 21 years in the industry. A lot of plants have closed, people have been sent home, and it really has come quicker than anybody expected. I think it’s hard to say, three, four, five years from now, what will this industry look like domestically."

As with the American textile industry, our furniture industry is being decimated in uneven competition with low-wage nations like Communist China. The Chinese "have millions of people that they’re trying to have employed so it’s hard to fault them," Toms opines. "But I think that at some point, this country has to think about what’s best for us.... You have industries and examples of predatory pricing. That’s the risk we run not just in furniture, but in any industry that we’re letting leave this country."

Andrew Brod is an economic analyst in Kernersville, North Carolina, where Hooker closed a plant formerly employing hundreds. He told ABC News that many American companies, rather than making capital investments in the U.S., have decided to "funnel investments abroad, many to China itself...." "Some have contracted with Chinese producers, but others have entered into joint ventures to establish new factories [and] to refurbish existing factories," Brod notes.

The closing of the Kernersville Hooker plant is already having a local economic impact. "If I don’t work, I can’t go out and spend money to shop or buy what I need, so that’s going to put somebody else in jeopardy," observed former Hooker employee Mildred Stiles. Rather than being "that trickle-down thing," she continued, "I think it’s going to be more of a pour-down.... I think it’s going to hurt everybody concerned." In some economic circles, the phenomenon she describes is called the "race to the bottom" — the sudden, rapid decline of an entire population from the middle class to near-subsistence living.

Our nation’s manufacturing sector has been the gateway to the middle class for untold millions of Americans, resulting in unprecedented national prosperity. What will America look like if manufacturing jobs continue to be outsourced to low-wage foreign competitors? Surveying Kernersville’s grim economic prospects, Brod declares: "In part, the answer to that question is, ‘What sort of America do you see now?’ It’s here already."

Grim portents abound for other manufacturing-dependent communities and for our nation as a whole. An academic study compiled in 2001 for the U.S.-China Security Review Commission and the U.S. Trade Deficit Review Commission reports: "In the months since the enactment of Permanent Normal Trade Relations (PNTR) legislation with China there has been an escalation of production shifts out of the U.S. and into China.... [B]etween October 1, 2000 and April 30, 2001 more than eighty corporations announced their intentions to shift production to China...." Since 1992, "as many as 760,000 U.S. jobs have been lost due to the U.S.-China trade deficit," with a comparable number of jobs disappearing because of outsourcing to Mexico. "The employment effects of these production shifts go well beyond the individual workers whose jobs were lost," continues the report. "Each time another company shuts down operations and moves work to China, Mexico, or any other country, it has a ripple effect on the wages of every other worker in that industry" — in other words, accelerating the "race to the bottom."

The August 25th Financial Times reported that Communist China is "rapidly catching up with the U.S. as the world’s most popular location for foreign investment": Last year, China attracted a record $52.7 billion in foreign investment, "more than any other country." "China has been widely blamed in developed countries for flooding the industrialized world with cheap goods," commented Alan Ruskin of the 4Cast economic consulting group. "But Western investment is largely making this rise in productive capacity possible."

Mercury Marine, the manufacturer of small boat engines and the largest employer in Wisconsin’s Fond du Lac County, has announced that it "will shift some production to China within the next three years," reported the August 8th Appleton, Wisconsin, Post-Crescent. Five days earlier, the Milwaukee Journal Sentinel reported: "A small group of Mercury Marine employees from China are coming to Fond du Lac to tour the plant … but not to take work to China, [company communications manager Steve] Fleming said." But at some American companies, such visits by Chinese employees have foreshadowed outsourcing manufacturing jobs there.

The northwest Indiana town of Valparaiso confronts the prospect of losing a local plant operated by Magnequench, an electronics firm acquired in 1995 by a consortium including Chinese industrial interests. If the plant is moved to China, 225 local residents will lose their jobs. Even more shocking is the fact that the Magnequench facility in Valparaiso "makes 80 percent of rare earth magnets used in smart bombs," according to the Chesterton Tribune.

The erosion of the U.S. industrial base "has enormous national security implications," reported the August 2003 issue of National Defense magazine. "It has made the United States so dependent on foreign countries for critical components and systems that it may have lost its ability to control its supply chains. The United States is becoming dependent on countries such as China, India, Russia, France and Germany for critical weapons technology. It’s conceivable that one of these governments could tell its local suppliers not to sell critical components to the United States because they do not agree with U.S. foreign policy."

Writing in the June 2002 issue of Harper’s magazine, business analyst Barry Lynn points out that many of America’s premier corporations — including key defense-related firms — now consider themselves "virtual companies" depending on a complex and widely dispersed network of suppliers around the world. Dell Computer, for example, assembles its computers out of 4,500 parts manufactured in various Asian countries, including Communist China. Dell — an important defense contractor — maintains an inventory sufficient for only four days’ production. If its supply line were interrupted for more than 96 hours, Dell’s Texas plants would cease production.

Simply put, "the U.S. industrial base is being taken apart, piece-by-piece, and relocated to other nations," conclude trade analysts Pat Choate and Edward Miller. "In the process, much of America’s industrial and military production base is being sold to foreign interests, and more importantly a significant portion of it is being physically relocated into other nations, including our most likely strategic rival — China."

For more than a century and a half, America’s manufacturing economy attracted hardworking people from around the world eager to become Americans. Manufacturing jobs offered these new arrivals entrée into the middle class and helped them assimilate into our nation’s civic culture. But as former Treasury Department official Paul Craig Roberts points out, "The loss of high productivity jobs takes away the ladders of upward mobility and wipes out our human capital."

As our manufacturing base is being stripped away, Americans may someday find it necessary to emigrate to find manufacturing jobs. Case in point: A machinist employed for several years at a major Wisconsin-based multinational firm — the father of a large family — described to The New American how he was told by his employer that within several years he may have to "relocate to China" if he wants to keep his job.

A "Political Thing"

John C. McCoy, owner of Omnitech Technical Associates in Bellingham, Washington, commented to The New American that "China is being set up as the center of global manufacturing. They have a huge supply of cheap labor, cheap power, and very modern production facilities. Many, perhaps even most, of the Chinese-made products being unloaded on our docks and reaching our store shelves are assembled in automated plants, and dropped into shipping boxes without ever being touched by human hands." Many of those ultra-modern Chinese plants have been built by Japanese firms, but others have been built in recent years by U.S.-based multinational corporations.

McCoy, an activist with a group called Save our American Manufacturing (SAM), points out that outsourcing to China has exploded because of a chain reaction. "Once tooling capacity is lost, manufacturing simply has to move," he told The New American. "People running companies in this country generally don’t want to go offshore. But once the process got started, it snowballed, because the specialized tooling capacity started to shut down — and it takes a long time to re-tool, too long to remain competitive in this globalized economy."

Behind the Decline

McCoy describes our declining manufacturing base as "a political thing," rather than the result of market forces or irresponsible corporate greed. "Present American policy has lost touch with knowledge of how goods are produced," he contends. "America without the capacity to renew and invent products will perish. The most important key to our renewal, apart from the entrepreneurial spirit, is the ability to engineer, and make tooling. Under current trade policy these assets are quickly disappearing, being traded away. And once they’re gone, we may never get them back."

The Communist Chinese regime enjoys an unnatural competitive advantage over American manufacturers because it essentially employs slave labor. That advantage is compounded by our own government’s perverse insistence on subsidizing, via the Export-Import Bank (Ex-Im), the relocation of U.S. corporations to China. The Ex-Im Bank was created by the FDR administration in 1934 for the purpose of encouraging business investment in the Soviet Union. Through Ex-Im, corporate investments in China are subsidized, and any losses incurred are socialized (that is, picked up by U.S. taxpayers) — while the profits remain private and legitimate market competition is undermined.

Government-subsidized corporate relocation to China also accelerates the process described by McCoy, in which Beijing’s manufacturing sector "tools-up" even as ours "tools-down." As the May 1998 issue of Harvard Business Review reported, American companies seeking to do business in China "face many requirements to transfer technology or to export a certain percentage of their products made in China. Controls on foreign exchange keep them from moving funds freely out of the country."

"Every firm that sets up for production in China has to turn over its technology," Jerry Skoff, owner of Badger Metal Tech in Menominee Falls, Wisconsin, pointed out to The New American. "Intellectual property theft by the Chinese is very common. And any investment banker familiar with the Chinese system will tell people preparing to set up over there that they should pad their expenses by at least 40 percent to allow for the graft, bribes, and other payoffs involved in doing business over there." Given the pandemic corruption of the Chinese system, the federal government’s role in socializing risks and losses for U.S.-based firms looms even larger.

Many U.S. companies were lured to China by the prospect of a vast, untapped consumer market. But rather than selling goods in China, American companies are exporting goods from there — and completing the circuit by sending jobs and plants back to China. Consequently, observed Richard Bernstein and Ross H. Munro in their 1997 book The Coming Conflict with China, "China has been getting American investment capital and reaping windfall trade surpluses at the same time. As a result, China is one of the leading foreign-exchange-reserve countries in the world — a bizarre situation for a poor and developing country."

Beijing benefits greatly from China’s trade surplus because it can subsidize predatory trade practices — such as directing subsidies into various manufacturing fields as a way of underbidding potential American competitors.

In an interview with the Christian Science Monitor, Jay Bender, owner of Falcon Plastics in Brookings, South Dakota, described "how one of his customers, a manufacturer of fishing lures, has decided to move its production from the U.S. to China.... [The fishing lure manufacturer] asked him to bid on molds to make the plastic bait. He bid $25,000 per mold. ‘That was a competitive price,’ he said." However, the potential customer found a Chinese source charging $3,000 for each mold. "I can’t even buy raw materials for that," Bender observes. "There are two possibilities: Either they are subsidized by the government, or they gave away the molds to get the manufacturing business." To remain in business, Bender has had to lay off nearly one-third of his workforce.

"We’re killing ourselves," laments Jerry Skoff. "Bombs are falling, but people aren’t paying attention. We’re being reduced from a manufacturing and hi-tech economy into a service economy — and if things continue the way they are, the service sector will eventually go the same direction."

Abolishing the Middle Class

At the end of the process Skoff describes is the eradication of the American middle class — derisively referred to as the "bourgeoisie" by Karl Marx. "We’re basically liquidating our whole middle class, polarizing people on the two extremes, haves and have-nots," warned Roger Chastain, president of the Milliken & Co. textile firm, in an interview with the Durham Herald. "We’ll be a third world country."

"It makes me wonder if there is some merit to the ‘conspiracy theory’ — the idea that all of this is part of a deliberate scheme to wipe out the middle class," Jerry Skoff mused to The New American. "The middle class is always a pain in the neck where government’s concerned. It’s where you find most of the people who complain about taxes, regulations, and other policies. If you wipe them out, you just have the ultra-rich and the poor — a perfect arrangement for a dictatorship."