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Now Available! Other Lands Have Dreams: From Baghdad to Pekin Prison by KATHY KELLY Click Here to Order the Hot New CounterPunch Book by 3-time Nobel Peace Prize Nominee Kathy Kelly! Today's Stories May 19, 2005 Paul Craig Roberts The Politics and Economics of Outsourcing   May 18, 2005 Jean Bricmont Vive La France? Laura Carlsen Bush's Posada Carriles Quandry: an Anti-Cuba Terrorist is Still a Terrorist Mike Whitney The Secret Raids of Alberto Gonzales: 10,000 Swept Up Joshua Frank Flushing the Koran: Why Newsweek Got It Right George Galloway Thusly, I Humiliated Norm Coleman (and Christopher Hitchens) Manuel Garcia, Jr. Writing Tickets for American War Crimes Dwight D. Eisenhower How the GOP will Destroy Itself Dave Lindorff The Plot to Make the PATRIOT Act Even Worse May 17, 2005 Mickey Z. GIs Behaving Badly Petuuche Gilbert The People of Acoma Still Fight to be Free Paul Craig Roberts Lies That Kill: Why Isn't Bush in the Dock? Ramzy Baroud The New Palestinian Uprising Robert Jensen / Pat Youngblood Pinning the Blame on Newsweek Stan Cox Poisoning Patancheru: the Severe Side Effects of India's Drug Industry Dave Zirin American Anthem: Ozzie Guillen and Fining for Freedom Diana Barahona Reporters Without Borders Unmasked Website of the Day Revolutionary Flower Pot Society May 16, 2005 Michael Gillespie The Family Released a Statement: Death Notices for the Warrior Theocracy Jason Leopold BP Stains the Arctic Jesse Muldoon How Many Schools Left Behind? Norman Solomon Media and the War: "The Bombs in Iraq Explode at Home" Robert Cray Twenty Patrick Cockburn Iraq is a Bloody No Man's Land Website of the Day Bolton's Divorce Papers: She Took It All Away, Including Most of the Furniture May 14 / 15, 2005 Alexander Cockburn Join the 14 Per Cent Club! Saul Landau Lessons from Vietnam: Wars Kill Empires as Well as People Gary Leupp Whither Yale? Towards the Imperial University JoAnn Wypijewski The Glory that is Lockhart, Texas Ben Tripp The Wayward Airplane: a Cautionary Tale Brian J. Foley Was Jesus Gay? Tom Barry Bolton the Eavesdropper Mitchell Verter Barbarous Oaxaca: Indigenous Rights Groups Meet the "Law of the Club" Mike Ferner War on COs: Army Files Additional Charges Against Kevin Benderman Dan Smith Perceiving Darfur Mark Scaramella Death with Pitfalls Don Fitz Mommy, Is This a Finger in My Rice Puffs?: Splicing Human DNA into the Food Chain Diane Farsetta PR Industry Imitates Big Tobacco: the Senate's "Fake News" Hearings Michael Dickinson Soldier Crawling: Military Conscription in Turkey Ron Jacobs The Jackson State Murders Fred Gardner "Hydroponics? 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Lind Reality Gap: the Myth of US Invincibilty Jack Random The Dubious Wisdom of George W. Bush Gary Leupp Douglas Feith Bares His Soul to Jeffrey Goldberg     May 11, 2005 Patrick Cockburn The Rise, Fall and Rise of Ahmed Chalabi: King of Jordan to Pardon His $300 Million Bank Swindle Kevin Zeese The Occupation Gets More Saddam-like Every Day Christopher Brauchli Coffee, Tea or Torture?: A One Way Ticket to Uzbekistan Zalman Amit The Collapse of Academic Freedom in Israel: Tantura, Teddy Katz and Haifa University Robert Shull Carte Blanche for the Terror Cops: Senate Gives DHS Power to Waive All Laws Mike Whitney God, Gays, and George Bernard Shaw Dr. Teresa Whitehurst Anti-Arabic Week at a Southern High School Norman Solomon Political Bluster and the Filibuster     May 10, 2005 Richard Drayton The Imperial Mythology of WW II: an Ethical Blank Check Dave Zirin Steve Nash's Brilliant Year: Anti-War Hoopster Wins NBA's MVP Jackie Corr The Medicare Catch: Mrs. O'Hara's Windfall Dave Lindorff Silence of the Scams: Economists on China Michael Donnelly From Roadless to Clueless: the Great Stillborn Eco Victory Reza Fiyouzat Nomadic Abstracts Scott Parkin Taking Direct Action Against Halliburton Stephen Babcock The Burden of Knowing Better Alan Farago Florida, Water and Lobbyists Michael Neumann Naomi's Courage Website of the Day One Nation Under Plagiarism     May 9, 2005 Louis Proyect Shilling for Chevron: Jared Diamond, Greenwasher Robert Fisk "Mission Accomplished": the Occupation, Year Two Kevin Zeese Concientious Objection on Trial: the Court Martial of Keith Benderman Joshua Frank Kerry Bashes Gay Marriage Sasha Kramer A Mother's Day Call for Justice in Haiti's Prisons Andrew Wimmer Create and Resist Jeffrey Webber Back to the Streets in Bolivia? Jeffrey St. Clair Straight to Bechtel   May 7 / 8, 2005 Alexander Cockburn Who Beat Hitler? Gary Leupp Biblical Prophecy and Christian Zionism Saul Landau Pope Torquemada: Purges, Pedophiles and Cover-Ups Joe DeRaymond Autumn of the Revolutionary: Another Look at Daniel Ortega Daniela Ponce Seeing Chile in Nepal Heather Williams Hollywood Does Enron Gregory Elich Zimbabwe's Fight for Justice Anis Memon To Cuba and Back John Chuckman The Peculiar State: "Criticism of Israel is a Form of Anti-Semitism" Mike Whitney Hard Right Rage Against the Truth Ron Jacobs Re-Reading "Born on the Fourth of July" as the Iraq War Grinds On Colin Kalmbacher Whither Disorder? Ann Coulter and the Texas Police State, Cont. Lance Selfa Uprising in Mexico City Fred Gardner "Getting High is a Little Like Cuba" Ben Tripp Letters on Wittgenstein Mickey Z. The Mother of All Days Richard Joseph Those Patriotic Magnets Dr. Susan Block Come As You Are: Masturbation 101 Poets' Basement Smith-Ferri, Louise, Nettnin, Engel and Albert   May 6, 2005 Patrick Cockburn Baghdad Diary: a Week of Bombs and Blood Erin Yoshioka Another "3 Strikes" Travesty: Why is Santo Reyes Facing Life in Prison? Sam Husseini Talking with Syrians Dave Lindorff Ernie Pyle Where Are You? When Reporters were Reporters Kevin Zeese Circus Trials of Abu Ghraib: When Even the Fall Girl Can't Plead Guilty Joshua Frank An Overextended US Military? It Won't Stop Another War Dan Bacher Tribes and Salmon Win One: Bush Backs Off Trinity River Water Raid P. Sainath India's Bloody Water Wars   May 5, 2005 Carles Mutaner Is Chavez's Venezuela "Socialist" or "Populist?" Carl G. Estabrook Is There Any Hope for the Pope? Farrah Hassen The US's Syrian Obsession Kevin Zeese "Sent Into Combat Unequipped and Unprepared": an Interview with Patrick Resta Michael Leonardi May Day with an American Soldier in Rome Bennett Ramberg The Future of Nuclear Terror: Coming to a Reactor Near You Ray McGovern The Smoking Gun on White House Deceit Norman Solomon Nuclear Fundamentalism, the New York Times and Iran Nicole Colson The Back Alley Attack on Abortion Rights Brian Concannon, Jr. Clearing the Fences in Haiti     May 4, 2005 Colin Kalmbacher Ann Coulter and the Police State: Heckle a Racist, Get Arrested John Walsh Al Franken is a Big Fat Phony: Lying on Air America to Support the War Greg Moses Vigilante Wedge: Schwarzenegger Reprises "Birth of a Nation" Ali Khan Nuclear Non-Proliferation Treaty Poised to Fall Apart Chris Floyd Ring Them Bells Linda S. Heard D-Day for Tony Blair: Bogeymen and Scare Tactics Dave Zirin The NFL, Congress and the Male Cheerleader Principle William S. Lind Fool's Paradise Gary Leupp Bolton's Proudest Moment: Breaking the UN's Anti-Zionist Resolution Website of the Day Kent State, May 4, 1970   May 3, 2005 Dave Lindorff Bush has Grasped the Third Rail, Now Turn on the Juice Brian Cloughley Halliburton's War Loot Ira Kurzban Death Squad Diplomacy: How Bolton Armed Haiti's Thugs and Killers Seth Sandronsky Towards Debtors' Prisons? Gilad Atzmon The Labour Party Isn't an Option Any More Michael Donnelly Branding Eco Collapse Alex Sanchez Chile's Man at the OAS: a Blow to Bush? Peter Linebaugh Magna Carta and May Day   May 2, 2005 Ron Jacobs Toward an Anti-Imperialist Movement Stan Goff The Case of Hasan Akbar Karyn Strickler Achieving Gender Balance in US Politics Joshua Frank Leaked UK Memo Indict's Blair's Iraq Folly Kevin Zeese Getting Out of Iraq will Prove Tougher Than Getting Out of Vietnam Vicente Navarro Pope Benedict: a Rightwing Politician       April 30 / May 1, 2005 Alexander Cockburn Marla Ruzicka, Rachel Corrie and "Credibility" Gabriel Kolko Lessons from a Total Defeat: the End of the Vietnam War, 30 Years Later Jennifer Loewenstein The Disengaged: Gaza and the Fragmentation of Palestinian Nationhood Lee Sustar City for Sale: Richard Daley's Chicago Saul Landau The Bush-DeLay Axis of Naked Power T.W. Croft The Undiscovered Country: the High Tide of the Neo-Con Confederacy Nikolas Kozloff Fox News v. Hugo Chavez William Blum Never-Ending Double Standards Dave Lindorff Judicial Jury Tampering in Philly Joshua Frank The Bi-Partisan Assault on Teenage Girls Doug Giebel Saving Jane Fonda Steven Erlanger A Response to Kathy Christison, from the NYT Jerusalem Bureau Chief Fred Gardner Washington State Doctor Harassed Mike Whitney Another Mad Bush Press Conference Kurt Nimmo Putin Pussyfoots in Palestine Joe DeRaymond A Short History of the 15th Congressional District of Pennsylvania Michael Dickinson Flags Mickey Z. May Day at Yankee Stadium Justin Taylor The Crawling Chaos: HP Lovecraft's Polymorphous Legacy Poets Basement Krieger, Engel, Albert, St. Clair Website of the Weekend Save Barbados's Cowpastor                                             Hot Stories Alexander Cockburn Behold, the Head of a Neo-Con! Subcomandante Marcos The Death Train of the WTO Norman Finkelstein Hitchens as Model Apostate Steve Niva Israel's Assassination Policy: the Trigger for Suicide Bombings? Dardagan, Slobodo and Williams CounterPunch Exclusive: 20,000 Wounded Iraqi Civilians Steve J.B. Prison Bitch Sheldon Rampton and John Stauber True Lies: the Use of Propaganda in the Iraq War Wendell Berry Small Destructions Add Up CounterPunch Wire WMD: Who Said What When Cindy Corrie A Mother's Day Talk: the Daughter I Can't Hear From Gore Vidal The Erosion of the American Dream Francis Boyle Impeach Bush: A Draft Resolution Click Here for More Stories.     Subscribe Online

May 19, 2005 Out Through the In Door The Politics and Economics of Outsourcing By PAUL CRAIG ROBERTS Offshore outsourcing is misunderstood by economists and policymakers. The phenomenon is misperceived as an extension of the mutual benefits of comparative advantage-based trade. Comparative advantage has two necessary conditions, neither of which is met today. One condition is that capital is immobile internationally relative to traded goods. The other is that the trading countries have different opportunity costs of producing the traded goods. (The economic concept of opportunity cost is an in-kind measure; for example, the quantity of wine that is not produced in order to make a yard of cloth.) The condition of capital immobility is required to insure that a country's capital seeks comparative advantage at home instead of absolute advantage abroad. Different internal cost ratios of producing one good in terms of another are necessary if low- and high-cost countries are to experience mutual gains from specializing and trading. David Ricardo discovered comparative advantage when he investigated the question of why a country that could most cheaply produce all tradable goods would trade with a higher cost country. Ricardo's answer is that the opportunity cost of producing one good in terms of the other was different in the two countries. He was able to show that total output would increase if each country specialized in the product in which it had relative advantage. He then showed that the increased output would be shared by the terms on which the countries would trade one product for the other. In Ricardo's example, the different opportunity cost ratios of producing wine and cloth in the two countries are due to inherent differences in geography, climate and soil. Modern production functions, however, are based on acquired knowledge. They operate the same in all countries. These production functions do not reflect country-specific inherent differences that result in different opportunity cost ratios on which comparative advantage depends. When I point out that the conditions on which the case for free trade is based are no longer met in today's world, economists either evade the issue or drag red herrings across the path. They talk about shifts in the terms of trade, about productivity gains abroad, and about the pervasiveness of factor mobility even in Ricardo's time. They equate the rise of the high speed Internet and collapse of world socialism, which made vast quantities of cheap labor available to first world capital, with innovations such as lower transport costs that turned previously non-traded goods into traded goods. None of these arguments engages the issue. Ricardo imposed the condition of relative capital immobility internationally in order that specialization according to comparative advantage could occur. Otherwise, a country's capital would flow to absolute advantage abroad. When US firms substitute foreign labor for domestic labor in their production for domestic markets, capital is flowing to absolute advantage. Factor mobility from Ricardo's time to the recent advent of offshore outsourcing was qualitatively different. Foreign investment was a way to evade tariffs, quotas, and high transport costs. Foreign investment was not geared toward offshore production for home markets. Ford and GM produced cars in Europe to sell to Europeans, not to export to America. Economists assume that offshore production for home markets is trade because the goods count as imports when they enter the US. But what is being traded when a US firm closes its American factory, lays off its American work force, moves its capital and technology offshore and uses foreign labor to produce the identical product for the same US markets? This is not trade in the traditional sense with one country specializing in cloth, the other in wine, and sharing the gains. The old free trade argument that US labor has nothing to fear from cheap foreign labor, because US labor works with more capital and better technology no longer holds when US firms provide the same capital and technology to foreign labor. The international mobility of capital and technology and the advent of production functions that operate the same regardless of location mean first world labor will be displaced in tradable goods and services until there is a global equalization of wages and living standards. Indeed, one reason the facts of offshore outsourcing are evaded by so many economists is that they look with favor on the international redistribution of income and wealth that is occurring. As the BLS payroll jobs statistics make clear, the US has ceased to create jobs in tradable goods and services. The higher productivity, higher value-added jobs that provide upward mobility are missing from the data. Our most prestigious engineering schools report a marked decline in enrollments in computer and electrical engineering. Business Week magazine reports that US firms are now outsourcing R&D, design and innovation. As I report each month following the BLS release, so far in the 21st century the US economy has been able to create jobs only in domestic nontradable services. Independent studies by economists at Northeastern University (reported in The Boston Globe by Charles Stein, Feb. 20, 2005) and by Edwin S. Rubenstein conclude that most of the new jobs in domestic services have gone to new legal and illegal immigrants. If these studies are correct, employment growth of native-born Americans has ceased in the 21st century. In the 21st century, the US labor force has been acquiring the complexion of a third world country, with new jobs available only in domestic services. In contrast, China and India are acquiring high tech manufacturing and professional service jobs, the mark of first world countries. How does the US gain from inability to create jobs in export and import-competitive goods and services? How do Americans gain from the loss of the jobs, careers, and incomes associated with the production of the goods and services that they consume? How do US firms gain, beyond the short-run advantage of CEO bonuses and share prices based on quarterly performance, from becoming brand names with a sales force marketing foreign made goods? How does America as a whole gain when the US pays for the cheap foreign labor contained in the offshored goods and services (a major component of the rising trade deficit) a second time by handing over to foreigners more of its existing stock of assets? The "cheap Wal-Mart goods" are not cheap when properly measured. How do US universities gain when there are no payoffs to a university degree? The BLS estimates that the vast majority of the new jobs that the economy is expected to create during the next ten years require no university education. Where is patriotism when politicians turn a blind eye to the decimation of opportunity for native-born citizens. What is the state of economic education in the US when economists cannot comprehend the reality that confronts them? Economists are not even aware of the latest and most important work in international trade. In 2000 M.I.T. Press published Global Trade and Conflicting National Interests by Ralph E. Gomory and William J. Baumol. This important work, which does not directly address the offshore outsourcing issue, shows that the comparative advantage case for free trade is too unsophisticated to be correct even if its required conditions are met. It will take economists a decade or longer to absorb this work. In the meantime, they are operating with a defective trade model that leads them to incorrect conclusions and disastrous policy advice. Paul Craig Roberts has held a number of academic appointments and has contributed to numerous scholarly publications. He served as Assistant Secretary of the Treasury in the Reagan administration. His graduate economics education was at the University of Virginia, the University of California at Berkeley, and Oxford University. He is coauthor of The Tyranny of Good Intentions.He can be reached at: pcroberts@postmark.net