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Global trends suggest U.S. is a bit cocky

I just spent two days listening to learned people warn how the winds of global change are battering the U.S. economy in ways we still fail to grasp.

All the gloom and doom caught me a bit off guard. I thought 2004 was shaping up to be a big boom year for the economy. Did I miss the forest for the trees?

Like blue-collar jobs before them, white-collar jobs are heading rapidly overseas to lower-cost countries. China is on a fast track to overtake the U.S. economy. The few new jobs created by the U.S. economy pay less and less at the very time that the U.S. deficit is soaring, endangering the American middle class and a way of life.

These are some of the key themes debated at the rarefied World Economic Forum, the elite and elitist annual gathering of world economic and political leaders that just concluded in Davos, Switzerland.

And these are also the main points aired this week at the International Economic Development Council, an organization of economic developers, at the Renaissance Vinoy hotel in St. Petersburg. As much as I enjoy Switzerland, I figure I saved my newspaper a bundle by getting the sobering economic news right here.

But when Davos and St. Petersburg are talking about the same concerns at the same time, maybe it's time to take a closer look.

Only two days ago, this newspaper ran the results of an annual St. Petersburg Times survey that found a record nine out of 10 area business executives and managers think the U.S. economy will improve this year. In the stock markets, the Dow nailed a 31-month high Monday, while the Nasdaq hit a 2{-year high. U.S. consumer confidence rose to an 18-month high in January, the Conference Board said Tuesday.

So what's not to like? Plenty, experts said at the Vinoy and in Davos.

"We used to be asked by corporate clients, "If I stay in the U.S., what states should I consider?' " asked Ron Pollina, a real estate economist and corporate site selection consultant who spoke Tuesday at the Vinoy. "Today they ask, "Should we move offshore?' The threat of losing jobs to workers overseas is now greater than losing jobs to another state," Pollina said.

Ever get the feeling that we were fighting yesterday's war with all those economic development battles to lure jobs from Pinellas to Hillsborough counties, or to grab jobs from Georgia to Florida?

"What I say today is not intended to make you feel good," Pollina told a room of economic developers from around the country. "Can we maintain the American dream?"

Compare Pollina's view with the remarks in Davos of John Chambers, the influential CEO of Cisco Systems, who argued rapid productivity gains from technology will raise people's standard of living more quickly, according to the New York Times.

The trick is that the very same U.S. companies obsessed with rising productivity will try to achieve those gains by moving jobs to India, China and other low-cost markets. So exactly whose standard of living will rise and whose will stagnate?

Another hot topic in Davos and the Vinoy is China. With 100-million Chinese looking for low-wage work, U.S. businesses are way past trying to compete against China based on costs. Pollina, quoting Automotive News, said General Motors, Ford and Chrysler last year urged some of their key suppliers to open plants with cheap labor in China just to pressure competing U.S. auto suppliers to drop their prices.

Wal-Mart, fixated on selling the lowest-cost goods, doubled its imports from China last year. The U.S. trade deficit with China, modest in 1990, surpassed what was our biggest deficit with Japan in 2000. The 2003 U.S. trade deficit with China topped $100-billion.

Within a decade, China will be the world leader in manufacturing, Pollina told the Vinoy audience.

Within a decade, China's economy will overtake that of Germany. It will surpass the American economy by 2041, according to a Goldman, Sachs study issued at Davos.

So whatever happened to the clever theory that the United States would naturally shed low-skill jobs and replace them with higher-end, better-paying jobs performed by well-trained "knowledge" workers?

It's not happening, says economic development analyst William Fruth, president of Policom Corp. in Stuart, Fla., who addressed the Vinoy audience on Monday. Corporations are more likely to dumb down jobs to fit the available work force than create more highly skilled jobs, he said.

"Only American arrogance could lead us to assume we could have an economy based on intelligence," Fruth said. Education and skill training are commodities that any country can develop and use. And such nations as India are taking full advantage of it.

Nasty, scary outlooks. Hardly what I expected to hear at a Vinoy meeting full of bullish economic developers.

Are we really fiddling, fat and happy, while Rome burns?

_ Robert Trigaux can be reached at trigauxsptimes.com or (727) 893-8405.

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