THE BOOK OF JOBS – Revised Global Edition

Earlier this week, Robert Reich posted this article, The Great Decoupling of Corporate Profits from Jobs. His observations and conclusions: Corporate profits are up; the largest 500 companies have stashed away an estimated $1 trillion in cash; but the winnings are not translating into jobs at home. Why?

American corporations are investing in regions where the profits are coming from: Overseas. They are investing in low-wage markets, investing in laborsaving technologies, paying dividends to shareholders or buying back equity, and rewarding themselves with fat bonuses.  Forget trickle-down economics, Reich says:  No amount of profits or tax cuts will create more jobs.

Reich offers a grim but accurate assessment of the current situation, but he hardly scratches the surface.

"Start-Ups, Not Bailouts,” says the eminently more-opinionated-than-informed columnist for the New York Times, Thomas Friedman, who is still stuck in the skunkwork days of garage start-ups that turned Apple Computer into a household name. What Friedman and others do not grasp is that the bristling days of Silicon Valley are forever gone.

In this BusinessWeek article How America Can Create Jobs, Andrew Groves, who served as Intel’s CEO from 1987 to 2005, knows what blunderbuss pundits do not; he knows his business:

American companies discovered that they could have their manufacturing and even their engineering done more cheaply overseas (…) The largest of these companies is Hon Hai Precision Industry, also known as Foxconn (…) Some 250,000 Foxconn employees in Southern China produce Apple’s products. Apple, meanwhile, has about 25,000 employees in the U.S. That means for every Apple worker in the U.S., there are 10 people in China working on iMacs, iPods, and iPhones. The same roughly 10-to-1 relationship holds for Dell, disk-drive maker Seagate Technology, and other U.S. companies [such as Dell, Microsoft, HP, and Intel as examples].

When Apple sells an iPhone, is it considered an American product or an import? How much of our so-called Gross Domestic Product is actually domestic?

Here’s an inconvenient truth. The next generation of whiz-bang products will also be made in Asia, and the high-tech sector that drove the American economy in the 1980s and 90s will no longer generate jobs at home. With 90% of the work force located overseas, a rose may still be a rose, but American products are no longer American products. For every consumer dollar spent, most of the revenue stream will support overseas economies and an overseas workforce.

Want more bad news? Alternative energy technologies – the so-called job-driving engines of the future (which include advanced batteries, photovoltaics, and wind power) – will most likely be outsourced too. For instance, all commercially produced photovoltaic panels, originally invented in America, come from China.  Lithium-ion batteries, the all-important component of the electric cars of the future, will most likely come from Asia:

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Yes, everyone knows Asian labor is cheap.  How cheap, you ask?  If it takes 10 overseas jobs for every domestic one to bring an American product to market, there is an inverse relationship in worker compensation.  For every dollar spent in America, you can always find someone somewhere who can do the same job for ten cents or less. An M.D. in Mumbai, for example, can read your MRI scan for one-tenth the cost of an American expert.  Yes, this is no exaggeration.  Every American job that can be exported WILL be exported … even M.D. and Ph.D. level jobs in the medical and pharmaceutical industries (which also means your highly sensitive financial and medical records, including your social security number and other personal data, are also going abroad). Why bother studying for an advanced degree when the only jobs left will be those that cannot be exported … flipping hamburgers or waiting on tables.

Why should American corporations give a damn about American workers when their customers are no longer on Main Street but worldwide.  Globalization has freed them from the encumbrances of citizenship.

A GHOST OF DEPRESSION PAST

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Fellow creatures above and below the waves: We have managed to retrace the route of the Great Depression and repeat the same mistakes as if we learned nothing from history.

Marriner S. Eccles served as Franklin Roosevelt's Chairman of the Federal Reserve from November 1934 to February 1948. In his memoir, Beckoning Frontiers (New York, Alfred A. Knopf, 1951), he offered his opinion of what caused the Great Depression:

As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation's economic machinery.

Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.

Sound familiar? In essence, Bush's economic policies created conditions similar to those that triggered the Great Depression. From 2001 through 2007, the American economy grew by 31%, but the increase in wealth was not fairly or evenly distributed throughout the economy. After-tax income for corporate CEOs grew 40 to 400%; whereas average income for middle class wage earners declined 3% during the same period.

Factoring in rising costs of energy, food, education, and health care, which rose faster than the base inflationary rate, what do get? A middle class that can no longer serve as the engine for economic recovery. Thus, the real reason behind our economic crisis is the concentration of wealth in the hands of the few at the expense of the many ... just like it was almost 80 years ago.