Economic Populist Commentary

Economic commentary by a pro-capitalist, economic populist. Demand-Side Economic theory. Consists of author's economic views. Questions & comments appreciated. Dissenting views are VERY welcome and encouraged. Main "agenda" is crafting and advocacy of a "populist" economic agenda. A secondary goal is prevention of an economic Armageddon. Encouraging open discussion of US economy.

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Location: Southern California, California, United States

The author is a physician by profession, and a "student economist" by necessity. The current status of our economy necessitates the latter. The intent of this blog is to explain and discuss economics in layman terms. It is designed to promote thought and discussion. It is written by a layman. Comments and critiques of these theories and letters are welcome and ENCOURAGED. Dissenting comments are also WELCOME! They form the basis for discussion.

Wednesday, December 13, 2006

OUTSOURCING BONANZA: VIETNAMESE TRADE NORMALIZATION


On Friday, December 8th, the House of Representatives passed H.R. 6406, by a vote of 212-184This bill allows for "normalization" of trade with Vietnam.


This new "permanent normalization of trade relations" (PNTR) with Vietnam is the first step in opening up their labor market to exploitation by Corporate America and to the outsourcing of American jobs to Vietnam.


What are the relative "benefits" to the United States? It allegedly opens up the Vietnamese "consumer" market to American goods. However, the benefit of such market opening is minuscule. The exchange traded value of Vietnam's entire GDP is only $43 billion. (See Vietnam: CIA assessment ) This is approximately 3/100ths of a percent of U.S. GDP. To put it another way, if Vietnam's entire GDP was spent on American imports, it would raise U.S. GDP .03%. So a U.S. GDP growth of 2.20% would rise to 2.23%. Again, this is assuming ALL of Vietnam's GDP was spent on American goods, which is certainly not going to happen. Vietnam's Exchange Rate per capita GDP is only $521/year. {Vietnam's Purchasing Power Parity (PPP) per capita GDP is listed as $2800. By converting this to an exchange rate value this becomes a per capita income of only $521/year. It's the Exchange Rate income that is important here, because this measures the ability to purchase American imports.} Given these numbers it's very unlikely that we can sell significant U.S production to Vietnamese consumers.


What's the downside? Vietnam has a labor force of 43 million workers. Once Vietnam is opened up to investment by Corporate America, this could become a virtual addition of 43 million workers to America's 152 million participating labor force. If Corporate America replaced 43 million American workers ( averaging $17/hour ) with 43 million Vietnamese workers, it would reduce American labor & consumer income by $1.52 trillion.


(43 million X $17/hr. X 8 hrs./day X 365 days/yr. X 5 days/wk divided by 7 days/week = $1.52 trillion. )


This would also reduce American consumer spending power by $1.52 trillion dollars. A decline in consumer spending by that $1.52 trillion, subtracted directly from our $13 trillion GDP, would amount to a direct decline in our GDP of almost 12%. (Applying any multiplier would drop our GDP far more than 12%) Of course, we could "gain" that whopping 0.03% in GDP from selling our exports to Vietnam.


These are theoretical calculations only, designed to show the magnitude of relative benefits vs. costs to Americans from "normalization" of trade with Vietnam. While Corporate America is not likely to hire all 43 million Vietnamese workers, it's clear that the potential loss to our economy is much greater than the potential gain. We'll gain an almost non-existent consumer market from Vietnam, while adding a virtual 43 million workers to America's labor pool. And the direct loss of jobs is only the measurable effect. The decline in American wages from the supply & demand effect of competition with another 43 million impoverished workers hasn't been calculated. Clearly this would decrease American wages and labor income MUCH more than just $1.52 trillion.


To the majority of Americans, permanent normalization of trade with Vietnam is exclusively negative. Once again, it'll put American workers (and their wages) in direct competition with impoverished 3rd world workers. Clearly the goal here is not to open up the Vietnamese consumer market to American goods. The goal is to open up the Vietnamese labor market to American Multinational Corporations. The true goal is to replace even more American workers with easily exploitable semi-slave laborers of another impoverished country. It'll be another disaster for American workers, and another windfall profit gain for rich Globalist Corporations.


unlawflcombatnt


Economic Populist Forum

8 Comments:

Anonymous lib-slayer said...

If this were the case then nominal wage growth would be declining due to the offshoring to Asia, it hasn't been, it has been steadily climbing

5:49 PM  
Anonymous lib-slayer said...

If this were the case then nominal wage growth would be declining due to the offshoring to Asia, it hasn't been, it has been steadily climbing

5:50 PM  
Anonymous Anonymous said...

Lib-slayer your wrong.

All Nafta, Cafta and this Viet thing did/will do is provide a huge "wage" transferr from the USA labor force to USA company profits and/or CEO salaries. The resulting problem is... year after year of declining wages takes a toll on consumers wallet and purchasing power.

You, the CEO's and big business don't get it.... do you?

Eventually the consumer is tapped out and has empty pockets. No discretionary purchasing power and all money goes to pay the basic bills or to file bankruptcy. The parents of average middleclass families now work two or three low paying jobs each... with no benefits.... just to keep their heads above water and kids in school.

Now keep in mind that American's purchase 25% of all manufactured products in the "world".

So...if Americans don't have the spendable income to buy American companies now "foreign made" "shit"....excuse me I mean "products"... then what happens to the bottom line? Huh? What happens? Can you say the words "decreasing sales and profits"? That in turn means more out sourcing, mergers and layoffs... and again... "more decreasing sales and profits"....which leads to more USA mergers, layoffs, chapter 11's, bankruptcy etc. ... and so on and so on....so on...on..on..

Now lib-slayer do you get it?

Also... the Bush Administration "cooks the books". The numbers released by the US Government and Bush Mafia are phoney, lies, distortions of the truth tailored to fit the needs of our Bush "Mafia" Administration... not our economy.

Note this Example;
Today... I read an AP article in local newspaper explaining how USA Department of Homeland Security "cooks" the numbers on terrorist events/attacks happening on our soil. It turns out another Federal Employee exposed Bush Mafia's evil ways and how they included average police arrests and/or events as being terrorist related in the numbers. Thereby grossly overstating terrorist related events to frighten the public and justifiy unneeded USA security changes.

Get real....the GDP, employment numbers, US terrorist events etc. all lies.

I suppose the "garbage in garbage out" theory applies here when aligned with Bush Mafia rule and our present US Economy. It's a very simple explanation for whats about to happened next.

The USA/world economy is headed towards a major "depression".... not recession... but "DEPRESSION"... lasting "years".

"Garbage in garbage out".

5:25 PM  
Blogger unlawflcombatnt said...

Anonymous,

You're right on the money about the consumer effects of outsourcing. It reduces the amount of wage income American consumers have to spend. The more jobs outsourced, the lower American employment and wages are, and the lower aggregate consumer income is.

It's not just a wage "transfer" to foreign countries, it's a global wage loss, since the foreign workers who replace American workers make a fraction of what American workers make. Replacing a $130/day American worker with a $2/day Chinese worker reduces global wages by $128/day. Eventually there's not enough consumer spending power to keep our economy going.

1:52 AM  
Anonymous Anonymous said...

Your absolutely correct about the shrinking "Global Wages". This lost money heads straight to the bottom line for one year then disappears forever from the world economy. Then the vicious cycle of declining sales/profits/layoffs and mergers begins.

Why coporate America and our US Government can't grasp this concept is beyond me.

Also, thanks for your fine work. It is appreciated and I have told many friends/students about this informative US Economic web site.

G.

8:38 PM  
Anonymous Anonymous said...

Mike-

I have a question for you.

We know this adminstration has cooked the books, lied about everything and held the economy together with bailing wire and scotch tape for over six years. I know investment banking, brokerages, oil, big pharma and other industries are on board in this fascist administration. I know Israel's elite are pulling our chain and Iraq/Iran is really their war. Is this It? The only reason for the long run or is there something else I don't see?

Why hasn't this house of cards fallen sooner?

G.

11:54 AM  
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9:16 PM  
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10:23 PM  

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