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OFFSHORE OUTSOURCING AND THE FUTURE OF AMERICAN
COMPETITIVENESS
As presented before the…
ITA ISAC-13 Advisory Committee, Washington, DC, October 14, 2003; Kennedy School of
Government, Harvard University, Boston, MA, October 1, 2003; ITIC Workforce Committee,
Washington, DC, September 22, 2003; Business Roundtable Policy Working Group,
Washington, DC, July 31, 2003; National Foreign Trade Council Board of Directors,
Annapolis, MD, June 17, 2003; ITAA IT Services Board of Directors, Arlington, VA, June 9,
2003; ITAA Board of Directors, Arlington, VA, May 4, 2003
BRUCE P. MEHLMAN
Assistant Secretary for Technology Policy
United States Department of Commerce
“Is your job next?”
That was the frightening question posed by the February 3, 2003 Business Week cover that so
effectively captures the concerns and uncertainty many Americans are feeling these days. The
cover went on to declare that “[a] new round of globalization is sending upscale jobs offshore.
They include chip design, engineering, basic research– even financial analysis.” It concluded
with the attention-grabbing query: “Can America lose these jobs and still prosper?”
The issue of offshore outsourcing is ubiquitous these days. Fueled by genuine worker concern
(especially among IT workers
1
), slow post-recession job growth here at home,
2
continuing
evolution in global business models (including accelerating outsourcing),
3
and even political
opportunism, one can find daily discussions of the trend and its implications everywhere.
Today I will (1) explain how the issue is igniting passions in the media and in Congress, (2)
explore the opportunities and challenges for our nation, (3) identify several proposals by others
to address it, and (4) explain how the Administration is pursuing initiatives both for immediate
growth and long-term competitiveness. We are committed to promoting American growth and
leadership in a globalizing world, and I am confident we will succeed.
The global competition that gives rise to offshore outsourcing accelerates creative destruction,
which can be good for innovative and market-based economies overall, but terribly difficult for
displaced communities and individuals in the process. America must never compete in the battle
to see who can pay their workers the least, and it will take sustained innovation to ensure we
don’t have to. The Administration will continue working with Congress and innovation leaders
across the nation to ensure that Americans can compete and win on our own terms in the 21
st
century.
* * * * *
The issue of offshore outsourcing is ubiquitous in the mainstream press these days. CIO
Magazine’sSeptember 2003 cover story – entitled “Backlash” – observes that “[a]s a growing
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number of IT jobs move overseas, some CIOs and economists prophesy a political storm against
offshore outsourcing.” The June 3, 2003 Wall Street Journal reported on efforts to block such
outsourcing, writing: “Alarmed by jobs flowing overseas, where skilled workers are cheaper,
state lawmakers and labor unions are fighting back.” On October 10, 2003, the Journal noted
how “Skilled Workers Mount Opposition to Free Trade, Swaying Politicians.” And Time
Magazine’s August 18, 2003 edition included a story entitled “Where the Good Jobs Are Going”
that began: “Forget sweatshops. U.S. companies are now shifting high-wage work overseas,
especially to India.”
Given the frequencyof its reporting and intensity of workers’ concerns, this issue is – not
surprisingly – showing up prominently on politicians’ radar screens. Many note with alarm the
recent estimates of projected off-shored jobs and wages:
• A widely-quoted 2002 Forrester report estimates that over the next 15 years, 3.3 million
U.S. service industry jobs – including 1 million IT service jobs – and $136 billion in
wages will “move offshore."
• The Gartner Group predicted in July 2003 that “by year-end 2004, one out of every 10
jobs within U.S.-based IT vendors and IT service providers will move to emerging
markets, as will one of every 20 IT jobs within user enterprises.”
Others point to “historic” unemployment in domains expected to be core American strengths and
pillars of our future economic growth, such as information technology and electrical engineering.
According to the Bureau of Labor Statistics, unemployment among electrical engineers hit 7% in
the first quarter of 2003, while computer programmer unemployment was at 6.8%, both exceeding
the national average for overall unemployment.
We have already seen legislative reactions at the state level to prohibit offshore outsourcing of
government work, including laws proposed (but not passed) in New Jersey, Connecticut, Hawaii,
Maryland, Michigan, Missouri, North Carolina, and Washington. And concerns have predictably
made their way to the floors of the U.S. House of Representatives and Senate, with even some
historically free-trade and innovation leaders questioning globalization trends and warning that
“[w]e need to pay attention to losing our manufacturing base and now losing our high tech base.”
(Rep. Nick Smith, Chairman of the House Science Subcommittee on Research, Apr. 7, 2003). I
testified before the House Small Business Committee on this very issue on June 18, 2003, and I
can assure you that Members’ interests and concerns are quite real.
4
PUTTING TRENDS INTO CONTEXT
Many observers suggest that global competition for white-collar service work mirrors trends we
have seen for decades in other sectors and will benefit our nation. Economists tell us that
advanced economies are supposed to “leverage their comparative advantages” to develop higher-
wage jobs as the lower-skilled work becomes “commoditized” and migrates to lower cost
producers. During the past several decades, they point out, we saw heavy competition in
tradable goods (with America losing predominantly lower-wage, lower-value-added jobs) while
we grew employment in knowledge-based services (with ostensibly higher-wage, higher-value-
added positions), such as software and information technology. Similarly, America’s transition
from an agricultural economy to an industrial economy proved highly beneficial to most citizens’
standard of living, even if the change was disruptive.
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Yet one of the reasons for the sound and fury around offshore outsourcing today is that it seems
we have entered a new era. Advances in communications technologies (e.g. broadband Internet)
have empowered once-distant service sector workers to compete in real-time, while foreign
workers and service providers continue to improve their quality, processes and expertise. We are
now competing for low-skilled and higher-skilled work, both in IT and elsewhere, and we will
need to replace both with high-skilled, high-wage opportunities to raise our standard of living.
No jobs are “safe,” and our success or failure will turn on our ability to create and retain new
jobs, new industries and new processes, goods and services – to innovate.
IS THE GLOBAL AVAILABILITY OF SERVICES GOOD OR BAD FOR AMERICA?
As with so many global trends, there is significant disagreement over the implications of global
competition in services for American prosperity and competitiveness. Many observers are
pessimistic about the impact of offshore outsourcing at a time when American workers are
having more difficulty finding employment, since it creates personal hardships, reduces the tax
base (at least temporarily) and increases demands on our safety nets. Competitors from lower-
wage nations, it is feared, could put downward pressure on profit margins and salaries going
forward,
5
while the work being sent overseas is already migrating up the value chain from call
centers, help desks and low-end programming to design, accounting, high-end programming,
financial analysis and consulting.
Some raise concern about the national security implications of off-shoring, asking whether U.S.
interests are put at risk by increasing dependence upon foreign nationals to handle economically
critical tasks and, often, highly sensitive data – particularly in nations that have not historically
been close United States allies. Many nations to which such work is sent present apparent
geopolitical risk (e.g. India and Pakistan), and some ask whether the potential for disruption to
American supply chains is being considered adequately. Others suggest offshore outsourcing
entails many hidden costs and far fewer savings than outsourcing consultants advertise, and that
offshore outsourcing is being driven by the same “herd mentality” that helped generate the
NASDAQ tech bubble.
6
Some observers express fear that reduced wages or increased
unemployment in technology jobs might discourage future generations of Americans from
pursuing science and technology careers. And the opportunity to do high-wage, high-value work
without immigrating to the U.S. clearly reduces the “brain gain” that has been so critical to
America’s historical success.
Others suggest that the rise of global competition in service work is a net positive trend for our
nation. Competition drives down prices for businesses and consumers and increases their
choices. By outsourcing to lower cost operations, businesses are able to reduce their overhead,
compress time-to-completion with around-the-clock operations, and focus on core, strategic
investments and hiring. Many manufacturers, for example, are running leaner, more competitive
operations as the result of outsourced (often off-shored) IT services, focusing their resources on
the research, design and processes for improving their products.
7
Thus proponents argue that
offshore outsourcing some service work enables employers to preserve the rest of the jobs here
in the U.S.
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A McKinsey Global Research Report from August 2003 estimated that roughly two-thirds of
every dollar of value realized through offshore outsourcing is captured by the United States.
8
Some have even suggested that off-shored service work is of higher quality, although their data
are often anecdotal and usually provided by those already successfully invested in off-shoring.
9
Optimists note that the majority of work sent offshore so far is lower-wage, represents a small
fraction of the overall market for software and IT services, and will never displace the large
majority of work done here in the United States. Indeed, the Bureau of Labor Statistics projected
in December 2001 that the number of professional IT jobs in the United States would grow by
72.7% between 2000 and 2010. (New projections expected in March 2004 covering the 2002 to
2012 period will factor in the economic impacts of events and trends subsequent to their previous
projections, e.g. the 2001 recession, 9/11 terrorist attacks, and offshore outsourcing trend).
A recent article in Business 2.0, entitled “The Coming Job Boom,” even implies offshore
outsourcing may prove critical to America in the face of a skilled worker shortage caused by the
imminent retirement of baby boomers. This article cited research by labor economist Anthony
Carnevale, former Chairman of President Clinton’s National Commission for Employment
Policy, who forecast that America will face a skilled worker gap that will grow to 5.3 million by
2010 and 14 million by 2020.
10
Finally, since global competition is a two-way street, United States-based companies gain
opportunities to win global business, particularly as developing nations improve their own
domestic markets for hardware, software and services. In 2001, U.S. cross-border exports of IT
services totaled $10.9 billion, while imports totaled $3 billion, yielding a trade surplus of $7.9
billion.
11
In 2002, overall commercial services exports exceeded imports by $58 billion.
12
Expanding operations around the globe enables American companies to operate closer to growth
markets and new customers, improving economies of scale for entire enterprises with global
reach and tapping the best-and-brightest talent around the world.
A TALE OF TWO AMERICAS?
Of course both the optimists and the pessimists make many compelling points. And that is one
of the things that make this debate so fierce – both sides have merit. In some ways it appears to
be a tale of two Americas. At the broader “macro” level – looking at the economy at the national
level or at our stronger multinational employers – America is better positioned to thrive in the
global business environment than any other nation. Relentless productivity improvements and a
significant comparative advantage in innovation enabled America to succeed impressively over
the last 50 years. Despite decades of global engagement and work moving from U.S. factories to
global destinations, we have led the planet in creating new jobs, new industries and improving
our standard of living through productivity. We can assume the past is prologue, we are assured,
and push forward to promote full and fair global competition, placing our faith in America’s
unique innovation engine and entrepreneurial culture. As Federal Reserve Chairman Alan
Greenspan recently stated in a Congressional hearing: “Innovation by its very nature is
unforecastable…. what we do know is that if we have a sufficiently flexible labor market and a
capital goods market which is functioning appropriately, that jobs will be created. They will be
high tech, but we cannot know exactly where they will be.”
13
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At the more “micro” level – considering this trend from the perspective of specific regions,
occupations or individuals – creative destruction can be a terribly difficult process, leading to
community disruption, unexpected lay offs, and displaced professionals. The same McKinsey
Global Research study that found America receiving roughly two-thirds of the value generated
by offshore outsourcing reported a less attractive re-employment picture for displaced Americans
over the period 1979-1999: “36% of displaced workers found jobs that matched or increased
their wages but 55% were at best working for 85% of their former wages. As many as 25% saw
pay cuts of 30% or more.”
14
Past performance is no guarantee of future results, pessimists argue,
because America will be at a permanent cost disadvantage as billions of new workers – including
many highly educated and technically-trained workers in places such as China, India, Russia and
Eastern Europe – enter the global workforce. Too many Americans lack the training, education
or opportunity to shift their focus mid-life and mid-career, from the jobs that are going global to
the jobs we will be creating here at home.
WHY THIS WILL KEEP GETTING TOUGHER: LONG-TERM CHALLENGES
Going forward, the quality and intensity of global competition is likely to increase. Foreign
nations will continue to work to make their business climates and infrastructures more attractive
to global innovation leaders, and many will retain a labor cost advantage for the foreseeable
future. Economies around the world are educating rapidly growing numbers of scientists and
technologists, building legions of competent, capable and hungry young innovators eager to
compete.
We may take some comfort from the fact that we have risen to seemingly overwhelming
challenges before – my office was established in the 1980s, with Congress convinced that we
were insufficiently competitive with “Japan, Inc.” But our economy, people and systems will
face tougher challenges in the 21
st
century than ever before, particularly as new technologies,
rising competition and inexorable globalization accelerate the pace of change. Four long-term
challenges stand out in particular.
1. Growing, training, attracting & retaining the best and brightest. Within a generation we
will need a far more technically-literate, technology-savvy society than we have today –
as workers, consumers and teachers. Yet American students at the K-12 level continue to
lag behind their international counterparts in math and science learning. U.S. eighth
graders ranked 19
th
out of 38 nations in math and 18
th
in science in the 1999 Third
International Math & Science Study Repeat. The World Competitiveness Yearbook
ranked the U.S. 24
th
out of 45 nations in science education and 18
th
in “attractiveness of
S&T to youth.” At the same time other nations are graduating far greater numbers of
scientists and engineers, further improving their capabilities to handle high-end work.
While the U.S. graduated 59,500 engineers last year, China graduated 219,600.
15
Other
nations are aggressively acting to stem their own brain drains and entice citizens trained
in the U.S. to return to their native countries, and many are succeeding. How can we
grow, educate, attract and retain the best and brightest scientists and engineering
students? How do we avoid a disconnect between the jobs we want to keep in the U.S.
and our workforce’s ability to do them?
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2. Funding the Future. Americans enjoy and expect a very generous entitlement system.
Retirees are living longer and receiving far more in government benefits than they ever
paid into the system. According to the Congressional Budget Office, in 2001, the big
entitlement programs accounted for 26 percent of non-interest federal spending; but in
2030, they could account for up to 70 percent. Things we can afford to provide our
parents may well become too expensive for our children to pay for us. How can we
ensure sustained federal support for education, infrastructure, and research and
development – the foundation for our national innovation engine and global
competitiveness – in the face of such growing entitlement expenses?
3. Defining national interests in a global economy. While policymakers are hired to
promote national interests, it is getting much harder to define them as the global
economy develops. For example, is it better for America to buy a BMW made in South
Carolina or a Ford made in Canada? How about IT services procured through IBM but
performed in India, versus services purchased from Infosys but staffed using H1B
workers living and spending their salaries in America? Is it better to help manufacturers
remain competitive by enabling them to cut IT costs through off-shoring or help IT
service workers remain employed by shielding them from global competition? Certainly
consumers look for value, irrespective of the national origins of the products they
purchase, but policy makers are expected to operate differently.
Two real-world examples help illustrate why this is so difficult at the government level.
In 2001, New Jersey’s Department of Human Services (Division of Family Development)
outsourced a basic call center used to support a welfare program to an Arizona firm,
which then sent the work – nine jobs – to India. State legislators were outraged, and in
the wake of controversy, the state returned the jobs to New Jersey. Unfortunately, the
cost of the call center work was 20 percent higher when done back in the U.S., thereby
reducing the amount of funds available for the welfare recipients for whom the call center
is needed.
The Pentagon faced similar outrage when it sought to procure black berets from China.
Lawmakers were incensed that U.S. tax dollars in the Defense Department, of all places,
were not being used to support American manufacturers, and the hats were procured from
a domestic supplier. Yet unfortunately this question is a bit more complicated. Since
even the Defense Department faces a ceiling on its budget, Defense planners are forced to
make tough choices every day. Every dollar spent on clothing is a dollar less for
improving soldiers’ pay (to keep military families off food stamps), supporting forward
deployments, designing new defense systems to better protect our men and women in
harm’s way, and improving the accuracy of our precision-guided munitions to minimize
noncombatant casualties. The choices become very real and very difficult. How should
we answer the question when choosing between U.S. jobs and maximizing resources for
medical care for the elderly, education for our children or national security?
4. Equipping people and building systems able to cope with change. Driven by globalization
and the convergence of radically disruptive new technologies (such as nanotechnology,
advanced IT and biotech), changes in the 21
st
century will come faster. The nations, firms,
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and individuals who succeed will be those best able to manage the complexity and rapid
change. The IT worker experience offers the quintessential example. In the late 1990s
there was much talk of IT worker “shortages,” and many companies complained of
difficulty in filling jobs even as many IT workers applied often but could not find work. In
fact, the aggregate number of self-classified IT workers may have been near the number of
corporate-classified IT jobs available – hence the extreme and understandable frustration
among existing IT workers. But skill sets did not always match up. Mainframe
programmers were not network administrators, Cobol is not C++, and someone ready to
“hit the ground running” in Y2K remediation is not necessarily ready to tackle wireless
security issues. As a report on IT worker training issued this year by my office explains,
16
because employers demand immediate expertise in whatever skill is “hot,” and today’s hot
skill may not be in demand tomorrow, we could face a perennial skills mismatch putting
great stress on our IT workforce and providers. How do we best equip U.S. workers with
the tools, opportunity and resources to constantly update their skills and the ability to
compete in a just-in-time world? How do we move from a model of reactive training (after
workers lose their jobs) to proactive training?
SO WHAT SHOULD BE DONE?: SOME VIEWS BEFORE CONGRESS
So what, if anything, should the government “do” to address the challenges posed by global
sourcing? Proposals on the Hill and among those running for President span a wide range. Clearly
the winds of protectionism are blowing, although it is hard to conceive that we’ll see a return to the
days of the Smoot-Hawley Tariff.
17
Some of the proposals offered on the Hill include:
• Collecting better data and analyses on the trend and its implications. (Rep. Adam Smith
commissioned a Government Accounting Office report on the topic)
• Using the bully pulpit to urge domestic procurements and/or “shame” those who
outsource offshore. (House Small Business Committee)
• Tightening rules and enforcement for the use of L1 visas. (Rep. Nancy Johnson & Sen.
Chris Dodd)
• Reducing the quantity of H1B visas and/or greater enforcement of the “prevailing wage”
rule. (IEEE)
• Offering tax incentives to keep work and jobs onshore. (various)
• Offering tax incentives to subsidize the retraining of American workers. (various)
• Expanding the Trade Adjustment Assistance program to include those who lose service
sector jobs to foreign competition.
• Reducing capacity building assistance to developing nations.
• Requiring companies to notify customers if overseas contractors have access to financial
or personal data. (NJ Programmers Guild)
• Increasing “Buy American” requirements for federal procurements. (House Armed
Services Chairman Duncan Hunter)
• Prohibiting taxpayer financed projects from going offshore.
• Requiring future trade agreements to include labor, environmental or other baselines to
reduce foreign markets’ cost advantages. (various)
• Banning companies that move operations offshore from access to government contracts.
(Wash Tech)
• Supporting or encouraging unionization of the technology workforce. (CWA)
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SO WHAT SHOULD BE DONE?: THE BUSH ADMINISTRATION’S AGENDA
The Administration is committed to promoting American growth and leadership in a globalizing
world. Because of its implications for both jobs and competitiveness, we are keenly interested in
the issue of offshore outsourcing. To address the 21
st
century’s challenges and ensure our
success, we are pursuing initiatives both for immediate-term growth and long-term
competitiveness. Specifically, to remain competitive and successful:
• We must increase American economic growth and accelerate job creation. The
Administration continues to offer aggressive fiscal policies that promote jobs and growth,
essential economic medicine in the face of the 2000 “bubble” market collapse, 2001
recession, and continuing business uncertainty caused by global terror and the corporate
finance scandals of the late 1990s. Many experts believed the 2001 tax cut moderated the
recession that began just after President Bush took office. Our 2002 stimulus package
extended benefits for displaced workers and accelerated depreciation schedules for
businesses investment in capital equipment, which helped maintain new business
investment in IT. The President’s recently enacted jobs and growth package is
stimulating job creation, investment and growth, including a tripling of allowances for
small business investments. The Administration has no higher priority than creating jobs
and growing the economy.
18
• We must ensure American companies fair access to global markets. America thrives on
competition, and our workforce benefits from global engagement. We are aggressively
promoting export opportunities for American companies through the WTO and in
multiple bilateral agreements, working to open global markets for goods and services
made by American workers. But all nations of the world must play by the rules they
agreed to, and the Administration is committed to opening new markets to U.S. goods
and services, while enforcing existing trade agreements. All nations should compete on a
level playing field. Technical (non-tariff) barriers to trade have become increasingly
important here, as the U.S. depends more on technology-based trade, and we are working
to prevent and knock down non-tariff trade barriers.
19
• We must ensure global protection for intellectual property. The Administration is
strengthening intellectual property protection – by devoting far more resources to the
U.S. Patent & Trademark Office within the Commerce Department, overhauling its
policies and procedures to speed operations and improve quality,
20
and by enforcing
intellectual property rights aggressively at home and abroad. As an increasing amount of
American output is creative, we need to be certain our hard work and intellectual capital
are protected, to maintain the incentives underlying new industries, products and jobs.
• We must press our advantages in innovation, entrepreneurship, infrastructure and
workforce talent. To maintain American leadership, competitiveness and job growth, the
Administration is also pursuing a longer-term innovation agenda that seeks to press our
advantages and ensure long-term success.
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o To promote innovation, the President has proposed aggressive investments in new
research and development – $123 billion for 2004, up more than 25 percent since
taking office, with significant increases in critical emerging technologies such as
nanotechnology and life sciences. This will help ensure an ongoing innovation
pipeline and a well-trained science and technology workforce. We have also been
asking Congress to make the research and experimentation tax credit permanent,
to reflect the importance of private investments in R&D, which are twice as large
as the federal government’s. The President additionally launched an initiative to
improve math and science teaching at the K-12 level, devoting $1 billion through
the National Science Foundation and Department of Education over five years.
o To support an entrepreneurial business climate, the President continues to offer
pro-job growth, pro-tech fiscal policies, as described above. Entrepreneurship is
critical to the great American job engine, creating the new businesses and new
opportunities that replace work sent offshore. The President has also proposed
expanding citizens’ access to quality health care by reducing costs imposed by
frivolous litigation and expanding prescription drug benefits for seniors. And at
the Commerce Department, the Economic Development Administration is
pioneering investments and strategies that use technology investments and
projects to spearhead regional growth and economic development.
21
o To improve our infrastructure, the President’s technology priorities include
hardening the Nation’s defenses, especially critical infrastructure protection and
cyber security; implementing a national energy plan that uses innovative
technologies to improve energy efficiency while expanding generation and
transmission capacities; strongly supporting deployment and use of high-speed
Internet (broadband) networks; and improving the effectiveness with which we
manage radio spectrum. Led by our colleagues at Commerce’s National
Telecommunications and Information Administration, we have made great strides
already in spectrum, breaking a two year logjam to find space for 3G services,
supporting the elimination of spectrum caps, leading the development of a world-
wide harmonized standard to double the amount of spectrum for WiFi in the
5GHz band, and proposing legislation to create a fund to help government users
can relocate frequencies when the spectrum they are currently using is allocated
for commercial use.
o Of greatest importance to this President may be the bipartisan efforts to improve
our Nation’s education system, exemplified by the No Child Left Behind Act.
The most significant education reform in a generation, effective implementation
of this legislation will be key to sustaining American leadership and productivity
in the 21
st
Century by ensuring our children learn and know how to learn. To
remain globally competitive – both as a tech-led economy and as the most-
inclusive opportunity society – we must place education first, and that is what
President Bush is doing.
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CONCLUSIONS AND RECOMMENDATIONS
Notwithstanding this ambitious agenda, much work remains. Certainly we will need further
analysis to understand the impact of global competition in knowledge work on American
prosperity and competitiveness, separating so-called globalization trends from the economic
shocks of the post-bubble, post-recession, post-9/11, post-Enron and post-Iraq world. One thing
we already know is that American workers and employers will face unprecedented global
competition going forward, and we must be ready.
We will need to develop management approaches and systems that can anticipate and address
rapid and complex changes in the marketplace. This means improved learning environments and
training opportunities. We will need to find ways to boost the productivity and effectiveness of
American knowledge workers to overcome global wage disparities, building a dynamic and
responsive re-skilling landscape that uses innovation to generate new jobs, companies and
opportunities. As a group of leading visionaries from education, industry, laboratories and
government assembled at the Technology Administration’s request recently suggested, advanced
technologies may hold the key here as well.
22
Last but not least, we must work with other nations around the world. The Internet itself has
reaffirmed the power of “Metcalf’s Law.” This principle states that the value of a network
increases exponentially as more people connect – going from 10 to 100 users increases the value
of a network by more than a factor of 10. As we look to solve the policy challenges before us,
we must look to others around the world as collaborators to make this incredible networked,
digital world more valuable for everyone. While I speak often of American global
competitiveness, I believe very deeply that America’s future depends greatly upon the concurrent
success of citizens of many other nations. Our economy grows fastest when we’re able to sell
our goods, products and expertise into other growing economies around the planet. We must
find the win-win solutions around issues such as global sourcing, so that the rising tide can lift all
boats.
Thank you for inviting me here today and for your attention.
ADDENDUM
At the Commerce Department, the Office of Technology Policy (http://www.technology.gov/)
seeks to maximize technology’s contribution to American economic growth, job creation and
global competitiveness. We serve as policy analysts, ambassadors from the federal government to
the innovation community, and advocates for innovation within the Department and across
government. Our analytical efforts include constant review and assessment of long and short-term
trends and implications and frequent recommendations to policy makers, informed through
aggressive outreachto the private sector and academia.
Starting in early 2002, OTP convened a series of roundtables and outreach efforts to assess the
state of innovation in America. Chaired by Deputy Secretary Samuel W. Bodman, we were
particularly interested in better understanding the factors that influenced some private actors
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when they were deciding where to locate their R&D and knowledge work. Our goal, of course,
was to assess how we might maximize those elements that promote innovation in America, while
reducing any comparative disadvantages that discourage on-shore R&D. Transcripts from these
discussions can be found on our web site at http://www.technology.gov/reports.htm.
WHY INNOVATORS LOCATE KNOWLEDGE WORK ON U.S. SHORES
According to the corporate, university and government leaders we convened, America presently
remains the premier destination for innovative activity for several reasons.
1. PEOPLE. The R&D talent pool in this country is second to none, with industry experts,
lab scientists and university researchers all contributing to an unmatched quality and
quantity of expertise. For example, America publishes one-third of the world's scientific
and technical articles, triple the share of the next largest country, and has the largest share
of the world’s science, engineering, and technical workforce.
23
Our university system is
unequalled, attracting the best and brightest from around the world and remaining a
hotbed for generating inventions and training inventors.
2. BUSINESS CLIMATE. America has the most entrepreneurial business climate, one
promoting market-based competition, rewarding risk, permitting failure and with
relatively easy access to capital. Unburdened by government-owned national champions,
new ideas and new entrants are able to compete and win on the merits. In this regard we
fare very well against many European competitors, where governmental burdens make
entrepreneurship more difficult and less common. For example, in March 2002 the Wall
Street Journal reported on a British study that found it takes 43 months on average to get
the regulatory approval needed to open a gas station in Europe, three times longer than in
the United States.
3. INFRASTRUCTURE. From world-class federal labs such as the National Institute of
Standards & Technology and Argonne National Lab, to our telecom, energy
24
and
transportation systems, America’s infrastructure permits cutting-edge R&D almost
anywhere in our nation. Innovators and technology entrepreneurs stay here to leverage
these unique assets that underlie competitive discoveries and speed time-to-market.
4. MARKET & MARKET ACCESS: Innovators want to conduct R&D in the world’s
biggest and wealthiest market – close to the customer – with consumer, business and
government spending encouraging innovation in America. Our culture offers a good fit
for innovators – consumers are eager for new gadgets and medicines, success is rewarded
handsomely and innovators are celebrated as cultural icons (e.g. Thomas Edison, Bill
Gates, Albert Einstein, Jeff Bezos, etc.).
5. INTELLECTUAL PROPERTY PROTECTION. It is not surprising that innovators will
create jobs and technologies wherever their ideas are best protected and most profitable.
The United States boasts the most consistent protections for intellectual property rights,
the most effective patent office, and the system least likely to limit returns on investment
in intensely innovative products such as pharmaceuticals. In this area we retain a
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significant advantage over rising powerhouse China, with its far less consistent
commitment and ability to protect intellectual property.
6. GOVERNMENT. We provide an honest and transparent government, with political
stability and a broad respect for the rule of law. While government taxes and regulates,
we do not prop up national champions and we rely on the market, not federal agencies, to
pick winners and losers.
7. QUALITY OF LIFE. People who can choose where to live are often attracted by
America’s high quality of life, the result in large part of our democracy, freedoms, clean
environment and outstanding health care system. America’s relative security and
abundance likewise attract the best-and-brightest to live and work on our shores.
WHY INNOVATORS GO OFFSHORE
At the same time, multiple factors are encouraging accelerating R&D and knowledge work in
other parts of the world. While the National Science Foundation reports that the United States
accounted for 44 percent of the total R&D among OECD nations in 2001 – more than the rest of
the G7 nations combined – we accounted for 70 percent of this total in 1970. A great many
nations have witnessed America’s unparalleled economic success over the past 60 years and
understandably seek to emulate it by fostering their own innovation excellence. The rest of the
world is not standing still, and they are competing for a growing share of foreign direct
investment in research and knowledge work. Here’s why:
1. COST. Research and other technical talent and facilities cost appreciably less in many
areas of the world. Similarly, many foreign nations offer businesses and researchers
significant financial incentives to locate R&D, technical services and manufacturing
within their borders.
2. PEOPLE. There are many highly talented researchers and technical workers among the
more than six billion people on the planet who are not United States citizens, and some
foreign nations such as China are now graduating more physical science and engineering
students than the U.S. every year. U.S. companies facing global competition want to tap
the best and the brightest, wherever they may live, and the GEs, Microsofts, IBMs and
others like them are investing heavily in new research facilities in emerging technology
clusters such as Bangalore, India and Guandong Province, China.
3. MARKET ACCESS. Many business leaders are attracted to the perceived market
possibilities in rapidly developing nations such as China and India, with over 2.4 billion
people between them. Proximity to customers is often essential to compete for service
sector business. Other innovators believe they need to globalize their research efforts to
overcome foreign government impediments to doing business (e.g. standards, VAT
taxes), or to ensure they can gain needed regulatory approvals in the future (e.g. merger
approvals).
4. INFRASTRUCTURE. Foreign governments are making their own investments in
university and lab research facilities, transportation, energy and telecommunications to
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more effectively compete. It is no accident that the new global clusters attracting the
most foreign investment and most knowledge work are precisely those with the most
advanced infrastructures (though as stated above, America retains an advantage here for
now).
5. BUSINESS CLIMATE. A great number of top-tier innovative companies explain moves
to Asia by pointing to their less burdensome taxation, regulation and litigation
environments. These reflect both bottom-line and speed-to-market concerns, although
many appropriately question whether nations lacking in freedom, robust intellectual
property rights, and thorough worker protections can sustain innovation leadership over a
long period.
6. PROXIMITY TO OFFSHORE MANUFACTURING. While the rise in offshore IT
service work does not appear to result predominantly from the global migration of
manufacturing, some suggest that other knowledge and R&D jobs may be pulled abroad
by off-shored manufacturing. Semiconductor industry experts, for example, indicate chip
design work needs to happen close to manufacturing facilities. Thus the movement of
manufacturing work portends the movement of the more innovative activities.
ENDNOTES
1
Few Americans are feeling greater uncertainty these days than information and
communications technology (“IT”) workers. Over the past five years, IT workers have
endured multiple shocks to IT spending and employment, including:
• the end of Y2K preparations in 1999;
• the bursting of the Internet and telecom “bubbles” in 2000;
• dramatic reductions in corporate IT spending during and after the January-
September 2001 recession;
• the 9/11 terrorist attacks;
• investor and business uncertainty as the WorldCom, Enron and other business
scandals of the late 1990s came to light;
• continued market caution preceding the liberation of Iraq; and
accelerating global competition.
2
It is difficult to precisely separate American IT job losses due to the post-bubble
business cycle from slower growth in overall IT employment resulting from global
competition or “off-shoring”
2
work. Little data exists to demonstrate one-to-one
relationships. It is certainly clear that as the growth in U.S. IT jobs slowed dramatically
for multiple reasons, the volume and value of off-shored work has increased rapidly.
2001 was the first year in more than two decades with negative growth in U.S. IT
employment. At the same time, the amount of IT service work done overseas has been
growing for years, and growing numbers of global competitors are likely to capture
increasing shares of U.S. white-collar service work.
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3
See, e.g. “The Challenge of Complexity in Global Manufacturing: Critical Trends in
Supply Chain Management,” Deloitte Touche 2003.
4
http://www.technology.gov/Testimony/BPM_030618.htm
5
see IDC Price Erosion Study, 2003
6
See CIO Magazine, The Hidden Costs of Offshore Outsourcing, Sept. 2003)
7
Proctor & Gamble told Fortune Magazine it has saved $1 billion since 1999 by
concentrating back-office work in Costa Rica, the Philippines and Britain. (“In the Age of
the Internet, A Company’s Location Hardly Matters,” May 12, 2003).
8
See “Offshoring: Is It a Win-Win Game?” McKinsey Global Institute, Aug. 2003
(http://www.mckinsey.com/knowledge/mgi/reports/pdfs/offshore/Offshoring_MGI_Persp
ective.pdf). “Indeed, of the full $1.45 to $1.47 of value created globally from offshoring
$1.00 of U.S. labor cost, the U.S. captures $1.12 to $1.14, while the receiving country
captures, on average, just 33 cents.”
9
A recent survey of 145 U.S. companies by Forrester Research found that 88 percent of the
firms that look overseas for services claimed to get better value for their money offshore
than from U.S. providers, while 71 percent said offshore workers did better quality work.
(At the same time one might note that the IEEE, a leading voice supporting American IT
workers, recently awarded Wipro Technologies – one of the major Indian IT service
providers – its prestigious IEEE Award for Software Process Excellence.)
10
http://www.business2.com/articles/mag/0,1640,51816,00.html
11
U.S. International Trade Commission.
12
Services Exports and the U.S. Economy, ITA, March 2003.
http://www.ita.doc.gov/td/sif/PDF/SERVEXP32003.PDF
13
Appearance of Federal Reserve Chairman Alan Greenspan before the Financial
Services Committee, United States House of Representatives, July 15, 2003. (Response
to question from Delaware Rep. Michael Castle).
14
http://www.mckinsey.com/knowledge/mgi/reports/pdfs/offshore/Offshoring_MGI_Pers
pective.pdf
15
PCAST sourcing NSF data, 2002 Science & Technology Indicators. [FIND PRECISE
URL]
16
http://www.technology.gov/reports/ITWorkForce/ITWF2003.pdf
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17
Passed in 1930, many blame this protectionist legislation for contributing to turning the
1929 stock market crash and recession into the global Great Depression.
http://www.state.gov/r/pa/ho/time/id/17606.htm
18
See October 16, 2003 Remarks by the President in San Bernadino.
http://www.whitehouse.gov/news/releases/2003/10/20031016-7.html.
19
For example, Commerce Secretary Don Evans announced a Standards Initiative in
March 2003.
http://www.commerce.gov/opa/press/2003_Releases/March/19_Standards.htm
20
See The 21
st
Century Strategic Plan of the U.S. Patent & Trademark Office.
http://www.uspto.gov/web/offices/com/strat21/index.htm
21
See July 9, 2003 Remarks of Assistant Secretary David Sampson to the Pittsburgh
Technology Council
http://12.39.209.165/xp/EDAPublic/NewsEvents/Speeches/Speech07092003.xml
22
http://www.technology.gov/reports/TechPolicy/2020Visions.pdf.
23
National Science Foundation.
24
See “Power Outages in India Slowing Nation’s Economic Development,” Wall Street
Journal, Oct. 3, 2003. This story opens by describing how the Chairman of Offshore
Software Outsourcing firm Wipro had a presentation to clients interrupted four times by
power outages, observing “the incident illustrates how India’s creaky infrastructure –
inadequate power supplies, potholed roads and congested ports – hinders an economic
takeoff.”

Ricardo's Free Trade Assumptions

Ricardo's Free Trade assumptions prove inappropriate in contemporary Global trade. This is because production means are additionally exported to low level income markets exploited by mega-producers; without regard to subsequent negative consequences. JMK acknowledged reservations REGARDING Ricardo's viewpoint at his career's conclusion. Especially if the means of production mobility was outside the host nation state. Ergo, the existing validity of conventional ''Free Trade" terminology must be revisited for thorough analyses. It is Truism: The stock market will rocket because the existing ongoing transfer amounts to a ''selling-off of the US production base." Review of the numbers FROM!!!

>>> mid-1960s to date demonstrate this colossal continuing relocation is a TRANSFER OF US WEALTH , NOT ANY FORM OF RECIPROCAL 'FREE ' trade. Formerly, this transpired benefiting Japan, European and other nations. Presently, an unexpectedly -rapid transfer is occurring FROM!!!

>>> the USA to India and especially China. Made possible by by enormous US and European Mega Corporations Capital investments. Alarmingly this raises the potential of severe international instability. The Dollar will drop. Globalism means the eventual annihilation of the Nation State Model. This is because such rapid transfer of capital investment, production, and service economy (re Internet) across borders nullifies the sovereignty of nation states to control. Thus, NYSE will skyrocket and investors will benefit, but this jobless recovery demonstrates no further benefit to US economy can be expected; only enormous Megas' profit incremental(s). Created simply by exploitation of foreign 'cheap' labor. Massive US living-wage job losses in al probability will create imminent societal instability. Perhaps, a moratorium on federal usage of Globalism concept must be proposed. The necessity of buying time for reanalysis is imperative. A rethinking and review must be urgently accomplished. Time to consider new model paradigm. If not, a high probability exists, Protectionism will raise its ugly head. which might actuate political instability. Obviously, as all are aware, inflation and fed rates will remain minimal. Because the importation of cheap imports FROM!!!

>>> the Donee nations. More worrisome is our conviction that this self-cannibalization of the US Economy will create its "Day of Reckoning." When "This Fool's Holiday At Never-Never-Land" due bill is presented but impossible to pay, then the horrible moment of truth will be at hand. Too late to rectify. We hope we are incorrect, but our realistic numbers and projections mandate our request for a broad-based professional reassessment.

"The Economist"

This is supposed to be the LAND OF ECONOMIC OPPORTUNITY FOR ALL; NOT THE LAND OF OPPORTUNISTS TAKING ADVANTAGE OF THE MIDDLE-CLASS AND THE POOR.

--- not just what our Founding Fathers called these the dangerous FEW "aristocrats" who would despotically capture government power using it against the interest and consent of the governed --- THE MANY. While the SMALL BUSINESSMAN is forced out of the free enterprise market by unjust monopolies illegal anti-trust business practices. The next generation will be excluded completely from our cherished free enterprise capitalism MARKET. The FEW are becoming a Corporate Oligarch RULING CLASS against --us as in USA, we as in "We the people..." Be a good American, start studying to discover THE FACTS---not cable and radio conservative propaganda. Get the Whole Truth.

It was not affirmative action, welfare or women's rights. The real reasons why you can be justifiably angry. Victims of Mega-Corporations GLOBALISM. US Standard of living declined 50% since WWII. Yes. Once a man working 8 hours could support a wife at home with children. Now, to remain in the middleclass two spouses MUST work. Ergo, creation of the ANGRY WHITE MALE mentality. White males feel ostracized if not outright emasculated, they cannot without two degrees support their family as their fathers did. But blaming affirmative action, women African-American and the poor is the wrong road of thinking and will not resolve their economic problem. Hate never does, but knowledge of truth and fact help commencement of rebuilding the Economic production economy. Then the economic forces supporting Globalism defeated "The Buy-American Movement." Resultantly, Globalism policymakers shipped your living wage jobs and whole industries to slave worker nation.

It was called FREE TRADE but was GIVEAWAY TRADE. It was not Fair Trade---it gave away your job for cheap 25 cents am hour slave wages and creation of cheap imports which we import and ergo no inflation occurs. As stated above, some of us were deeply involved in 70s

WORRIED ABOUT A TRADE WAR? WE HAVE BEEN LOSING ONE SINCE THE 1970 WITH JAPAN AND EUROPE

We must face the negativity of the perennial negative trade deficit; trade deficit annually how much add money we middle-class give foreigners and foreign corps head-on---otherwise it cannot be resolved to help the mc: there is no free trade, except for foreign nations, there is no fair trade, now foreigner trying dump below market value product on tour market to destroy our remaining industries and pledging ones--dumping is a crime, but no one enforces us law to the middle-class s benefit.

BREAKING THE BACK OF THE MIDDLE CLASS

"Purchasing products 'MADE IN CHINA'

or investing US capital there, is transferring wealth to a nation which murders its children who protest for liberty" ''The Philosopher-Ethicist'' and ''The Economist'' The demise of free enterprise capitalism for monopolistic capitalism. The transference of the FREEDOMS of the Bill of Rights and our Democracy for an Corporate international Oligarchy. They use our money spent at retail level to buy Congress and the Presidency; even before the elections' are held. (OLIGOPOLIES.) To Tip O'Neil is heaven, "Tip, We really screwed up down here. No longer is all politics LOCAL, it is all CORPORATE - monopoly not free enterprise. Wish you were her." So, how the begin reversing the problem.

"Think American! Be American! Buy American!" DRSJWJD "The Buy-American Movement" 1970

In 1970s GLOBALIZATION IS A DECEPTION Millions of living wage AMERICAN jobs have been exported under the pseudo guise of GLOBALISM, which is a sham term to explain this economic treason down to America and its people. Americans were informed America would no longer be a production economy, we had to become a service economy, and informational economy. However, any economist knows in order for a nation to survive he cited since the 1970s to dump America, the middle-class, the average worker, the AMERICAN family, -- in favor of exporting America its production, it's living wage jobs, it's intellectual and fiscal and financial capital, to overseas nations in order to exploit slave labor such as in China. Time and will not be spent on explaining detailing the corporate decisions to exploit his these slave wage for employees. it must reduce its own goods not only services. The expectation of AMERICAN production jobs etc. commenced in the late 60s early 1970s, in the old industrial industries. This frightened people and especially labor unions which had a gone place to their head and effects saying "if you don't balance if you don't agree to be downsized, if you don't agree to have your corporation dismembered, if you don't agree to give him back to the corporation, if you go on strike or demand higher wages -- -- -- and we will simply do my relocate our production facilities and corporation to foreign soil. Then, you will be jobless.

"THE BUY AMERICAN" Movement. The US Government through trade policy (with Carla Hills TYPES) have been allowing our US corporations to send their manufacturing production facilities and of course your job overseas. When we raise the issue, no one would support us Not even the unions, the steel unions would listen.

The only support we received was from one corporate executive a first generation AMERICAN --- LEE IACOCCA. Presently it is clear to all Americans especially the ANGRY WHITE MALES something went wrong. Yes it did, but affirmative action, women, African Americans and minorities did not cause it. It was the International Mega-Corporations GREEDHEADS. Yes the very crooks who stole 8 trillion of the Baby Boomer Retirement fund. Their avarice knows no bounds. The buy the politicians and the law even before elections are held. Their inside men such as our President Bush thinks nothing of squandering a 5 Trillion surplus and creating enormous deficits for the middle-class the ton pay off. Which the middle class can no longer do.

We will all be "McMINIMUM WAGED." Needing a doctorate to sell hamburgers imported from the that the note to Brazil to each other. greed know no bounds reciprocal trade not former immoral trade by us economic traitors. Lou Dobbs - series the exporting of America. Explains it all. covers the real issues facing AMERICAN people-economics-- -----

LISTING SOME OF MANY OUTRAGES

MILLIONS OF US JOBS EXPORTED TO SLAVE-waged LABOR NATIONS

THE USA TECH INDUSTRY IS ABOUT TO RECEIVE THE SAME FATE

MIDDLE-CLASS FAMILIES DOWNSIZED IN INCOME AND STANDARD OF LIVING.

EFFICIENT CORPORATIONS WERE VICIOUSLLY DISMEMBERED BY CORPORATE RAIDER

EMPLOYEES FORCED TO GIVE-BACK PORTIONS OF THEIR PAY

FOREIGN TECH WORKER WILL RECEIVE l1 VISAS TO TO REPLACE US EMPLOYEES ON US SOIL.

EDUCATED QUALIFIED WORKERS EITHER PART-TIMED; OR NOT GIVEN SUFFICIENT HOUR TO PROVIDE FOR THEIR FAMILIES.

FORCED EARLY RETIREMENTS

LOSS OF PREVIOUSLY GUARANTEED BENEFITS AFTER RETIREMENT

LOSS HEALTH CARE COVERAGE OR COERCED TO CONTRIBUTE TO THE EMPLOYERSB RESPONSIBILITY

LOSS OF OVERTIME PAY

UNRESTRAINED ABUSE OF CHAPTER 11 BANKRUPTCY BY CORPORATION TO AVOID THEIR EMPLOYEE CONTRACTUAL RESPONSIBILITIES.

MUCH More to come .........

THE TECH IT INDUSTRY IS NEXT... OUTSOURCING OFF-SHORING THE NEXT GENERATION'S ''OUR KIDS'' ECONOMIC PROSPERITY

The Mega-international corporate monopolies are beginning gradual exportation of the American-created Tech Industry to foreign nations. Many white collar and blue collar workers we lose their living wage jobs. Moreover, the Mega-Multinationals will be importing foreign Tech professionals (under H visas) to replace American tech professionals at lower salaries. This is where we draw the line. Time to dig in and vociferously declare our opposition. After 20 years( as College and University professors) spent retraining downsized US workers, we professors are not standing silently by and observing our efforts cast aside overboard for cheap foreign labor and corporate PROFITEERING!!! No Way!!!

THE TWO TIERS OF AMERICAN LAW! ONE FOR RICH, ONE FOR THE REST OF US

One for the Corporations and Rich. The real law for the rest of us. ALL THE CORPORATE crooks will beat the rap. the end of AMERICAN justice. never steal anything small he two tiers of AMERICAN law : one for the corporations and rich. the real law for the rest of us. all the corporate crooks will beat the rap. the end of AMERICAN justice. never steal anything small attorney general Ashcroft: an ethical personal disappointment this problem cannot be handled by Elliot spitzer ny ag without the staff nor legal mandate to the two tiers of AMERICAN law: one for the corporations and rich. the real law for the rest of us. all the corporate crooks will beat the rap. the end of AMERICAN justice. never steal anything small despite what nacho man says Sam Wacksel(? sp.) will do time in a cc prison for the rich , most of day be allowed out steak and lobster a night. then get out and keep the money he stole. first strict enforcement of the state and esp. the federal ant-trust and Rico laws concept pf divestiture when monopolies or oligopolies abuse monopoly power unfair trade practices--price fixing etc.

first we must clean up the business and government environment. again why??? ---because the us economic system corrupted to the core must be reformed-back to free enterprise capitalism tough love with us corporations exploiting foreign slave labor if export back to USA such products receive 300% surcharge you are either with us as in USA or yo9u are against us; no more foreign corporation dumping on uss market driving our pledging small business out of business.

Bermuda us corporation product receive 300 % surcharge triple minimal tax for Bermuda corporation not return to America . Time for each mega corporation to declare itself it it a multination corp. first or is it a Us corp. first and a multinational second.

(AS AN ASIDE, most PAST, present, and future mergers and acquisitions violated

One for the Corporations and Rich. The real law for the rest of us. ALL THE CORPORATE crooks will beat the rap. the end of AMERICAN justice. never steal anything small he two tiers of AMERICAN law : one for the corporations and rich. the real law for the rest of us. all the corporate crooks will beat the rap. the end of AMERICAN justice. never steal anything small attorney general Ashcroft: an ethical personal disappointment this problem cannot be handled by Elliot spitzer ny ag without the staff nor legal mandate to the two tiers of AMERICAN law: one for the corporations and rich. the real law for the rest of us. all the corporate crooks will beat the rap. the end of AMERICAN justice. never steal anything small despite what nacho man says Sam Wacksel(? sp.) will do time in a cc prison for the rich , most of day be allowed out steak and lobster a night. then get out and keep the money he stole. first strict enforcement of the state and esp. the federal ant-trust and Rico laws concept pf divestiture when monopolies or oligopolies abuse monopoly power unfair trade practices--price fixing etc.

first we must clean up the business and government environment. again why??? ---because the us economic system corrupted to the core must be reformed-back to free enterprise capitalism tough love with us corporations exploiting foreign slave labor if export back to USA such products receive 300% surcharge you are either with us as in USA or yo9u are against us; no more foreign corporation dumping on uss market driving our pledging small business out of business.

Bermuda us corporation product receive 300 % surcharge triple minimal tax for Bermuda corporation not return to America . Time for each mega corporation to declare itself it it a multination corp. first or is it a Us corp. first and a multinational second.

(AS AN ASIDE, most PAST, present, and future mergers and acquisitions violated

ANGRY WHITE MALES:
BEWARE OF HATE-MONGERS
STOP AND THINK FOR YOURSELF! WAKE-UP!

Do not allow uneducated under informed right-winger radio propagandists and TV opinion-journalists to sell you more, misinformation, disinformation and outright lies. They play upon your prejudices, anger, fear and life's disappointments ---telling you what you want to hear. Always blaming someone else for the economic problems and diminished career success. They are demagogues and shills for the corporate right-wing agenda. Especially "Russian Limburger Cheese-head." These filibustering Blowhards babble unproven unsubstantiated generalities of prejudice and misinformation - NOT FACTS. You must face the truth ---you probably do not want to hear.

They have manipulated you to support political and economic ideas against your OWN INTEREST, the MIDDLE-CLASS and POOR. Supporting the right-winger (pretending to be conservatives) and the Mega-Multinational Corporations' GLOBALISM agenda. No there is no vast right-wing conspiracy. Rather it is extremist moneyed right-wing of the Corporate Republican and Democratic Parties purchasing economic and political power. Yes and the outrage is with your money you paid for purchase of good and services they imported from slave-wage global nations. Of course, your living wage job they exported many years ago. Now, the chickens have come home to roost, and the MC and the poor are very hungry.

LOOK AROUND YOU -- all the trillions in continuing corporate scandals. The vast concentration of WEALTH in the hands of a FEW corporate monopolies. Now they want to concentrate ALL MEDIA in the hands of 6 MEGA-Corporations with FCC approval

EISENHOWER'S FAREWELL WARNING: THE MILITARY INDUSTRIAL COMPLEX CONTROL MAJOR PORTION OF ECONOMY THE MILITARY INDUSTRIAL COMPLEX NEEDS A WAR AND ENEMY TO EXIST I

n effect, Eisenhower was forewarning us, if we retained an economy based upon military production, the USA , would be in an eternal state of warfare. always needing a war to utilize the excess military industrial complexes output --products -- bombs etc. in time, the USA economy would not benefit from such eternalized economics policy. For instance, Americans would receive little benefit from "the economics multiplier effect": the economic wealth created by the overturning-dollar's effect of spending on a dollar in the private market; as compared to spending the same dollar in the military products - materiel market. Simply, if you spend $5000 on one bomb, it is dropped, explodes, and that is the termination of the multiplier effect and social benefit of the $5000. However, the important point is, there must be a war. In war, people die, namely our adolescent children- for the most part-poor, middle-class. On the other hand, if you spend $5000 in the private marketplace purchasing or producing consumer products, such buying and selling, expands the economy bringing prosperity for all; not just the few.

Obviously, President Eisenhower's warning gone unheeded. As a foreign friend explained, "America will one day have all the bombs, and we will have all the money. And, America will be too terrified to utilize the bombs against the international moneyed elite."

This is the stain of shame on our society leading to the

INESCAPABLE question: HAS OUR SOCIETY BECOME CORRUPT?

IF SO, WHAT CAN BE DONE TO REVERSE IT!!!

This used to offset Pres. Bush's Tax cut for the rich. Moreover, The corporate criminals stole $8 TRILLION from Middle-Class 401(k) retirement accounts and will not be imprisoned. Some may RECEIVE a small SEC fine, approximately 1 Billion for stealing $8 Trillion. Shockingly, this "settlement" is supported by the NY State Attorney's office .


Furthermore, they take a hefty tax-deduction for it passing it on to the middle-class and poor a second time. They get to control the democratic-republican political process even before the candidates are chosen. Then they are repaid by a third time by getting contracts and other financial favors for from the government which they elected. Fourthly, they are repaid again by lobbying and gainingcontracts and finacial benefited from the bureaucracy. Regarding this present crisis of crises---We realized something seriously wrong when 8 trillion dollars for were stolen and only few individuals were charged and imprisoned ; especially, in Enron---ken lay--all the corporate crooks will beat the rap (two rules of law) . then another unbelievable economic travesty occurred -- energy companies criminally rape California energy market without enforcement of law. Initially this page commenced as a scholarly analysis of liberal economics. A boring dry subject, only for the few, with intellectual patience. Why? Because of all the sciences, who can you can the reason?

Our economic, political and sociological research demonstrated a disturbing fact. The MIDDLE-CLASS is being pushed to the brink of extinction. The whole truth is, "It's the middleclass which drives the economy which is is the backbone of America. Break their back, and the AMERICAN dream is no more. Assassinate the middleclass and small business -- the USA will cease to exist. Ergo, we concluded it is time for economics action not scholarly boring discussions. ''It's the money, Stupid. The Money which is produced from a Living Wage job"

This author struggled with this. It's difficult to have spent 55 years in research scholarship to have some gains some understanding of what America's future might be. As a result, the conclusions reached a devastating not only disturbing. However, before these truth are expressed, this author should lost get assurances -- there is a solution! This author informs the average citizens of these specific economic concerns. All are well aware of them. But as if fearful if they speak of them, they will be considered unpatriotic work created a self-fulfilling prophecy. It was hoped AMERICAN politicians and economic leaders, would patriotically face the economic truth about America's presence financial stability and its future prosperity.

our Founding Fathers believed and and our history any one immigrating or born in the USA, is they are will to work hard can succeed financially in creating a comfortable life for themselves and their family. No longer each day is a fact. Moreover, THE SCIENCE OF economics boring tedious science-yet most important. -economics issues most difficult to cover---to explain average individual. that is why there will be some redundancy of issues for better explanatory educational issues. Herein. therefore the emphasis of this page has switched to be an economics page advocating the prosperity of the middle-class and small business. for it is small business which provides most jobs in USA-not corporations. we advocate solutions founded in free enterprise capitalism principles, --- not international (former USA) corporations monopolies Economic-financial corruption reigns supreme-Not addressed by politicians fearing loss of corporate campaign contributions necessary to win elections or re-election. Of course, we already have publics financing of all elections. It is collected by the corporations at the retail market in the price they charge for goods and services. Furthermore, they take a hefty tax-deduction for it passing it on to the middle-class and poor a second time. They get to control the democratic-republican political process even before the candidates are chosen. Then they are repaid by a third time by getting contracts and other financial favors for from the government which they elected. Fourthly, they are repaid again by lobbying and gaining contracts and financial benefited from the bureaucracy.

NO ONE HARDLY SAID A WORD; NEVER STEAL ANYTHING SMALL This was beginning the rape of America and the middle-class once Pres Bush I, the father, allowed the the savings and loans to be ripped off and again no one went to hard time prison. it was open season on raping the us economy. 500 billion stolen and passed on in additional taxes to the public in payroll taxes. Yes Ivan Boesky got 3 years in country club prison then released to spend his 100 million stolen . Then Michael Milkin stole by crude estimations, approximately $500 million. He was imprisoned 5 years served 3 in another country club prison . I can, released to enjoy his 500 million or more. Milkin's poor secretary received more time . Good --- then until the corporate theft of 8 trillion from the stock market and the economy , we assumed the federal government the Justice Department would enforce the law. That is, in to retrieve the middle-class investor money. That was not the case. Then when when President Bush No. 2 literally giveaway 6 trillion of our well deserved surplus to the upper class, we became seriously concerned. Since the giveaway totaled No. 13 trillion dollars: leading to the disturbing question: has been USA become a corrupt to society 13 TRILLION Dollars: Stolen or Given-Away A New Home For Each US Family!!! (SEE: Articles Page 6)One of our economists estimated with the 8 trillion stolen by the corporate crooks and wall street scammer and the 5.6 trillion surplus recklessly wasted amounted to $13 trillion. In his estimation, a brand new house could have been built and freely given to every American family-------free----and partially furnished.

It was hoped AMERICAN politicians and economic leaders, would patriotically face the economic truth about America's presence financial stability and its future prosperity.

our Founding Fathers believed and and our history any one immigrating or born in the USA, is they are will to work hard can succeed financially in creating a comfortable life for themselves and their family. No longer each day is a fact.

Moreover, THE SCIENCE OF economics boring tedious science-yet most important. -economics issues most difficult to cover -to explain average individual. that is why there will be some redundancy of issues for better explanatory educational issues.

Herein. therefore the emphasis of this page has switched to be an economics page advocating the prosperity of the middle-class and small business. for it is small business which provides most jobs in USA-not corporations. we advocate solutions founded in free enterprise capitalism principles, --- not international (former USA) corporations monopolies

William J McDonough, the President of the Federal Reserve Bank of New York, watches his words as closely as a Savile Row tailor watches his stitches, and with good reason. Any mis-statement on his part, or even an intentional but slight deviation from the previous official line, can send the financial markets into a multi-billion-dollar tizzy.

McDonough shuns press conferences, but in November 1994 he invited 35 academics, executives and journalists to a day-long conference at the New York Fed’s headquarters in lower Manhattan. When they had assembled, some from as far away as Los Angeles and London, he addressed them as follows: ‘I am very pleased that all of you are here today to discuss what I feel is a critical issue facing our country. The issue is, of course, the growing disparity in wages earned by different segments of our labor force. It is deeply troubling that during the 1980s the real wages of low-skilled workers in the United States have fallen sharply, both in absolute terms and relative to the wages of highly-skilled workers. These dramatic wage developments raise profound questions for the United States, issues of equity and social cohesion, issues that affect the very temperament of the country.’

For a pillar of capitalism like McDonough to express concern about low wages is surprising. For him to then question, as he did, whether America ‘will be able to go forward together as a unified society’ is virtually unprecedented.

Until recently, it was an empirical law of American economics that the majority of citizens, including virtually all those who considered themselves middle class, received steadily rising wages. In the three decades after the Second World War in particular, the American dream of moving to the suburbs, buying a house and even sending the kids to college was no mere election slogan. Home ownership soared and the living standards of the middle class – idealized in television sitcoms – were the envy of the world.

Today that image is as dated as the television shows it spawned. Falling wages and rising prices have transformed the home economics of tens of millions of Americans. The trend is best illustrated with the help of a mental experiment. Imagine lining up the entire population of the US in order of ascending income, with the poorest on the extreme left and the richest on the extreme right. The person smack in the center of the line – the meridian – would be, by definition, the most middle-class American alive.

In September of 1979 this person was earning (in constant, inflation-adjusted dollars) $498 a week, or $24,700 a year. By 1995 he or she had suffered a wage cut of about a hundred dollars a month, or 4.6 per cent.

The citizens on the right of the income line-up fared very differently. In 1979 the typical full-time worker in the top third of the income distribution was earning $890 a week, or $46,280 a year. By September of 1995 his or her pay-check had swelled to $960 a week, or $49,920 a year – an increase of 7.9 per cent.

The fortunate souls on the extreme right of the income line-up were doing best of all. In 1979 the richest five per cent of American families earned, on average, $137,482, according to Census Bureau data. By 1993 their income had risen to $177,518, an increase of $770 a week, or 29.1 per cent. The top one per cent of families have made spectacular gains. According to the Congressional Budget Office, between 1977 and 1989 their average income rose from $323,942 to $576,553 – a gain of $252,611, or 78 per cent.

The numbers prove what many Americans have suspected for a long time: living standards have fallen or stagnated for the majority, while a small minority have enjoyed a bonanza. Taken together, recent wage and income trends suggest an unavoidable conclusion: America is no longer a middle-class country; indeed, the term ‘middle class’ has lost its meaning.

Vague meaning
The idea that the United States is a middle-class country is at least as old as de Tocqueville (‘The whole country seems to have melded into one middle class’) and Matthew Arnold (‘That which in England we call the Middle Classes is in America virtually the nation’). By the 1950s opinion polls showed that the vast majority of Americans referred to themselves as middle class, regardless of their income. Despite this consensus, the exact meaning of ‘middle class’ remained vague. In contrast to what it meant in Europe, it did not mean the bourgeoisie, who were clearly defined by Engels as ‘the class of modern capitalists, owners of the means of social production and employers of wage labor’.

Few inhabitants of California’s Orange County or New York’s Suffolk County owned factories or speculated on Wall Street. Most were regular employees of major corporations like McDonnell Douglas, Grumman or Hughes Aircraft. If they didn’t go to work they risked losing their livelihoods, their houses and their cars. They were, in fact, not middle class at all in the Marxian sense of the word. They were working class but, unlike similar people in Britain or Germany, they called themselves middle class.

Most commentators let them get away with the theoretical confusion, and it is easy to see why. From 1945 until 1973 – a period that economic historians now refer to as the Golden Era – the American economy resolutely refused to conform to the pattern predicted by the left-wing graybeards. Yes, the rich got richer, but almost everybody else got richer with them, and at roughly the same pace. The spoils of economic growth were divided remarkably evenly. Broadly speaking, all Americans’ incomes doubled – secretaries’, factory workers’, bank executives’.

A chart that is particularly worth examining divides the nation’s 68.5 million families into fifths, or quintiles, with the poorest fifth on the left and the richest on the right, and covers two periods: from 1947 to 1973 and from 1973 to 1993.

As Paul Krugman, an economist at Stamford University, has noted, the 1947-73 graph looks like a picket fence, which is entirely fitting: during the Golden Era income growth, like the picket fence, was an icon of middle-class America. The annual growth rate of family income was between 2.4 and 3.0 per cent, regardless of where the family stood in the income distribution.

A glance at the 1973-93 chart, however, shows that the picket fence has been replaced by a small staircase – and some of the steps are underground. The bottom two-fifths of American families saw their income fall, while the average family in the middle saw its income basically stagnate. Only the top 40 per cent enjoyed any income growth, and only the very rich enjoyed growth comparable with that of the Golden Era.

Some conservative economists have attempted to challenge these findings, but with little success. However the figures are shuffled, the basic picture remains the same: the staircase has replaced the picket fence and the country has experienced an unprecedented redistribution of income towards the rich.

The staircase graph and the changing distribution of income suggest that the country has now split into four groups. At the top there is an immensely wealthy élite, which has never had it so good. At the bottom there is an underclass which is increasingly divorced from the rest of society. And between these extremes there are, instead of a unified middle class, two distinct groups: an upper echelon of highly-skilled, highly-educated professionals who are doing very well; and a vast swathe of unskilled and semi-skilled workers who are experiencing falling wages, stagnant or declining living standards, and increased economic uncertainty. To label this group ‘middle class’ doesn’t make sense. That phrase implies two things – rising living standards and a high degree of economic security – that no longer apply.

The dramatic rise in inequality has had one beneficial side effect: it has provided gainful employment for hundreds of economists who have been burrowing away in universities and research institutes trying to solve the mystery of who killed the middle class. Sad to report, they have yet to come up with a single murderer.

One thing we do know is that the murder has nothing to do with taxation. This bit of knowledge will disappoint both conservatives who lay the blame for the middle-class squeeze on a growing tax burden, and liberals who link rising wealth concentration to regressive tax policies. But it is indisputable: the fact is that the rise in equality happened before the Internal Revenue Service got its hands on anybody’s paycheck. And, contrary to popular myth, the over-all burden of taxation has remained remarkably constant. In 1973 federal taxes swallowed 19.5 per cent of the gross domestic product and in 1993 the figure was 19.9 per cent. It was the free market that decreed that most people’s wages should fall or stagnate after 1973. And it was the free market that handed out pay bonanzas at the top of the income distribution.