Saturday, December 20, 2014

Will Cuba be the new Emerging Market?

Was Obama's reason for ending the 50-year-old embargo on Cuba based on "humanitarian reasons" — such as to bring home an American spy and so that Cuban families could reunite?

Or was big business behind Obama's decision to open trade relations with another dictatorship so as to create another "emerging market" to boost corporate profits — and to accommodate American companies who are seeking another pool of cheap labor?

Kentucky Senator Rand Paul, who agrees with ending the embargo on Cuba, recently said that he had grew up in a family that opposed communism — and that trading with China was the best way to actually ultimately defeat communism.

But did the U.S. — by opening up trade with, and offshoring jobs to, China defeat communism in China? Or did it enable China to now become the world's largest economy? (Senator Marco Rubio claimed on Fox News that Rand Paul (his fellow Senate Foreign Relations Committee member) "has no idea what he's talking about".

And speaking of China...

Will new trade relations with Cuba mean people like Sheldon Adelson and Steve Wynn will want to open new billion-dollar casinos in Havana? If so, will they have to bribe Cuban officials?

Also, as the largest private employer in all of China, and one of the biggest supply chain manufacturers in the world, Foxconn just announced that it will soon start using robots to help assemble devices at several of its sprawling factories in China.

Apple, as one of Foxconn’s biggest partners (assembling its iPhones, iPads, etc.) will be the first company to use their robots.

Foxconn said its new “Foxbots” will cost roughly $20,000 to $25,000 to make, but individually be able to build an average of 30,000 devices. The company will deploy 10,000 robots to its factories before expanding the rollout any further.

And speaking of robots...

From Scientific American: How the digital economy could lead to "secular stagnation" (a condition of negligible or no economic growth).

"The digitization of the economy may have far-reaching implications for the future of growth and employment ... After 2000, when the first wave of IT investment peaked, the demand for new work in the U.S. declined ... There is much that governments can do to prevent stagnation. They can redistribute income to those with a higher propensity to spend. They can also support investment into industries that might foster more new jobs [other] than digital technologies ... Self-employment might become the new normal. The challenge for economic policy is to create an environment that rewards and encourages more entrepreneurial risk taking. A basic guaranteed income, for instance, would help by capping the downside to entrepreneurial failure while boosting spending and combating inequality."

* My related posts on this subject:

Maybe (in the not too distant future) American companies could be buying "Foxbots” from Taiwan and using them in Cuba to put more Americans out of work in the U.S.? Which begs the question: Just how rich does the very rich have to be before they are ever satisfied? (I've already imagined what the top 0.01 percent's ultimate "END GAME" might look like.)

And speaking of the very rich...

What about all the American MULTI-billionaires who are now on government welfare? According to a new study by Good Jobs First, not only do Bill Gates, Warren Buffett (Berkshire Hathaway), Larry Ellison (who was named Greediest Person of the Year in 2014), the Koch Brothers, the Waltons (Walmart), Michael Bloomberg and Mark Zuckerberg (Facebook) all own companies that have received billions in taxpayer funds — and 99 of the 258 companies connected with the multi-billionaires on The Forbes 400 List have received such subsidies.

The report says: "Subsidies — in the form of business property tax abatements, corporate income tax credits, sales tax exemptions, training grants, infrastructure improvements and the like — are supposed to promote job creation and broad-based economic growth. Yet they are often awarded to profitable, growing companies that do not need tax breaks to finance a project --- meaning, that the subsidies serve mainly to increase profits.

Five of the 99 firms have been awarded more than $1 billion in subsidies, including Intel ($5.9 billion), Nike ($2 billion), Cerner ($1.7 billion), Tesla Motors ($1.3 billion) and Warren Buffett's Berkshire Hathaway ($1.2 billion).

Kenneth P. Thomas (author of Competing for Capital) writes:

"The new report points out that subsidies for investment increase inequality as average taxpayers subsidize wealthy corporate owners. Location incentives directly puts money into their pockets, which then has to be offset by higher taxes on others, or by reduced government services, or with higher levels of government debt. Moreover, as the study notes, despite the huge amount of these subsidies given in the name of "economic development", there has not been enough payback to raise real wages. In other words, if economic development has created so many new jobs, why haven't wages risen?" [Editor's Note: He also has a post saying Mitt Romney's Steel Dynamics took subsidies — not once, but twice — under Bain Capital's ownership.]

* Below are two tables from the 27 page report (in PDF format) CLICK IMAGE TO ENLARGE.

New study from Good Jobs

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