THE CURMUDGEON CHRONICLE - #282

THE CURMUDGEON CHRONICLE ©

AN IRREVERENT VIEW


Time Line: July 20, 2010
Date Line: Chicago IL

A message heard repeatedly creates conscious and unconscious awareness. Orkin TV commercials (as pervasive as they are disgusting) engender a dislike for bugs, just as reminders of the shortage of jobs make us aware that there is no quick fix for that problem.

“Jobs” has become a battle-cry for people who need them; for politicians seeking votes; and for pundits who want listeners. Oddly, the need for jobs is not voiced by those whose businesses hire other people to fill them.

Despite the setbacks caused by the current recession corporate profits remain solid. Executive compensation and dividends are stable or increasing: both are signs of business health. Nevertheless we can’t find our proverbial donkey with both hands when it comes to giving Joe down the block a job.

Joe is as literate (or more so) as his counterpart in China; as educated as his peers in India, his children’s need are equal to those of children everywhere, and his ability to produce goods and services is equal to or better than his competitors anywhere else in the world.

Why can’t Joe get a job?

There are reasons which have nothing to do with politics, cost of
production or currency manipulation. There is the speed of technological advances in the production of goods and the elimination of services performed by humans. That is followed by long lead times needed to replace the jobs lost with new ones required in the world of advanced technology.

Most important of all is the displacement caused by advances in medical and health sciences that keep us healthier and working past the time of retirement deemed appropriate by our grandparents. The continued growth in the over 70 population is what will ultimately break the Social Security, a system based on an average life expectancy of less than 62. The arithmetic does not work in a population with a life expectancy of 85.

We are left with the question: what about the 5 million jobs we lost that had nothing to do with technology? Are the Chinese truly better than us at making towels, socks, clothing, and everything that we buy on a daily basis? Is it truly cheaper to have them do that work?

The answers are No, and (in the short, intermediate, and long run), No.

China has proved that there is no product a country can make better than any other country, given equivalent materials, equipment, and specifications. “Cheaper” is a relative term. The social costs, loss of global market share; loss of self-sufficiency, and loss of strategic capacities add up to an amount that cannot be offset by any reduction in the manufactured cost of any product group.

Social costs include government’s loss of revenue: fewer employees mean fewer tax payers; more unemployment benefits, and higher taxes for business and those who are employed. Loss of global market share means fewer trading partners and inability to deal effectively with the trading partners we manage to retain. Loss of self sufficiency and strategic capacity means an end to world class status of US citizenship.

Clearly, Wal-Mart is on the wrong track for America when it destroys US suppliers and puts China in the driver’s seat. Big retail is not alone in short-sighted purchasing. Every bank that outsourced clerical activity to India also reduced the likelihood that its credit card receivables will be collected. Every brand of household appliances hat subcontracted manufacture abroad could cut its market by 70%. That is the percentage of the market represented by a fully employed US consumer base. Every technology company that licensed its technology abroad has effectively sold its “children”.

Our textile and clothing manufacture, computer and auto parts makers have largely outsourced their manufacturing operations and licensed their intellectual property. Our banks and brokerage firms have outsourced their fulfillment operations and our armed forces are ordering aircraft, vessels and strategic parts and equipment abroad.

There was a song in the Depression Era that had as its refrain
“What’s to do about it?
Let’s turn out the lights and go to sleep.”
Instead of going to sleep, we can rebuild the economy with technologies known to our work force, eliminating a learning curve for labor and management.

The “savings” that come from outsourcing are not generally passed on to US consumers; they drop to the bottom line and are distributed as executive compensation and dividends. A pair of socks costs between $1.50 and $5.00 just like they did when they were made in Tennessee instead of China.

We can not and should not legislate how a business is run. W can make it more appealing to do business here with US labor than working abroad.

We could start by making everything used or worn by federal, state and local governments on shore and with US labor. That would rebuild a dozen basic industries in hard goods manufacture, clothing, woolens, and cotton goods. It will re-create markets here and let us export from that base. It will save Social Security and keep the tax rates low.

With the US Government as the first customer the world cannot complain about our program being a “non-global trade policy”.
The precedents include China, France, the EU, and Russia.

We have an absolute right to defend ourselves and be certain of our supply sources at all times. The program will create a new class of entrepreneur /millionaire but why not? In any event it is simpler to control the privateers we empower than to keep a checkrein on the ones in the Orient.

Howard Stamer