Ali’s blog

Mostly quant stuff with occasional digressions


Posted by alifinmath on January 15, 2008

“Class” and “class warfare” are taboo words in the US of A. Occasionally someone will let his guard down, for example:

“There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”

Other people are also commenting on this and they’re not exactly members of the loony left. One of my favorite writers is Paul Craig Roberts and here is a recent piece by him on Vdare on the taboo subject of class warfare:

For decades Democrats seemed to have a monopoly on class war with demagogy of “the rich.” Today it is the rich who are instigating class war with attacks on middle class jobs. The ladders of upward mobility are being dismantled. America, the land of opportunity, is giving way to polarization between rich and poor.

In testimony before the U.S.-China Commission (September 25, 2003:[ PDF]), I explained that offshoring is the replacement of U.S. labor with foreign labor in U.S. production functions over a wide range of tradeable goods and services. As the production of most tradeable goods and services can be moved offshore, there are no replacement occupations for which to train except in domestic “hands on” services such as barbers, manicurists, and hospital orderlies. No country benefits from trading its professional jobs, such as engineering, for domestic service jobs.

Software engineers and information technology workers have been especially hard hit. Jobs offshoring, which began with call centers and back-office operations, is rapidly moving up the value chain. Business Week’s Michael Mandel (September 15, 2005: ) compared starting salaries in 2005 with those in 2001. He found a 12.7% decline in computer science pay, a 12% decline in computer engineering pay, and a 10.2% decline in electrical engineering pay. Marketing salaries experienced a 6.5% decline and business administration salaries fell 5.7%. Despite Sarbanes-Oxley, a make-work law for accountants, even accounting majors were offered 2.3% less.

On February 22, 2006, staff writer Shaheen Pasha reported that America’s large financial institutions are moving “large portions of their investment banking operations abroad.” Offshoring is now killing American jobs in research and analytic operations, foreign exchange trades and highly complicated credit derivatives contracts. Deal-making responsibility itself may eventually move abroad. Deloitte Touche says that the financial services industry will move 20 percent of its total costs base offshore by the end of 2010. As the costs are lower in India, the move will represent more than 20 percent of the business. A job on Wall St is a declining option for bright young persons with high stress tolerance as America’s last remaining advantage is outsourced.

The real state of the U.S. job market is revealed by a Chicago Sun-Times report on January 26, 2006, that 25,000 people applied for 325 jobs at a new Chicago Wal-Mart..

U.S. manufacturing lost 2.9 million jobs, almost 17% of the manufacturing work force. The wipeout is across the board. Not a single manufacturing payroll classification created a single new job.

The declines in some manufacturing sectors have more in common with a country undergoing saturation bombing during war than with a super-economy that is “the envy of the world.” In five years, communications equipment lost 42% of its workforce. Semiconductors and electronic components lost 37% of its workforce. The workforce in computers and electronic products declined 30%. Electrical equipment and appliances lost 25% of its employees. The workforce in motor vehicles and parts declined 12%. Furniture and related products lost 17% of its jobs. Apparel manufacturers lost almost half of the work force. Employment in textile mills declined 43%. Paper and paper products lost one-fifth of its jobs. The work force in plastics and rubber products declined by 15%.

These are merely excerpts of course, and the whole piece deserves a careful reading. It is in this context that the present — and deepening — economic crisis needs to be understood. The crisis is most emphatically not about bad loans being made to uncreditworthy customers — it’s more about a rickety economic system that can no longer pull its own weight because American companies, with the connivance of their political puppets, have pulled out of their commitments at home. Again, there are reasons for this, but I don’t want to go into these at the moment. Suffice it to say that the US is in a deepening economic crisis and merely fiddling with interest rates will not change this underlying reality.

Oh, by the way, if you need something else to cheer you up, take a look at a more recent piece by Roberts.


4 Responses to “Class”

  1. Chris Prouty said

    For many years the white collar class of Americans has scoffed at the idea of unions. My father, who lived through the great depression, told me when I was young that there would come a time when the professional American class would need to form unions to survive. I always laughed at him, but it looks like he may have been correct. I suspect the professionals in America won’t have the same resolve as their brothers and sisters in manual labor and skilled trades to band together for the common good.

    On the other hand, the labor unions of the mining, steel, and auto industries (to name a few) have proved incapable of retaining work for their members. As always, the only reliable hedge is clean water and ammunition.

  2. alifinmath said

    There are people who have examined the (growing) impotence of the American labor movement. At the risk of gross oversimplification, let me make a few points. 1) The early radical US labor movement of the late 19th and early 20th century got its head bludgeoned in, 2)the post-WW2 labor movement arrived at a modus vivendi with corporate America: decent wages but no interference in management (such as work patterns and automation), 3) the labor movement has never been unified: highly-skilled and organised labor has won concessions for itself, 4) not much political influence, except a blank cheque to the Democratic party — which is not even remotely similar to European social democrat parties and 5) an ideological onslaught from business and the political right for the last three decades — with no countervailing force from any other quarter (the “Left” doesn’t really exist in the USA except in the fevered imagination of lunatics and whores like Ann Coulter and Rush Limbaugh). The best we get is Bill Clinton, who “feels our pain.”

    I see those monkeys — McCain, Romney, and Huckabee are in Michigan now promising to do “something” about the derelict auto industry. But what exactly other than the usual glib political rhetoric, which is promptly forgotten once in office?

    It’s not unions per se which will save Americans — and by Americans I mean all those not in the top 5%. It will have to be some sort of political movement. What will emerge in the USA will be nationalist in nature (possibly with racial undertones), and socialist in outlook. Something along the lines of Gregor Strasser’s philosophy. Eventually people reach a breaking point and the usual controls — mass media, political repression, and the distractions of a consumer society (for thnose who can afford it) — become impotent.

  3. Chris said

    Paul Fussel (professor at Penn – not sure if he is still there) wrote a book some years ago on class in the US. I believe it was called Class. It was an entertaining, if somewhat meanspirited, study of the sociology of class. As I recall he focused a lot on old money vs new money. I seem to remember that he used the word “Prole” to refer to the working class – a group Prof Fussel clearly doesn’t identify with. On the issue of outsourcing, professional jobs are definitely going overseas. Will that benefit the US? I should think not though it enriches some, as we all know. I know a lawyer in Philadelphia who has established a successful legal outsourcing business in India. By outsourcing research work to India he can save clients a lot of money. I asked him what would happen to the American legal profession as this catches on. He insists that within 5 years or so lawyers who have graduated from second tier law schools will no longer have work as traditional lawyers. The legal profession will be run by graduates of the top schools. The rest will have to be “creative” in finding work.

  4. alifinmath said

    Please note: “Chris” is not “Chris Prouty”; he’s an expatriate now residing in Argentina. And a chum of mine.

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