Letter from an angry reader
I find it absolutely stunning that the Yves post and MIT study below is considered big news. Four or five years ago, I saw the writing on the wall. Off-shoring, outsourcing…name of the game. All the blather about new technology was just that: blather—otherwise, how do we explain China? It uses cheap labor …as does Vietnam, Mexico…on and on. Apple and IBM are the poster children of the modus operandi. They are American companies in name only.
Eventually, I just gave up singing the song. All the big economic voices have their selling of corporate profit…. Globalization—poorly designed for all us schmucks. It was designed for the rich….end of story.
WTO rules? Ok: Last time. China played that WTO game by stiffing its own companies to lure the multi-corporations to set up house on Chinese soil. Chinese firms were taxed at twice the rate of foreign firms. Non-existent environmental standards in China, which lowered the cost of doing business. Unions? None. Lowered the cost of doing business. Cheap, slave labor. I could continue…but what is the use? And of course: monetary manipulation. Make cheap in China—sell high in the West. Where were the big economic voices?
And what did the U.S. do? Worry about the consumer stepping up to the plate!—banks charged uxorious rates for credit cards and loans. Extending risky credit was the name of the game. Get every last penny from the American consumer.
Sorry to get so annoyed. I saw all the stupid arguments…they were dodges. Clinton gave Phil Gramm a big wet kiss –and signed the Financial Modernization Act of 1999. Then he told us NAFTA was a win-win…. create jobs at home. Yup Yup. Then Clinton joined the lobbyist crowd and made his millions. Now we have Obama his loves the big CEO`s—
Obama’s efforts to stem outsourcing/offshoring have been silly. Obama’s solution? Cut taxes on corporations to keep them here. China gave tax free ten-year holidays to many corporations. O think he is going to match that? His strategy is classic economic stupidity…a knee jerk solution. And will O match the cheap labor costs? Will he match the low environmental standards? Will he call a halt to monetary manipulation? I suggest, play Name the Corporation who hates American. Name the corporations and the CEO who have shipped jobs overseas—only to send the goods back home.
Shame them. Make it difficult for them. Put a tariff on all goods made abroad by American companies—and exported here. Revisit the idea of what a corporate charter means. Take it away from corporations who consistently stiff us.
Close down tax havens. Get serious about them. Christ, if we think Iraq and Iran are problems….what about Bermuda? Close it down. I am serious. Send in the marines. If we cannot think of ways of really hurting Bermuda and similar uglies….we do not have a country interested in defending itself.
And change the rules of the WTO: Countries must have environment and labor standards. Countries cannot have a two-tiered taxation system—one for indigenous and one for foreign firms. All must be equal. No advantages to foreign firms in order to lure them. Otherwise, ditch the WTO.It will take a major revolution or an outright collapse to stop all this nonsense. And with Global warming, pollution, resource lost, etc. Etc…. we do not have much time.
We have to start thinking outside the box. And listen to the squeals from the very rich.
doug
the blogger message i got from trying the above link “Yves post and MIT study”
Your current account does not have access to view this page.
My clicking on the link to me to our blogger dashboard.
On topic, there was the Citizens United report on the Korea agreement current results.
9% decline in US exports to Korea, 2% increase in imports from Korea and a 30% increase in our trade deficit.
It notes that at the current rate of export growth for the US, Obama’s goal of doubling it will not happen until 2032. I’m going to assume this ignores the continued race of the western economies toward austerity. I have a feeling accounting for that might mean we never really get there in inflation adjusted numbers. Of course this does not account to the other 2 natural issues: global warming and natural resource depletion.
Stormy/Dan:
Try this link http://www.nakedcapitalism.com/2013/03/as-dow-sprints-to-new-high-the-middle-class-and-manufacturing-languish.html “As Dow Sprints to New High, the Middle Class and Manufacturing Languish” March 6, 2013
The MIT Study is here: http://web.mit.edu/press/images/documents/pie-report.pdf “Report of the MIT Taskforce on INNOVATION and
PRODUCTION”
I would agree with Stormy, this is old news. The red herring in this argument has always been “Labor” and the cost of it when it’s direct cost to the product is such a small percentage of the Total Cost. Too much emphasis on Direct Labor over Materials and Overhead. Non-manufacturing people who are buried in the macro side of economics lose sight of the Labor Impact.
BCG also has this report on manufacturing: http://www.bcg.com/documents/file84471.pdf “Made In America Again, Why Manufacturing Will Return to America Again”
stormy
it’s not a question of thinking outside the box. it’s a question of thinking at all. then it becomes a question of stopping the dishonesty.
the “only” question is whether our “leaders” are deliberately trying to destroy America, or if they are just so focussed on the next ill-gotten dollar that they don’t see what they are doing.
i am sorry if the “deliberately destroying” sounds paranoid. i really think it is the more plausible explanation. except of course for stupidity.
Links fixed….thanks Bill and Dan.
Great post by Stormy. Just wanted to mention other victims of this trend: the Asian workers exploited in sweatshop conditions in the name of greater profits.
Pretty funny: “uxorious rates” – That’s the rate you charge your wife, as best I can tell. I assume he meant usurious.
Otherwise, yup! It seems to take great minds to ignore the obvious.
I’ve been pushing for an invasion of the Caymans for a while now. We trumped up a war on Iraq, we invaded Grenada, surely we can trump up and win a war on the Caymans. We could just seize all assets there as terrorism money or some such garbage and apply them to the VA retirement and medical care fund. (I’d bet a lot of ex-military would like to retire to State 51, Cayman, with a nice comfy pension.)
Direct labor costs have consistently been the smokescreen thrown up by corporate titans, even though they very well may not understand why they do what they do. My own direct experience with this outsourcing issue revealed that direct labor accounts for only about 10% of the cost of the products we manufactured. That’s what we used as well in our break-even analyses we ran on our product lines. What lured corporations to make the shifts were the sweet tax forgiveness deals offered, the potential tax advantages inherent in transfer pricing scams, and the lower environmental and safety expenses possible. Basically, the corporate titans’ bonuses were goosed by dumping the externalities on society and cheating. Such a system is built on quicksand and can’t last for very long, even if that long might be counted in a handful of centuries. For the planet, even a society, that’s the blink of an eye. But, then again, corporate titans have always been short sighted if nothing else.
Vic
i think even 10% would look like a lot of money to a corp. especially if a large part of it can be converted into CEO paycheck.
i also “understand” that the great offshoring was driven by the high value of the dollar that resulted from Volker Fed policies in the 1980’s.
Coberly,
— ”The purpose [of the 1985 Plaza Accord] was to force the United States to devalue its currency due to a current account deficit.”
U.S. was growing a bit below three percent but ” the European nations and Japan were experiencing enormous current account surpluses as well as negative GDP growth…”
The idea was prevent greater international protectionism and ‘rebalance’ the world economy via concerted foreign exchange measures.
[more] – http://www.investopedia.com/articles/forex/09/plaza-accord.asp
I don’t think its mentioned but even then private FX traders might have disrupted the project, at least that’s what Walter Wriston alludes to in his ‘end of sovereignty’ book some years ago.
—–For Whom Does the Smiling Curve Smile?
– China is caught in the immiserizing growth trap———-
http://www.rieti.go.jp/en/china/04011601.html
juan
i dont pretend to understand it. it’s just what i read in Greider’s “Secrets of the Temple.”
seems to me he said Volker didn’t change his policies, despite pleas from Reagan, until they started to cause bank failures from the bad economy.
i like “immiserizing growth trap.”