Article

2010-07-06 Economy

Archived material is restricted to Rantburg regulars and members. If you need access email fred.pruitt=at=gmail.com with your nick to be added to the members list. There is no charge to join Rantburg as a member.

Posted by BrerRabbit 2010-07-06 00:00|| E-Mail|| Front Page|| [11128 views ] Top

#1 The article doesn't mention the outsourcing of US jobs overseas, something that can't be pinned on the US government.
Andy Grove, former head of Intel, wrote an article last week about this:
From his opinion piece in Bloomberg:

Today, manufacturing employment in the U.S. computer industry is about 166,000 lower than it was before the first personal computer, the MITS Altair 2800, was assembled in 1975. Meanwhile, a very effective computer-manufacturing industry has emerged in Asia, employing about 1.5 million workers factory employees, engineers and managers.

The largest of these companies is Hon Hai Precision Industry Co., also known as Foxconn. The company has grown at an astounding rate, first in Taiwan and later in China. Its revenue last year was $62 billion, larger than Apple Inc., Microsoft Corp., Dell Inc. or Intel. Foxconn employs more than 800,000 people, more than the combined worldwide head count of Apple, Dell, Microsoft, Hewlett-Packard Co., Intel and Sony Corp

You could say, as many do, that shipping jobs overseas is no big deal because the high-value work and much of the profits remain in the U.S. That may well be so. But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work and masses of unemployed? Since the early days of Silicon Valley, the money invested in companies has increased dramatically, only to produce fewer jobs. Simply put, the U.S. has become wildly inefficient at creating American tech jobs.

Posted by Anguper Hupomosing9418 2010-07-06 00:12|| 2010-07-06 00:12|| Front Page Top

#2 Like you AH, I don't like the fact that many of our jobs have gone overseas. But I think a little clarity on why is in order.

Or put another way, AH, the American labor force has become extortionist in their demand for income stream level and bulletproof security thereof, and that's ultimately the cause of this issue.

To the American public I say - critique management if you will, critique government and cynical politicians who have attempted to deal with the inevitable globalization of labor by ignoring or even promoting illegal immigration. Both of those critiques are valid. But ultimately the reasons for the offshoring of our work force are the poisonous and historically inaccurate notion that a certain standard of living and lifestyle and lack of worry or anxiety about said job are the birthright of any American who shows up to a job 40 hours a week, and the immature and unreasonable revolution of rising expectations that has paralyzed us since the 1950's.

Add to this the explosion of regulatory burden by government both in terms of money and time spent (which is a de facto form of pay to the employees - think OSHA, ADA, etc.) and you have a collusion between workers and government which is inimical to keeping employees here.

This attitude used to be confined to semiskilled and unskilled labor, but exists pretty much everywhere in the workforce. Management, CEO's tech jobs, everybody. We've all swallowed the Koolaid. Fifty years of almost every dispute going to the workers and management putting up only a token resistance because they, too, were making tons of money and didn't want to upset the applecart with stockholders imbued the workforce and management both with the idea that we could get everything we wanted forever. That this mentality eventually osmosed into the tech industry and a slightly or even greatly more skilled sector of the economy was inevitable.

I'm also not moved by those who clothe themselves in the flag - going to whatever lengths they must to claim that their little corner of the IT world is absolutely crucial to defense - in order to snow others into providing them with the income stream security they so crave. Yes, there are important defense secrets and capabilities, and they need protection. But the overwhelming bulk of the tech industry is not that. Certainly nothing like the precentage of those workers who claim to be indispensable.

There was a British MP (forget his name) who claimed that the basis of the financial meltdown in the West was quite simple; we have become accustomed to overvaluing the worth of our work in terms of the amount of lifestyle it justifies. I think that's a true statement in terms of the meltdown, but relevant to the offshoring issue as well.

I know this post will step on a lot of toes - my thoughts on this aren't exactly popular, I just hope that this time around I don't get threats of violence like I did the previous time I posted on this subject. I'm not happy about my fellow Americans being out of work or the nuts and bolts or electrons or photons of our industries moving elsewhere. But the truth is the truth. The reckoning has come. No more money. Not for credit, not for houses, not for a pay grade that is ten times what a worker in another country would get for the same product.

Yes, I know that other countries are less free, have less safe workplaces, are less environmentally safe, etc. That's a moot argument. I don't like that stuff, either. But even if those things were equalized, the sense of expectation and entitlement of Amercans is paralyzing.

It's time that Western workers in general and American ones in particular realize that if you do a job that lots of people can do, your labor isn't worth that much, no matter how skilled you are or how much education and training you have received.

Some people will be very rich, and have lots of stuff you don't. Get over it. In a scenario with realistic interest rates and pay grades it will only be a small fraction. It certainly won't include no mo uro, with the skill set I have. That's OK by me, my life is great without that stuff.

Instead of deriving all your satisfaction from owning houses and stuff and never having to worry about your job, relearn what Americans knew for most of our history in terms of the joy of community and religion and avocations and the freedoms we enjoy (even in the age of Obama). You can persist in wanting the 4000 square foot house with the fancy eyebrow windows over the garage and a new car every three years and the vacations you can brag about by the water cooler and the money to send all you kids to college (even the ones who probably shouldn't go) so that you can puff your chest out and feel good about yourself. Or you can get a grip and realize that the idea that 300 million of us can all have it all, all at once, was a dangerous and impossible dream. The good stuff in life isn't there. Time for America to relearn that.

Posted by no mo uro 2010-07-06 06:49|| 2010-07-06 06:49|| Front Page Top

#3 Time for America to relearn that.

I hope you're wrong, but I'm afraid you're right, and the learning process is going to be long and ugly. But we have the right guy in the White House to start us down the path of understanding.

Posted by Bobby 2010-07-06 07:36|| 2010-07-06 07:36|| Front Page Top

#4 The author concludes:

The West is at its watershed, not because of a threat from a less-productive society. The collapse of the West is not because Islam is at the gates. Islam is at the gates because of the collapse of the West.

Posted by Bobby 2010-07-06 07:43|| 2010-07-06 07:43|| Front Page Top

#5 Fifty years of almost every dispute going to the workers and management putting up only a token resistance because they, too, were making tons of money and didn't want to upset the applecart with stockholders..

Fifty years ago the 'stockholders' were not institutionalized corporate raiders who played with companies like tokens. Real stockholders had invested interest beyond trading someone with a low performing bottom line though sound in management for someone who exploited or looted the structure to make a pretty bottom line for that seven or eight figure bonus from the Board that is largely outside anything close to accountability. Strikes and industrial labor relations in the 50s meant some adults were still in management and could remain in management because they were backed by real stockholders. Those type of 'owners' have long gone, replaced by account managers which transmuted too much business from a process to create a product or service to one which, like the mortgage derivatives, simply represents something of value associated to its function in the form of paper.

Posted by Procopius2k 2010-07-06 07:56|| 2010-07-06 07:56|| Front Page Top

#6 uro,
Fifty years of almost every dispute going to the workers and management putting up only a token resistance

Your world-view seems to have been frozen during the heyday of the AFL-CIO and UAW, about forty years ago. What you say was true in the 1960s and early 1970s, but it hasn't been true for over a generation. The age of Big Steel and Big Manufacturing in this country, of mass unionization of US manufacturing companies, ended around the time Reagan broke the PATCO strike.

You speak about "every dispute going to the workers", but in fact this nation's private sector unions, with the sole exception of the UAW, are impotent. About 90% of private sector employees don't even belong to a union at all.

You're right that there's not a lot that can or necessarily should be done to halt globalized competition, and that unskilled louts don't deserve to make $40/hr for pushing a button all day-- as Young Barry learned when he left academe to organize the community in the mid-1980s in steeltowns in NW Indiana.

But the hard fact is that if this country does not find a way to sustain a large employment base of 50m or more well-paid middle-class families, it will cease to be democracy in any meaningful sense of the word. It will become an oligarchy, on the latin model, with a harried and shrinking middle class squeezed between a swelling underclass and two types of elites in control of a large and predatory state: a small coterie of crony capitalists, and a huge, untouchable public sector union apparat.

That process is underway now, in the biggest, most economically advanced and technology-rich state in the union. Apple and Google, Cisco and Oracle and Intel all make money hand over fist. They dominate their markets. And they're not hiring in any appreciable numbers (100 jobs here or there is nothing in a 100-million strong labor market). This is precisely because the tech model that we've chosen to follow is to outsource everything imaginable that need not be done face to face. The result is that the strongest, healthiest, most competitive part of our economy is not adding, and has not for over a decade now, added any jobs on a net basis.

Unemployment in Silicon Valley is way above the national average. Many who are hired are receiving less money than they did 5 years ago, or are working as contractors without benefits.

As Andy Grove points out, we are greasing our own guillotine.

When the globalization fanboys put forth a CREDIBLE, well thought-out plan for providing real, sustainable opportunities to this nation's middle class once again, then there will be some hope of avoiding oligarchy in this last best hope for earth.

Posted by lex 2010-07-06 08:14|| 2010-07-06 08:14|| Front Page Top

#7 No no uro,

We can have the nice houses, cars, toys and savings if we produce those things. We used to do so until the 70's. We used to even export the surplus around the world. There was a reason that until fairly recently, trade and tariff policy was geared to favor domestic production. Because it created wealth and advancement for the vast majority of citizens.

Then in the '70s and accelerating in the '80s and 90's (yes under Reagan), via stupid and short sighted trade and tariff decisions (globalization), a conscious policy has been in effect to undercut the productive middle class, substituting virtual slave labor from around the world. This has incredibly enriched a tiny minority who could act as middlemen in this transaction (from Wall Street bankers, chain retailers to politicians).

Since then real wages of the middle class has not grown, and are now falling, while the profits of outsourcing have accrued to a tiny financial elite. But as we have seen in the past year, this is all coming to a screeching halt. The middle class has been bled dry and they and the government are heading to bankruptcy.

Posted by ed 2010-07-06 08:47|| 2010-07-06 08:47|| Front Page Top

#8 I think you have it backwards.

For starters, a whole lot of the money the big businesses are paying the unions here (or not paying them when they don't have workers) don't really get to the workers, they go to union bosses, who get to manage that money as if it's their own.

Don't make the mistake of confusing the mobsters running the AFL-CIO with honest working people. If those of us out there in flyover country wanted to unionize, we could have, very easily, but we've spent the last forty years fighting that sort of thing, which is why union membership is at an all time low, outside of government.

I WISH I had time to describe how the whole "health benefits" and other benefits scams aren't increasing anyone's standard of living, or how health insurance both limits freedom and increases the costs involved.

The _Big_ businesses jumped into a whole lot of the regulatory overhead they complain about because it was useful to drive out of business a lot of their smaller competitors, at the same time they were contracting out their manufacturing overseas to avoid the negative consequences of _their own decisions_.

And you know? They relied a whole lot during that process on a free trade environment made possible by a lot of blue-collar conservatives who were voting for Republicans as the Republicans did nothing about their jobs being priced out of the market, against our will, by regulators and rent-seekers who give us no benefit.

In a really big way, that working class's support for free trade has been one of the major engines driving the growth of government and regulation in the west: they could come up with a regulatory environment and laws (supported by the big corporations and the unions in the NE, but NOT the working class as a whole, or even a plurality of it) that completely screw over people trying to manufacture in this country, but still allow them profits off of their imported junk.

Companies like HP and Apple and Microsoft and GM can dump their money into socializing the US economy, and count on the fact that Joe Redneck down in Mississippi is going to vote for someone who will vote against tarriffs so those companies can keep using Foxconn subcontractors to avoid the consequences of their own decision.

Pro-free-trade conservative working class people are failing the Prisoner's Dilemna.

If we didn't have as much free trade you wouldn't see HP (for instance) lobbying so much to raise the price of hydrocarbons (and therefore plastics) by trying to shut down tar sands ventures in Alberta. They can do that because they can have their plastic shit made in China from oil that's cheap there because China's state owned oil company, well, drills in countries ranging from Angola to Zimbabwe. (And Canada, and Venezuela, and Ecuador...)

In the absense of unilateral free trade advocacy from all of _us_, all of those large companies would have to stop backing the government regulations that strangle their suppliers here. They wouldn't be supporting Cap and Trade, for example. They'd be sending money to Sarah Palin's PAC and lobbying to allow drilling in ANWR.

Posted by Thing From Snowy Mountain 2010-07-06 10:24|| 2010-07-06 10:24|| Front Page Top

#9 I really need to organize that train of thought better, and rewrite that post, but I don't have time. Y'all will just have to suffer the word salad if you want to read it, I have to get back to work.

Posted by Thing From Snowy Mountain 2010-07-06 10:28|| 2010-07-06 10:28|| Front Page Top

#10 And finally:

The article doesn't mention the outsourcing of US jobs overseas, something that can't be pinned on the US government.
Andy Grove, former head of Intel, wrote an article last week about this:
From his opinion piece in Bloomberg:

IF you think that the government and the mountain of regulations and rent-seeking that have accompanied it didn't have anything to do with the outsourcing trend, you must be living a very sheltered life.

Posted by Thing From Snowy Mountain 2010-07-06 10:32|| 2010-07-06 10:32|| Front Page Top

#11 I didn't say outsourcing had nothing to do with the government's actions, just that it is not entirely due to them. 'Private enterprise' as currently constituted had a lot to do with it. Rent seeking will be with us forever, along with the business cycle.
BTW, the US is already an oligarchy on the Latin model, as mentioned in comment #6. I keep meeting recent college grads dispensing coffee at Starbucks & passing out towels at the local gym. Maybe it's not too late to turn things around. A different political leadership & getting this info out are two of the critical changes needed.

Posted by Anguper Hupomosing9418 2010-07-06 11:23|| 2010-07-06 11:23|| Front Page Top

#12 Re latin style oligarchy, one of the hallmarks of the style of governance in places like Argentina, Brazil, Mexico etc is the political class's deliberate use of debt default and currency devaluation as a tool of governance. We in Latin America North can't devalue our way out of this, as the $'s still the reserve currency, but our political class is determined to risk default via the only economic policy it understands: liquidity.

Both parties seek to flood the economy with artificially cheap credit as a way of stoking unsustainable asset bubbles that satisfy their cronies on Wall St (by creating hedging and carry trade opportunities) and that feed the public sector union beast.

Slight problem for this strategery: the little people on Main Street no longer can be bought off with cheap money because a) normal Americans have rediscovered yankee virtues like thrift and self-reliance, and b) the banks are sitting on their trillions that the Fed has redirected to their balance sheets, and c) the market for home-flipping (aka minor-league speculative opportunities for the little people on Main Street) has collapsed.

So now the political class has to do some thinking about fundamentals like how you create wealth, how you get quarterly earnings-obsessed multinationals to invest in job creation here in the US, how to end this policy of importing an illiterate underclass from Mexico etc.

We don't need to switch from Tweedledum to Tweedledee. We need a new political class altogether, one that recognizes the looming danger of oligarchy in this country and that is determined to halt oligarchy in its tracks.

Posted by lex 2010-07-06 11:52|| 2010-07-06 11:52|| Front Page Top

#13 Fine thread. Please keep it up, although you may want to dumb it down some in case anybody in the administration reads it.

A great anecdotal read on the subject is Factory Girls by Leslie Chang. As I read the book I kept thinking whether any American father would want his daughter to be working in those conditions. And I also found myself thinking, look at how much you can do when government regulation is close to non-existent. It's not a simple trade-off.

Posted by Matt 2010-07-06 12:04|| 2010-07-06 12:04|| Front Page Top

#14 We've had this argument before (we as a nation, I mean). Throughout the 1970s and 1980s the talk was of how to stem US menaufacturing decline, whether we needed an industrial policy and so forth in order to meet the challenge coming from... Japan.

While Japan's stagnation seemed to settle that argument-- against industrial policy/interventionism-- it did not. There's a huge difference between Japan and China: the Chinese accept and encourage foreign investment, and no industrial nation on the planet can undercut Chinese wages. Another huge difference is that the Chinese are determined to secure natural resources all over the world, and are not constrained by any desire to avoid the appearance of imperialism or economic aggression. They couldn't care less about "local content" or other ways of making nice to the host country. They have no constraints to speak of.

If we do not get clear-eyed and smart about the Chinese threat, then we are finished as a middle class, prosperous nation. That would be fine with Wall Street and its Washington whores, and with the non-profit sector that lives on the sufferance of gazillionaires' taxes and charitable donations, but it would be the end of American democracy as we know it.

Posted by lex 2010-07-06 12:33|| 2010-07-06 12:33|| Front Page Top

#15 Free Trade might be a great policy when you are a net exporter, but it's not working for the workers in the US anymore.

Under normal conditions, the current account deficit would force the Yuan/dollar rate down, which would help to correct the imbalance. But the peg supported by China is blocking that adjustment.

How about a tariff on Chinese goods specifically set to correct the FX imbalance, when it is out of a certain range?

Or consider Warren Buffett's Balanced Trade via Import Certificates.

Posted by KBK 2010-07-06 16:09|| 2010-07-06 16:09|| Front Page Top

#16 All-

Thanks for the comments, both pro and con, to my post. It's amazing how much attitudes have changed in a couple of years.

It seems like all here agree on many points, and disagree on a few others about this issue, but this thread is much more civilized and on a higher level than a similar one on the 'burg I was in two or three years ago. I had people threatening me and my family with physical violence for espousing the views I have on this subject. This thread is way more productive. Instead of feeling exasperated, I learned some stuff reading the responses.

Good stuff. I appreciate your posts.

ed #7

I must respectfully disagree with almost all of your post. Simply attempting to produce those things is no guarantee that the business will flourish or that there will be sufficent market at a given price point for the businesses to remain viable without subsidies. In essence, you are forcing (through the tax code, subsidies, and tariffs) your neighbors to pay the income you think you deserve without regard to the real market conditions. Would you like it if someone else with a marginal business model used the government to do that to you? I think not. The "wealth and advancement" you describe wasn't real if it was done by one group of people lobbying the government to intervene to make their own small piece of the economy more profitable. No different from farm subsidies, really.

Was there a conscious decision to harm the middle class, as you assert? Please. Evidence, if you will. That's conspiracy theory stuff. If the middle class would have stayed content with a REAL middle class lifestyle, by historical standards, many of those jobs would have stayed. Instead, much of the middle class watched HGTV and This Old House and decided they needed huge houses, saw TV and decided that they needed expensive vacations and cars, listened blindly to educators and told themselves that they needed to send all their kids to college or they weren't keeping up with the Joneses or being good parents, etc.

You're also way off base with the notion of offshoring being slave labor and that profits thereof being accrued to a tiny minority. Most of the people doing the jobs which have been offshored would not remotely consider themselves to be slaves. In fact, they enjoy a lifestyle that we in this ountry would have considered, well, middle class fifty years ago. And while some of the savings gained from farming out work to more reasonable and historically accurate labor costs did end up as corporate profits, much, much more of the "profits" from lower production costs accrued to people's retirement funds and, more importantly, the U.S. consumer in the form of lower cost goods. Remember that guy, the consumer? So few seem to. Everyone discusses management and employees, but they forget that the consumer has an interest, too.

Yes, things have come to a screeching halt. Bad practices by government and corporate America are certainly factors. But this notion of middle class being "bled dry" is exactly and precisely what I addressed in my first post on this thread. This is that revolution of forever rising ecxpectations I mentioned. It's simply a wrong notion. We aren't being bled dry at all. We are experiencing a reset to more normal historical levels. THAT is the explanation for the stagnation of middle class wages.

It's time for us all to realize this. If the never ending rising expectations don't go away, America will.

Posted by no mo uro 2010-07-06 17:26|| 2010-07-06 17:26|| Front Page Top

#17 We are experiencing a reset to more normal historical levels. THAT is the explanation for the stagnation of middle class wages

On that we can agree. Americans' biggest problem is that we have a badly educated proletariat that pretends it's middle class and therefore feels entitled to a fat middle class lifestyle that would put them in the top 2-3% by living standard of nearly any country outside of northern Europe.

But expectations matter. It's in the nature of Americans to expect that each generation have a better life than the one preceding it.

Perhaps one way to preserve this American sense of improvement/progress/uplift while accepting the freakishness of our post-WWII era hegemony and the consumer paradise it enabled would be to redefine success-- away from the amount of stuff owned or the square footage of one's house, and toward the strength and depth of our families and communities and the richness of our culture.

Our family doesn't go out to movies. We don't have cable TV. But my kids read lots of books and draw and paint and build all kinds of stuff that teach them about physics and chemistry and electronics-- like this DIY compressed air rocket launcher. I have less success than my father did, and live in a worse neighborhood than the one I grew up in, but I don't think I'm a worse father than he was or that my kids are deprived compared to the way I grew up. I still think America's the best place for them, and still have hope for my country and for them.

Posted by lex 2010-07-06 19:40|| 2010-07-06 19:40|| Front Page Top

#18 "But expectations matter. It's in the nature of Americans to expect that each generation have a better life than the one preceding it.

Perhaps one way to preserve this American sense of improvement/progress/uplift while accepting the freakishness of our post-WWII era hegemony and the consumer paradise it enabled would be to redefine success-- away from the amount of stuff owned or the square footage of one's house, and toward the strength and depth of our families and communities and the richness of our culture."

Thank you so much. lex, for putting into so few words what it seems to take me lots more to say.

Posted by no mo uro 2010-07-06 20:22|| 2010-07-06 20:22|| Front Page Top

#19 How about a nomination to put this thread in The Classics?. The amount of thought illuminated here gives so much hope. As bad as things are, the upside is that people are engaged. I'm cautiously hopeful and this thread illustrates that we still possess the knowledge to pull ourselves out of this, however painful that must be. The job is to put that knowledge to action. Job #1 is to deliver a crusing defeat to the statists of both parties.

Posted by Rex Mundi 2010-07-06 20:48|| 2010-07-06 20:48|| Front Page Top

23:48 Pappy
23:42 SteveS
23:33 Super Hose
23:28 Super Hose
23:11 Asymmetrical Triangulation
23:09 49 Pan
23:04 49 Pan
23:00 JohnQC
22:55 JohnQC
22:53 DMFD
22:51 Goober Goobelopolous
22:50 JohnQC
22:43 JohnQC
22:38 Ford Maude Elle
22:32 JohnQC
22:31 tipper
22:30 logi_cal
22:22 3dc
22:01 Halliburton - Mysterious Conspiracy Division
21:57 logi_cal
21:54 JohnQC
21:41 Frank G
21:39 Alaska Paul
21:38 Frank G
Merry-Go-Blog