The new cutting edge economy
A: Quintero: We want to provide job opportunities, retain our position as a regional market, and then take Merced's economy to the next level, which would be the knowledge-based economy.
Q: When you say knowledge-based economy, what do you mean?
A: Cahill: It tends to focus on industries which are more cutting-edge industries, where the products have a shorter life cycle, where the products are unique, rather than being commodities.
Thirty years ago when people talked about this, they were talking about computers, 20 years ago, people talked about computer software, 15 years ago people started talking about bio technology. Ten years ago the Internet and Web-based applications were the rage.
But this is more than flavor of the month, it's trying to make sure that we have industries which are cutting edge and which tend to be among the industries adding most value, and because of that, paying good wages and having good jobs.
Q: We have a low-skill, low-education work force -- how will those people be included in Merced's new economy?
A: Cahill: First of all, we're not walking away from the old economy. There will still be a lot of production jobs. We have a labor force which is very well qualified for semi-skilled and moderately skilled production jobs. (Also), there are production jobs in the so-called new economy.
I think we're going to find that many folks locally are in fact well prepared to do those jobs. Education and training is very important to be able to move us fully into having a more advanced labor force and being able to satisfy the labor demands of knowledge-based industries.
Q: The draft of the city's new economic development business plan lists developing jobs for spouses of UC Merced employees as a top priority. Why?
A: Cahill: It's been an issue for the UC. It's an issue for any university in America that's located in a small town. When a highly talented person is being recruited for the university, they're often accompanied by a highly talented spouse. That person needs a job opportunity as well, so it's important to try to create or access those opportunities in order to get good people into the university.
--Merced Sun-Star, Sept. 29, 2006
I was interested in the City of Merced officials’ description of “knowledge-based economy.” It seems to present an industry requiring educated technologists producing technology for rapid obsolescence. I gather the idea is that once an economy makes it into the technological sector (through the help of the University of California), it can count on ceaseless innovation, constantly producing these bits of technology with short half-lives. This assumes a rather ideal market, without resistance, which has never existed on earth nor ever will, but we’re not in the knowledge-based economy yet here in the Valley, so how would we know?
The “people” talking about how computers were hot 20 years ago, etc., we suppose, are local government economic development officials and their trade magazines rather than those industries themselves.
By the details of the City of Merced economic development plan are covered over with a magic term, “cutting-edge.”
In fact, the City and County of Merced have a major problem on their hands. The advent of UC Merced provoked a housing boom, which is now busting, without having provided any housing/jobs balance. And real estate speculators do not make neighborhoods out of subdivisions.
Paul Craig Roberts, assistant secretary of the Treasury in the Reagan administration, associate editor of the Wall Street Journal editorial page and contributing editor of National Review, reported (CounterPunch, Sept. 30, 2006) American “knowedge-based” jobs occur in the service sector. Yet, former Federal Reserve vice chairman Alan Blinder concluded (in Foreign Affairs, March/April 2006) that between 42 and 56 million American service sector jobs are vulnerable to offshoring and, regardless of whether the jobs leave, they will be vulnerable to wage competition from foreigners willing to work for lower wages.
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 compared starting salaries in 2005 with those in 2001. He found a 12.7 per cent decline in computer science pay, a 12 per cent decline in computer engineering pay, and a 10.2 per cent decline in electrical engineering pay. Marketing salaries experienced a 6.5 per cent decline, and business administration salaries fell 5.7 per cent. Despite a make-work law for accountants known by the names of its congressional sponsors, Sarbanes-Oxley, even accounting majors, were offered 2.3 per cent less.
Using the same sources as the Business Week article (salary data from the National Association of Colleges and Employers and Bureau of Labor Statistics data for inflation adjustment), professor Norm Matloff at the University of California, Davis, made the same comparison for master's degree graduates. He found that between 2001 and 2005 starting pay for master's degrees in computer science, computer engineering, and electrical engineering fell 6.6 per cent, 13.7 per cent, and 9.4 per cent respectively.
On February 22, 2006, CNNMoney.com 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 per cent 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 per cent of the business. A job on Wall Street is a declining option for bright young persons with high stress tolerance as America's last remaining advantage is outsourced.
And, speaking of unique products in the great technology economy,
According to Norm Augustine, former CEO of Lockheed Martin, even McDonald jobs are on the way offshore. Augustine reports that McDonald is experimenting with replacing error-prone order takers with a system that transmits orders via satellite to a central location and from there to the person preparing the order. The technology lets the orders be taken in India or China at costs below the U.S. minimum wage and without the liabilities of U.S. employees.
U.S. manufacturing lost 2.9 million jobs, almost 17 per cent 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 "supereconomy" that is "the envy of the world." In five years, communications equipment lost 42 per cent of its work force. Semiconductors and electronic components lost 37 per cent of its work force . The work force in computers and electronic products declined 30 per cent. Electrical equipment and appliances lost 25 per cent of its employees. The work force in motor vehicles and parts declined 12 per cent. Furniture and related products lost 17 per cent of its jobs. Apparel manufacturers lost almost half of the work force. Employment in textile mills declined 43 per cent. Paper and paper products lost one-fifth of its jobs. The work force in plastics and rubber products declined by 15 per cent.
For the five-year period, U.S. job growth was limited to four areas: education and health services, state and local government, leisure and hospitality, and financial services. There was no U.S. job growth outside these four areas of domestic nontradable services.
Merced has two tax-paid areas of job growth: education (K-14 and UC Merced) and state and local government. However, it’s engine of growth is and remains agriculture. But, that’s part of the “old economy” of non-tradeable commodities, and of course, most of the work is being done by immigrants, who "will work for less. "
From time to time, it is true, UC officials state that UC Merced will become a high-tech, bio-tech engine of growth for the Valley. But, what we actually see is UC Lawrence Livermore National Laboratory bidding for a level-4 biowarfare laboratory on a site near Tracy. Again, “cutting edge” takes on a somber tone. Although it is supposed to be a lab to develop defenses against biological attack by terrorists, which some say we are producing by the thousands by our belligerent foreign policy, there are two problems with this approach. First, what better target for terrorists than a lab full of Ebola? Second, given the record of this administration is preparing for Avian Flu, what hope do Americans have that antidotes would be available? This government cannot even protect its citizens against E. Coli.
We don't think much of the city officials' economics. They talk about the "old economy," based on "commodities," and a "new economy" based on "unique products with shorter shelf lives," and of course that "cutting edge." In fact, the hottest commodity in Merced County for the last several years has been farm and ranch land, bought for urban development. Agricultural land is a unique product of an extremely complex, not fully understand process of Nature that has taken a very long time, but it loses both its uniqueness and all its shelf life when it is bulldozed for a subdivision in a few days or weeks. And whether the people who buy the tract houses to live in or for speculation even find that cutting edge job is of no concern to either the land owner, the local government who granted the permit, the developer who destroyed the agricultural land to build his subdivision, or any of the lending institutions involved.
It is an easy thing to rip up farm land and build a subdivision. You can get in and out in a few years. You can call it Vista de la Chingadera -- unique! To build a good farm or ranch takes a generation, maybe more, if it is ever more than a real estate investment. But you can't farm a subdivision. It ceases to be productive land and become merely a site for housing stock that isn't getting any younger. And in California, land of fabuous real estate wealth, population growth and the two worst air pollution basins in the nation, we've found that new subdivisions do not always become neighborhoods and old neighborhoods often cease to be neighborhoods. Communities lose through this fabulous, cutting edge, new housing product with its short shelf life. It is unique only in its economic, environmental and political destructiveness -- although the present era is probably comparable to the era of total domination of the state by the Railroad.
Another class of unique products with short shelf lives is the environmental review local government provides for many of its permits for sprawl, frequently on the cutting edge of California Environmental Quality Act violation. In this category, a very unique product that has been on its shelf long after its expiration date is the Merced County General Plan, which has not been updated since before UC Merced was proposed. The amendments to the county General Plan make it resemble a gallon of milk on the supermarket refrigerator shelf with a number of new expiration dates stamped on it, one on top of the other.
Judging from the pay raises local government officials have been receiving, these cutting edge products are successful entrepreneurial ventures.
Bill Hatch
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References:
Sept. 30, 2006
CounterPunch Special Report
How the US Government Planned America's Downfall
The New Face of Class War
By PAUL CRAIG ROBERTS
The attacks on middle-class jobs are lending new meaning to the phrase "class war". The ladders of upward mobility are being dismantled. America, the land of opportunity, is giving way to ever deepening polarization between rich and poor.
The assault on jobs predates the Bush regime. However, the loss of middle-class jobs has become particularly intense in the 21st century, and, like other pressing problems, has been ignored by President Bush, who is focused on waging war in the Middle East and building a police state at home. The lives and careers that are being lost to the carnage of a gratuitous war in Iraq are paralleled by the economic destruction of careers, families, and communities in the U.S.A. Since the days of President Franklin D. Roosevelt in the 1930s, the U.S. government has sought to protect employment of its citizens. Bush has turned his back on this responsibility. He has given his support to the offshoring of American jobs that is eroding the living standards of Americans. It is another example of his betrayal of the public trust.
"Free trade" and "globalization" are the guises behind which class war is being conducted against the middle class by both political parties. Patrick J. Buchanan, a three-time contender for the presidential nomination, put it well when he wrote1 that NAFTA and the various so-called trade agreements were never trade deals. The agreements were enabling acts that enabled U.S. corporations to dump their American workers, avoid Social Security taxes, health care and pensions, and move their factories offshore to locations where labor is cheap. The offshore outsourcing of American jobs has nothing to do with free trade based on comparative advantage. Offshoring is labor arbitrage. First world capital and technology are not seeking comparative advantage at home in order to compete abroad. They are seeking absolute advantage abroad in cheap labor...
9-29-06
Merced Sun-Star
A peek into Merced's future...Leslie Albrecht
http://www.mercedsunstar.com/local/story/12803889p-13493414c.html
Merced's future...city transformed from a dusty agriculture town to a center for high-tech innovation over the next decade. Development Manager Frank Quintero and Assistant City Manager Bill Cahill sat down with the Sun-Star for a question-and-answer session on the city's new economic development business plan, which is being updated for the first time since 1999.
Q: Why does a city have an economic development strategy? What's the goal of the plan?
A: Quintero: We want to provide job opportunities, retain our position as a regional market...take Merced's economy to the next level, which would be the knowledge-based economy.
Q: When you say knowledge-based economy, what do you mean?
A: Cahill: It tends to focus on industries which are more cutting-edge industries, where the products have a shorter life cycle, where the products are unique, rather than being commodities.
Q: We have a low-skill, low-education work force -- how will those people be included in Merced's new economy?
A: Cahill: First of all, we're not walking away from the old economy...
Q: The draft of the city's new economic development business plan lists developing jobs for spouses of UC Merced employees as a top priority. Why?
A: Cahill: It's been an issue for the UC...highly talented spouse...needs a job opportunity as well.
Q: The new strategy also points to the wastewater treatment plant expansion as important to economic development. Why?
A: Cahill: ...You simply cannot have development without adequate sewer capacity.
Q: How has economic development in Merced changed since the city wrote its first economic development plan in 1991?
A: Cahill: ...early 1990s approach was on the basis of price...strategy being developed now...not on the basis of price. It's on the basis of having a unique community asset in the University of California that we can build upon to make sure that we are not just trying to sell the cheapest commodity...instead something that is unique and valuable and has fundamentally different implications for where we go economically. (Companies are) moving a greater number of managerial and technical people or highly-paid skilled people here. They recognize that just to get the work force that they need, they need...other quality community characteristics.