Ken Melvin on Nets

This one is by reader Ken Melvin…


Someone from country Xyz can immigrate to our country if they bring a couple million bucks and agree to start a business that employees fifty or more. — Implies that such an immigrant adds to the economy, doesn’t it? No doubt, dropping the couple million into an economy would have an effect, but starting a business that competes with an existing isn’t going to help much; might even be a negative. Say your invitee started a business and employed illegals to make a product that an existing business employing natives was making, and competed in the same market – probably a net loss for your country, no? Even if the invitee uses native labor to make a product that was already being made domestically, there’s no net gain to the Nation’s economy unless the invitee’s product either addresses a new domestic market, or is exported.

What’s America’s actual, for real, net from globalization/free trade? On the plus side, billions and billions, maybe trillions, increased return to investors, and oodles of cheap stuff at Wal-Mart. But, there are negatives. Suppose, for example, that more than thirty million American workers saw their wages or salaries fall behind an average of six thousand dollars per year for the past ten years? That’s $1.8 trillion. And, suppose, for example, that crime increased due to the reduced living standard for an additional cost to the Nation of, say, $200 billion over the ten years?

Where the plant stood, a plant that once – long time ago in 1980 – employed a thousand workers, now squats a better than nothing self-storage for storing all the stuff people buy that they don’t need, worth maybe $10 million. When it was operating and profitable, the plant was a sizable asset, worth say one-half $billion. Long since relocated to China, it’s off the Nation’s books, so the jobs. One-thousand jobs averaging say $30 k/year over ten years represent a loss of $300 million; plus the $490 million asset loss; multiply the two by the tens of thousands of plants lost and you’re talking tens of billions of more dollars lost to the economy.

Wall Street loves McDonalds. Pays dividends, provides cheap eats, and so it must be good. What about the rest of America? Is America better off without the waitress/waiter making union wages? What’s the net? Recall the fastfoodies’ hand wringing over an increase in minimum wage? “We’re providing entry-level jobs”, they said, i.e., they were training the Nation’s youth to be good future employees. Appears they meant the nations of Mexico and Guatemala. Ah, but we still have choices in restaurants; McDonald’s, Burger King, Jack-in-the Box, Taco Bell, … and either Chinese or Mexican. Again, what’s the net if a Chinese, or Mexican restaurant opens and runs the local coffee shop out of business?

In some cities, trains and buses always served the Airport. Now, BART and Muni-Busses serve SFO direct. But they didn’t for some fifty years. Oh it wasn’t that people didn’t want such service – getting to and from SFO was a big pain, but, you see; there was this hand full of parking lot owners, jitney operators, limo-services, taxi companies, … who, ever election cycle, greased the palms of local politicians and reminded them of the extended voting families that were dependent on the status quo. My point? The hiring of illegals in SF, too, is based on what’s best for the few vs. what’s good for the community. While, some Chinese illegals are working off indenture, and the Mexicans, Guatemalans, … are in a race to the bottom for wages, native San Franciscan laborers, painters, gardeners, roofers, waiters/waitresses, … are out of luck. And, ‘tis so because a few restaurants, hotels, … are greasing politicos palms while reminding them of the large Latin/Asian vote.

As I recall, John Kenneth Galbraith thought that a nation’s economy should serve the Nation’s populace. If I’m right about this, he got it right.

Am I placing too much blame on trade and immigration? Yes. The problem of resources was always there, and is huge. And, it would have been better if the Nation had had the time to adjust to automation alone and before globalization struck.


This one was by Ken Melvin.