U.S. Moving From First to Third World

U.S. Moving From First to Third World

Paul Craig Roberts
Wednesday, Oct. 20, 2004

In the early 1980s, when I was assistant secretary of the treasury, the U.S. trade deficit was due to oil imports.

Currently, the U.S. deficit in manufactured goods alone is 3.5 times our oil imports. Our trade deficit in vehicles is nearly equal to our deficit in oil, and our deficit in clothing, ADP equipment, office machines, TV and VCRs is 1.5 times our oil import bill.

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The United States is ceasing to be a manufacturing country. America has a trade deficit in almost every manufacturing product.

Comparing the first eight months of this year to the first eight months of last year, our trade deficit in manufacturing products increased by 16 percent. In iron and steel mill production, it increased 146 percent.

The United States has a trade surplus in corn, cotton, wheat, scrap metal and animal feeds. The only manufacturing products in which the United States has a (small) trade surplus is airplanes and scientific instruments.

Since 1985, the U.S. trade balance with China has deteriorated from balance to a deficit of $160 billion. Who has the high-tech economy, and who has the Third World economy? Normally, Third World countries run trade deficits with high-tech countries.

Charles McMillion, president of MBG Information Services, notes that the U.S.-China trade relationship is the most unequal in the world. The United States has a trade deficit with China in almost every industry code. The U.S. deficit in advanced technology products with China is astounding.

How was it possible for China, alone in world history, to outpace the most advanced country on earth? Was China elevated to the forefront by U.S. firms who moved their production for the American market to China in order to take advantage of essentially free labor?

Americans no longer produce the "American goods" that they consume. American incomes are falling, as economist Joseph Stiglitz recently pointed out. When the dollar gives way, as Dallas Federal Reserve Bank President Robert McTeer says it must, Americans will not be able to purchase the goods and services that American firms produce abroad with foreign labor.

U.S. firms will have to sell their offshore-produced wares to the labor that produces them. "Cheap foreign goods" will be beyond the reach of Americans, whose country is in rapid transformation from a superpower to a Third World economy.