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.