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The enclosed article caught my attention about 4 years ago. The only problem is that this trend might be accelerating even further today, because of the new technologies that were not available only a few years ago.

The enclosed article explains why jobs are being transferred from the US economy to other countries at a faster rate than before or they are being eliminated forever. The article also gives you the essence of the theory of creative destruction - a critical economic concept that the next president of the United States must understand it.

Brazzil Magazine - Wednesday, September 06, 2006
"While the American Dream Is Outsourced Brazil Drives the World into the Future"
Written by Ricardo C. Amaral

http://www.brazzil.com/...

Factory Employment Is Falling World-Wide Study of 20 Big Economies Finds 22 Million Jobs Lost; Even China Shows Decline.

Manufacturing jobs are disappearing around the globe, here is why......

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Factory Employment Is Falling World-Wide Study of 20 Big Economies Finds 22 Million Jobs Lost; Even China Shows Decline
THE WALL STREET JOURNAL - October 20, 2003
By JON E. HILSENRATH and REBECCA BUCKMAN

The U.S. manufacturing sector has gone through 38 grueling months of declining employment, but a new report shows that factory-job woes aren't just an American problem. From Brazil to Russia and yes, even to China, manufacturing jobs are disappearing around the globe.

Economists at Alliance Capital Management LP in New York looked at employment trends in 20 large economies and found that from 1995 to 2002, more than 22 million jobs in the manufacturing sector were eliminated, a decline of more than 11%.

Contrary to conventional U.S. beliefs, the research found that American manufacturing workers weren't the biggest losers. The U.S. lost about two million manufacturing jobs in the 1995-2002 period, an 11% drop. But Brazil had a 20% decline. Japan's factory work force shed 16% of its jobs, while China's was down 15%.

Joseph Carson, director of global economic research at Alliance, says the reasons for the declines are similar across the globe: Gains in technology and competitive pressure have forced factories to become more efficient, allowing them to boost output with far fewer workers. Indeed, even as manufacturing employment declined, says Mr. Carson, global industrial output rose more than 30%.

At the same time, countries everywhere -- including developing countries like China -- are struggling to reduce excess capacity. "We've got too many steel plants in the world, too many auto companies," says Bill Belchere, chief economist for Asia at J.P. Morgan Chase in Hong Kong. "There's going to be a further shakeout as we move forward."
                                                           
The job losses in the U.S. have become a hot-button political issue in Washington. Some U.S. manufacturers and labor unions complain that American manufacturing jobs are fleeing to low-cost Asian countries, like China, which is keeping its currency cheap to make exports inexpensive. While there's no doubt some U.S. jobs are moving to China, India and some other low-cost countries abroad, Mr. Carson says that isn't the entire story.

"The argument that politicians are throwing out there is that we are losing jobs and nobody else is, and that is wrong," says Mr. Carson. "What I found is that the loss of manufacturing jobs that we have seen in the U.S. is not unique. It is part of a global trend that began many years ago."

...Perhaps the most surprising result of these latest studies is the manufacturing employment trends in China. Since 2000, manufacturing payrolls in China are up about 2.5 million, even as the rest of the world has suffered. But looked at over a longer time horizon, employment in China's manufacturing sector is down sharply. From 1995 to 2002, manufacturing employment has fallen to 83 million from 98 million, a 15% drop that outpaces many of the declines elsewhere in the world.

It isn't difficult to figure out why. China remains burdened with a massive and unproductive state sector that will take years to restructure. Even as foreign direct investment pours into the country's newer plants, millions of workers at inefficient state plants have to find new work, a source of potentially destabilizing unrest in the country and massive internal migrations.

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Contrary to popular belief, the global push to relocate facilities to countries with lower production costs has not caused an increase in manufacturing employment in those areas. In fact, since 1995, the reduction of manufacturing jobs in China has been as large as that of any other country.

Merely lowering operating costs is not enough for businesses to survive today. Enormous gains in technology have raised the bar on global competitiveness, punishing firms with outmoded facilities regardless of their location.

...deterioration in America's manufacturing employment is not unique but reflects a global shift in factory payrolls. Indeed, though American manufacturers undoubtedly have relocated in search of lower overhead, factory jobs are still disappearing in the majority of developed and developing countries.

Thus, the "giant sucking sound" being heard today is not just in the US, but across the globe. Competitive pressures felt by firms in developed countries are now affecting less efficient firms located in Asia, despite the lower production costs.

While many in the United States perceive manufacturing jobs are being exported, other countries are experiencing an even larger drop.

The United States lost about 2 million manufacturing jobs, or 11 percent, in the seven-year period studied, but Brazil lost 20 percent, Japan lost 16 percent and China was down 15 percent, the Wall Street Journal reported.

One of our more interesting findings is that, taken on its own, China's job losses are double the average of the remaining 17 countries for the same seven-year period. Manufacturing employment in the 17 largest economies other than China fell a little more than 7%, from 96 million in 1995 to 89 million in 2002. In contrast, China's fell a whopping 15% in the period, from 98 million in 1995 to 83 million in 2002.

Gains in technology and competitive pressure have forced factories worldwide to become more efficient, allowing them to boost output with far fewer workers, according to Joseph Carson, director of global economic research at the New York-based Alliance.

However, although manufacturing employment declined, global industrial output rose more than 30 percent, Carson said.

"We've got too many steel plants in the world, too many auto companies," Bill Belchere, chief economist for Asia at J.P. Morgan Chase in Hong Kong, told the Journal. "There's going to be a further shakeout as we move forward."

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Originally posted to SouthAmerica on Thu Jan 17, 2008 at 11:11 PM PST.

Poll

Which potential presidential candidate do you believe that he has grasped the essence of Joseph Schumpeterâ€<sup>TM</sup>s economic theory of - creative destruction?

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| 16 votes | Vote | Results

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