Monday, January 23, 2012

How to Lose Your Economy

Over the weekend, I read one of the best “big picture” articles I’ve read in a while. It is somewhat lengthy, so I’ll try to keep my comments brief (good luck with that) so that you’ll have some time to read it. From the New York Times (of course):

How the U.S. Lost Out on iPhone Work

”Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.

Why can’t that work come home? Mr. Obama asked.”

Disclaimer: I have Apple products running out my ears. Within reach right this moment is an iPad, iPhone and Mac Book.

Suffice it to say, I never read a good answer to the President’s question. I heard a lot of excuses. But the following really got my attention.

”Apple has become one of the best-known, most admired and most imitated companies on earth, in part through an unrelenting mastery of global operations. Last year, it earned over $400,000 in profit per employee, more than Goldman Sachs, Exxon Mobil or Google.”

$400,000 per employee? I had no idea any company did so well. That single line turned on a few light bulbs for me. I hope it does for you too.

”“Companies once felt an obligation to support American workers, even when it wasn’t the best financial choice,” said Betsey Stevenson, the chief economist at the Labor Department until last September. “That’s disappeared. Profits and efficiency have trumped generosity.”

Companies and other economists say that notion is naïve. Though Americans are among the most educated workers in the world, the nation has stopped training enough people in the mid-level skills that factories need, executives say.”

This is the major thrust I got from the article. America had the capability to manufacture anything. But we don’t anymore because it’s cheaper overseas. So, it becomes sort of a reverse chicken-or-egg problem. Which left first? Our ability to manufacture or our skills to do so? In other words, we laid off all the “people in the mid-level skills” when we moved our manufacturing overseas and now companies complain that we don’t have “people in the mid-level skills”. Personally, I find the argument ridiculous. And easily solvable if you can settle for a little less than $400,000 profit per employee. Which leads me to...

”A few years after Mr. Saragoza started his job (back in the 90s), his bosses explained how the California plant stacked up against overseas factories: the cost, excluding the materials, of building a $1,500 computer in Elk Grove was $22 a machine. In Singapore, it was $6. In Taiwan, $4.85. Wages weren’t the major reason for the disparities. Rather it was costs like inventory and how long it took workers to finish a task.

“We were told we would have to do 12-hour days, and come in on Saturdays,” Mr. Saragoza said. “I had a family. I wanted to see my kids play soccer.””

Ah ha. I see. You can keep your job if you are willing to give up your lifestyle (so the executives can better theirs).

”In the last decade, technological leaps in solar and wind energy, semiconductor fabrication and display technologies have created thousands of jobs. But while many of those industries started in America, much of the employment has occurred abroad. Companies have closed major facilities in the United States to reopen in China. By way of explanation, executives say they are competing with Apple for shareholders. If they cannot rival Apple’s growth and profit margins, they won’t survive.”

Once again, it is the same old race to the bottom of the barrel. But it is a fool’s race. If we cannot maintain the the standard of living here in the United States then Apple (et al.) will have no market. That’s the thing about being the world’s richest nation -- it makes us the world’s biggest market and finances the world’s biggest military that keeps those sea lanes between China and America open (amongst other things).

It’s the same question I’ve raised before about what makes a company an “American” company. I love Apple products. But I don’t love any company enough to allow it to ruin our county. You can’t come here, take advantage of our just and fair legal system, our stable political system, protected by our military and enjoy access to the world’s largest market only to ship all our jobs overseas.

Corporations want to enjoy eating ice cream without paying for the labor that makes it. They want to own the farm and own the cow but they don’t want to pay the guy that milks the cow or churns the cream. They want serfs. And if you aren’t willing to live like a serf then they’ll ship the milk off to somebody across the sea that is (for a time). And they still expect you to pay the taxes that maintain the transportation system for them.

Not only is it morally wrong, it is unsustainable (to use their own buzz word). Without jobs we won’t stay the world’s largest economy and we won’t pay taxes, without which we can no longer sustain the world’s largest military which provides the security for the world’s largest economy and all that free trade. The leg bone is connected to the ankle bone.

The solution is what has always worked. Despite what the Republicans would have you believe, it is commitment and intervention of the government that makes it all go. Our government intervened after Sputnik was launched (by another government) and we got serious about cranking out engineers. We can do it again. That’s how China is doing it.

”When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost.”

(Emphasis added)

It isn’t their overwhelming culture of capitalism that is threatening our economy. It’s China’s government using capitalism to further their national goals. It really isn’t that hard to figure out. Well, unless you’re a modern-day Republican that staked your career on the idea that government can’t do anything right.

Don Brown
January 23, 2012

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