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Greenspan tells house to shun protectionism Original Source Link: (May no longer be active)
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Greenspan tells House to shun protectionism
Says consumers' demands driving job-migration woes
By BARRIE McKENNA
UPDATED AT 8:28 AM EST Friday, Mar. 12, 2004
WASHINGTON -- Alan Greenspan says education -- not protectionism -- is the answer to growing angst over the migration of U.S. jobs to low-wage havens such as China and India, and he predicts that employers will resume hiring soon.
The U.S. Federal Reserve Board chairman said yesterday that companies are increasingly tapping global markets for labour and products because of relentless demand by Americans for ever-cheaper products.
"Retailers are afforded little leeway in product sourcing," Mr. Greenspan told the U.S. House of Representatives' education and work force committee.
"If consumers are stern taskmasters of their marketplace, business purchasers of capital equipment and production materials inputs have taken the competitive paradigm a step further and applied it on a global scale."
The outsourcing of U.S. jobs has become a contentious issue in the U.S. presidential race, with Democratic challenger John Kerry accusing President George W. Bush of doing nothing about the flight of jobs. Nearly 2.3 million jobs have disappeared on Mr. Bush's watch.
Just how thorny the issue is was underscored yesterday when the White House abruptly cancelled the planned appointment of a manufacturing czar after Mr. Kerry revealed that the leading candidate -- Nebraska businessman Anthony Raimondo -- owns a company that shifted jobs to China in 2002.
Mr. Kerry said Mr. Bush wasn't "really serious" about saving U.S. factory jobs.
In his testimony, Mr. Greenspan acknowledged that job creation has been slow since the economy emerged from recession in late 2001. But he said that all the signs point to a resumption of more rapid job growth is just around the corner. "In all likelihood, employment will begin to increase more quickly before long," he said.
Economists were stunned last week by a report that showed that the U.S. economy generated just 21,000 jobs in February.
But Mr. Greenspan said proposed measures to stem the flight of jobs overseas could threaten U.S. prosperity.
"These alleged cures could make matters worse rather than better," he said. "They would do little to create jobs and if foreigners were to retaliate, we would surely lose jobs."
Mr. Greenspan noted that unemployment has remained relatively constant over the last half century even as global trade has exploded.
"As history clearly shows, our economy is best served by full and vigorous engagement in the global economy," Mr. Greenspan said.
"Globalization is a very disruptive process, but at the end of the day it creates major advances in standards of living."
He pointed out that competition has spurred the United States to ever greater levels of "production, technology and advancement."
Rather than close its markets to the world, Mr. Greenspan endorsed extending jobless benefits to the more than 2 million Americans who have been out of work for at least six months as well as boosting funds for education and training.
"Anything that we do to enhance the skill level of the American work force is crucial to our long-term development and the stability of our society," Mr. Greenspan said.
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