- The Washington Times - Saturday, October 2, 2004

The United States might be a superpower, but it does not control its own fate. Delusion does.

Much of the U.S. public is deluded about the invasion and occupation of Iraq and its consequences, and about the state of the U.S. economy.

Just as Americans are deceived into believing Iraq was involved in the September 11, 2001, terrorist attacks on the United States and threatened America with weapons of mass destruction (WMDs), Americans are deceived into believing they benefit economically from outsourcing, offshore production and an unprecedented trade deficit.

The deceivers emphasize the lower prices, not the incomes lost and careers destroyed when cheaper foreign labor replaces American workers. The deceivers allege the trade deficit means we consume more of the world’s goods than we produce, with the added benefit that foreigners pay for our excess consumption by investing in America.

Actually, “foreign investment” in the U.S. today consists of Asian central banks, mainly Japan and China, using surplus earnings from massive trade surpluses to prop up the U.S. dollar by purchasing U.S. government bonds.

By propping up the dollar, Asians keep their goods and services cheap, thus worsening the U.S. trade deficit. Washington goes along because Asian countries use their export surpluses to finance the U.S. budget deficit.

Propping up the dollar undermines investment in factories or businesses that produce jobs for Americans. Stephen Roach, Morgan Stanley’s chief economist, reports net 2003 U.S. business-sector investment was 60 percent below 2000’s.

The United States has become the world’s largest debtor, in hock to foreigners for a fourth of its gross domestic product. The ratio of U.S. external debt (what we owe foreigners) and U.S. exports approaches the crisis ratios of banana republics.

It is inevitable: America’s mounting debts will produce a crisis. The dollar’s value will plummet, and U.S. living standards will drop. Everything will become more expensive for Americans.

The dollar’s perilous condition is one reason President Bush invaded Iraq. The Middle East bills its oil in dollars, a status that supports our overvalued currency. Every country must buy dollars to pay for oil, and this keeps the dollar afloat.

Just before the U.S. invasion, Iraqi oil sanctions had run their course and were soon to be removed. Saddam Hussein intended to bill Iraqi oil in euros, which could have started the abandonment of the dollar by oil-producing countries. Instead of fixing our economic problems, we started a war.

In the meantime, America continues to lose high-paying jobs and entire occupations to foreigners, because US corporations outsource jobs and produce offshore. University of California professor Norm Matloff warns that outsourcing and H1-B visas, which bring foreign workers into US firms, are destroying the US software engineering profession. (Matloff’s writings are available online and are worth more attention than this column provides.)

The shrinking computer science enrollments in American universities have finally caught the attention of the academic establishment. Computer science departments, which should have spoken out long ago, have been muzzled, because they heavily depend on research and faculty funds from firms whose outsourcing is destroying the occupation in America.

Falling enrollments mean fewer faculty positions and graduate students. Despite threats to their funding from decreased enrollments, most computer science professors are unwilling to contradict their corporate benefactors’ false claim that “outsourcing is good for America.” Another year of biting the tongue, another grant received.

Instead, the professors acknowledge programming is a lost occupation for Americans and claim there is still a future for American students in designing computer systems — “computer software systems architecture.” Nonsense, says Mr. Matloff, a computer science professor himself. He notes it is impossible to design computer systems without years of programming experience. If you lose programming, you lose the base for the occupation, and all the rest goes offshore too.

Some economists claim lost occupations will return to the United States when wages rise in India and China. Mr. Matloff’s answer: “Did manufacturing work return to the U.S. over time as wages rose in developing countries? Of course not.” Only America is stupid enough to give away its manufacturing and high-tech occupations.

Other economists claim new high-tech professions will rise to replace the lost computer engineering profession. Mr. Matloff punctures that delusion: Venture capitalists routinely demand that the new companies they finance outsource to the hilt.

U.S. universities have educated enough Indians and Chinese to fill every high-tech job American firms have to offer. The false claim only drudgery jobs are outsourced is laughable.

If you believe that lie, you believe Saddam Hussein was in cahoots with Osama bin Laden and had WMDs.

Paul Craig Roberts is a nationally syndicated columnist.

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