Posts Tagged ‘jobs’

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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Of course they are, and therein lies the problem for the U.S.  A great many of the world’s multinational companies were at one time American companies.  They were located in America, they manufactured their goods in America, they hired American workers to make those goods, and they sold their goods in America.  Not any more.  It’s hard to find a large, completely American company these days – there are better profits to be made elsewhere.  So, the question that needs to be asked is this: are these formerly American companies helping or hurting America?  Does America benefit from their existence or does their existence harm America?

If we go back to the beginning, it is easy to see that the multinational companies arose out of two desires on the part of the owners: 1) a larger market and 2) a cheaper labor force.  Fifty or a hundred years ago this desire was satisfied by the movement of American companies from the industrialized north to the agrarian south.  Everything was still in the family, so to speak, and because these companies were still entirely contained within the boundaries of the U.S. no one could say they were un-American.  On the other hand, there were a lot of confused people in the north staring at vacant factory buildings, slowly being covered by weeds and blowing dirt, who were wondering only one thing: “Now what do we do?”

In time, the costs of labor in the American south became a burden to the business owners and they began looking for other, even less expansive ways to manufacture their goods.  Sure, they turned to mechanization, and that certainly eliminated a lot of jobs – thus increasing profits.  But machines can be expensive too.  And they break.  And they get outdated.  So the business owners began to look further afield and soon saw that there was a semi-infinite supply of extremely cheap labor in the developing world. These people would work for next to nothing compared to American workers. All that was needed was some sort of legal framework to enable the companies to exploit this newfound source of labor.  In time, with the help of the U.S. government obligingly creating favorable tax legislation and foreign governments doing the same, a new mechanism was created where companies that were based in the U.S. could manufacture their goods someplace else, but still sell them in the U.S.  Of course their American workers lost their jobs as a result, and therefore couldn’t buy their products – but that wasn’t a problem, there were plenty of other Americans who had jobs, and they could buy the foreign made products.  And they did – gleefully – because the products cost much less than they used to.  The company owners had passed on the savings to the customers (well, some of it anyway, they of course pocketed a lot of it too).

It wasn’t long before a lot of other companies caught on and a slew of multinationals were born, giving rise to the Celtic Tiger in Ireland, the Asian Tigers in the Southeast Asia, and the Hidden Dragon/Crouching Lion we call The People’s Republic of China – or just China Inc for short.  Everybody got into the act and what had once been American companies established roots all over the world.  And then a transformation happened. These corporations began to look at themselves and found a new identity – they weren’t American, nor were they Irish, nor were they Chinese – they weren’t anything except corporations.  And with this internal revelation they realized that they owed nothing to any country.  They no longer had any allegiance to any flag.  They had no responsibility for any particular population group.  Their only “raison d’etre” was to make money – profit actually – for their owners, and they did.  Lots of it.

It is now becoming clear that all the favorable tax treatment the multinationals have received from the U.S. and other countries has been shortsighted.  Sure, there was a temporary benefit for a lot of people when U.S. jobs were exported. A lot of stuff became cheaper to buy for those Americans who still had jobs, but eventually the whole thing caught up with us. We’ve exported way too many jobs and now we can’t afford to buy even the cheap imported stuff that comes in.  So we use our credit cards. And we get home equity loans. And we play financial roulette, buying and flipping houses.  Now, as our economy lies a smoking ruin, we look to the multinationals for help.  Will they hire us?  Will they create new jobs for Americans?  Hardly.  These stateless entities care only for themselves; they have become parasites rather than good citizens. They are by definition un-American.

So what can be done to save the American economy from being completely bled to death by these heartless leeches?  Tax reform.  Of course that takes a government that isn’t being paid by lobbyists for the multinational corporations, but that is our only hope.  The cure for the multinational problem is simple: give huge tax incentives to truly American companies, i.e. companies that hire Americans, manufacture in America, and sell their products in America.  As for the multinationals – tax the Hell out of them.  Then send every American a check (sort of like how the State of Alaska sends every citizen of Alaska a check based upon oil company revenues) – their share of the tax on multinationals. We could then use that money to buy goods made by truly American companies.

Oh, by the way, that’ll never happen…

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We have heard a lot about outsourcing, i.e. hiring people in other countries to do work that used to be done here, in the past few years. It would be understandable if some people thought that this was a recent phenomenon; however, outsourcing in America has roots that go deep into our past. I don’t think we called it outsourcing then; we just said that jobs were being lost as businesses were closing down. Here is an example:

Beginning in the 1800’s New England experienced a financial boom based upon the industrial revolution. Factories were built by the hundreds. The town of Lowell, Massachusetts was built as a model of the new industrial society, with dormitories provided for factory workers, many of whom were imported from other countries because these factories could not find enough labor in the United States. Factories throughout New England eventually manufactured almost everything you could imagine, from shoes, wool, textiles, and linen to structural steel, copper wire, and high tech abrasives. However, by the 1950’s and into the 1960’s the factories began to close and the model factory town of Lowell became a synonym for a slum town. The major manufacturing city of Worcester, Massachusetts saw factory after factory close, with perhaps the greatest blow coming when its massive United States Steel plant closed. But where did all the jobs go?

They went south. They went to states like North Carolina and others where new factories were built and a flagging economy, that had yet to recover from the Civil War, saw a boom that led to nearly full employment and the beginning of an economy based upon something other than agriculture. The industrial jobs of the prosperous north had been outsourced to the indigent south. Why? Because the factory owners had determined that as the cost of employing people in the north increased they were making less and less profit. The south was a source of cheap labor and therefore an opportunity to return to the glory days of maximum profit. The outsourcing of jobs from the north to the south was a bad thing for the north, but a good thing for the south, wasn’t it? It was also a good thing for the factory owners – at least for a while. What about the overall American economy? Was it a good or bad thing overall? You might say that the north’s loss was the south’s gain and I think you would be mostly correct. I think that, for a closed economic system like the eastern U.S., outsourcing was, overall, a neutral economic activity, although it certainly inflicted a lot of pain – and happiness- in specific places.

Moving on to the 21st Century, a new type of outsourcing has occurred. The new outsourcing sends U.S. jobs to foreign countries, where the workers are paid much less than American workers, but the owners of the companies can return, once again, to the glory days of maximum profits. In this round of outsourcing we see the textile mills in North Carolina closing and new ones opening in China, India, and lots of other places. In the north, which transitioned to a high tech based economy after the loss of the mills, we see high tech jobs being outsourced to China, India, and lots of other places. In the new outsourcing, American jobs have been lost in both the north and the south. There is good news, however. You can now go to Wal-Mart and buy a pair of $60 Levis for only $20.

Eventually this sort of thing has to have consequences. One of these is that the owners of the companies are now making truly massive profits. It is better even than the old glory days. Money is pouring into the U.S. Is this a good thing? I don’t think so because the money isn’t really going into the overall economy; it’s going into the bank accounts of the owners of the companies. Fortunately, there are service jobs at places like Starbucks that seem to be immune to outsourcing. Lots of skilled American workers eventually have to settle for something like these and now make just enough money to pay for a $20 pair of Levis at Wal-Mart.

The new outsourcing doesn’t have an overall neutral effect on the average American like the old outsourcing; it makes their quality of life worse. The reason the new outsourcing is a bad thing is that, unlike the U.S. economy, the global economy is not a closed system. It is an open system. Money that flows out of the U.S. economy doesn’t flow back into it – instead it just winds up in the bank accounts of the ultra-rich.

I suppose then that it is not correct to say that no one benefits from outsourcing, because they do… It just isn’t you.

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