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Posts Tagged ‘globalization’

I suppose we should have seen it coming when China launched its own version of the Apollo spacecraft – three Chinese astronauts circling the Earth – a few years ago.  It was at a time when the U.S. space program was, at best, going sideways, partnering with Russia, making short trips to the Space Station with the Shuttle. Not a whole lot of new things have been done by NASA recently, and now NASA’s most recent brainstrom, a return to the Moon, has been canceled. But this Chinese high speed rail deal is different. We’re not talking about the Moon anymore.

It has just been announced that China is in negotiations to build a high speed rail network connecting Europe and Asia. The trains that China will build, the fastest in the world, will travel almost as fast as a jet plane. People will be able to take high speed rail, using Chinese technology, from London to Beijing. China is now in talks with seventeen countries, among them England, Russia, France, and India to build the system.

So, how did the U.S. do in the competition for the job? Let’s be serious. Nobody even asked us. And why should they? We don’t make high speed trains. Our so-called high speed train, the Amtrak Acela, doesn’t come close to the performance of Chinese trains. We don’t build real high speed trains because we can’t. We don’t have the knowledge or the manufacturing capability. We are simply not a player in high speed rail technology. China is the clear leader with Japan a fairly close second.

It’s interesting that the U.S. press, to my knowledge, hasn’t even covered this story. I found it in the Irish Independent. So, does that mean that this isn’t part of the news that is worthy of print in America? Or does it mean something else? Could it be that our news media is unaware of this development? Or, could it be that, for whatever reason, they would just rather not tell us about it? I know; it sounds kind of paranoid, but I just went through eight years of Bush/Cheney, so don’t we all have a right to be paranoid? In fact, it seems that at least half the country is paranoid now, debating things like whether health care for all of us is good or bad (does that question even make sense?).

Meanwhile, China quietly pushes ahead on all fronts.  China’s economy is booming. China is already the primary manufacturer of most of the consumer goods that are sold in America. Oh, but that’s OK we said. It’s just low tech stuff. We don’t need those jobs anymore.  We’re a high tech country now. OK. So what high tech stuff do we make? Airplanes? Sure, if you count military planes (we’re really good at making things that kill people). How about commercial planes? Well, we’re down to Boeing now. Everyone else – names like Lockheed, McDonnell Douglas, Convair – not to mention Wright – they’re not in the business anymore. Most of the planes you see in the sky in America these days are built by the European company Airbus, or by the Canadian company Bombardier, or by the Brazilian company Embraer. Boeing is fading too. My guess is that the 787 will be its swan song for commercial aviation. The last of the American commercial airplane companies.

We need to understand the significance of this new announcement about a Chinese trans – Europe and Asia high speed rail system. The handwriting is on the wall. We have been eclipsed.  China is about to become the technological King of the World.  Under Bush we were obsessed with military attacks and military expenses and nothing else.  Not even Katrina could capture his attention for a microsecond. We have built the most efficient killing machines in the world, but we have an economy that is struggling to recover from banking disaster and a seriously decayed civilian technological manufacturing infrastructure that can’t begin to compete with China. Our only hope is that there will be a need for financing for this magnificent rail system. Our banks could make the loans and then package them as collateralized debt obligations (CDOs) and then, just in case the borrowers don’t pay back the loans our banks could buy credit default swaps from our insurance companies and, of course, then sell the swaps on the derivatives market. Or at least create an options market for the CDOs and swaps. We’re pretty good at that.  We just need to figure out how the average citizen makes money this way.

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Today, the national unemployment rate is at 10%.  So far, the Obama administration has spent only about $200 billion of the allocated economic stimulus money- about 1/4 of what has been appropriated. One might conclude that President Obama doesn’t have a sense of urgency about the country’s economic situation.  While the President’s attention has been turned to health care and Afghanistan, American’s have continued to lose jobs every month since he was elected – and for many months before he was elected. George Bush was equally unable to create jobs for Americans. Why?

First of all, we need to admit that the U.S. government does create a lot of jobs for Americans. About one half of our entire national budget is spent on defense. So, if you work for Lockheed Martin, Boeing, Northrop Grumman, General Dynamics or other defense contractors, or if you work at one of the national labs that does defense research, or if you are in the military – Uncle Sam has created your job. The problem of course is that these types of jobs do not create additional revenue. i.e. the only customer, by definition, is the U.S. government.  So the income that people receive from these jobs is sort of like taking money out of one pocket and putting it in the other – the total wealth of the country doesn’t increase – and by the way, for many people, the money to pay for these jobs is coming out of their pockets and going into the pocket of someone else. Remember – that is fully one half of all the money our government spends, and we have been doing that for many years.  It’s a big part of our economy – such as it is.

The rest of our economy is in a shambles.  We all know that.  That’s why we have been depending on a real estate Ponzi scheme to make money for us for the past several years. Now that the bubble has burst, it is pretty clear that we can’t re-inflate that particular bubble anytime soon.  We’ll have to find another way to make money for the part of the population that doesn’t feed off the defense budget.  And this is where the problem lies. This is Obama’s Dilemma.

There are many places we can turn to illustrate the roots of Obama’s Dilemma, but perhaps none are so illustrative of the problem as everybody’s favorite store: Wal-Mart.  The problem with Wal-Mart can be found in their motto: Save Money, Live Better Wal-Mart.  We all like to save money and it is difficult to find any place that sells stuff for less than Wal-Mart, but that is exactly the problem, and it started a long time ago. Next time you go to Wal-Mart see if you can find anything (except food) that carries the label “Made in USA”.

For those of us old enough to remember, we know that once upon a time television sets were made in the USA. So were refrigerators and other appliances; so were cars; so were airplanes; so were clothes; so was furniture. I guess you can see where I’m going here. We, well not exactly we – but the wealthy people who actually run this country and it’s government – found that they could make a lot more money by building stuff in China and India and Mexico and Costa Rica and Egypt and almost anywhere that much cheaper labor could be found. These “Americans” who own the multinational businesses that make our stuff exported our jobs throughout the world. While the American people played Ponzi real estate bubble, the wealthy class exported our jobs. We now live in a multinational economy but the problem is that we can’t compete because our wages are too high.  We can buy, but we can’t sell.

So, while businesses like Wal-Mart and many, many others flushed our economy down the toilet – while they made fortunes for themselves, most Americans were unaware of what was happening. Now we face a hard reality. The jobs are gone and they are not coming back. The bubble has burst and we can’t play bubble games anymore.  We are a bunch of high rollers who have spent our last few dollars and our credit is no longer any good at the banks.  We need jobs but, outside of more defense jobs, the government is unable to create anything that would have much of an effect.

So, President Obama dabbles with Green technology ideas – as if that will put ten or twenty million Americans back to work.  We have cash for clunkers and rebates for first time home buyers and other little tricks that give temporary surges.  It’s like when your car is out of gas and you add a pint of gas to the tank. It doesn’t take you very far. The question we all need to ask is this: can this thing be fixed?  The answer is no – at least not very soon.

Our wealthy “un-Americans” have enriched themselves at the expense of the entire country’s economy.  Globalization has been a boon to some Americans in the short run – but the short run is over – now we are in for a long-term disaster.  Globalization means flattening, that which is high is lowered (that’s us) and that which is low is raised (that’s China, India, and soon to be Africa).  A few of John McCain’s class will benefit but many, many more will suffer and our government has let this happen, slowly, over the past twenty to thirty years. There are many people to blame, but Obama is not one of them.  Even so, he will be blamed if he can’t solve the dilemma.

The problem is that the solution is not palatable to the wealthy, ruling class.  The solution is to scale back globalization.  The solution is to level the playing field via tariffs on imported goods so that American made goods can compete again.  Only then will there be jobs in the U.S. again.  Our economy won’t be healed until we once again build televisions and furniture here. We won’t have stability until we build quality cars in this country that compete in price with foreign-made cars. We won’t have good technical jobs in this country until we have more than one company building commercial airplanes and at least one company that builds commercial ships.

Wal-Mart is not the cause of globalization, but it is the poster child for the siren lure of cheap foreign imports. Our economy won’t be finally healed until the Mom and Pop clothing stores and hardware stores on Main Street can compete fiercely with Wal-Mart. However, that is something that is abhorrent to many, if not most, of our very wealthy Senators and Congressmen, their sycophantic lobbyists, and the hidden oligarchs of our society.

Even so, it must be done, and how to make that happen is Obama’s Dilemma.

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In 1783, as the American Revolutionary War came to an end and four years before work began on drafting the U.S. Constitution, two brothers, George and William Penrose started a crystal making company in Ireland.  They called it Waterford Crystal, named after the Irish town in which they lived.  A little more than 200 years later, in 1986, Waterford Crystal acquired Wedgwood, an English company famous for its china.  Yesterday, after almost 250 years of combined operations, it was announced that Waterford Wedgwood is being placed in receivership, i.e. they are bankrupt. A month ago the company was in talks with an American consortium that planned to move Waterford’s operations to Indonesia, where labor costs are cheaper.  It is said that Waterford management opposed moving Irish jobs to Indonesia though, and the talks fell through.

If you drive across America’s southland, states like Alabama, Mississippi, and Georgia, you can’t help but notice the gigantic, new, gleaming bright, automobile manufacturing plants. They all build cars for foreign automobile companies like Toyota and BMW.  They pay their American workers much less than the U.S. automobile manufacturers in the northern cities like Detroit and Grand Rapids.  Last month, General Motors, the recipient of a huge government bailout, announced that they are opening a new manufacturing plant in China where they will begin mass production of the Chevrolet Cruze.

It’s all part of a process outlined in Tom Friedman’s bestseller, The World is Flat.  Except, the world isn’t really flat – well, not yet anyway. There are still mountains and valleys and quiet corners of the world where excellence still prevails, even though it costs more. Waterford, Ireland is one of those places.  The question is: can Waterford prevail as the flood waters of globalization sweep over it, or is globalization an unstoppable economic tsunami flattening everything in its path until all the earth’s mountains are leveled and the valleys are filled everywhere with the same monochromatic sand and beach-washed debris?

Remember Pan American World Airways?  Remember Trans World Airlines?  How about Eastern Airlines, or any of the many other airlines that disappeared after President Reagan deregulated the airline industry?  Remember how the airlines actually served hot meals and your knees didn’t get crushed by the seat-back in front of you?  Remember when you could buy a television with a name like RCA or Zenith and it was actually built in the USA?  These and so many more companies are gone, either sold to foreign companies or simply vanished due to intense price competition from abroad.

The world is getting flatter, and that is good for some people – especially those who live in the economic low-lying areas, like China and Indonesia.  However, for the most part, America has been the economic high ground, and now, slowly but surely, as our businesses embrace globalization, the economic high ground beneath us is eroding.  It is, as John McCain likes to say, the redistribution of wealth – except, of course, he was referring to the redistribution of the rich people’s wealth by taxation and not the redistribution of the  wealth of the middle and poorer classes by the globalization of the rich people’s businesses.

Whether you buy Waterford crystal or Wedgwood China or not, whether you care about Irish jobs or not, whether you can remember the glory days of American aviation and manufacturing or not, listen for a brief moment as the Church bells of Waterford toll for their ancient crystal making industry, because they also toll for you.

Slan, Waterford.

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