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Obama’s (Steve) Jobs Problem: American corporations simply do not want to create good paying domestic jobs with benefits – and they haven’t for years.
February 20012
President Obama in his state of the union speech talked about “in-sourcing” and creating good paying jobs right here in America. The fact of the matter is that the economic environment here in the United States simply does not allow for this development.
Not only are the trade agreements and tax laws skewed against high paying American jobs – American corporations simply do not want to create these jobs.
Take Apple as an example. The Imac was made in the United States in Cupertino at a state of the art manufacturing facility. Now the various I-iterations – pad – pod and whatever are made exclusively in China.
Apple which has large cash reserves, larger than most countries in the third and second world, wants to have its workers making 70 cents an hour while working 16 hour days – and if you happen to be a child of 13 working those hours – no problem.
Apple has an opportunity right now to change the world - in the same way the iphone and ipad and ipod have changed music, communications and computing. It would be a choice made by the CEO and BOD in response to the current outcry over the modern day suicide inducing hi-tech neo-indentured servitude they are promoting through their global manufacturing chain.
Apple could, and should, move all of its manufacturing back to the United States and proudly proclaim the Apple Brand is an American brand. They have the cash reserves to do it, they have the market share, they have the skill set, and they have done it all before with the imac.
This change would foster a whole new paradigm of made in America manufacturing led by arguably the top American brand - Apple. Other global corporations would have no choice but to follow their lead back to domestic manufacturing after the market response.
Let’s look domestically for another example. General Motors, which was just named the top auto maker in the world by sales, does not want to create these jobs either. Through tough negotiations with the autoworkers there is now a two – tier pay system at its plants.
In a modern GM plant workers standing side by side doing the same job: Those under the old contract are making 60 percent more than new hires – and have benefits unavailable to the new hires.
GM has turned a good paying American job, the type Obama is talking about, one that can support a family and send the kids to state college, into a job that can’t even support a family.
The answer to the American job problem is a change in the economic environment. American corporations simply will not create good paying jobs with benefits for average workers under the present conditions. Even if you ask them nicely, which seems to be Obama's present strategy.
I can see no solution to this problem under the present business environment. What would be required is a change in trade policies, tariffs, tax policies, collective bargaining laws and new laws that address workers rights and labor conditions in countries outside the United States that produce products for this market.
The federal government would simply have to make it more expensive to make things outside of the country by pulling these economic levers.
This is not unheard of - BMW and VW both have manufacturing facilities in the United States that were built here years ago as a response to probable tariffs that would have made products built outside America uncompetitive price-wise.
Well either that or oil would have to go to $1,000 a barrel making intercontinental shipping untenable.
A Rubicon was crossed quietly in this country when Lincoln Electric, a case study company in graduate business programs years ago that demonstrated the might of American manufacturing, producing world class products with well paid American workers, packed up and moved manufacturing to Mexico after NAFTA.
DeJaVu all over again...
President Obama could not pass any legislation this past session of congress - one of the most contentious in history - except of course a free trade agreement - with Korea - Panama and Columbia - passed quickly by the same house and senate.
The bill originally conceived by Bush II will primarily gain access to these markets by U.S. Wall St. firms and American farm products - while enabling Korea to flood the U.S. with $7 billion worth of manufactured goods.
This agreement was opposed by Clyde Prestowitz (Regan Commerce Dept Official) who felt it would cost U.S. jobs in manufacturing - and organized labor which pointed out that both Panama and Columbia have opposed workers rights - with 51 assassinated Columbian union organizers last year as evidence.
Panama is a tax haven that hosts off shore accounts like those used by Mitt Romney to shelter income from U.S. taxes and this agreement will let Wall St. firms into this market.
American companies are all playing on the same pitch today and they are doing what is best for their shareholders under the rules as they are. Unless the pitch is changed there will be no creation of well paying domestic jobs in America.
The present pitch is a self inflected wound on the economy, an "own goal". Well paying American jobs with benefits, are simply not necessary under the rules as they are, and to go down this path now would only limit profit and shareholder value.
More and more American corporate giants like Apple and Google are looking like modern day privateers. They roam the world under their own flag, extorting local economies - accumulating swag - and burying their booty in secret troves around the world free of taxes and accountability.
These days when we look at our email inbox we immediately know to delete any messages with "free" in the subject line. You know that it will be an outright scam and rip off, or at best that it will end up costing you dearly in the end.
We didn't have the internet back when Bill Clinton passed NAFTA and the free trade agreement with China...
Taking a closer look at this point in time:
The free trade agreement with China was essentially a gift to Sam Walton, an Arkansas native, and his empire Wal-Mart (today Walton's heirs have more calculated wealth than the bottom 30% of the U.S. population - $70 billion). To this day the biggest shipping line in China is devoted to bringing goods from China to sell at Wal-Mart in the United States.
No wonder the American negotiator who fashioned this free trade deal for the Chinese - which allowed tariffs of 25% on imports from the U.S. to China and allowed the Chinese to peg their currency to 50% of the dollar creating an effective 75% tariff on imports from the U.S. to China - while imposing no such limits on Chinese exports to the U.S. - is well know and admired in China today - a celebrity - a rock star - people request autographs when this individual shows up there!
NAFTA was totally opposed by Clinton when he was running for president, then when he was elected suddenly it was a good idea and, pressed by the auto industry, he pushed and passed the treaty. Ross Perot heard a big sucking sound when the trade treaty passed - just one example - all the motors for the popular new GM (a company the U.S. taxpayers recently bailed out to avoid corporate bankruptcy) Camaro are made in Mexico not the United States - while Detroit suffers record unemployment.
Around this time Clinton's treasury secretary Bob Rubin, a (more like THE) Wall St. insider, pushed and passed the repeal of the Glass-Stegal act with the Financial Reform Act passed on the last day of a lame duck congress. This set the stage for CDS's and CDO's and all the other private derivatives and mergers that Rubin and Greenspan championed.
The two efforts met and energized each other shortly and became the great recession:
The Chinese were sending boats full of stuff to sell at Wal-Mart to America and we were sending boats full of American dollars back to China as the free trade agreement took effect. The Chinese took these trillions of U.S. dollars and bought the safest investment they could think of - short term U.S. treasury bonds - bidding up short term rates - and lowering long term rates relatively - inverting the yield curve - supplying low rate long term credit for - you guessed it - mortgages. And so money met deregulation and financial engineering and the world economy blew up as a result.
President Bush II passed a bankruptcy reform bill pushed by Wall St. as the bubble was inflating (to his credit even Bill Clinton felt this bill was too draconian an refused to let it pass). This change has essentially made it impossible for average joes to discharge their debts (court enforced re-payment plans go into effect) while big banks' debts were essentially forgiven by the federal government under a Bush II program - TARP - also written by a (again THE) Wall St. insider - Paulson - so they could avoid bankruptcy.
Today sages like Tom Friedman and Eric Schmidt from Apple preach that education, or the lack of it, is the reason people are unemployed. Education has played a critical role: All the people mentioned above in this short history were highly educated in the best schools - and their plans were backed by the intelligencia from MIT, Harvard, Stanford and elsewhere. Their hubris collectively caused the biggest collapse of GDP since the great depression - and will cause GDP to come in trillions below its potential for years to come - creating a state of permanent unemployment for tens of millions of Americans.
Just like an email scam, we were promised something for nothing - Free Trade - Free Markets - and it ended up costing the average American dearly in the end.
There is no free lunch.
A sobering thought.
Exactly what does America do best?
January 2012
I recently pondered this question and tried to do a bit of research on it but evidently I am a member of a select group – no one seems to have looked at this topic in a manner that takes into account the concept of bounded rationality.
It is a large topic, but what does America do best? Let’s take a stab at it:
1. Cultural Products – those based on the popular culture of the U.S.A. – the zeitgeist…
This is probably the one area that we truly dominate the world market - and the "mind space" of the world. Oddly even as the country itself is in decline, based on new poverty figures for example, the world cannot get enough of the idealized image of the country, or rather, the mainlining of what America presently thinks is” cool”.
Let’s include movies, popular music, video games, books, television programs and lowbrow performing arts. No one can seem to top us in this category. Selling the idealized American dream – or perhaps the stuff that represents American’s dreams.
Selling the reality of the crashing American dream would be a bit more problematic.
2. Industrial Conceptual Design – the cool stuff.
Obviously Apple comes to mind here – but we need to include Microsoft here as well. When we do it right we do it right. The Germans, for example, may have the old world brands like Porsche tied up - but when we try we win this competition. It is important to note that much of the industrial design attributed to other countries actually originates here – the Japanese automakers for example have all had their design arms based here in California for years.
Again a soft skill – culturally biased it would seem. China has industrial design as well – but have you ever seen a product designed in China? Well we don’t have a lot to worry about there.
3. Web 2.0
Well Al Gore may have invented the Internet but America dominates the medium. I cannot think of a single country that has made a significant contribution here other than the United States:
Amazon
NetflicksWe seem to own this space. When we focus the gigantic force of American venture capital, technical education and the ability to fund losing propositions until they become viable stock offerings – with some going on to actually eventually earn a profit - again we can't lose.
4. Wage war and build weapons systems.
Well this is indisputable. We are now the world’s superpower and we can and do fight multiple wars globally and simultaneously. Our weapons systems are second to none and sold throughout the world.
The fact that we can lead the world in this arena with American products, engineering, technology and domestic manufacturing proves all that all the economic theory de jour global-ist nonsense does not hold water.
You may argue with the results or motives but the facts re the facts. Like the space program of the 1960’s this demonstrates that when the United States gets totally behind a program, both politically and economically, it will dominate the space.
What did not make the list?
1. Financial services – Once the envy of the world – now not so much – more like the bane of the world.
2. Healthcare – Good but uneven – cancer treatment state of the art – basic care for reoccurring illness – not so much- accessibility – depends – now we are experiencing shortages of crucial drugs as well…
3. Multinational Corporations – Not so much with the global recession – none saw it coming or seem to see a way to profit from it without some sort of bailout – cash - trade agreement – or tax favor:
An example of Apple executives talking to president Obama after his famous last supper with Steve Jobs as reported by the New York Times...
"At dinner, for instance, the executives had suggested that the government should reform visa programs to help companies hire foreign engineers. Some had urged the president to give companies a “tax holiday” so they could bring back overseas profits which, they argued, would be used to create work. Mr. Jobs even suggested it might be possible, someday, to locate some of Apple’s skilled manufacturing in the United States if the government helped train more American engineers."
By CHARLES DUHIGG and KEITH BRADSHERNew York Times
There is also some argument as to whether these are in fact American companies – or just companies that choose to have headquarters here and list on our stock exchanges - with workers in China or elsewhere - and profits sheltered from American taxes overseas - see Google, Apple et al.....
4. Government Services – Other than the social programs of the new deal – there seems to be little the government can do right in this area – the social contract is in shreds – and the safety net – well we are working without a net right now - and the deficit presently equals GDP - with essentially no new government services for the average American.
5. Funding elections – Not sure again if this is entirely American any more - although there is no doubt we lead the world in this category – with recent supreme court rulings and multinational corporations and lobbying does anyone really know who is funding whom?
6. Education - Although students come from around the world to attend our universities for our average citizens they have become little more than debt factories for the financial sector. Outcomes are not meeting expectations for our university graduates. Primary and secondary education is uneven at best - despite the new testing programs in place. Six sigma appears to have reached too far in this case and proposes no solution. A new approach is called for.
7. Farming - Yes America feeds the world and devotes more food production to fuel than seems morally right, but is it self sustainable? The recent challenges to the American farm subsidy program at the WTO point out a troubling fact. Would we lead the world without the government support? Maybe - but perhaps what we do best here is use tax dollars to support prices.
Special Award for missing in action – total lack of leadership:
The American Free Press - once the envy of the free world – is now being outdone by twitter feeds. It would seem that at a time when the press has more to cover than ever – the great recession - ows – banking scandal et al – it wants only to regurgitate political press releases, restate obvious financial and economic data and discuss both relentlessly with one so called expert panel after another - without creating a shred of original content.
In summary it it easy to see that when America stays domestic and focuses its efforts on a goal with government, finance and the private sector all pulling in the same direction we will dominate that space.
Lack of leadership, or should I say lack of leadership with an appropriate goal set in mind is the problem. Leaders who have focused on global-ism and deregulation have done a great job reaching those goals. However, if you look at the results much of what has been passed off as deregulation and free market capitalism is actually corruption and, operationally defied, more likely criminal activity on a global scale by our politicians and business leaders.
What is required is a new, appropriate goal set for the times, and the appropriate leader to inspire and execute - steering the gigantic ship of state into the wind - taking the country in a new direction with a new sense of integrity – and willingness to root out corruption.
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