Manufacturing On Planet Economus

Economist Christina Romer had an op-ed in the NY Times this weekend, Do Manufacturers Need Special Treatment? The question that keep coming back to me is why did she feel the need to write an op-ed to diss manufacturing? Is it just an economist thing? Or is she, like so many economists, from another planet?
In her op-ed Romer claims those of us who argue for a national manufacturing policy do so out of “the feeling that it’s better to produce “real things” than services.” But, she says,

American consumers value health care and haircuts as much as washing machines and hair dryers. And our earnings from exporting architectural plans for a building in Shanghai are as real as those from exporting cars to Canada.

Here is the difference: We can’t just keep servicing each other. This “service economy” thing hasn’t worked out so well here on Earth, and now we have a huge trade deficit. It is “better to produce real things” because that is what you sell to others to get the money to pay each other for haircuts (and scissors).
Once You’ve Got It It’s Hard To Lose It, Once You Lose It It’s Hard To Get It Back
Manufacturing brings so much along with it that entire economies have been, are and will be supported. China isn’t making its living by cutting each others’ hair. Neither is Germany, or other countries that have realized the importance of manufacturing and manufacturing policy to an economy.
Manufacturing brings with it all the businesses in a supply chain, it brings the research and innovation that manufacturing requires, and it brings a lasting real infrastructure that requires enormous investment to duplicate elsewhere before competition is enabled. Today we have a tremendous current account imbalance that resulted from the terrible trade deficits suffered since we were invaded by this crowd from planet Economus, who told us we don’t need manufacturing – that we should transform ourselves into a “service economy.” And it will require enormous investment to restore the ecosystem that we allowed to escape to other countries in that period.
Once you’ve got it, it’s hard to lose it, and once you lose it, it’s hard to get it back. Not so much with services.
Romer’s Three Straw Arguments
Romer sets up three arguments made of straw for helping manufacturing, only to knock them down:
One: Market Failure. Romer says “government intervention” is only justified when you can demonstrate “market failure.” In essence she says markets must make our decisions, not We, the People. “For example, when competition in a market is limited, antitrust laws that prevent monopoly can be helpful.”
Romer writes that another “market failure” comes when it can be shown that there is a benefit to having clusters of businesses. When benefits leak beyond where a company is putting their money then tax breaks and other government help may be due.
Romer knocks down this justification for government “intervention” with two arguments. She says, “large clustering effects have been hard to find.”
Perhaps cluster effects don’t have benefits on planet Economus, where Romer apparently resides, but on earth all you have to do is look from the development of the auto industry in Detroit to the development of the semiconductor industry in Silicon Valley to understand that yes, clustering effects matter.
Romer also says if clustering does brings benefits why single out manufacturing for government benefits when other sectors also benefit from clustering? Well, of course we shouldn’t just help our manufacturing if it can be shown that government involvement boosts the businesses of We, the People in other sectors.
Romer also says there is market failure if a learning period means that future companies benefit form work done by early companies. Romer says, “ a study of the semiconductor industry found that although learning by doing was substantial, most of the rewards went to companies doing the early investing.”
The Silicon Valley Romer talks about is located on that planet Economus. The Terran Silicon Valley I live in has seen many, many startups fail, only to see later companies take up their ideas and succeed.
Romer concedes that we might need manufacturing to make things with which to defend the country, justifying government intervention in markets. The argument that we need a strong manufacturing base here in case of war must be taken seriously. But she says it still doesn’t follow that all manufacturing deserves special treatment. Which industries are truly essential in a war effort, she asks? I guess she asks this is because on planet Economus service industries are essential to a war effort. On Economus you apparently win wars by cutting each others’ hair.
Two: Romer’s second case-of-straw for “government intervention” is to create jobs and reduce unemployment. Romer says, “Unfortunately, those effects are probably small.”
In the 2000-2009 “service economy” decade we lost 5 million manufacturing jobs, more than 50,000 factories, and the hope to capture several industries of the future. Those are not small effects. And the effects on the surrounding communities are severe.
Romer rightly says that the current problem with the economy is lack of demand. She prescribes tax cuts for households, help for state and local governments and investment in infrastructure. (The old “taxes take money out of the economy” argument?)
But then she says that a tax break to encourage insourcing of jobs in manufacturing won’t create demand so we shouldn’t do it. It might make our goods cheaper to export, but challenging China’s currency manipulation would do more, so we shouldn’t do this. This is the old “don’t do anything if it doesn’t fix everything.” We need to do all of these things, and more.
Three: Romer’s third straw argument is income redistribution. Because manufacturing jobs “are seen as” better-paying “for less educated workers” then manufacturing is a way to distribute more income to people with less education. But no, she says, “Increased international competition has forced American manufacturers to reduce costs. As a result, the pay premium for low-skilled workers in manufacturing is smaller than it once was.”
Romer says government should help people get a better education instead of helping create jobs for people who do not go to college. Perhaps on planet Economus all the IQs are above average, but on Earth the average IQ is 100, and not everyone can or should get a college degree. If we send more people to college without bringing back manufacturing, we’ll just have more unemployed people with college degrees than we do now.
Romer also says, “If increasing income equality is the goal, it might be wiser to put money into infrastructure than to subsidize manufacturing. Construction also pays good wages, but with lower educational requirements. And America’s infrastructure needs are enormous.” Well, yes. But again this is the old “don’t do anything if it doesn’t fix everything.” Do those things. And revive American manufacturing.
Why is “the pay premium for low-skilled workers in manufacturing … smaller than it once was”? Here is why: Before we became a plutocracy we were a democracy. When We, the People had a say we demanded good wages, benefits, good working conditions, a clean environment and dignity on the job. But workers in China have no say. They are stuffed 6 to a room in dormitories, rousted in the middle of the night to work extra shifts …
“Free trade” agreements made democracy a competitive disadvantage. To people from planet Economus, these conditions in places like China are just “lower costs” that the rest of us need to learn to compete with.
Are All The Other Countries Wrong?
The countries that are successful in today’s economy have national industrial/economic policies. We do not. They work to capture parts or all of key strategic industries, and line up the infrastructure, finance, education, supply chains, power grid, tax policies and everything else needed to compete in the world economy. We do not.
We send our companies out against these national systems, and even our largest companies cannot compete with national systems. So we lose.
Are China, Germany and so many other countries just wrong, putting so much into these efforts to capture parts or all of strategic industries? Or are they being smart? Look at who has a trade surplus and who has a trade deficit, and see if you can guess the answer.
The Fix
1) Romer says we should not have special treatment to help manufacturing. Well, let’s start by removing the special treatments that are hurting manufacturing. After that we can begin to talk about “special treatment” to help manufacturing. Out tax policies encourage outsourcing and make it economically beneficial to close a factory rather than maintain it.
2) Countries like China offer subsidies to strategic companies and industries. They manipulate their currency to keep their prices lower in world markets. Let’s enforce trade rules against that, and if we can’t then let’s get out of these “free trade” agreements that are killing us and put tariffs on their goods so they are not unfairly competing with goods made here. And start matching subsidies on exports so they compete in world markets.
3) Other countries have national industrial policies, lining up everything needed to capture part of all of strategic industries. We don’t so we send our companies out alone against countries. We have to change this, or ultimately our companies have to lose.
4) Planet Economus is a place far from Earth. On planet Economus they apparently have free markets, and free trade. But on Earth free markets and free trade never existed anywhere at any time, and never worked when they were tried. So on Earth we have to have policies that reflect what happens on Earth, not on planet Economus.
This Time Isn’t Different
Romer concludes,

AS an economic historian, I appreciate what manufacturing has contributed to the United States. It was the engine of growth that allowed us to win two world wars and provided millions of families with a ticket to the middle class.

Right, and it still is. This time it isn’t different.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Democracy V. Plutocracy, Unions V. Servitude

Servitude: “a condition in which one lacks liberty especially to determine one’s course of action or way of life”
Democracy: “a government in which the supreme power is vested in the people and exercised by them directly or indirectly through a system of representation usually involving periodically held free elections”
Plutocracy: government by the wealthy
Labor union: an organization of workers formed for the purpose of advancing its members’ interests in respect to wages, benefits, and working conditions
You may have seen the recent flurry of stories about how hi-tech products are made in China. The stories focus on Apple, but it isn’t just Apple. These stories of exploited Chinese workers are also the story of how and why we — 99% of us, anyway — are all feeling such a squeeze here, because we are suffering the disappearance of our middle class. Our choice is democracy or servitude.

Working In China

A collection of excerpts from the Charles Duhigg and David Barboza story, Human Costs Are Built Into an iPad and the Charles Duhigg and Keith Bradsher story, How the U.S. Lost Out on iPhone Work both from the NY Times:
Rousted from dorms at midnight, told to work:

Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.
A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

“Work hard on the job today or work hard to find a job tomorrow.”

Banners on the walls warned the 120,000 employees: “Work hard on the job today or work hard to find a job tomorrow.”

(How close is that to the very definition of servitude?)
Long shifts, legs swollen from standing:

Shifts ran 24 hours a day, and the factory was always bright. At any moment, there were thousands of workers standing on assembly lines or sitting in backless chairs, crouching next to large machinery, or jogging between loading bays. Some workers’ legs swelled so much they waddled. “It’s hard to stand all day,” said Zhao Sheng, a plant worker.

Write confessions if late:

Mr. Lai was soon spending 12 hours a day, six days a week inside the factory, according to his paychecks. Employees who arrived late were sometimes required to write confession letters and copy quotations. There were “continuous shifts,” when workers were told to work two stretches in a row, according to interviews.

Injuries from speed-up toxics:

Investigations by news organizations revealed that over a hundred employees had been injured by n-hexane, a toxic chemical that can cause nerve damage and paralysis.
Employees said they had been ordered to use n-hexane to clean iPhone screens because it evaporated almost three times as fast as rubbing alcohol. Faster evaporation meant workers could clean more screens each minute.

American companies forcing Asian suppliers to squeeze workers:

“You can set all the rules you want, but they’re meaningless if you don’t give suppliers enough profit to treat workers well,” said one former Apple executive with firsthand knowledge of the supplier responsibility group. “If you squeeze margins, you’re forcing them to cut safety.”

The Results For The 1%

A series of recent newspaper headlines tells the story of how China’s working conditions benefit the 1% here.
NYT: Apple’s Profit Soars‎
CBS Moneywatch: Apple shares close at record high
SF Chronicle: Apple CEO’s Stock Awards Lift Compensation to $378 Million
ZDNet: Apple: made in China, untaxed profits kept offshore. We don’t even get to tax the profits from moving our jobs to China, to use for schools, roads, police, etc.

The Results For The 99%

Headlines like these show how things are going better and better for the 1%. But what happened to our middle-class prosperity? We allowed companies to move jobs and factories across the borders of democracy to places where workers are exploited, calling that “trade.” This enabled the breaking of unions and the weakening of our democracy.
The threat is in the air: “Shut up and take the wage cuts or we will move your job to China.” How is that threat used on us? Here is an example: We have heard the stories of Mitt Romney’s company Bain Capital, and how it “earned” its millions. According to the Christian Science Monitor, this is the story of what happened when a Bain-owned company “came to town”:

The new owner, American Pad & Paper, owned in turn by Bain Capital, told all 258 union workers they were fired, in a cost-cutting move. Security guards hustled them out of the building. They would be able to reapply for their jobs, at lesser wages and benefits, but not all would be rehired.

Workers in countries like China where people have no say have low wages, terrible working conditions, long hours, and are told to shut up and take it or they won[t have any job at all. They are given no choice.
Increasingly workers here have their wages, hours, benefits, dignity cut and are told to shut up and take it or their jobs will be moved to China. Because we are pitted against exploited workers in countries where people have no say, we have no choice.
The unions are weakened, the government doesn’t enforce or weakly enforces labor laws and regulations, age, gender or race discrimination laws, worker safety laws, so workers are placed in a terrible squeeze. Workers who try to organize unions are isolated, moved, smeared, fired, humiliated, whatever it takes.
This quote by Steve Jobs is from How the U.S. Lost Out on iPhone Work,

Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.
Why can’t that work come home? Mr. Obama asked.
Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.

Democracy Brought Us Prosperity

We used to be a democracy, where everyone used to have a say in things. Because we had a say we built up a country with good schools, good infrastructure, good courts, and we made rules that said workers had to be safe, get a minimum wage, overtime, weekends… we protected the environment, we set up Social Security. We took care of each other. This made us prosperous. A share of the prosperity for the 99% was the fruit of democracy.
China, on the other hand, is not a democracy, and workers in China don’t really have a say. So they don’t make much money, they don’t have good working conditions, the environment isn’t protected, etc.

We Used To Protect Democracy

We used to protect our democracy. We used to put a tariff on goods coming in if they were made by people who didn’t have the ability to speak up and better their condition. We’d let the goods in but we would use a tariff to strengthen our country, our infrastructure, our schools – our democracy. This brought us prosperity.
For some reason, we started letting our companies move our factories over there, forcing our workers to compete with workers who have no say. We got tricked, by people who call that “trade,” and said it would be good for us. (Like cutting taxes for the wealthy “job creators” is good for us.)
We opened the borders and let the big companies move the jobs, factories and industries over the border of our democracy, to places where workers don’t have a say, so they are exploited. And the result was the big corporations were able to come back and cut our pay, and get rid of our pensions, and tell us, “take it, shut up, or we will move your job, too.” We made the wages and working and conditions and environmental protections prosperity that democracy brings into a cost. We turned ourselves into a cost. We made democracy a competitive disadvantage.

Plutocrats Say Shed Benefits Of Democracy

Plutocrats say we need to shed the benefits of democracy and become more like China if we want to compete. They say get rid of regulations, employee protections, environmental protections, good wages, benefits like pensions and time off, etc… They say that We, the People (government) “get in the way of doing business.” They say the taxes that pay for good infrastructure and schools and police and courts and services like Social Security and care for the disabled and health care for children “take money out of the economy” but they mean these take some of the money that they have been taking from the economy.

Democracy Is The Best Economics

Look at the primary target of the corporate/conservatives: unions. That should tell you something. This is a power confrontation. This is the power of the 1% overcoming the power of the 99%.
Democracy is the power of the 99% to make the decisions, and to build structures that protect us from exploitation by the wealthy and powerful. This confrontation is the story of the origin of our country — how We, the People confronted the power and corruption of the British aristocracy, overcame that power, and built a country of, by and for the people.
Democracy and the taxes it enabled us to ask from the wealthiest is what enabled us to build the infrastructure and schools and everything that enabled our prosperity. The regulations of democracy are what enable our smaller businesses to compete with the giants. The shared prosperity — redistribution of wealth — is what enabled the middle class to grow, and turned us into the most prosperous country and largest market in the world.

Unions

Unions are about building up the power of groups of people, to confront and overcome the advantages of wealth and the power wealth brings to a few. When a union is strong enough to be able to confront the power of big corporations the result is that the 99% get a share of the pie. When unions are strong we all get better wages and better working conditions and a say in how we are treated, whether we are in unions or not. The benefits flow to the rest of the economy.
It would be nice if our system worked well enough that we didn’t need to organize unions on top of the structure of laws and regulations, but it is just the fact of life that the wealthy and powerful and their corporations have throughout our history been able to exert tremendous influence over legislative bodies, again and again. So to fight that working people organize and build these organized unions of people, and leverage that power of the group to demand wages and benefits and weekends and a share of the prosperity. The story of the power confrontation between unions of working people (99%) and the large corporations (1%) is the story of how we built a middle class that brought us the prosperity we enjoyed.
It is not just a coincidence that the weakening of the unions coincides with the decline of the middle class. It is not just a coincidence that the current rise of the plutocrats brings in a swarm of anti-union legislation. It is not just a coincidence that the times when our democracy is strongest we all do so much better. And now, when our demcoracy has been weakened by the money and power of the 1% and their corporations, the rest of us are so much worse off.

Not US v. China

This is not about US workers and markets vs China. Working people in all countries are at risk when their countries trade with countries where workers are exploited. China’s huge trade imbalance is threatening the world’s economy. The loss of manufacturing to countries that exploit workers is threatening workers in many countries.
The US market is still large, and the US can still demand that imported goods be made according to better standards for workers. The rest of the world can also demand that China’s workers be brought up to international standards. And we can certainly hold companies like Apple accountable, and demand that they only buy from suppliers that treat and pay workers according to international standards, because allowing companies to cheat, exploit workers and commit fraud drives the good companies out of business.
This is not about taking jobs back from Chinese workers! This is about demanding they be paid fairly and given a say in their workplaces! This is about not exploiting people there or here!
Trade can be an upward spiral, rather than a lever for exploitation of the 99% by the 1%. If Chinese workers are given a say and paid fairly then they can buy things we make and we can keep buying things they make.
Unions = Democracy = Middle Class = Shared Prosperity
Jon Stewart explains:

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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President Puts American Manufacturing Front And Center In State Of The Union

President Obama put American manufacturing literally at the front and center of his State of the Union speech. American manufacturing was at the front of the speech and at the center of a “blueprint” for bringing back jobs and strengthening our economy. By placing manufacturing front and center he has taken this conversation further than any President before him.
There is good reason to cheer, but also good reason to ask for even more. He outlined steps to stop the outsourcing and start the insourcing, but there is not yet a comprehensive, overall government strategy to fix trade and capture the industries of the future.

The Speech

Right up front the President talked about building “an America that attracts a new generation of high-tech manufacturing and high-paying jobs.” Then,

“Tonight, I want to speak about how we move forward and lay out a blueprint for an economy that’s built to last, an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values.
This blueprint begins with American manufacturing.”

Bob Borosage, in The Obama State of the Union: A Progressive View,

On the economy, the speech led with more discussion of manufacturing than anyone has heard in years. The president wanted and deserved credit for saving Detroit – a key to his campaign in the Midwest – and wanted to highlight the uptick in manufacturing jobs and “insourcing,” the movement of some jobs back to the US.
Again, his agenda focused on mostly symbolic measures of populist appeal. In addition to the tax on multinationals, he promised a new trade enforcement effort to challenge China and others who trample global trade rules. With Romney promising to cite China for currency violation on day one if elected, the administration seems likely to finally challenge China, at least symbolically.

Steps, But Not An Overall Picture

The President outlined steps to stop the outsourcing and start the insourcing. There are things that the Congress can do right now. These include but are not limited to,

  • Eliminate existing tax deductions for outsourcing
  • Big multinational corporations should pay a minimum tax
  • Use some of the money this brings in to cover the expenses of bringing jobs home
  • Pass tax cuts for manufacturing here
  • A trade enforcement unit to look at bringing cases against countries like China that cheat, use piracy, give subsidies
  • Steps to train skilled workers, with a national commitment to train 2 million with skills that will lead to a job
  • Do something about the maze of confusing training programs
  • Turn our unemployment system into a reemployment system
  • Instead of bashing teachers and laying them off, give schools resources to keep good teachers
  • Reduce the cost of college. Stop student loan interest rates from doubling in July. Condition federal assistance on lowering tuition.

This “blueprint” has a number of good, solid steps that will help stop the outsourcing and start the insourcing. But it is not a comprehensive national industrial/economic strategy that addresses the overall picture of all of the components of a national manufacturing ecosystem. To begin to address this, the President has established a cabinet-level Office of Manufacturing Policy to coordinate efforts of various government agencies.
Coordinating the efforts of various government agencies to help American exports is important, but this does not address the development of a national plan, like other countries have. We need this, too. A national plan would seek to cover all the elements of a healthy “industrial commons” — meaning all of the components of a healthy manufacturing ecosystem. These include government efforts to make sure the components are ready, funded and functioning:

  • The necessary educational components to provide people ready to do all of the jobs an industry requires;
  • The financing to build factories and obtain inventory;
  • The modern infrastructure of roads, electrical power, internet, posts and airports, to support the companies;
  • Trade and tax policies to help these companies locate and export;
  • R&D facilities and researchers for innovation and design;
  • Local suppliers to support the companies;
  • Legal structures and fully-funded and staffed court systems to support the industry;
  • The entire “chain of experience” located in an area, often around a “cluster” of businesses, required for an industry to develop and thrive.

Countries like China are engaged in national efforts to get all of these components lined up to capture industries like the new green energy revolution that is taking place. China is working to capture solar and wind energy manufacturing. They are working to capture high-speed rail manufacturing. The news about the reasons Apple and other high-tech manufactures have had to locate in China show how hard China has worked to capture that industry — and not without quite a bit of cheating that we are not stopping.
Our competitors are engaging in national efforts to line up all of these components to capture other new industries as they emerge. We are not.

Ideology Holds Us Back From Competing

This list of components of a national industrial/economic policy describes the kind of national effort that competitors like China are engaged in, and is the reason they are bringing in such a share of new industrial growth. To address this we have to see ourselves as a country, as China does, mutually supporting each other, to be able to embark on an undertaking like this. We have to abandon the “each of us on our own” and selfish, “in it only for ourselves” mentality that has set us apart, preventing national government efforts like other countries engage in.
Some of us hold on to an ideological fantasy that government is only in the way, but other countries do not. So the result is that we keep sending our companies out on their own against national systems. Even our largest companies cannot compete on their own against countries with national efforts to put all of these components in place. It takes a unified government effort.
We have to move to a “we are in this together” understanding of ourselves and our country if we want to bring back the shared prosperity we used to have, and can have again.
Update – White House fact sheet: FACT SHEET: President Obama’s Blueprint to Support U.S. Manufacturing Jobs, Discourage Outsourcing, and Encourage Insourcing
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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To Get Our Economy Back Hold Cheaters, Fraudsters And Exploiters Accountable

The spiral-to-the-bottom and inequality we are suffering is not an inevitable result of globalization, it is what happens when we don’t hold cheaters and exploiters accountable and stop them. This is not just about Wall Street, it is the story of what has happened to our wages and benefits, jobs, factories, companies, industries, economy and democracy in the last 30-or-so years.
Cheaters, Fraudsters and Exploiters
If cheaters and exploiters are not held accountable and fraudsters are not prosecuted, then the advantages this brings them forces honest players out. We’re all waiting to see if there is a deal in the works that lets big banksters off the hook for mortgage fraud and other (uninvestigated) crimes, making their shareholders pay fines for them instead. But that story of the 1%’s fraud and cheating and the consequences to the 99% are not what I am writing about here. This post is about how letting 1%er cheaters, fraudsters and exploiters off the hook has hurt America’s manufacturing and trade.
Apple Can’t Make It Here
Recent news stories about Apple hilight how we allowed our thriving, high-paying manufacturing sector to erode, with the result that our middle class is in decline. Apple used to proudly make their computers in the United States, but now everything is made in Asia. The NY Times’ Charles Duhigg and Keith Bradsher, in How the U.S. Lost Out on iPhone Work describe how China’s massive government subsidies and exploitation of workers mean “Those jobs aren’t coming back.”
The Entire Supply Chain Is Over There
China has done what it needs to do to bring factories, which bring supply chains, which bring industries. The NYT story describes what it means to have an entire supply chain located where the factories are,

When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.
The Chinese plant got the job.
“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”

Subsidies are often a violation of trade rules. Even so, as the article says, “The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory.” So, of course, “the Chinese plant got the job.” Meanwhile, our own country has resisted having an “industrial policy” to keep our industries and foster new ones. This is finally changing, but good efforts like “Buy American” and President Obama’s green energy policies are fought tooth-and-nail.
Exploited Workers
Another key part of China’s advantage is the ability to exploit workers and get away with it — which lets Apple get away with it, too. And when Apple sees violations, it doesn’t stop them.

One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.
A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.
“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”

Later in the story,

The first truckloads of cut glass arrived at Foxconn City in the dead of night, according to the former Apple executive. That’s when managers woke thousands of workers, who crawled into their uniforms — white and black shirts for men, red for women — and quickly lined up to assemble, by hand, the phones.
… The company disputed some details of the former Apple executive’s account, and wrote that a midnight shift, such as the one described, was impossible “because we have strict regulations regarding the working hours of our employees based on their designated shifts, and every employee has computerized timecards that would bar them from working at any facility at a time outside of their approved shift.” The company said that all shifts began at either 7 a.m. or 7 p.m., and that employees receive at least 12 hours’ notice of any schedule changes.
Foxconn employees, in interviews, have challenged those assertions.

Apple Audits Its Suppliers, Finds Many Violations
Earlier this month Apple released a report describing the practices of its suppliers. NY Times: Apple Lists Its Suppliers for 1st Time,

Apple said audits revealed that 93 supplier facilities had records indicating that over half of workers exceeded a 60-hour weekly working limit. Apple said 108 facilities did not pay proper overtime as required by law. In 15 facilities, Apple found foreign contract workers who had paid excessive recruitment fees to labor agencies.
And though Apple said it mandated changes at those suppliers, and some showed improvements, in aggregate, many types of lapses remained at general levels that have persisted for years.

William K Black, writing in Apple’s Foreign Suppliers Demonstrate Widespread Scamming and Horrific Abuse of Employees at AlterNet, looked at Apple’s report. Black writes that the audit of suppliers, “shows that anti-employee control fraud is the norm.”
Black says that two things stand out in the report,

First, Apple rarely terminates suppliers for defrauding their employees – even when the frauds endanger the lives and health of the workers and the community – and even where Apple knows that the supplier repeatedly lies to Apple about these fraudulent and lethal practices. Second, it appears unlikely in the extreme that Apple makes criminal referrals on its suppliers even when they commit anti-employee control frauds as a routine practice, even when the frauds endanger the worker’s and the public’s health, and even when the supplier repeatedly lies to Apple about the frauds. Apple’s report, therefore, understates substantially the actual incidence of fraud by the 156 suppliers (accounting for 97% of its payments to suppliers).

As Black wrote, “Apple knows that the supplier repeatedly lies to Apple about these fraudulent and lethal practices” and “…it appears unlikely in the extreme that Apple makes criminal referrals on its suppliers” Apple doesn’t stop these violations. They get too much of a competitive advantage out of it.
This Is Fraud
When you buy a product you assume that it is on the shelf at the cost you are asked to pay because laws and regulations were followed and standards were met. So you buy the one that has the right quality at the right price. But what if a product has a low cost as the result of cheating, exploitation and violations of environmental, labor and trade laws? What if there is a lie at the root of the transaction you are engaged in?
China’s massive investment in capturing entire industries — a violation of trade laws — means that many of the components of the high-tech manufacturing supply chain have migrated out of the US to that country. And China’s non-democracy political system means that workers have few, if any rights, and often the rights they have are not enforced. Black says American companies taking advantage of this are engaging in “a form of control fraud (fraud in which the head of a company subverts it for personal gain).”

Anti-employee control frauds most commonly fall into four broad, but not mutually exclusive, categories – illegal work conditions due to violation of safety rules, violation of child labor laws, failure to pay employees’ wages and benefits, and frauds based on goods and loans provided by the employer to the employee that lock the employee into quasi-slavery.

Allowing Fraud Drives Legitimate Businesses Out Of Existence
The key point Black makes is that allowing cheating, fraud and exploitation to continue brings them advantages that drive legitimate businesses out,

George Akerlof, in his famous article on markets for “lemons” (largely describing anti-customer control fraud), explained the perverse “Gresham’s” dynamic in 1970: “[D]ishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence.”

A Criminogenic Environment
Specifically, what this means to companies that try to compete with companies like Apple,

Anti-employee control fraud creates real economic profits for the firm and can massively increase the controlling officers’ wealth. Honest firm normally cannot compete with anti-employee control frauds, so bad ethics drives good ethics out of the markets. Companies like Apple and its counterparts create this criminogenic environment by selecting least-cost – criminal – suppliers who offer components at prices that honest firms cannot match. Effectively, they hang out a sign – only the fraudulent need apply to be suppliers

When we let companies get away with building products in places that violate trade rules, allow environmental degradation, exploit workers, cut corners on safety, use cheap components and ingredients, these companies get cost advantages that force honest companies out of business. This is the story of our economy. This is why our middle class is engaged in a race to the bottom.
Should Companies Like This Exist In The US?
Robwert Cruickshank puts two and two together, in a must-read post, Thinking Differently About Apple and 21st Century Society. He writes,

In the last year or two, it’s become increasingly clear that the way Apple makes its products is deeply flawed. Working conditions at the factory which makes most of their products – Foxconn in Shenzhen, China – are so appalling that workers engaged in a rash of suicides in 2010 to ameliorate their own suffering. Earlier this year workers threatened mass suicide over pay and working conditions. And of course, there’s the fact that Apple makes these products overseas rather than in the United States, where unemployment remains at some of the highest levels we’ve seen since the Great Depression.

Cruickshank asks if companies with this attitude should be allowed to continue to do business? He writes that Apple has,

…a narrow focus on their products and their profits, and disdain wider concerns for the good of society. When an unnamed Apple executive was asked about their role in addressing America’s economic problems, their response was revealing:

They say Apple’s success has benefited the economy by empowering entrepreneurs and creating jobs at companies like cellular providers and businesses shipping Apple products. And, ultimately, they say curing unemployment is not their job.
“We sell iPhones in over a hundred countries,” a current Apple executive said. “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.”

That quote is perhaps the best encapsulation of the pathologies of the modern American corporation. In fact, Apple does have an obligation to solve America’s problems. Everyone who lives in this country has that obligation. And corporations have that obligation too. If they don’t want to help make things better, then they shouldn’t exist.

Then he gets to the wider point,

The notion that companies exist only to generate profit or build a specific few set of products is corrosive. Those profits and products serve the rest of society. And as a part of that society, companies and their executives exist to make that society a better place. If they are engaged in a set of practices that make society worse off, then those actions are indefensible and need to be changed.
For the last 30 years, American businesses have been devoted to a single-minded pursuit of maximizing short-term profits. Unsurprisingly, this has had profound ripple effects throughout the rest of society. The economy became focused on those profits, and so with it followed politics, culture, and our values as a civilization.
By now it should be clear to everybody that while this works well for the small elite that has hoarded all these profits – the so-called “1%” – it has utterly failed to provide a happy and fulfilled life for everyone else.

Here I quote Cruickshank quoting Black, who is looking at Apple’s report of its suppliers, with “overwork and other forms of employment fraud being rampant.”

As William K. Black explains at Alternet, this is a good example of what may be a widespread tolerance for fraud in the global economy:

These frauds take place abroad, but they harm employees at home. Mitt Romney explains that Bain had to slash wages and pensions to save firms located in the U.S. who had to meet competition from foreign anti-employee control frauds. The damage from foreign anti-employee control frauds drives the domestic attack on U.S. manufacturing wages. Bad ethics increasingly drive good ethics out of the markets and manufacturing jobs out of the U.S. and into more fraud-friendly nations.

“These Frauds Take Place Abroad But They Harm Employees At Home”
Once again, for emphasis, “these frauds take place abroad, but they harm employees at home.”
If we want the downward slide to stop we have to decide to hold the cheaters, exploiters and fraudsters accountable for their actions. At home the efforts by the giant corporations to keep the National Labor Relations Board (NLRB) and the Consumer Financial Protection Bureau (CFPB) from doing their jobs, enforcing the rules and holding them accountable further show how this is affecting us all. Abroad we have to demand enforcement of labor and trade rules so companies like Apple can not gain advantages that put more ethical and honest companies out of business. We certainly should not be letting products made there have cost advantages here and stiff tariffs can fix that. Letting companies get away with this makes democracy a competitive disadvantage.
We have to get mad and hold the cheaters, fraudsters and exploiters accountable.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Did The President’s Jobs Council Go All Corporate?

President Obama’s Council on Jobs and Competitiveness (“Jobs Council”) issued a report calling for fewer regulations and lower corporate tax rates. This doesn’t have to be a bad idea.
The Report
The Jobs Council report, Road Map to Renewal makes a number of recommendations. Here are the main points – please click through for the details:

  • Prepare the American Workforce to Compete in the Global Economy
  • Foster a Climate that Lets Innovation Thrive
  • Adopt an “All-In” Strategy on Energy
  • Revitalize the American Manufacturing Sector
  • Enhance American Competitiveness through Smart Regulatory Reforms
  • Reform the Outdated Tax System to Enhance American Competitiveness

Council Heavily Weighted Toward 1%
The Jobs Council is heavily, heavily, heavily weighted to tilt toward the 1%. The list of members reads “Chair and CEO” with a smattering of ultra-wealthy finance types thrown in, and then a couple of token union leaders.
The Objections
United Food and Commercial Workers president Joseph Hansen abstained from voting. AFL-CIO President Richard Trumka released a 1635-word dissent. In the dissent Trumka writes, (emphasis added)

I agree with the overall spirit and a number of the specific recommendations in today’s report … I absolutely agree … that the United States is falling behind our international counterparts in investing in modern infrastructure, education, and skills; supporting a vibrant manufacturing sector; developing cost-effective and globally responsible energy practices; and supporting innovation. …
Unfortunately, I believe the report downplays the need for a proactive role for the U.S. government in many of these areas; fails to address the significant additional revenues needed to address the challenges identified on an appropriate scale; and in many cases erroneously identifies the root causes of the underlying structural problems.
… the report addresses regulatory issues as if we were not in the midst of a prolonged economic crisis whose proximate causes clearly included inadequate regulation of business, and in particular financial markets and institutions.
With respect to corporate tax reform, I believe that corporations as a group pay too low a share of taxes to support the kind of infrastructure investment and education/skills upgrades that are so urgently needed at this time… The report places way too much emphasis on statutory tax rates, mentioning only as an aside that the effective rates paid by corporations are much lower, and that overall corporate tax revenues as a percent of GDP are the fourth lowest in the OECD.

Yes, We Can Cut Corporate Taxes … If
Actually, we can cut corporate taxes, increasing our international competitiveness, while We, the People still fund our democracy and get paid back for our investment that enabled the prosperity of the corporations. Here’s how: Cut corporate taxes, but raise taxes on the 1%er owners of the corporations. Stop the nonsense of lower capital gains tax rates, and restore pre-Reagan top tax rates. Also, require corporations to either use their cash or pay it out to shareholders instead of just sitting on it as many do now.
Capital gains are taxes at a lower rate because most of the income of the 1% is from capital gains, and most of the income of the 1% is from capital gains because the tax rate is lower. The “incentive to invest” should be a good investment, period.
What does cutting corporate tax rates accomplish? First, by cutting corporate tax rates the right ways our companies could become more competitive with companies in other countries. This can be an incentive to locate companies here. But we don’t have to just sacrifice this revenue by any means. Instead we can tax it when it becomes personal income. But cutting corporate tax rates without increasing personal income tax rates to make up for it — which happens to be the DC elite consensus as voiced by Simpson-Bowles — is complete folly, nothing more than another scam by the 1% to rob We, the People. It is essential that a cut in corporate tax rates happen at the same time as taxes on the resulting personal income are increased, along with requirements that corporate money is either used inside the company or paid out to shareholders.
Look at this chart, which tells you everything you need to know about the who what when where and why of corporations. Corporate wealth is also personal wealth. When you hear about corporations doing well, think about this chart:
wealth2
Yes, the top 1% also own 50.9% of all stocks, bonds, and mutual fund assets. The top 10% own 90.3%. And it’s most likely only gotten worse since these figures were gathered.
Cut The Right Regulations
When the elite DC consensus calls for cutting regulations, they mean regulations that hamper the 1%’s ability to fleece us even more. But there are regulations that actually do impede competitiveness.
Here is what usually happens in DC. After Congress passes laws the regulatory bodies translate the laws into a regulatory framework. This is where the giant companies and their lobbyists get to work. The work they do is influencing these agencies to write regulations that help them, the 1%er corporations that can afford to swarm the agencies with lobbyists — and that obstruct their competition. So we end up with a situation where small businesses and startups don’t have a chance making it through the regulatory maze. They either have to hire specialized, $1000-an-hour DC law firms to help them out, or give up. This is by 1%er design, not because of “big government.”
So yes, there are regulatory impediments to competition, but I don’t think this form of “cutting regulations” means what the 1%ers on the Jobs Council and the big corporate-elites think it means.
Education
On education, the Jobs Council recommends,

In order to stay competitive in a global age, we must invest in our future by ensuring Americans have the right education and skills to realize their full potential and drive our nation’s economic success. … These measures will create a purposeful educational system that produces work-ready graduates, satisfied employers with access to a talented labor pool, and a vibrant economy poised for growth and success.

Trumka writes,

With respect to the education section of the report, I believe that the Jobs Council’s education recommendations begin and end in the wrong place: focusing on providing businesses with an endless supply of workers — as opposed to supporting, improving and sustaining a strong public education system.

So the report calls on government to reconfigure our education system to provide companies with trained worker-bees, which means companies don’t have to cough up the dough themselves to train their own workers. The report actually goes even further, basically calling for government to replace think-for-yourself education with do-what-we-say job training. There’s a difference. And they ask for this after already asking for tax cuts, too. Sheesh.
The Rest
On energy the 1%ers of course mean “drill, baby, drill.” But the council is correct, we do need to go “all-in” on energy, with massive Green Energy investment, freeing us from the damage Big Oil and King Coal do to our environment, our economy, our politics and our democracy.
On manufacturing the council notes that since 1980 manufacturing has slipped from 20% to only 9% of total employment,. The report calls for adding “three to four percentage points of global value added market share—an ambitious but achievable goal.” They say we should :take share from our global competitors.” There are wonky but great suggestions like “cluster development” and important ideas like going after in promising new manufacturing sectors. The President has formed an Office of Manufacturing Policy that is taking up many of the kinds of recommendations in this report.
In fact, we also need to rewrite our trade agreements so they provide a win-win for the working people here and across our borders, and incentives to manufacture here rather than move jobs, factories, companies and industries out of the country.
And So In Conclusion
Trumka sums things up nicely at the end of his dissent:

Perhaps most profoundly, the report does not ask the critical question: why is our country suffering a manufacturing crisis, complete with massive job loss and a structural trade deficit, when countries with higher overall taxes, higher wages, and more robust health, safety and environmental regulations are enjoying trade surpluses?
The answer lies in the view that we share with so many of our fellow Americans: that our country has become dominated by the interests of the wealthiest 1% at the expense of the remaining 99%. It turns out that a country run in the interests of the wealthiest 1% systematically underinvests in public goods;systematically silences, disempowers, and underinvests in its workers; and in the end is less competitive and creates fewer jobs than a country that focuses on the interests of the 99%.

Echo and amplify what Trumka said: Perhaps most profoundly, the report does not ask the critical question: why is our country suffering a manufacturing crisis, complete with massive job loss and a structural trade deficit, when countries with higher overall taxes, higher wages, and more robust health, safety and environmental regulations are enjoying trade surpluses?
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Use State ‘Buy American’ Rules To Promote Insourcing

President Obama is hosting a forum on “insourcing” today. We need to bring jobs back to America, and restore our “industrial commons.” One way to help move this along is for states to require “Buy American” in their procurement rules. This is legal and here’s the big thing — it saves states money.
In December Steelworkers President Leo Gerard wrote a strong post, Antidote For Stupidity Of Shipping Tax-Dollar-Financed Jobs Overseas, writing,

Amid prolonged, painfully high unemployment, ABC News Anchor Diane Sawyer for the past year tirelessly advocated a simple solution – buy American-made products. She clearly explained the reasoning: every American dollar spent on an American-made product helps create an American job.

Repeat and amplify: Every dollar spent on an American-made product helps create an American job.
Buy American Legislation
Gerard wrote,

Now there’s an antidote for California’s stupidity. It is legislation called the Invest in American Jobs Act. Championed by U.S. Rep. Nick J. Rahall, (D-W.Va.) and Senators Sherrod Brown, (D-Ohio), Bob Casey, (D-Pa.), and Debbie Stabenow (D-Mich.), it would strengthen existing requirements for buying American products when federal tax dollars pay for construction of highway, bridge, public transit, rail, water systems and aviation infrastructure equipment.

California Example
California decided to “save money” by purchasing Chinese steel to build the new Bay Bridge. Gerard writes about the disaster that brought to California. Never mind all the problems with the quality, the welds, the delays, and the problems overseeing the work that he described… Gerard also gets into the hidden costs to the state and country from the loss of business and the loss of jobs this caused:

Also, Schwarzenegger’s estimate that $400 million would be saved failed to account for the wages American workers lost, the taxes they would have paid, or the multiplier effect on the economy when workers spend their wages in their hometowns. In addition, Schwarzenegger’s estimate failed to account for the downside of hiring Chinese workers with American tax dollars, or in this case, bridge toll receipts. That includes unemployment compensation, Medicare fees and other costs borne by governments for joblessness.
The Investigative Reporting Workshop at the American University School of Communication included a story about the Bay Bridge project by two-time Pulitzer Prize winning investigative reporters Donald L. Bartlett and James B. Steele in a series called What Went Wrong: the Betrayal of the American Dream.
In their report about California sending the bridge work to China, Bartlett and Steel quote Tom Hickman, vice president of Oregon Iron Works in Clackamas, Ore., one of the American companies that tried to form a consortium to perform the Bay Bridge work. Here’s what Hickman said about the jobs California denied American workers and the work California denied his America company:

“These jobs are living-wage jobs and family-wage jobs. They provide health and welfare benefits, 401(k)s and pensions. Our facilities meet all of the environmental requirements, and it just is a very, very difficult thing to compete with the Chinese when you are really competing with the Chinese government (which subsidizes Chinese industry).”

Caltrans argued that no American company had the facilities to perform the work. Hickman said the consortium could have done it. But if government agencies like Caltrans continue to ignore the real costs of shipping work to China, American factories will continue to close. America lost 55,000 manufacturers over the past decade. If that doesn’t stop, at some point, America will forfeit the capacity to perform this kind of work.

Buying steel from another country proved to be a disaster for California every way you look at it.
Buy American Costs LESS
California “saved money” by purchasing Chinese steel to build the new Bay Bridge. In fact, the one government agency that built the bridge may have “saved money.” But what about the other costs to government and the rest of us because of the jobs lost from not making that steel here? What about the lost taxes from the unemployed workers and the American steel companies that would have provided the steel — and their suppliers ? What about the unemployment, food stamps, Medicaid, and all the other “safety net” costs that resulted? What about the loss of business to grocery stores and gas stations near the steel plants, and near all the suppliers that had to lay people off, and the lost sales taxes, etc?
When you add in the cost of losing jobs, factories, companies, industries and communities that result from decisions like this, you start to see that it really doesn’t make sense to “save money” by buying things made elsewhere.
BART Buys American
The Bay Area Rapid Transit district learned a lesson from the Chinese steel debacle and last year introduced a Buy American policy. BART Adopts “Buy America” – First in U.S., Agency Says,

The Bay Area Rapid Transit district has become the nation’s first transit agency to approve a “Buy America” policy, BART said.
The new Buy America Bid Preference policy, adopted unanimously by the BART board Thursday, “gives preferences to rail car manufacturers who create jobs in the U.S.A.,” according to a BART news release Friday.
BART is preparing to award $3 billion in contracts for its new fleet of train cars, which the agency calls the “Fleet of the Future.”

Buy American Policies
If we really want to start insourcing American jobs, then we should put our policies where our mouths are. “Buy American” provisions should be a mandate on federal, state and local government purchases, consistent with our trade laws. There is no reason our own government should be undermining American manufacturers. To accomplish this, our bottom line for federal procurement should be:

  • All federal spending should have “buy America” provisions giving American workers and businesses the first shot at procurement contracts.
  • New federal loan guarantees for energy projects should require the utilization of domestic supply chains for construction.
  • Our military equipment, technology and supply purchases should have increased domestic content requirements.
  • Renewable and traditional energy projects should use American materials in construction.

State-level spending should have similar requirements, and this panel will discuss these, and strategies to getting them in place.
Today many state-level procurement laws are very weak. As a result, a lot of tax dollars go to purchase goods made overseas instead of goods made in the USA. The impact of this often includes delays or cost overruns such as what happened with the San Francisco to Oakland California Bay Bridge, as well as the loss of jobs and revenue in the US.
The idea that national and state governments should “Buy American” isn’t in any way a partisan issue. If you look at polling you find that Republicans as well as Democrats believe that at least now while we are in economic distress, and trading “partners” are selling to us but not buying from us, our tax dollars should be supporting American companies and jobs.
There is a reason countries like China are working so hard to get this business.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Who Protects Info You Give To Offshored Call Centers?

Companies are always looking for ways to reduce the number of people they employ, and for ways to reduce the pay and benefits for the ones they keep. One way they have been doing this is to send jobs out of the country to places where the people don’t have the protections of democracy. Then they come back here and threaten the rest of us with losing our jobs, too, if we don’t give in. We have to find ways to restore the protections of democracy.
We are all familiar with “offshoring.” This is the process of packing up a factory or office, and moving what it does outside of the US to places where people are paid less — usually because they don’t have any say in how their country is run (a.k.a. democracy). Then the company brings the same products or services back to the US and calls that “trade.” Allowing this to happen makes democracy a competitive disadvantage.
One (more) job that has been offshored is call centers. We call to place an order or to get customer service, etc., and the person we talk to is in another country and we can’t understand them. This is frustrating, but it is even more frustrating when you think that this is one more job that someone here used to do.
Earlier this week I wrote about a new bill called The U.S. Call Center Worker and Consumer Protection Act that would help bring call-center jobs back to the US. In Call-Center Bill Would Let Customers Ask To Talk To Americans, I explained,

Today many call-center jobs are being moved out of the country to India and the Philippines. This costs American jobs, and can be very frustrating to consumers who have to speak to people who they cannot understand because of language problems or cultural differences. The The U.S. Call Center Worker and Consumer Protection Act gives consumers the right to ask where the person they are speaking with is based, and ask for an American-based representative instead.

Not JUST Jobs Lost — Data Privacy Is Lost, Too
A new study by the Communication Workers of America backs up the need for that bill. The report is called, Why Shipping Call Center Jobs Overseas Hurts Us Back Home. The study found that offshoring call-centers undoes protection of Americans’ private information. Personal data can be available to people who could use it for criminal purposes. Also, once information is sent across borders governments do not need warrants to collect this info.
From the press release, CWA Study Exposes Overseas Call Center Issues That Threaten American Consumers’ Personal Information,

The Communications Workers of America today released a sobering report detailing the linkage between the off-shoring of call center jobs and a range of serious negative effects on U.S. consumers and job seekers, including placing consumers’ personal information at risk.
… Key findings of the report include:

  • When a U.S. customer’s financial information is sent overseas, it loses the protections of the 4th Amendment to the Constitution. As long as an individual’s data is not specifically “targeted,” the data can be collected and analyzed by U.S. federal agencies without a warrant.
  • The documented security hazards are in addition to the damage caused to individuals and communities in the United States by the movement of local call center jobs overseas, off-shoring that often comes after taxpayer-funded dollars and other incentives are heaped upon the corporation.
  • As of this year, the Philippines surpassed India as the top destination for U.S. companies off-shoring call center jobs. American companies also have opened call centers in countries including Egypt, Saudi Arabia, China and Mexico.
  • Americans’ personal data also is at risk in foreign call centers in the relative difficulty in providing background checks on employees. Many foreign nations do not maintain central criminal databases and do not have standard identifiers such as the U.S. Social Security number. As a result, proper background checks are expensive, with one estimate putting the cost at up to $1,000 per employee.
  • This is one more way that offshoring is hurting us. By sending call-center jobs out of the country we are sending the data we give to those call centers out of the country and outside of the protection of our laws. So this call-center bill, named The U.S. Call Center Worker and Consumer Protection Act (H.R.3596) is important to us. It is bipartisan, introduced by Rep. Tim Bishop (D-N.Y.) and Rep. David McKinley (R-W.Va.). Call your own member of Congress and let them know that you support this.
    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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    Call-Center Bill Would Let Customers Ask To Talk To Americans

    Last week Rep. Tim Bishop (D-N.Y.) and Rep. David McKinley (R-W.Va.) introduced The U.S. Call Center Worker and Consumer Protection Act, a bipartisan bill to both help fight the offshoring of call-center jobs and protect consumers. This proposed legislation would let the public know which companies are engaging in sending jobs out of the country, let customers ask to use an American call center instead, and ban federal grants or guaranteed loans to American companies that move call center jobs out of the US. The bill should also give us the right to get a person on the phone at all, within a few minutes, and not requiring a long phone tree of choices first, but I guess that’s for another day…
    Today many call-center jobs are being moved out of the country to India and the Philippines. This costs American jobs, and can be very frustrating to consumers who have to speak to people who they cannot understand because of language problems or cultural differences. The The U.S. Call Center Worker and Consumer Protection Act gives consumers the right to ask where the person they are speaking with is based, and ask for an American-based representative instead. Among the things this bill would accomplish:

    • Require the Department of Labor to publicly list firms that move call center jobs overseas.
    • Make these firms ineligible for any direct or indirect federal loans or loan guarantees for five years.
    • Require 120 day advance notification of a proposed move off-shore.
    • Require call center employees to tell U.S. consumers where they are located, if asked.
    • Require that call centers transfer calls to a U.S. call center if asked.

    At the Huffington Post, David Jamieson writes more about this bill, in, Overseas Call Centers Target Of Anti-Outsourcing Bill,

    Although some call-center jobs have trickled back into the U.S. in recent years, the long-term trend has shown thousands of American-based customer service positions being outsourced to India and the Philippines, where workers come considerably cheaper. The Philippines’ call-center industry recently surpassed India’s as the largest in the world, according to a report in USA Today.
    … In addition to scuttling any grants or guaranteed loans for a period of five years, the U.S. Call Center Worker and Consumer Protection Act would require that companies that are about to offshore call-center jobs notify the Labor Department 120 days before they do so. The companies would then be put on a public list. Bishop said the law would apply to businesses in all industries.
    Such a bill is unlikely to garner strong support from anti-protectionist, free-trade GOP members of Congress, but the inclusion of the call-center rules adds an interesting wrinkle. Given the widespread frustration of customers who end up on long calls with agents overseas, plenty of constituents, Republican and Democrat alike, would probably appreciate the option of dealing more regularly with customer service reps based in America.

    In a press release, the Communications Workers of America, the union that represents call-center employees, writes,

    The Communications Workers of America is strongly backing new, bi-partisan legislation introduced in the House of Representatives today that would ban federal grants and loans to corporations who move U.S. call center jobs overseas. CWA represents 700,000 workers in telecommunications and other sectors; more than 150,000 are customer service professionals.
    .. “Americans are fed up with good-paying family supporting call center jobs here in the United States being shipped overseas so the one percent can make a little extra money,” said CWA Chief of Staff Ron Collins. This legislation does not prevent them from moving if they want, but it prevents them from gaining access to our tax dollars while they do so.”
    Collins, who began his career in a U.S.-based Verizon call center, said CWA members across the country will be mobilizing support for the legislation in individual states and Congressional Districts.
    “We will go door to door to reinforce to members of Congress that this is a bill their constituents want and need,” Collins said. “We appreciate Representatives Bishop, McKinley and all the members of Congress who are supporting this important legislation.”

    The full text of the bill is available here:

    H.R.3596 – To require a publicly available a list of all employers that relocate a call center overseas and to make such companies ineligible for Federal grants or guaranteed loans and to require disclosure of the physical location of business agents engaging in customer service communications.

    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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    99% March On K Street To Take Back The Capitol From The 1%

    I am in DC covering the Take Back the Capitol “99 in DC” events. On Tuesday I wrote about the efforts of unemployed people and others to get in to talk to their senators and representatives. (Watch some of them tell their stories.) On Wednesday they marched to “K Street” – the symbolic ground zero of the corporate takeover of our democracy. But first…
    When I was waiting to get on the plane to come here the jetway was backed up. Now that the airlines are charging $25 just to check a bag, everyone brings their bags on and tries to cram them into the limited on-plane carry-on space. But of course, the airlines aren’t paying the flight attendants more because of the extra work this causes. So this guy come pushing his way down the left side, shouting, “First class, out of the way, first class, let me through,” because he missed boarding first, and he was entitled to already be on the airplane and not have to wait in the line like the rest of us.
    The rest of us are supposed to walk past the already-seated, first class passengers, eyeing their large, comfortable seats, while they sip their champagne mimosas, and look important and … rich. We’re supposed to envy them, and hope to eventually be among them. But until then we are supposed to be grateful that they “create jobs” and allow us to serve them. This is America today.

    Why Occupy?

    Outrages like this been getting worse and worse, and have reached a breaking point, with many of us unemployed — because actually, the rich don’t “create jobs, WE do! So the rest of us – the 99% — have been getting mad about things like this for a long time, and are finally starting to show it, now that things have gotten so bad. Across the country people are “occupying” places and ideas that have been taken over by the 1%. They are letting themselves get angry about the things that have been happening, the change from democracy to plutocracy, the way the big corporations and Wall Street now make the rules while they don’t themselves have to follow the rules.
    Not only has our Congress come under the control of the 1%, they have done very little to help the 99% through this crisis that was caused by the 1%. This Congress — the first since the Citizens United ruling by the Supreme Court — has done nothing to create jobs while doing a lot to kill jobs, and worse, at the end of this year extended unemployment benefits run out and 2 million people will lose their entire income.

    Take Back The Capitol

    So this week Take Back the Capitol brought unemployed people and others to Washington to confront their members of Congress and the lobbyists on “K Street” that they work for, to demand a change. Today they marched on K Street, the center of lobbying activity. CAF intern Sean McMartin was observing and writes,

    On December 7, 2011, a date 70 years after Pearl Harbor, another piece of history was made. Supporters of the American Dream Movement and several other organizations from all over the country marched from the National Mall up to K Street in Washington. They came to protest their outrage with the rich, corporations, and the special interests, many of which have lobbyists with offices on “K Street.” They shouted they were the 99% of the country, who have not fared well over past few years with high unemployment and stagnated wages.
    Just before noon the people from the Take Back the Capitol came to the intersection of 16th and K Street, which became the epicenter of the protest. Occupy DC, which happened to be camped only a block away, saw what was happening and came out of their tents to join the protest. Then a group came marching from the west, too, as Occupy DC came from the east. The coordination was something to see in real time and represented several groups coming together from all over the place.
    The police had to use their cars to block off a perimeter for the protest that involved 14th Street to 17th Street and I Street to L Street. Even policemen on horses,not seen often in Washington, were used as a show of force. There was no violence from what I could see, but a good old protest where people come together to show their outrage with the status quo.
    Pedestrians going to lunch stepped out of their offices to witness history in the making. They took out their cameras and smartphones to record history as it happened and some even shouted their support for the movement.
    After 1 pm city workers and police ordered the protestors onto the sidewalks and of the streets. The protestors slowly but surely followed and cleared the streets as were told.

    Politico reported:

    Wednesday morning, protesters organized by the ADM swarmed the headquarters of major corporations and financial institutions including Verizon, General Electric, Capitol Tax Partners, the American Bankers Association and the financial lobbying firm Clark Lytle Geduldig & Cranford.
    A labor organizer said the protesters targeted corporations and lobbying groups representing companies that have paid more in executive compensation and lobbying in recent years than they’ve paid in taxes, citing a recent study by Public Campaign.
    Hundreds of protesters from around the country converged on Verizon’s headquarters, chanting slogans like, “whose street — our street” and “shame on Verizon, pay your fair share.” Verizon employees and building staff looked on from the building lobby as protesters swarmed by.
    Protesters also marched around the front of the American Bankers Association, where extra security had been put in place to prevent outsiders from getting into the building.
    About 20 protesters were in the lobby of the Capitol Tax Partners’ building for a brief time, according to a source in the building.
    Also on Wednesday, activists aligned with the Occupy D.C. movement based in McPherson Square marched to protest the Podesta Group, one of the city’s most powerful lobby shops, which has close ties to the Obama administration.

    Here is a collection of photos and videos from the action at K Street (click through for videos)::

    Click here to tell House Speaker John Boehner and Senate Minority Leader Mitch McConnell: Stop sabotaging the economy. Quit obstructing extensions of the payroll tax cut and long-term unemployment insurance.
    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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    It’s The Trade Deficit!

    A huge part of the reason we can’t get out of this unemployment slump is the trade deficit. We don’t buy American and neither do our “trade partners.” We buy from them, they sell to us — that’s not “trade.” Stimulus means we buy from them. Cutting taxes means the extra cash buys from them. Nothing we try brings jobs here because we don’t buy enough here that’s made here and they don’t either. If we want to fix employment we have to fix trade.
    The current unemployment crisis results, at least in large part, from the trade deficit. This has been masked by bubbles like the tech bubble and the housing bubble. Economist Paul Krugman explains, in a blog post, The Return Of Secular Stagnation,

    But then the question is, why do we find it so hard to achieve full employment even with saving somewhat low by historical standards. And the answer seems clear: it’s the trade deficit. America in the 70s and 80s could have high savings, not hugely strong investment, but still have full employment because trade deficits weren’t as large compared with the economy as they are now.
    And this in turn means that the savings glut possibly making the natural real rate negative is actually originating abroad, not at home.

    Krugman is taking issue with the economist argument that we have a problem of too much savings without investment, using a chart showing savings declining. (Note that the inflection point is right as Reagan’s policies start to hit.) He explains how this demonstrates that the problem is really our trade deficit.
    Easier to understand: We have to fix trade if we are going to fix the economy.
    China has accumulated more than a trillion dollars by selling to us and not buying from us. Think about what would happen to our economy if China used that money to place orders for US-made goods. Factories would be opening up, people would be hired, stores would be humming… When you think about how much good that would do, you are understanding the harm their sell-only trade policy has done. They were supposed to buy from us, too, because that is what trade is. But they didn’t, and here we are.
    Now, think about how much good it would do for China’s economy, if our economy was humming from all those orders for our goods! When you think about that, and realize that China is not doing that, you might start to think that this is not an economic game China is playing. If it was about economics, they would use that money to place those orders, to revive our economy, which would mean we would be placing even more orders from them.
    But they aren’t. Why is that?
    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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    People Want Jobs – Congress Focused On Taking Money Out Of Economy

    This situation of crony government protecting the connected rich while people are in the streets demanding change is more and more reminiscent of Egypt under Mubarak. In the real world tens of thousands are in the streets around the country demanding taxes on the rich and an end to corporate rule, as a new report lists profitable companies that pay no taxes at all. Today’s jobs report is not enough to even keep up. But in the Congress Senate Republicans filibuster another jobs bill and the “super committee” is looking at how much to take out of the economy and out of the things We the People do for each other — in order to keep taxes low for the rich and their giant corporations.
    Filibustering Jobs
    Yesterday Senate Republicans again filibustered a jobs bill – a plan to hire people to repair our country’s infrastructure. This is work that has to be done, and right now millions of people need work. But Republicans filibustered this bill. The corporate-owned mainstream media, however, largely refused to tell the public what is happening, instead blaming “the Senate.” The Washington Post headlined, Senate blocks $60 billion infrastructure plan, another part of Obama jobs bill. Politico blamed “both parties,” with Both parties block jobs bills. MSNBC: Senate blocks $60B part of Obama jobs plan. CNN: Competing infrastructure spending measures fail in Senate.
    So the big-corporate media leads the public to blame “the Senate” and government, providing few clues that tell people where to apply the pressure that makes representative democracy function.
    Big Corps Paying No Taxes, Not Just Low Taxes
    From Citizens for Tax Justice report: Corporate Taxpayers & Corporate Tax Dodgers, 2008-2010,

    280 Most Profitable U.S. Corporations Shelter Half Their Profits from Taxes.
    “These 280 corporations received a total of nearly $224 billion in tax subsidies,” said Robert McIntyre, Director at Citizens for Tax Justice and the report’s lead author. “This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit.”

  • 30 Companies average less than zero tax bill in the last three Years, 78 had at least one no-tax year.
  • Financial services received the largest share of all federal tax subsidies over the last three years. More than half the tax subsidies for companies in the study went to four industries: financial services, utilities, telecommunications, and oil, gas & pipelines.
  • U.S. corporations with significant foreign profits paid tax rates to foreign countries that were almost a third higher than they paid to the IRS on their domestic profits.
  • Who Are “The Markets?”
    Who are we talking about, when we talk about “corporate taxes?” Just who do we mean when we talk about “the markets?” See for yourself why the #occupy movement talks about the 1% vs the 99%.
    When you hear about corporations and “the markets,” think about how that connects to this chart:

    wealth2

    People In The Streets
    Yesterday, in the post, Oakland Occupied — Will Washington Listen At Last?, I wrote about the large demonstrations that are spreading and growing: spreading to more and more cities, and growing with larger numbers in each city. I warned that this is starting to look like Egypt with the people in the streets protesting Mubarak’s cronyism:

    A Warning Shot At Washington’s Increasing Irrelevance
    As I said, this public protest is spreading and growing. People have had enough and are taking to the streets in increasing numbers. But Washington continues to ignore the public, debating a national motto, as Repubicans block jobs and an elitist “super committee” debates cutting the things government does for the 99%.
    Poll after poll shows the public overwhelmingly supports increasing taxes on the wealthy, bringing corporations under control, and reigning in trade agreements that suck our jobs, factories, companies and industries out of the country. People do not want Medicare, Social Security and other essential government programs cut, they want the rich and corporations and Wall Street to start paying their share.
    The public wants something done about these problems. They want jobs, they want something done about the increasing
    If Congress continues to ignore the people of the country it will not be long before the situation is like Mubarak pretending he is still in charge of Egypt, while the people of the country are in the streets planning how they will run the country without him and his cronies.

    Super Committee To Take Money Out Of The Economy
    A representative democracy serves the 99%, a plutocracy serves the 1%. Currently in Washington Congress’ elite “super committee” represents the 1%, looking at ways to take more money out of the economy, discussing cutting Social Security at a time when many people have lost their pensions and savings. They are discussing cutting Medicare and other health services at a time when more and more people are in need. They are discussing cuts and cuts and cuts, when working people are falling behind and behind and behind.
    But the actual causes of the deficits that have Congress so concerned are ignored. Reagan and the Bushes cut taxes on the rich and increased military spending, and the deficits and resulting debt soared. It is right there in front of our faces. But even with such “concern” about deficits the tax cuts for the rich continue and the huge increases in military spending are left alone. Instead Congress discusses austerity – making the 99% pay for the benefits and bailouts for the 1%.
    People are fed up, and rightly so. Poll after poll shows that the public wants taxes on the rich increased to pay for the deficit, infrastructure, education, health care, retirement and the rest of the things We, the People need. But our captured government is only serving the top few when they talk about cutting these things in order to keep taxes low at the top. The 1% would be well-advised to pay attention to what has happened in other countries where government ignores the people and takes care only of the connected rich.
    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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    Tax Holiday Generates Holiday Gifts For Big Multinationals

    Have you heard about the “tax holiday” idea? The idea is to let corporations bring overseas profits back to the United States at a very low tax rate. These overseas profits were made in various ways, including schemes to move factories and jobs out of the country in order to avoid paying taxes here. With a “tax holiday” they would … well … get to bring that money back and pay even less in taxes, rewarding them for the offshoring and tax dodging. We did this in 2004 and it cost the country a lot of jobs but made the rich even richer. So of course they want to do it again.
    This is a test of our Congress. Will they continue to do the bidding of the top 1% and reward offshoring and tax dodging, even as more and more people are in the streets demanding they instead start doing the bidding of the 99%.
    What Is A Tax Holiday?
    Companies that report profits outside of the US don’t have to pay taxes on that money unless they bring it into the US. This encourages some companies to engage in various schemes that close factories and lay off workers here in order to report profits outside of the country. They use shell companies, foreign subsidiaries, post office boxes in tax havens as “headquarters,” etc. Other companies make a lot of money by making great stuff and selling it or providing great services. This money builds up and naturally owners want to bring it back here so they can live it up even more than they do. They could just bring it back and pay taxes (some do) but some are asking Congress to give them a “repatriation tax holiday,” letting them bring the money back (“repatriate” it) at a much, much lower tax rate than they would usually have to pay.
    Of course, we are in a jobs emergency so they claim that giving even more money to those top 1% “job creators” is a good thing because it will “create jobs.” If we were in a green cheese emergency they, of course, would call them selves the “green cheese creators” and say that giving them this huge holiday gift would “create green cheese.”
    They Tried It Before — FAIL
    In 2004 Congress passed a tax holiday bill named the “American Job Creation Act of 2004.” The big multinationals promised that they wiould use the money to “create jobs.” (Have we heard that somewhere before?)
    The Institute for Policy Studies looked at the results of the 2004 tax holiday and found that “their holiday didn’t just fail to create the promised jobs. Their holiday enriched corporations that actually destroyed jobs in the months right after they received their tax windfall.” IPS found that 58 multinationals who used the “American Job Creation Act of 2004″ tax holiday not only immediately laid off tens of thousands, they continued laying off, and laid off close to 600,000 workers between 2004 and now. From the IPS summary of the study,

    One government study looking at the first two years after the repatriation windfall found that 12 of the top recipients laid off more than 67,000 American workers. These firms collectively brought back home more than $100 billion …

    The companies that gained the most from the tax holiday actually cut jobs, on top of that they used the tax gift money to buy back their own stock, increasing its value, and pay out dividends, both thereby enriching executives and shareholders.
    Why Is This Even Being Discussed?
    Why is such a bad idea even being discussed today, not to mention in a bill entertained by Congress? Well, why else? Nation of Change reprints iWatch’s definitive tax-holiday post by Aaron Mehta and John Aloysius Farrell, Wealthy Corporations With a Trillion Dollars Stashed Offshore Lobby For a ‘Holiday’ From U.S. Taxes, and in it we find the (usual) answer,

    A number of trade groups and corporations that would benefit have joined in a coalition called WIN America . New lobbying disclosure reports show that the group and its member firms have spent millions of dollars, and employed dozens of lobbyists, to press for the tax break, according to an analysis.
    [. . .] WIN spent the first 9 months of this year actively lobbying for a repatriation bill in Congress. It spent $380,000 to hire two firms (Cauthen Forbes & Williams and Capitol Counsel LLC) and target lawmakers with a total of eight lobbyists. Among the lobbyists hired directly by WIN are several people with strong ties to Congress:

  • Jim McCrery, a former Congressman who represented Louisiana’s 4 th district until 2009.
  • Drew Goesl, who served as chief of staff for Rep. Mike Ross and communications director for Sen. Blanche Lincoln; Ross is a co-sponsor of the House bill.
  • Tucker Shumack, a former legislative assistant for Sen. John Isakson, a co-sponsor of the Senate bill.
  • Dena Battle, a former legislative director for Rep. Dave Camp, who as head of the powerful Ways and Means Committee has sway over tax policy in the U.S.
  • Jeff Forbes, a former staff director on the Senate Finance Committee.
  • Libby Greer, a former chief of staff for former Rep. Allen Boyd.
  • Millions of dollars lobbying… says it all.
    Where Are We Now?
    There is plenty of opposition being voiced. A strong New York Times editorial, No Holiday, make the case against this holiday gift,

    Big business has clearly decided that the economic crisis is too important to waste. While Washington debates how to create jobs and cut the budget deficit, major corporations — read major campaign contributors — are pushing Congress for an enormous tax cut on corporate profits. Lawmakers seem all too eager to grant their wish.
    [. . .] These days, corporations are flush with $2 trillion in cash that is not being used for hiring. As long as the economy is weak and consumers aren’t spending, tax cuts will add to the cash pile, not create jobs. A tax holiday also would add to the deficit, in part because companies rush to bring money home, rather than repatriating the earnings over time at the usual rate.

    At the Center on Budget and Policy Priorities blog, Chuck Marr writes in, Corporate Tax Holiday Would Be a Costly Mistake,

    A well-funded corporate lobbying campaign is pushing Congress to allow multinational corporations to bring profits held overseas back to the United States at a temporary, bargain-basement tax rate.
    …Congress tried this in 2004 and it proved an embarrassing failure. Firms not only failed to use the “repatriated” funds to boost their U.S. investment and hiring, many of them actually laid off thousands of U.S. workers.

    Marr also writes that this tax holiday, following the 2004 holiday, would make tax holidays an expectation, and that,

    … large revenue losses in later years would more than wipe out those gains as corporations shift more investments, profits, and jobs overseas in anticipation of yet another temporary holiday.

    Yes, anticipation of the next tax holiday. And the one after that.
    Even .. Heritage???
    In a shocker of shockers, Heritage Foundation agrees. (The check from the multinationals mush have gotten lost in the mail!) WSJ: Heritage: Repatriation Tax Holiday Wouldn’t Create Jobs,

    Giving U.S. companies a tax break for bringing home profits held overseas likely won’t create more jobs or spur domestic investment, an influential conservative think tank will argue in a report to be released Tuesday.
    In a break from many Republican lawmakers and a host of major U.S. companies including Google Inc., Apple Inc., Pfizer Inc. and Microsoft Corp., the Heritage Foundation said in a new study that a repatriation tax holiday would not motivate companies to hire new workers.

    Here are Jared Bernstein and Chuck Marr discussing whether Congress should give this holiday gift to the top 1% and their giant multinationals:

    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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