Wednesday, July 28, 2010

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:

(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.


  1. Profits that don't trickle down are the information that should be headline news. If the fortune 500 companies would invest their recent profits in America, there would be no recession. Recent business profits could be the new stimulus the country needs. Greed,however, is the dominant force behind the failure of business leaders to help their country.

    Unchecked capitalism that mushrooms out of control is deadly to democracy. Capitalism can only survive if there is a cheap labor source. America started this concept with slavery, indentured servants, poor immigrants who manned the mines and other menial jobs for next to nothing. As America rejects illegal immigrants, it has to go overseas for its cheap labor source. When businesses do this, our country flounders. The right wing is trying to keep the middle class from rebelling through lies. Without honest journalism, honest media, the lies will be perpetuated. This is so very depressing. I just don't see a happy ending to this saga.

  2. Next time you read some master of the universe regaling high tech, cloud computing and all the other wonderful stuff American industry invests in to 'increase productivity' and hence profitability, take it with a very large grain of salt. Fact is the increase in corporate profits due to 'higher productivity' invariably are the result of moving jobs offshore where labor is cheaper and workplace rules and regulations overwhelmingly favor management over labor.

    While the rightwing attaches ulterior motives to virtually every imaginable government action the fact is government could learn a trick or three from the corporate world when it comes to dissembling, defrauding and deceiving.

    That's the reality of the 'free market'. A world where capital is free to flow unimpeded and where workers are expected to sit quietly and do as they're told. When they're told. And for how much.


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