In a capitalist society such as the United States, the economic principle of
"free markets" and "supply-and demand" compliments the
theory that consumers are "job creators", just as jobs that pay a fair
and living wage (which allows for discretionary spending), creates consumer
demand. Jobs that pay better wages will create greater demand --- as would be
the case if we were ever to raise the minimum wage. (The
Black Hole Theory of the Minimum Wage).
Consumer demand drives an economy. Outsourcing jobs to other countries
creates consumer demand in those countries, which in turn, also creates a tax
revenue stream for their governments, allowing them to create and improve their
infrastructure, build and train a military, and to provide the most basic and
more advanced services for their people.
Jobs provide the means by which men and women can earn a livelihood. Without
full-time jobs (paying a living wage), there is no consumer demand, no
discretionary spending, and a drastically reduced tax revenue stream for which
the government can operate. So why do governments allow for the outsourcing of
their jobs?
Robert Reich recently
wrote a piece about how global corporations use their inordinate power to
dictate the government's laws by threatening to take their jobs and investments
elsewhere; and how they wield their power to manipulate laws by playing one
nation against another --- determining how much they pay in taxes, how much they
get in corporate welfare subsidies and how much regulation they're subjected to.
"Global corporations are using every strategy imaginable to maximize their
profits; and powerful governments are strategically employing market access to
develop their economies."
Many of our most notable economists are now saying that long-term
unemployment is one of America's biggest crisis. But the Democrats have done
little to correct this, and the Republicans have blocked all their futile
efforts to so. Instead, the GOP's leaders have been more concerned about
abortion issues and repealing ObamaCare (37 times thus far), primarily because
the GOP wants to repeal the 3.8% surtax that ObamaCare imposes on investment
income (capital gains) for the
richest 400 Americans --- the people the GOP calls our "job
creators".
The Cayman Islands has over 92,000 registered corporations that control well
over $1 trillion in assets, but rather than focusing on offshore
tax evasion, (depriving our government of much needed tax revenues for such
things as disaster relief, both God and man-made), our politicians are spending
most of their time on feuding over political "scandals" and engaging
in meaningless and wasteful (and sometimes, very immature) political sparring,
rather than attempting to fix our job crisis.
Rather than focusing on creating (or saving) jobs, or denying the outsourcing
of jobs by our "job creators", the politicians have been in a grid
lock on issues such as immigration reform, which allows for more guest-worker
programs and H-1B visas --- which allows for the importation of more foreign
workers to displace more American citizens for cheaper labor. Big business
always uses the excuse that Americans lack the necessary jobs skills, but this
lame argument has been thoroughly debunked --- many times, and by many
sources.
As a matter of fact, in
a recent study just last month by the Economic Policy Institute, they found
that "the United States has more than a sufficient supply of workers
available to work in STEM occupations." And the same is even more true for
non-skilled occupations, especially in an economy with only 3.8 million job
openings for 11.8 million unemployed Americans. But there are nearly 18
million Americans who want a job but don’t have one --- those who are
officially classified as unemployed, and are actively looking for work --- and
about 6 million more who are no longer counted in the labor force, but who say
they’d like a job (preferably a full-time job that pays a "living
wage".)
Robert Mundell, a Nobel Economics Laureate, and one of the chief architects
of Reaganomics and a lifelong advocate of trade liberalization, now raises a
large question mark over the continued viability of "free trade".
Mundell now believes that outsourcing has gone too far and that America’s
formerly world-beating industrial corporations are in danger of losing their
ability to manufacture (such as when America once had the capability to quickly
and efficiently mobilize in preparation for World War II).
Forbes
reports that in an interview last week, Mundell had made a startling
admission, "It has been a mistake to let U.S. manufacturing run down so
low. While other nations have industrial policies to maximize their trade
benefits, the United States leaves itself open like a naked woman. A big problem
is with nations that may prove to be future enemies.” (Do you think he might
have been referring to China?)
One
example might be Boeing: Ten years ago, Boeing had a unit of 1,200 engineers
in their home State of Washington designing electronic controls for all its
airplanes, and a plant in Texas where another 1,200 people built the hardware.
When Boeing launched the 787 Dreamliner program in 2003, management dispersed
all those engineers, outsourced their work, then sold off the Texas plant. Now
Boeing is having major problems with its systems and suppliers, and might have
for many years to come.
Some countries, such as Germany, has an actual industrial policy that has
thoughtfully determined how they can be competitive and how the national
government can help companies. And Germany has a tax system that creates
significant incentives to export their products. In the U.S. we have a tax
system that has no incentives to export...but has incentives to outsource
good-paying jobs and to import cheap products, driving up our trade deficit ---
all which lowers consumer demand, decreases discretionary spending and cuts
government's tax revenues.
Forbes:
“The salient difference is that, in Germany, [they] operate within an
environment that precludes a race to the bottom; in the U.S., they operate
within an environment that encourages such a race.” And a
recent series of wage agreements show that German employers are acceding to
worker demands for higher pay after more than a decade of only modest increases.
New
York Times: "The recovery from the Great Recession has been slow, or
even nonexistent, in most of the developed world. But not in Germany. In
Germany, alone among the 27 members of the European Union, unemployment rates
for both older and younger workers are now lower than they were when the United
States slipped into a recession at the end of 2007.
Most U.S. publicly-traded companies are incorporated in Delaware, and are
governed by the "Revlon
Rule", which states that the management and the board must view
business decisions exclusively on creating long term value for
shareholders (such as Bain Capital: bankrupting companies with debt,
confiscating their worker's pensions, and then outsourcing their jobs to Asia).
Although, the rule doesn't explicitly say, "and may the host country and
their labor force be damned."
This might be a moral dilemma for legal entities known as multi-national
corporations, because there is no "multi-national patriotism". They
have no duty to non-existent borders, but only to the company officers and to
their large institutional shareholders --- such as the big banks, the private
equity firms and the hedge funds...who themselves have no duty to any given
country or their indigenous people.
"The link between the profitability of American companies and the
well-being of America is broken." - Economist Jared Bernstein,
regarding the Senate hearing on Apple
and tax avoidance.
Just last year alone, 25 of America’s top hedge fund managers grabbed
at least $200 million each. The hedge fund universe, one Harvard Business
Review commentary observed, has become a “crimogenic” environment that
encourages those enmeshed in it to ignore legal and ethical rules. "We’re
no longer talking simply about the occasional corrupt individual,” adds Preet
Bharara, the hard-charging federal
prosecutor going after Steven Cohen at SAC Capital. "We’re talking
about something verging on a corrupt business model.”
Les Leopold, author of The
Looting of America, argues that hedge funds have played a much larger role
in our ongoing economic woes than analysts have generally acknowledged. The
Securities and Exchange Commission has done nothing to curb their nefarious
trades, and the GOP (along with a few Democrats) is doing everything possible to
water-down the Dodd-Frank bill. And neither political party seems genuinely
interested in reforming the tax code --- or making these hedge-fund managers and
CEOs pay the progressive tax rate on 100% of their personal incomes (instead of
paying the much lower capital gains tax rate).
America’s Nobel Laureates had already been becoming increasingly uneasy
with the practical effects of America’s trade policies, which these banks,
private equity firms, and hedge funds have also greatly benefit from. In the
past decade, economics laureates in particular have issued statements on
everything from the Balanced Budget Amendment (they were against it) to free
trade with China (they
were for it). But many others believe that it was a economic disaster for
America when Bill Clinton sighed the free trade agreement with China --- not to
mention, the others that followed.
Daniel McFadden, who is a professor at the University of California at
Berkeley, was less worried about the short term than about the long term. “As
long as foreign investors are prepared to buy American securities, there is no
problem. It seems likely, however, at some point, that foreign investors will
repatriate their funds.” Translation: The dollar would collapse and U.S.
interest rates would soar. “The whole financial system is based on trust,”
McFadden added. “As long as we have trust, the elaborate house of cards will
hold up.” Translation: Our economy is an elaborate house of cards.
Ohio Democrat Betty Sutton (on October 25th, 2011) in a speech to the House
of Representatives, had said, "Every day in the United States, we are
losing 15 factories. Many big companies have not created jobs in the U.S.
Instead, they’ve taken many of their jobs to countries with the cheapest
labor, the least regulations and few employee rights."
Politifact
rated her statements as TRUE, and says the data shows there were 398,887
private manufacturing establishments of all sizes in the United States during
the first quarter of 2001. By the end of 2010, the number declined to 342,647, a
loss of 56,190 facilities. Over 10 years, that works out to an average yearly
loss of 5,619 factories. Dividing that by the 365 days in a year produces a
15.39 average daily number of factories lost. One
website says that just in 2011 alone, 2.4 million jobs were outsourced. With
3
million high school graduates every year, why would our government allow for
the outsourcing (or insourcing) of even ONE JOB?
The National Association of Manufacturers, the corporate lobbying group, has
a new
chair. NAM’s choice is the "latest hero" in executive circles,
Doug Oberhelman, the CEO of Caterpillar. Oberhelman uses tough-guy labor tactics
--- he shut
down one plant when workers refused to swallow a 50 percent pay cut, which
have sent Caterpillar profits soaring. But Oberhelman’s own
pay has jumped to $22 million. Last year, a Caterpillar worker in Illinois
(who hadn’t received a wage hike in 10 years) asked
Oberhelman when he could expect a raise. The CEO told him that all paychecks at
Caterpillar have to stay "globally competitive". Oberhelman’s chief
CEO rival is Kunio Noji of Japan’s Komatsu, who only took
home $2.1 million in 2012.
For years, if not decades, (or an entire century since the Triangle
Shirtwaist factory fire), when American corporations haven't been busting labor
unions, depressing wages, gutting benefits, laying off and forcing employees to
do more, replacing regular workers with "independent contractors",
using "bona fide occupational qualifications" to discriminate, imposing
"term-limits" on frontline employees and cutting
hours to escape paying full-time benefits, they have been outsourcing
American jobs all over the planet in their constant search for the cheapest
labor, lowest tax rates, and least governmental regulations (such as
environmental and worker safety laws).
Sending jobs to China has greatly expanded the Chinese economy (at the
expense of the American economy), and one factory who manufactures for Apple has
grown into another huge multinational (Taiwanese) corporation. Hon Hai
Precision Industry Co. is a company in the Republic of China (Taiwan), and
is also known as Foxconn Technology Group.
Hon Hai has 1.3 million employees, and exponentially, with their employees'
purchasing power, could have created an additional 2 million jobs. Hon Hai has
made a fortune over the years assembling iPhones and iPads for Apple Inc. According
to the Wall Street Journal: Hon Hai (Foxconn) mostly operates factories in
mainland China. It doesn't break down revenue from each client but analysts
estimate Apple accounts for 50% of its revenue, which totaled about $130 billion
last year. The company's growth was up 53% in 2010 when the iPad was first
launched. Hon Hai also assembles PCs for Hewlett-Packard, PlayStations for Sony,
and mobile handsets for Nokia.
Since 2010, Hon Hai's (Foxconn's) earnings growth has slowed as it battled
rising wage costs in China and discontent among employees. It moved some of it's
factories further inland, to more economically disadvantaged areas, to cut costs
--- just the way Boeing was making a move from a unionized plant in Washington
State (where they were headquartered for years) to a non-union plant in rural
South Carolina --- to avoid strikes for fairer wages. Hon Hai says they have
also launched efforts to improve working conditions after a spate of much
publicized suicides and workplace accidents over the last few years.
Hon Hai is moving aggressively to add new clients and is looking at ways to
diversify beyond "contract manufacturing" (such as with Apple).
Perhaps the biggest sign of the Taiwan-based company's larger ambitions is its
planned investments in media content and software. It is also reviewing plans to
sell its own Foxconn brand of electronics accessories to improve their profit
margins.
"As our production capacity has grown to such a large scale and existing
major brand customers (such as Apple) offer limited order growth, we need to
actively expand our client base to help increase our manufacturing volume,"
said one Hon Hai executive. (An American manufacturing executive in the United
States should have been saying this.)
Hon Hai has already made some headway with clients in China, such as
assembling smartphones and TVs for U.S. TV maker Vizio. The company is also
expanding its retail distribution partners to include RadioShack, which sells
large TVs under the RadioShack brand that Hon Hai assembles in China.
Hon Hai's ultimate aim is to be able to supply content for all of the devices
it assembles. The company is hiring software engineers for its research and
development center in southern Taiwan, who will focus on developing mobile
applications, cloud computing technology for servers, and applications for smart
watch devices. Hon Hai is also reviewing plans to make accessories such as data
transmission cables, headphones and keyboards under the Foxconn brand.
Maybe companies such as Foxconn wouldn't even exist today, if it were not for
these American business attitudes (From
the Atlantic): "The U.S.-based CEO of one of the world’s largest
hedge funds told me that his firm’s investment committee often discusses the
question of who wins and who loses in today’s economy. In a recent internal
debate, he said, one of his senior colleagues had argued that the hollowing-out
of the American middle class didn’t really matter. The CEO recalled, 'His
point was, that if the transformation of the world economy lifts four people in
China and India out of poverty and into the middle class, and meanwhile means
one American drops out of the middle class, that’s not such a bad trade.'”
Would it be fair to say that employers deliberately limit employee pay to the
minimum amount that allows them to consume just enough to minimally
sustain their lives, so that the employers can maximize their profits and CEO
compensation packages? How do corporations justify the millions they stuff into
CEO pockets?
"We’re just paying for performance", their standard refrain goes.
Absolute
nonsense, counters Michael Dorff of Southwestern Law School, the author of
the upcoming University of California Press book, Indispensable and Other
Myths: The True Story of CEO Pay. Dorff has a simple fix for escalating CEO
compensation: abolish “performance pay.” At best, he told
Dow Jones Newswires last week, stock options and other performance-pay
incentives have CEOs thinking more about their own personal rewards than
long-term enterprise sustainability. At their worst, “pay for performance”
deals encourage criminal behavior.
With
50% of the U.S. labor force netting only $27,000 a year or less, we already
have a situation where ordinary Americans can barely afford cheaper Chinese
goods. What happens when they can't even afford that? We should be setting
policies that help Americans buy OUR goods. It used to be that "Made in
America" was a matter of pride. Now almost nothing is made here if it can
be made elsewhere cheaper.
An important message for those who think that these large corporations are
our "job creators." A multi-millionaire venture capitalist, Nick
Hanauer from Seattle Washington, tells an audience at a TED University
conference, "I can say with confidence that rich people don't create jobs,
nor do businesses, large or small. Jobs are a consequence of a circle of life-like
feedback loop between customers and businesses. And only consumers can set
in motion this virtuous cycle of increasing demand and hiring. In this sense, an
ordinary consumer is more of a job creator than a capitalist like me." (The
full text of his very interesting speech is
here and the
video is at YouTube)
The Race to the Bottom (video
at YouTube) - "Corporate America is guilty as sin for human rights
violations all across the globe. In that they are complicit, they are no less
guilty than if the CEO took a whip to beat the back of a 12-year-old girl
himself; or if he had picked up a gun and shot and killed a foreign labor
organizer. Just like the kingpins of international drug cartels, American
CEOs know EXACTLY how all their blood money is being made." And right
now they
are looking to expand their operations in other places such as in Columbia
and Panama.
Ever since the factory fire and building collapse, Bangladesh’s cabinet
approved changes
in their labor laws, so the
relentless search by multinationals for new locations has taken on more
urgency --- from Cambodia to Vietnam to Indonesia. In Indonesian garment
executives say they have seen a steady procession of arrivals in recent weeks
and months, always
asking the same questions about political stability, labor laws, safety
compliance and wages.
Some newly opened apparel factories have started competing for scarce
seamstresses by offering free meals and free health insurance. Construction
companies are struggling to find enough workers to build all the garment
factories that are now being carved out of the forests of coconut palms, banana
trees and conifers that carpet central Java.
These are the same American CEOs that register their businesses in Delaware.
The Corporation Trust Center, located on 1209 North Orange Street, is a
single-story building located in the Brandywine neighborhood of Wilmington,
Delaware. This is CT
Corporation's location for providing "registered agent services".
It is home to over 6,500 corporations and more than 200,000 businesses who hold
addresses at this location as their registered agents.
The
New York Times notes that big corporations, small-time businesses, rogues,
scoundrels and worse — all have used this Delaware address in hopes of
minimizing taxes, skirting regulations, plying friendly courts or, when needed,
covering their tracks. Federal authorities worry that, in addition to the
legitimate businesses flocking here, drug traffickers, embezzlers and money
launderers are increasingly heading to Delaware, too. It’s easy to set up
shell companies here, no questions asked.
Its occupants, on paper, include giants like American Airlines, Apple, Bank
of America, Berkshire Hathaway, Cargill, Coca-Cola, Ford, General Electric,
Google, JPMorgan Chase, and Wal-Mart. These companies do business across the
nation and around the world. Many of these same U.S. corporations also hold
several offshore bank accounts. But here, at 1209 North Orange, they simply have
a dropbox.
Besides domestic jobs, America's other precious and vital natural resources
(such as oil and natural gas) are
also being exported to profit a small handful of individuals at the very top
of the economic food chain. What's next, the drinking water from our lakes and
rivers --- or the very air we breath?
From
South Korea to inner China, to Guatemala to Vietnam, multinationals are
continually looking for low-cost (but politically stable) "emerging
markets" to outsource their production, service and tech jobs. But
outsourcing is not just a problem for American workers, it's a global problem.
Jordanian farmers in Saudi Arabia are
also being displaced by Filipinos and Pakistani workers for cheaper wages.
Commentary: When their jobs (pictured below) are outsourced to other
countries, it's not just their lives that are affected, but all the lives
they touch...their spouses, their children, their parents, and all their
loved ones. Either pass laws to prevent corporations from outsourcing jobs (and
make them pay a living wage) --- or impose
a cap on CEO pay and tax their corporations the absolute
"statutory" rate of 35% --- and do away with all their tax loopholes
and corporate welfare subsidies.
Working less than 30 hours a week for $7.25 an hour can barely pay the rent
on a one-bedroom apartment, and nothing else. Among other things,
full-time jobs that pay a REAL living wage are needed for...
A trip to the movies, a six-pack of cold beer, and a large
pepperoni pizza would be "extra". Does any CEO really need two or
three 14-room beachfront mansions, a private Learjet and a 100-foot
yacht...especially if most of their employees are living in poverty and need
food stamps to eat? Is that what our Founding Fathers (who owned slaves) had
once envisioned for 50%
of the American work force? That college graduates (with $40,000 of debt)
would be working at the general store (Wal-Mart) or at the local restaurant
(McDonald's) to pay off that debt, while the college president was raking in a
million dollars a year? Is this the result of the economic principle of
"free markets" and "supply-and demand"? If so, then maybe we
should forgo some capitalism for a while and give Socialism a chance.