Rob Kall: Now I've got to say, when I talk to kids going to college, I say "Don't look for a job that can be outsourced by the internet." Even radiologists are being outsourced.; so if you get an x-ray, they send the results to India to have a radiologist in India do it instead of an American doctor doing it. It's so scary.
Paul Craig Roberts: Yep.
Rob Kall: You wrote in your article When Truth Is Suppressed, Countries Die - the first half of the article is mostly about this topic, about how theorists were saying that we would be transitioning to an information economy, and did the creative approaches and what have you, and what you argued was that you've got to have production; you have to have manufacturing, or if you lose that, you're in big trouble. I wanted your comment, and I just think that it also ties into the space program, which both parties are just throwing away and selling off and getting rid of now, and letting India and China and every other country pick up on.
It seems to me like -- I've been saying it for a while now: the US is being strip-mined, and they're basically just going through us, and we're going to be left a third world country, which you've written a lot about. Talk a little bit about that and globalization too, because this is all tied in to corporate globalization. I've just thrown a lot at you; pick whatever you want to talk about from it.
Paul Craig Roberts: OK Rob. It's certainly the case that innovation follows manufacturing. If you're not manufacturing things, you're out of touch, and you don't know what to innovate, or how to innovate. So the kind of arguments that we got from the shills for global corporations (like Michael Porter at Harvard, all of these people paid to come up with phony studies to reassure Americans that they weren't really losing anything by closing down the manufacturing sector), the argument they made was: "OK, look. These are 'dirty fingernail' jobs, and we don't need them. We are now going to all be white collar workers doings intellectual work innovating! We'll be doing all the innovations, and the Chinese will have the dirty fingernail jobs of producing the products that we innovate.
This was the Line, this was the "New Economy" that they talked about. Of course it was all just baloney! Because, as I said (to repeat myself), if you're not making things, you don't know what to innovate. You get out of touch with technologies. You become a Third World Country. We now see from all the surveys that increasingly, American corporations innovate outside the country where their offshore plants are. And we recently had a report from twenty  MIT professors who were aided by the graduate students, so we had twenty professors at MIT who have issued a report that we've lost the ability to innovate, or we're, in the process, about lost, because things that are made aren't made here, and so we've lost the ability to innovate. So I see that as vindication. I've been warning about this for years, and this study, it was recently reported out in the last month or two, I think.
The other point I've been making for a decade about offshore production is not free trade, it's labor arbitrage; and that all tradable goods and services can be moved offshore. So that you can very easily have a permanent unemployment rate of 25% or 35% percent or even higher, because the only jobs that can't be offshored require hands-on performance: like going to the dentist, or getting your hair cut, or being served in a restaurant by a waitress, or in a bar by a bartender. Those kinds of jobs are the only ones that can't be offshored, and so -
Rob Kall: Paul, can you just describe what you mean by arbitrage? I think it's usually a word used to talk about the stock market. What does it mean, and how does it apply in terms of jobs?
Paul Craig Roberts: It means the same things as in the stock market if there is a difference in price. In the case of labor arbitrage, the price is labor. So if the American manufacturing worker costs $22 an hour (with all the benefits, and so forth), and the Chinese at the time this started cost 25c an hour (laughs), you have an amazing labor cost difference. And so they look at this and they say: "Well, wow! We could really drop our cost of production by producing with this Chinese labor, because instead of twenty-five bucks an hour, it's twenty five cents." That's what we mean by labor arbitrage. They just say, "OK, we're not hiring these Americans, we're going to hire the Chinese." That's labor arbitrage, and it has nothing whatsoever to do, nothing is being traded.
There's no free trade, there's no any kind of trade, it's just labor arbitrage. It's just like if somebody in the stock market sees a difference in pricing somewhere, they move quickly to take advantage of it. Now they use these extremely high speed computers to try to get in front of trades, and they trade on nano-pennies in nanoseconds. So that's what the labor arbitrage means. Now let me finish this story. As I warned for a decade, the job offshoring was undermining employment opportunities in the United States, and certainly had stopped the rise in consumer income.
Well, two years ago, the Nobel Economist Michael Spence did the same studies that I've done, and came to the same conclusion. It was published (I think) as a Council For Foreign Relations paper. He said the same things that I've said, that the United States faces a hell of an employment challenge, because so much has been moved off, and so much more can be. The main function of globalism is to de-industrialize high-wage countries that are developed.
The other main result of globalism is to turn lesser developed countries that had viable agriculture and were self-sustaining, to turn them into monocultures; supplying like one crop for global markets, and then that makes them -- first of all, that destroys the economic-social systems there, and people now are dependent on food imports. The big farms, of course, haven't room for much of the population that used to be on sustainable farms. So globalism is a wrecking force of amazing power to wreck. It doesn't do anything good except for shareholders of big corporations and their managers, or chief executives.
Rob Kall: Now, in your new book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West, you write, "Globalism and financial concentration have destroyed the justifications of market capitalism. Corporations that have become too big to fail are sustained by public subsidies, thus destroying Capitalism's claim to be an efficient allocator of resources." When you talk about globalism, I think you're talking about corporate globalism, which is basically the only globalism we have. Am I right on that?
Paul Craig Roberts: Yeah, sure. What they mean by globalism is the total free movement across national borders of capital and production, so that -
Rob Kall: In a sense, by creating this corporate Globalism system that we have now, we have a system where corporatism transcends the power and the Democracy of nations! Isn't that true?
Paul Craig Roberts: Yeah, right. Well we've seen that, haven't we; in Greece, Italy, and now Cyprus. Remember when the Greek bailout was up, and the Greek Prime Minister or President said, "OK, I'm going to put it to vote"? And the EU said, "No you aren't! The people don't get to decide. You resign right now." And then they appointed from outside, they appointed the government of Greece. And they did the same thing to Italy! The Italian Prime Minister or President or whatever they call him wasn't elected, he was appointed by the EU bankers.