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By Paul Craig Roberts

Few economists have come to terms with the

meaning that offshore production of goods and

services has both for the US economy and for

the operation of US economic policy.

One of the main reasons for the rapid expansion

of the US trade imbalance is offshoring. When a

company closes a plant in the US and moves its

production for US markets offshore, domestic

production is turned into imports. Some

additional impacts of offshoring are rising

foreign ownership of the US stock of capital,

increased payments to foreigners that result

from the growth in this ownership, and pressure

on the US dollar's value and role as world

reserve currency.

There is also impact on the efficacy of US

economic policy tools. Traditional methods of

stimulating consumer demand are now less

effective. They might cause a rebound in sales,

but the follow- through to domestic employment

is diluted as the response to demand is met by

foreign labor. There is now a large new

"leakage," as increases in domestic demand are

met by offshore production.

This leakage from offshore production is in

addition to the traditional leakage from

foreign trade. Economists have long understood

that some part of rising consumer incomes

during an economic recovery will be spent on

imports and can result in leakage if the

domestic economy is expanding more rapidly than

the economies of trading partners, thus

resulting in a trade deficit. With so many

American brand name goods now produced

offshore, a pickup in domestic demand

immediately translates into jobs and wages for

offshore workers. During the current economic

recovery, three million US manufacturing jobs

have been lost, hours worked have declined, and

there has been no gain in real incomes for the

vast majority of Americans.

Moreover, as US capital and technology are

shifted to the employment of labor abroad,

there is less boost to US consumer demand from

productivity-based growth in real income. The

effect, then, of offshoring production for US

markets is to weaken the effectiveness of

traditional economic policy tools.

As official US economic reports make clear, and

as Charles McMillion at MBG Information

Services has emphasized, the current economic

expansion has been driven primarily by US

household dis-savings and by government red

ink. For the sixth consecutive quarter,

consumer spending has exceeded total disposable

income.

There are limits to a debt-based expansion. The

housing boom, which stimulated consumer

spending through refinancings, has come to an

end, and more households have reached their

limit on credit card debt.

As the high tax rates of the pre-Reagan era no

longer exist, supply-side tax rate reductions

cannot deliver the punch of a quarter century

ago. Easy money can encourage more debt, but

households have fewer assets and income streams

to mortgage. New domestic investment spending

by US business weakens as cheap foreign labor

draws US capital, technology and business

know-how abroad. The bulk of new foreign

investment in the US consists primarily of the

acquisition of existing assets rather than new

investments in plant and equipment. Therefore,

the move abroad of US capital and technology is

not offset by foreign investment in the US.

The access of US corporations to low wage

foreign labor has produced an effective

divergence of interests between US shareholders

and US labor. With stock prices and CEO

remuneration closely tied to quarterly results,

there is strong pressure to move jobs offshore

in order to lower labor costs and improve

reported earnings.

In the past unions and managements fought over

the level of wages and benefits. However, most

economists believed that wages were in keeping

with labor productivity. With offshored

production, the large excess supplies of labor

in countries such as China and India keep wages

associated with offshore production below the

productivity of labor.

Consequently, the measures used in the US to

determine the success and tenure of corporate

management and boards result in a divergence

between the interests of capital and labor that

favors capital.

As the large excess supplies of Asian labor are

unlikely to be absorbed except over the

long-run, addressing the new American economic

problem would seem to require a change in the

criteria used to measure corporate success.

Economists refuse to acknowledge the problem,

because they believe it has protectionist

implications and that nothing can be worst than

protectionism. Indeed, so many economists have

emotional commitments to free trade and

professional commitments to globalism, that

they are incapable of acknowledging that there

is a problem.

As Herman Daly and I have emphasized,

offshoring is not a manifestation of free trade

based on comparative advantage. Offshoring is

labor arbitrage or capital's pursuit of

absolute advantage in low cost labor.

Moreover, the classic case for free trade has

troubles of its own. The case depends on two

conditions that no longer exist: the relative

immobility of capital internationally, and

different relative cost ratios of producing

tradable goods in different countries. Today

capital is as internationally mobile as traded

goods, and knowledge- based production

functions are not affected by climate or

geographical location. Their operation is the

same regardless of location. New original work

in trade theory by William Baumol and Ralph

Gomory challenges the correctness of the

classic case for free trade even when its two

conditions are met.

The longer economists wait until they address

the new economic problem, the more the ladders

of upward mobility in the US will be dismantled

and the more political stability will drain

from the US. In the 21st century, US job growth

as been restricted to domestic services. The

longer the growth of new US jobs is restricted

to domestic services, the more difficult it

will be to restore job growth in export and

import-competitive sectors of the economy and

the more the US will come to resemble a third

world economy.

I call on economists to get their heads out of

the sand and to put on their thinking caps.

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Movie name: Saas Bahu Aur Sensex

Genre: Drama

Actor/ Actresses: Ankur Khanna, Farooque Shaikh, Masumeh Makhija, Lillete Dubey, Sharon Prabhakar, Mukta Barve, Seema Azmi, Shahnaz Anand, Chirjyot Singh, Kiran Yadnopavit, Farrokh Mehta, Kartik Ramachandran, Ayan Malik, Khoobad, Tanushree Datta, Kiron Kher.

Review:
With her mother suddenly divorcing her father and leaving their comfortable home in Kolkata, Nitya finds herself in the new environs of Navi (new) Mumbai. Finding her bearings, in a new city, letting go of her ambition to study in the USA for her MBA, and to begin work at a call centre is tough. She finds it a little easier however to cope with the situation, courtesy her newfound friend, Ritesh Jetmalani. Ritesh is the nicest guy on the planet, and maybe even in the universe. He does everything with full sincerity. In fact he confesses that he has only two vices, one is that he?s always running late (mostly because he?s stopped to help someone), and the other is that he loves to eat non-Veg food (he swears he?ll quit one day). His third vice [which he won?t admit] is his passion for girlfriend Kirti Wagaskar,a ,selfish, but charming young lady looking for a short cut to a better life. (She has him on standby in case she doesn?t land a richer catch.) Nitya?s mother Vinita Sen is troubled by her failed marriage. She hopes to find the new start she needs, in New Mumbai. She is befriended by the women in the colony and joins their kitty parties. She knows her daughter is angry with her and blames her for their situation, but believes that this was their best alternative to find their own place under the sun. Vinita?s father had left her some shares and she traces her father?s old stock broking house to fiqure out the maze of the stock market reality. Here she meets Firoz Sethna an ethical but cranky and eccentric stock broker who teaches her the ropes of correct investing. Nitya gets pulled into daily life at the call centre; she and Ritesh develop a wonderful relationship. She tries to warn him that Kirti is using him. Ritesh believes that all human beings are essentially good and says he loves Kirti for her spirit, sure she pushes him around but she won?t always be like that, she?ll realize how much he loves her and things will change. In the meantime, the group of kitty party ladies, feel, that Vinita is up to something dubious, they haven?t got the gossip on her... And why did she leave her husband anyways? Her house is getting swankier, so is her attire, she keeps meeting a strange man. When Vinita is confronted by these suspicious ladies who imagine the worst of her, she shares her stock market fortunes and soon kitty conversations about TV soaps switch to conversations on Indian business and investments. Kirti Wagaskar is no ordinary middle class girl; she plans to marry RICH. She hates her elder sister Parimal?s lifewho is a housewife to her grouchy traditional husband, Ganpatrao. Serving Coffee at Costa?s, she spends an entire month?s salary on a Gucci bag and dreams of landing Yash Modi, a billionaire by birth. As life?s uncanny logic kicks in, she meets Yash and her interaction with him tips the calm of modern colony. Nitya is caught in the cross fire as Kirti plays Ritesh and Nitya to suit her whims. Yash Modi?s father Ketan Modi owns a large share of the financial call centre ?M & M? that Ritesh and Nitya work in. Vinita and her colony friends have recently invested in the company based on news that Yash Modi marriage has been arranged with the daughter of the owner Macmillan financial group. When Kirti realizes that Yash has no intention of marrying her, she agrees to marry Ritesh. Ritesh knows nothing of Kirti and Yash?s relationship. He is thrilled. With all kitty ladies invested emotionally and financially in the company, Ritesh marrying Kirti is best for everyone and Nitya, despite her feelings for Ritesh, watches the wedding morning arrive in silence. If Yash married Kirti it would break Ritesh?s golden heart and spell financial disaster for the colony?s new amateur investors, who are banking on the Modi Macmillian tie up, to improve their savings and investing prospectives. Vinita sees her daughter?s dilemma and finally tells her the real reason for her coming to New Mumbai. Her husband had left her for a younger woman, and she didn?t want her daughter to deal with the pressure or gossip nor did she want to be dependent him. Nitya realizes that her mother getting together with these amateur investors who have switched from watching soaps to watching CNBC, to look for investing opportunities, even if they are ?aunties? is cool after all. Is love is meant to be? How does Vinita and her daughter find their place in the masala of the New Mumbai world, with the stock market fluctuations, kitty parties, soap operas and the changing tides of New India.

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Movie name: Hulla

Genre: Comedy

Actor/ Actresses: Ankur Khanna, Farooque Shaikh, Masumeh Makhija, Lillete Dubey, Sharon Prabhakar, Mukta Barve, Seema Azmi, Shahnaz Anand, Chirjyot Singh, Kiran Yadnopavit, Farrokh Mehta, Kartik Ramachandran, Ayan Malik, Khoobad, Tanushree Datta, Kiron Kher.

Review:
Raj an aggressive sub-broker in a prosperous broking firm and Abha a marketing professional are a couple in their early-thirties. They move into a new 2-bedroom flat in a Mumbai suburb expecting peace and quiet. Life is sweet as their promising careers now seem to be nicely complemented by domestic stability. Cracks start appearing in their ideal existence when Raj who is light sleeper is disturbed by noises at nights. They wake him several times in the nights (Abha is undisturbed though). Finally one night, Raj goes down to investigate and discovers that it is the night watchman blowing the whistle periodically in the night to scare thieves away. Raj scolds the watchman and forbids him from making any further noise but the secretary Janardan insists on the whistling continuing in lieu of the building security. Raj tries to garner support from fellow-residents but to no avail. An issue that starts out lightly and amusingly trivial begins to escalate to take the shape of a serious problem for Raj. He begins to slowly go to pieces. Not being able to sleep at night begins to take a serious toll on him, both professionally and personally. At work, he becomes edgy and his usual smart sense of judgment suffers. At home, he becomes obsessed with any loud noises in the environment. His disgust at being unable to solve a seemingly simple problem such as this begins to drive him crazy. Moreover, to his great irritation, no-one really sympathises with his problem ? not Abha, not Dev ? his friend at work, not any of the neighbours. It annoys Raj immensely, because he genuinely believes that this nightly noise-making is an illogical, uncivilized act (there is also a hint that it is Raj's conscience that's not allowing him to sleep, rather than the whistling, but it is deliberately left ambiguous). &quot;Hulla&quot; is story of a simple annoyance affecting a person's life and bringing about dramatic unexpected change that brings the real character and emotions of the Raj and the people surrounding him, to the fore. </font>

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