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:
(Click on graph to enlarge)
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.
