Tag Archives: manufacturing

Conservatives Demand Surrender To China

Posted on by

The worldwide battle to get away from the coal and oil industries has been underway for some time. Countries are fighting to gain a share of the new green manufacturing industries with millions of jobs and trillions of dollars on the line. Country after country is executing plans to grab a share of this new industry. But not us. Oil-funded conservatives are trying to keep us from even fighting in that war.

Oil And Coal Are The Problem

Look around you, the climate is changing, the seas are rising, terrible storms are hitting, huge fires are burning, terrible droughts are causing crop failure, and plants, animals and insects are migrating to new areas. (In DC right now you might not be able to turn on a light because of that huge, freak storm you just had, so maybe wait and look around you after the sun comes up.) We have to stop burning oil and coal, and find a way to get that carbon back out of the air.
Aside from the terrible effects of climate change, our country has a trade deficit that is partly about buying oil, and those purchases send money to places that use that money against our country’s interests.
Other countries get all of this. But our country is in the grip of an oil-and-coal-funded propaganda machine that tries to keep us from getting it.

Green Job Opportunities

We are in a worldwide economic competition to build the post-oil economy. This is a competition for millions of jobs and trillions of dollars. Every country wants a share of the design and manufacturing of wind turbines, solar panels, geothermal systems, biofuels, electric cars, high-speed rail, urban and suburban light rail, advanced batteries, smart-grid power transmission systems, and all of the rest. And there is also the fight for the construction, installation and maintenance contracts for all of these systems.
Many countries are fully engaged, and have national plans to capture a share of this new industry. They compete with us as countries, and see us as a country to compete with even if we do not. Because we refuse to act as a country, we send our companies out to compete with countries, and as big as our companies are they cannot compete with the resources of engaged countries.

Conservatives Demand Surrender

Our top competitor is China. Shots have been fired; China is helping their companies compete, and this has cut solar prices. So a few American companies are going under. In response, America’s oil-backed conservatives are demanding immediate surrender. In fact, they don’t just demand surrender, they are giving aid and comfort, even actively helping the other side, running down America’s efforts to fight for a share of the new green economy.
This huge effort by conservatives to keep our country out of the world competition for a share of the new green economy kind of makes you wonder about the secrecy surrounding all of the money that funds the conservative movement, its think tanks, media outlets, and now even funds political campaigns. We don’t even know where the hundreds of millions funding these horrible, negative ads comes from! Does any of it come from our economic competitors? Shouldn’t we at least be able to find out who (or where) is funding the conservative propaganda and political machine that is running down our own government and demanding we surrender the new green economy to China?

Solyndra And Chevy Volt

Conservatives celebrated the fall of Solyndra, declaring that its demise meant that green energy in general is a “bad bet,” or losing technology. They also have been trying to convince people not to purchase hybrids and new technologies like the Chevy Volt. The next time you hear someone of FOX running down our country’s green energy efforts, knocking the Chevy Volt or denying climate change, think abougt this: Fox’s second-largest shareholder is a billionaire Saudi oil prince. Fox might just have an agenda beyond backing conservatives here. Speaking of conservatives, though, keep in mind that the Koch brothers == oil.

Abound Solar Goes Under

Last week solar panel manufacturer Abound Solar filed for bankruptcy. NY Times reports in “A 2nd U.S.-Supported Maker of Solar Panels Will Close,”

Republicans, including Mitt Romney, the presumptive Republican presidential nominee, seized on Solyndra’s failure as evidence that the Obama administration was wasting taxpayer money by supporting clean energy companies.
… The company said it could have been profitable if it had had large-scale manufacturing under way, but “aggressive pricing actions from Chinese solar panel companies have made it very difficult for an early stage start-up company like Abound to scale in current market conditions.”

Abound Solar was unable to compete with low solar prices resulting from Chinese subsidies for their own solar manufacturers. (Add to that, China’s currency manipulation which keeps the prices of everything made there up to 30% lower, even bore their subsidies, trade barriers, etc.) Federal officials froze their credit line last year, after the Solyndra failure, so Abound was unable to draw on credit to scale its manufacturing to a level that could compete with subsidized Chinese imports.
Conservatives immediately stepped up their drumbeat of demands that we surrender to China. Here are a few examples of conservatives blaming America first, calling America’s efforts a failure, or generally running down efforts to fight for a share of the new green economy:
Hot Air: Yet another DOE-backed solar panel company bites the dust

Good grief. I feel like these ailing Department of Energy-backed loan guarantees are so laughably many that they’re barely even worth noting anymore, but you’re darn tootin’ I’ll continue to do so as long as President Obama keeps acting like it’s the federal government’s divine right to pick and choose winners in the energy market on the taxpayers’ dime.
… This article tries to spin the situation to suggest that the company’s failure is the result of too much unfair competition and global oversupply, and we should therefore direct our ire at China. No — just no. This is the fault of the Obama administration. Maybe if we had just left the decision to develop solar (or not!) up to the private sector, we would’ve quickly figured out that investing in solar energy was a bad idea.

Weekly Standard: Video: Obama Touted $400 Million Loan to Another Solar Company Now Declaring Bankruptcy
Washington Moon Times: Yet another government-backed solar company turns out the lights

News of the company’s demise prompted early criticism from Rep. Jim Jordan, Ohio Republican and chairman of the House subcommittee on regulatory affairs, stimulus oversight and government spending.
In a statement, Mr. Jordan, among other Republicans, said Abound’s collapse shows that “our government is not good at picking winners and losers in the marketplace but has certainly proved it is good at wasting taxpayer dollars.”

National Legal and Policy Center: Yet Another DOE Green Failure as Abound Solar Goes Bankrupt

And now with failures like Solyndra and Abound Solar, in addition to several others, these crony redistributors leave the political fallout to others and just move on to their next “green” scheme. Unfortunately we won’t find out if the ultimate political price is paid until November, but in the meantime DOE continues with its renewable energy “investments,” which will undoubtedly lead to more pain for taxpayers.

Human Events: Your Obama “green energy” bankruptcy of the day: Abound Solar,

Abound had borrowed about $70 million against these loan guarantees. That would have bought a lot of health care for poor people, but the Obama Administration blew it on solar panel junk instead.

Heritage Foundation: Another Stimulus Backed ‘Green Energy’ Company Goes Bankrupt

Another stimulus-backed green energy company has filed for bankruptcy, further fueling criticism of Energy Department programs that backed highly-risky investments on the taxpayer dime.
Like Solyndra and a number of other green energy investments made under this administration, Abound Solar had a very poor credit rating, but enjoyed a wealth of political connections.

So … should we respond as a country to this economic attack on us by other countries who see us as a country and compete with us as a country? Or should we surrender the new green economy to others?
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
Sign up here for the CAF daily summary

The National Manufacturing Strategy Debate

Posted on by

President Obama has been pushing policies to boost American manufacturing. Democrats in Congress are pushing a package of bills under the label “Make It In America.” The Obama administration’s Gene Sperling gave a big speech recently describing the vital importance of a healthy manufacturing sector to our economy. But others say promoting manufacturing is “the wrong target” and reviving manufacturing won’t help revive our economy. So what’s the story?
Gene Sperling, Director of the Obama administration’s National Economic Council gave a big speech at the recent Conference on the Renaissance of American Manufacturing. Sperling talked about how a manufacturing “commons” works, and why it is a good thing if government promotes this commons.
A manufacturing commons is an ecosystem, in which manufacturers, suppliers, designers, innovators and all the other manufacturers, suppliers, designers and innovators all complement each other, creating a “cluster” effect. When all of these components are working together it creates a “virtuous cycle” but when they don’t it creates a “vicious cycle.” So because the sum of these parts is greater than the whole, each component’s interests do not align with the interests of the whole — and “our” (We, the People’s) manufacturing capacity is degraded, which degrades our standard of living. So government (We, the People) must play a role in promoting the whole effort. From Spreling’s speech:

The ecosystems that grow up around these intersections of innovation and production tend to be complex. They are the result of evolutions that occur over periods of years and decades. Once the virtuous, reinforcing cycles are broken they are difficult to recreate, and they can turn to a vicious cycle. That’s why losing pieces of our manufacturing base should be such a serious concern.
… For any single firm, the decision to move production elsewhere may make economic sense. But that decision impacts suppliers and the local talent pool. This makes the decision even easier for the next firm to leave and even harder for the next firm considering coming there to say yes.

Job Loss Not Just Competition And Productivity
Sperling traces the history of our manufacturing and shows that we didn’t lose jobs when competing with Japan, and didn’t lose jobs during periods of high productivity growth. He shows that what happened between 2000 and 2009 (the Bush years, and China in the WTO) with the loss of 50,000 factories and millions of manufacturing jobs was different, saying “the dramatic loss of manufacturing employment in the past decade was a break from the past and cannot be explained by the conventional view of productivity and technology gains.”

Since 2000, the manufacturing sector lost nearly one-third of its workforce, a total of nearly 6 million jobs. Unlike the preceding decades, according to the Federal Reserve, manufacturing production, the measure of the physical amount of goods that we make, actually declined from 2000 to 2010 by five percent. This drop was not just a result of the recession. From 2000 to 2007, manufacturing production grew at only 1.3 percent per year, the worst peak-to-peak performance since World War II.

Sperling explains why this loss is so significant to our economy: manufacturing is special in that so many other jobs depend on manufacturing, extending “from the web of suppliers that support manufacturers to the communities where manufacturing plants often serve as an anchor employer.”

For those of you here from towns across the U.S. that rely on a major manufacturer, or states like Michigan where I come from, you understand the impact of manufacturing. In addition to the web of suppliers, the expansion of an auto plant brings other types of businesses to town including new restaurants, retailers, and service providers feeding off of this economic activity. If an auto plant opens up, a Wal-Mart can be expected to follow. But the converse does not necessarily hold – that a Wal-Mart opening definitely does not bring an auto plant with it.

So it is clear that this is not just about the back-and-forth of companies competing, we have a national interest in bolstering the manufacturing sector.
Finally, Sperling described some of the administrations manufacturing initiatives. He did not come out and advocate for a coordinated national industrial strategy — which every major competitor has and we don’t have. But his speech did advocate “policy to support manufacturing.” This is at least a start.
Criticisms And Agreements
Matthew Yglesias at Slate, in Forget the Factories writes that it is “foolish” and worries about the, “troubling possibility that these ideas will actually guide policy in a second term rather than simply serve as props in a re-election campaign.” Yglesias writes that.

it should be obvious that the path forward for America is to focus on our strengths in information technology and media, and not compete with the Chinese for manufacturing supremacy.

Yglesias writes that manufacturing areas are “poor” while high-tech areas are “richer” and “more prosperous” and we should “learn from the most prosperous parts of the country, not to imitate Chinese clusters that are even poorer than America’s industrial hubs.” Also, “creating new billion-dollar software startups has a lot more to do with the future of American prosperity.”
Yglasias concludes that we should “instead build and expand new industries that push living standards up and keep factory owners searching abroad for cheap labor.”
Ezra Klein, writing Is industrial policy back? at the Washington Post, writes that “cozy consensus against industrial policy is, at least when it comes to manufacturing, flawed.” Describing what Sperling’s argument, Kleinwrites,

There is, in other words, a building argument that the market is failing to appropriately price the benefits of manufacturing firms. They’re worth more to the economy than they are to individual firms. And that’s the key to this new argument: Sperling isn’t saying America should support the manufacturing sector because it delivers good jobs, or it’s been important to America’s middle class, or even because China is competing unfairly. He’s saying there’s a market failure. And even the most orthodox economists will tell you that it’s appropriate for the government to intervene to correct market failures.

Even so, he says the Obama administration isn’t really doing all that much,

For all this, the Obama administration’s strategy to promote high-tech manufacturing is modest: A couple of tax cuts, mostly. Some money for research into basic technologies and new techniques. And a sustained effort to talk up the industry’s importance and thus signal to investors that America intends to fight for its manufacturing base. None of these are gamechangers.

At least the consensus against doing anything is changing.
Economist Mark Thoma writes in Is Manufacturing the Answer?, “At one time I would have been opposed to industrial policy, but I have been reevaluating my position lately (I can’t say I’ve been convinced as of yet, but I want to stay open-minded on the question).” He links to EPI’s Lawrence Mischel, who writes in Robert Lawrence misleads the New York Times on manufacturing, saying that,

… closing the trade deficit would provide millions of jobs and boost the economy. For instance, my colleague Robert Scott has shown that growing trade deficits with China eliminated 2.8 million U.S. jobs between 2001 and 2010 alone, including 1.9 million jobs displaced from manufacturing. Similarly, correcting the currency imbalances with China, Hong Kong, Taiwan, Singapore, and Malaysia could add up to $285.7 billion (1.9 percent) to U.S. GDP, create up to 2.25 million jobs over the next 18 to 24 months (most in manufacturing), and reduce U.S. budget deficits by up to $71.4 billion per year.
… manufacturing employment will not return to 25 percent of employment. Nevertheless, we can gain a lot of manufacturing jobs by strengthening the recovery and through appropriate trade and currency policy. This would provide millions of good jobs, aid many communities, and be good for the nation.

At Financial Times, Edward Luce writes in America reassembles industrial policy that we do have an industrial policy, that favors oil and Wall Street,

Whether it is the schooner-rigging of tax incentives for Wall Street – and the federal tax system’s subsidies for debt over equity – or the panoply of write-offs for Big Oil, Washington never stopped promoting favoured sectors. Manufacturing was simply not among them.
Most are of long pedigree. Some might say it would be easier to pass through the eye of a needle than to separate the fossil fuel sector from its Washington subsidies, which date from the second world war. No presidential hopeful would dare to suggest scrapping Depression-era farm subsidies because they skew so heavily towards key states such as Iowa.

Luce points out that Facebook and Twitter might be glamorous, but making actual things is where innovation comes from,

Facebook and Twitter may bring disruptive social change. But the most valuable innovation still comes from making products such as semiconductors, batteries and robotics.

Just Look Around
I think a problem with economists (and a lot of big-city columnists and journalists) is that they somehow are unable to just look around them. All one has to do is drive around the midwest for a few days, Michigan, Ohio, etc. and you will see for yourself how important – and different – manufacturing is to the country, and what happens when factories close. It affects the entire community and those jobs are not replaced – and the ripple effect from the loss of a community’s jobs base is terrible. All the other jobs that manufacturing supports go away, too, when manufacturing goes away.
I live in Silicon Valley. Facebook, Google and Twitter employ relatively few people relative to manufacturing. Apple sends its manufacturing to China, because in China working people don’t have any say, so they can treat workers there worse than workers here in our democracy will allow. In fact Silicon Valley has high unemployment, in some areas here as much as 25% or more of the office and light industrial buildings are for lease, and our downtowns and commercial streets have plenty of empty stores. They’re just newer, so they don’t look as bad as the downtowns across the midwest. But it is as bad.
In February economist Christina Romer wrote in a NY Times op-ed, Do Manufacturers Need Special Treatment? that our government should not promote manufacturing. She wrote,

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.

I responded, in Manufacturing On Planet Economus, and think it very much applies in response to this ongoing discussion:

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).
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.

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.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
Sign up here for the CAF daily summary.

We, The People Have To Say, “No You Can’t Do That”

Posted on by

In Will We Choose A Chinese Future, David Sirota asks the core question: “Do we accept an economic competition that asks us to emulate China?” THIS is the choice that the “job creators” are demanding that we make when they say we need to be more “business friendly.” THIS is what they are asking us to do to ourselves when they say that less government, less regulation, lower taxes, anti-union “right-to-work” laws, and the rest of the corporate-conservative litany is what will restore the economy and “create jobs.”
We, the People have to say, “No, you can’t do that.”
It’s Not Low Wages, It’s Low Democracy
The reason so many factories have moved to China is not just price, it is because they do things a democracy cannot allow. Steve Jobs famously said, “Those jobs aren’t coming back,” because over there they make people live in dormatories at the factory and can roust them at midnight and make them work 12-14 hour days, seven days a week, using toxic chemicals. Richard Eslow lays it out in, Hell Is Cheaper: China, Apple, And The Economics Of Horror,

Companies like Apple don’t outsource to China because the workforce is better-educated or more highly motivated. They don’t even outsource just because the labor is cheaper there. They outsource because employers who defraud their workers can make products more cheaply, and those who ignore their safety can produce them more quickly. […] It’s possible that Steve Jobs and other outsourcing executives really think that “those jobs aren’t coming back” because they expect it will always be impossible to underbid the Chinese – because they don’t believe Chinese workers will ever be protected by law.
That’s the inexorable logic of the unrestrained and unregulated market. If things don’t change, there will be no stopping the outflow of employment from the safe and the stable to the cheated, the endangered, and the abused. Bad ethics drives out good ethics.

Jobs is saying that those jobs and companies and factories are not coming back because over there the workers can be forced to do those things, because they don’t have a say. They don’t have We, the People democracy like we do, so they can’t do anything about it. And our trade agreements allow our companies to close our factories here and force our workers to compete with that.
We can’t ever be “business-friendly” ENOUGH. We have to do something else. We have to understand that We, the People — the 99% — are in a real fight here to keep our democracy, or we will lose what is left of it.
We, the People have to say, “No, you can’t do that.” We have to say it to the companies that move jobs to China, where people have no say and are exploited. And we have to say that goods made by people with no say cannot be brought into our country without a strong tariff. We should use the funds brought in by that tariff to subsidize goods made here so they can compete in world markets. Otherwise we are making democracy into a competitive disadvantage. And if countries like China don’t like it, they can give their people a say, pay them decent wages, and protect their environment. That would be a race to the top instead of the current race to the bottom.
The Climate Change Denial Industry
Oil and coal companies are funding a “denial industry” to keep us from doing what needs to be done to rescue the planet’s climate. They make billions upon billions from pumping carbon into the air, and block efforts to cut back their polluting. Modeled after the tobacco denial industry and its “doubt is our product” strategy, they fight efforts to move us to green energy sources. They even direct their propaganda to attack electric cars and high-speed rail.
We, the People have to say, “No, you can’t do that.”
The Too-Big Banks
It’s the same story with the biggest banks. They pushed debt on us. They used their power to gut regulations and then took huge risks that crashed the economy. They demanded taxpayer money to rescue them without even cutting back the huge salaries and bonuses. And then they funded propaganda that blamed us, the poor, the government, public employees, unions — anyone but themselves. And they used their vast power and wealth to block investigations and accountability, forcing “settlements” that make their shareholders and their employees and their customers pay.
We, the People have to say, “No, you can’t do that.”
Other Examples
There are many, many other examples of wealthy, powerful interests – “the 1%” – using their wealth and power to make us do things that benefit themselves at the expense of the rest of us. And as this continues life for “the 99%” gets harder and bleaker and we fall further and further behind.
In all of these example We, the People have to say, “No, you can’t do that.”
That’s What Government Is
Government is We, the People banding together to watch out for and take care of each other. Government is We, the People saying to the wealthy and powerful, “No, you can’t do that.”
When the1%ers demand “less government” they are using their power and propaganda to force us into a position where we are less able to say to them, “No, you can’t do that.”
We, the People have to say, “No, you can’t do that.” Until we do, they will do that, and that, and that.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
Sign up here for the CAF daily summary.

China Is Very “Business-Friendly”

Posted on by

China is very, very “business-friendly.” Corporate conservatives lecture us that we should be more “business-friendly,” in order to “compete” with China. They say we need to cut wages and benefits, work longer hours, get rid of overtime and sick pay — even lunch breaks. They say we should shed unions, get rid of environmental and safety regulations, gut government services, and especially, especially, especially we should cut taxes. But America can never be “business-friendly” enough to compete with China, and here is why.
Workers In Dormatories, 12 To A Room, Rousted At Midnight
China is very, very “business friendly.” Recent stories about Apple’s manufacturing contractors have started to reveal just how “business-friendly” China is. Recently the NY Times’ Charles Duhigg and Keith Bradsher exposed the conditions of workers at Apple’s Chinese suppliers, in How the U.S. Lost Out on iPhone Work. They describe how China’s massive government subsidies and exploitation of workers mean, as Steve Jobs told President Obama, “Those jobs aren’t coming back.”

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. … 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.”

Right. No American plant can roust workers out of nearby dorms at midnight to force them onto a 12-hour shift. And the corporate conservatives criticize America for this, not China, saying we are not “business-friendly” enough to compete. This is because we are a place where We, the People still have at least some say in how things are done. (Don’t we?) 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.

“Business-friendly” = living 12 to a room in dorms, rousted out of bed at midnight for 12-hour shifts, working in a plant paid for by the government, using a neurotoxin cleaner that harms people but enables more production for companies like Apple.
Forced Labor Is The Real “Business-Friendly”
Arun Gupta at AlterNet, in iEmpire: Apple’s Sordid Business Practices Are Even Worse Than You Think, writes,

Researchers with the Hong Kong-based Students and Scholars Against Corporate Misbehavior (SACOM) say that legions of vocational and university students, some as young as 16, are forced to take months’-long “internships” in Foxconn’s mainland China factories assembling Apple products. The details of the internship program paint a far more disturbing picture than the Times does of how Foxconn, “the Chinese hell factory,” treats its workers, relying on public humiliation, military discipline, forced labor and physical abuse as management tools to hold down costs and extract maximum profits for Apple.
… Foxconn and Apple depend on tax breaks, repression of labor, subsidies and Chinese government aid, including housing, infrastructure, transportation and recruitment, to fatten their corporate treasuries. As the students function as seasonal employees to meet increased demand for new product rollouts, Apple is directly dependent on forced labor.
… The use of hundreds of thousands of students is one way in which China’s state regulates labor in the interests of Foxconn and Apple. Other measures include banning independent unions and enforcing a household registration system that denies migrants social services and many political rights once they leave their home region, ensuring they can be easily exploited. In Shenzhen about 85 percent of the 14 million residents are migrants. Migrants work on average 286 hours a month and earn less than 60 percent of what urban workers make. Half of migrants are owed back wages and only one in 10 has health insurance. They are socially marginalized, live in extremely crowded and unsanitary conditions, perform the most dangerous and deadly jobs, and are more vulnerable to crime.

Please read the entire AlterNet piece, iEmpire: Apple’s Sordid Business Practices Are Even Worse Than You Think. These things are not “costs” that we can compete with by lowering our wages, these things are something else.
Not JUST Low Taxes — Massive Government Subsidies
These stories also describe how the Chinese government massively subsidizes these operations, assists their low-wage labor-recruitment schemes, and looks the other way at violations of labor and trade policies. The Chinese government is very “business-friendly.” They hand money to businesses so they are much more able to “compete.” They are so friendly to business that they even own many businesses.
Trade Secret Theft
Another area where China has very “business-friendly” policies is when their own businesses steal from non-Chinese businesses. This NY Times story, U.S. to Share Cautionary Tale of Trade Secret Theft With Chinese Official details just one case of the “unbelievably endemic” problem of Chinese theft of “intellectual property” — the trade secrets that keep businesses competitive. In this case China’s Sinovel sole the software that ran an American company’s products, and immediately cancelled their orders for those products because they could now make them in China:

Last March, China’s Sinovel, the world’s second largest wind turbine manufacturer, abruptly refused shipments of American Superconductor’s wind turbine electrical systems and control software. The blow was devastating; Sinovel provided more than 70 percent of the firm’s revenues.
… Last summer, evidence emerged that Sinovel had promised $1.5 million to Dejan Karabasevic, a Serbian employee of American Superconductor in Austria.

If you steal the ideas, processes, techniques, expertise, plans, designs, software and the other things that give companies a competitive edge, then you don’t have to pay them and you can just make the things yourself. When you get in bed with a very “business-friendly” country, you might find that they are more friendly to their own businesses. Because they consider themselves to be a country with a national strategy, not a self-balancing, self-regulating “market.”
Trade Deficit Drains Our Economy
As a result of our ideological blindness, refusing to understand China’s game, we have a massive trade deficit with them. This means hundreds of billions of dollars are drained from our economy, year after year. And to make up for this we borrow from them in order to keep buying from them. But this does not cause their currency to strengthen in the “markets” because China loves this game the way it is going, and intervenes against the markets to keep their currency low. And so it continues, year after year. We believe in “markets” they believe in rigging markets so they come out ahead…
Markets Can’t “Compete” With This
Corporate conservatives tell us we need to be more “business-friendly” to “compete” with China. But at the same time Steve Jobs was being a realist when he said “the jobs are never coming back” because he understood that the current political climate, controlled by a wealthy few who benefit from China’s “business-friendly” policies will not let us fight this. Why should these companies bring jobs back here, when over there they can roust thousands from dorms at midnight and make them use toxic chemicals for 12 hours a day for very low pay to make iPhone screens that he can sell at fantastically high prices? Why should they, unless We, the People tell them they can’t do that to people, and that we won’t let them profit from it?
As long as we continue to think that this is about “markets” competing, we will lose. China sees itself as a nation, and they have a national strategy to continue to be so “business-friendly” that our businesses can’t compete. Our leaders and corporations may have “moved on” past this quaint nation thing but China has not.
We, The People Need To Act To Fix This
As long as we continue to send our companies out there alone against national economic strategies that engage entire national systems utilizing the resources of nations, our companies will lose. But the executives at those companies are currently getting very rich now from these schemes, so what happens in the future is not their problem. Maybe the companies they manage won’t be around later, but that is not their problem. Others are concerned, but are forced to play the game because no one can compete with national systems like China’s.
When everyone is in a position where something isn’t their problem, or where they can’t do anything about it on their own, it means this is a larger problem, and this is where government — We, the People — needs to get involved. It is our problem but we have been convinced that we — government — shouldn’t interfere, or “protect” our industries, because “the markets” don’t like “government” — We, the People — butting in. This is a very convenient viewpoint for few who are geting very, very wealthy at the expense of the rest of us.
We Need A Plan
In U.S. must end China’s rulers’ free pass at Politico, AAM’s Scott Paul writes, Read it, read it, read it!)

We shouldn’t fear China’s citizens. But we should be worried about the actions of its authoritarian — and, yes, still communist — regime that tightly controls the People’s Republic. And we should be downright terrified by some of our own leaders’ attitudes toward China.
… China is not merely the key U.S. supplier of cheap toys, clothing and electronics: Its government is also one of our foreign financiers. China achieved this status by defying the free market and its international obligations toward more open trade and investment.
[. . .] History didn’t do in the Soviet Union. A sustained and aggressive strategy did. China engaged our business and political elites — and seduced them into believing these policies were no longer necessary.
… There has been no strategy, no effort to prevail economically.
… No one is suggesting that China is an enemy and we should just update our Cold War strategies. No one can accurately define what China’s intentions are in terms of foreign policy or defense. But on the economic front, the lessons of the past are instructive: We need a plan.

We need a plan. We need to understand that China is not competing with us in “markets’ they are competing with us as a nation. We need a national economic/industrial strategy that understands the urgent need to fight as a country to win the industries of the future.
It’s not just price, it is things a democracy cannot allow. We can’t ever be “business-friendly” ENOUGH. We have to do something else. We have to understand that We, the People — the 99% — are in a real fight here to keep our democracy, or we will lose what is left of it.
Democracy Is The Best Economics
When people have a say they demand good wages, benefits, reasonable working conditions, a clean environment, workplace safety and dignity on the job. We need more of that, not less of that. We must demand that goods made in places where people who do not have a say do not have a competitive advantage over goods made in places where people do have a say. And we must demand that those places give their people a say.
As long as we let democracy be a competitive disadvantage, We, the People will lose.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
Sign up here for the CAF daily summary.

Manufacturing On Planet Economus

Posted on by

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.
Sign up here for the CAF daily summary.

President Puts American Manufacturing Front And Center In State Of The Union

Posted on by

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.
Sign up here for the CAF daily summary.

To Get Our Economy Back Hold Cheaters, Fraudsters And Exploiters Accountable

Posted on by

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.
Sign up here for the CAF daily summary.

Did The President’s Jobs Council Go All Corporate?

Posted on by

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.
Sign up here for the CAF daily summary.

Santorum’s Make It In America Plan Shows Republicans Can Read Polls

Posted on by

One after another, the Republican Presidential candidates have come out with strong statements that appear to show support for making things in America and revitalizing American manufacturing. This is because they can read polls and polls show that Americans overwhelmingly want American manufacturing revitalized, are tired of offshoring, understand the importance of fixing trade deficits and want to see things made here again. Donald Trump gained a lot of traction from the appearance of taking on China. Mitt Romney also talks about how we need to take on China. Rick Santorum has his own “Made In America” plan. But do their actual proposals match up with their rhetoric?
Romney
Mitt Romney has strong words about China. For example, last week Romney visited Competitive Edge, an Iowa company that sells promotional campaign items that you can put your own brand or message on. (“We’ve got items for convention give-a-ways, business gifts, direct mail campaign items, fund raising, political campaigns, special events, company promotions, and more!”) At this campaign stop Romney said,

“I’ll clamp down on China that’s been cheating,” Romney said. “They’ve been stealing our intellectual property, our designs, our patents, our know-how, our brands, they’ve been hacking into our computers. That has got to stop.”
“I will stop it if I’m President of the United States,” Romney said.

However, in spite of Romney’s words, many wonder if he is only saying this to get votes. For example, the website for Competitive Edge, the site of his Iowa appearance, says, “Competitive Edge is a major importer of Specialty Products from Asia and Europe.” According to TPM, the president of Competitive Edge “said he doesn’t think Romney’s being completely serious when it comes to his tough China talk.” He explained,

“I think the rhetoric of a campaign is different than the actual application,” he said. “[Romney] will sit down and he will get the right people in, he will take the advice of maybe a Huntsman who will say, ‘this is how to handle China.’” … When it comes to actually governing, Greenspon said he expects Romney will take a much softer approach to China at the urging of his supporters in the business community.

So much for Romney. As with so many of his campaign positions, surrogates explain behind the scenes that he is just saying what he needs to say to get votes, what he will do if he is elected might or might be completely different, there is no way to know.
Santorum
Rick “not-Romney” Santorum is now the official #2 in the GOP race. Santorum can also read polls, and is offering a “Made In America” plan. The plan begins the way Santorum always begins, “Rick Santorum believes that to have a strong national economy, we must have strong families.”
Much of Santorum’s plan is the usual Big Lobbyist and Wall Street-backed Republican stuff about cutting taxes on the rich and getting rid of any restraints on the wealthy and powerful as “pro-growth” policies. Items 1,2,3,4,5,6,7,8 and 9 are actually all the same item: cut taxes on the rich and their big corporations.
And then Santorum diversifies. Item 13 is get rid of President Obama’s health care reform, with no explanation of how this will help manufacturing. Item 15 includes, “eliminate funding for Planned Parenthood and support adoption” and “eliminate funding for United Nations organizations that undermine America’s interests.” Again, there is no explanation of how these will help manufacturing. These points are apparently included in a manufacturing plan to reassure the Republican base that he is certifiably nuts, to attract Michelle Bachmann voters.
Some of the items appear to be the result of selling advertising space to lobbyists from various industries.

  • The oil industry purchased Item 20: Tap into America’s vast domestic energy resources…
  • The big Telco giants purchased Item 21: Unleash innovation in telecommunications and Internet consumer options by getting government out of the way…
  • Pete Peterson shelled out for Item 22: Reform Social Security and Medicare…
  • The big Wall Street firms that are investing in privatizing education purchased Item 26: Reclaim the role of parents as the decision makers in their children’s education and incentivize the states to promote parental choice…
  • Canadian oil companies that want to sell to China purchased Item 28: Approve the Keystone Pipeline…
  • Wall Street and promoters of “The Big Lie” purchased Item 30: Phase out Fannie Mae and Freddie Mac’s government backed role in mortgages…

The plan is not all bad. Santorum accidentally comes up with a few things that would actually help American manufacturing. Of course, they are mostly just more about cutting taxes, but these cut specific taxes on manufacturers, which might help bring some manufacturing back. These are:

  • Item 10: Eliminate the corporate income tax for manufacturers – from 35% to 0% – which will spur middle income job creation in the United States and will create a job multiplier effect for workers
  • Item 11: Spur innovation in America by increasing the Research & Development Tax Credit from 14% to 20% and make it permanent

Santorum’s Item 32 is important, and I’m singling it out for attention: Strengthen our national security and national defense so that we are not dependent upon our foes or competitors for critical manufacturing, technology, energy and other security needs
So Santorum’s plan has a few good points but only barely matches the promise of its title. In reality it only offers more of the same policies that boost the 1% at the expense of everything else, even harming smaller manufacturers trying to compete with the multi-national giants. The plan even offers a number of items that have ravaged our manufacturing base, pushing even more disastrous “free-trade” agreements. And, the plan has the added bonus of a series of unrelated proposals apparently included only as filler and the necessary proof of insanity to qualify him in a Republican primary.
President Obama’s Office of Manufacturing Policy
As one component of a set of policy initiatives to improve manufacturing President Obama recently set up a new Office of Manufacturing Policy that will have cabinet-level status, reflecting the importance of the manufacturing sector to our economy. The office will coordinate the efforts of different government agencies, such as the Small Business Administration, the Department of Commerce and the Transportation Department.
Congressional Democrats’ Make In In America Plan
In May Democrats in the Congress brought out a “Make In In America” package of specific legislative proposals to revitalize American manufacturing. In Democrats’ Plan Makes Jobs In America I described the plan:

Congressional Democrats yesterday unveiled the Make It In America plan for the 112th congress. This is a set of specific, detailed, targeted bills that clearly create jobs and restore our economic competitiveness, beginning with a national strategy for manufacturing. This is very different from the vague, sloganeering, lobbyist-written plan offered by Senate Republicans.
Yesterday House Democratic Whip Steny Hoyer and Minority Leader Nancy Pelosi unveiled their Make It In America plan “to support job creation today and in the future by encouraging businesses to make products and innovate in the US and sell it to the world through strengthening our infrastructure and supporting investments in key areas like education and energy innovation.”
This Make It In America initiative involves a series of bills that have been introduced for consideration by the 112th Congress. This initiative will create jobs here, grow the economy and reduce the trade deficit, all of which help reduce our budget deficits. Creating jobs and growing the economy reduces deficits by increasing tax revenues and decreasing spending on unemployment benefits, food stamps, etc.

Click through for details of the plan.
A Warning
There is a warning here for President Obama and all other candidates of either party running for office in 2012: the public wants to see plans to bring back American manufacturing. The public understands what the NAFTA-style trade deals have done to our wages, jobs, factories, industries, trade deficit and economy. They hate Wall Street’s quick-buck outsourcing schemes and the trade deals that enabled them, and want American manufacturing revitalized. Supporting Wall Street and trade deals and the quick-buck, offshoring economy harms the country and for that reason is political suicide
The public wants to go into stores and see “Made In America” again.
Frank Sobatka explains:

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
Sign up here for the CAF daily summary.

For Jobs Obama Must Bypass Congress

Posted on by

Here is a fact about bipartisanship and civility in Washington: the Republicans in Congress will obstruct anything President Obama proposes to create jobs and help the economy, period. A bad economy helps them in the coming elections, and that is that. Deal with it. If you want to see results on jobs and economic growth you are going to have to get around a Republican House of Representatives intent on blocking jobs and growth. The President can and should “go big” and make dramatic proposals to Congress for job-creation. Doing so will draw contrasts so the public has a clear choice in the coming elections. Fortunately there are things the President can do right now, without the approval of Congress, that will have a big impact on job-creation now and in the future.
China Currency
China doesn’t buy from us nearly as much as it sells to us and this has cost us dearly. China manipulates its currency to give Chinese-manufactured goods a competitive advantage in world markets. In effect this subsidizes their products so they have a cost advantage of as much as 30-40% coming out the gate, even before other competitive factors come into play. This has created huge imbalances not just with us but across the world.
The biggest thing the President could do right now is declare China to be a currency manipulator. Doing so enables the administration to impose sanctions, including tariffs, that would remove any cost advantage China gains from their manipulation. This would have an effect on reversing the loss of American jobs, factories and industries to Chinese imports, and would be supported by the public.
The President should officially declare China to be the currency manipulator that it is, and impose tariffs as a remedy. That takes care of China’s advantage in US markets, and encourages other countries to take action, too.
With a level playing field our manufacturers can compete in world markets. Our government can take steps to help bring about such a level playing field, or to help our own companies against countries that do not play fair. This would tell companies that it is safe to manufacture here again, and our government will back them up.
But, But ,But…
There is concern about angering China when “we owe them so much money.” It is important to remember why we “owe them” money. We owe them money because we thought we had a trade deal with them. By definition a trade deal involves actual trade, which involves buying and selling. We bought from them and they were supposed to use the dollars we spent there to buy things from us. But they didn’t. The huge amount we “owe them” by definition means they didn’t live up to their part of the bargain. We should insist that they use those treasury notes they have accumulated to purchase US-made goods.
Other Actions That Don’t Require Congress
Scott Paul of the Alliance for American Manufacturing wrote in The Hill last month that there are things the President can do without needing Congress’ approval:

There is plenty that President Obama could do on his own right now:
• Expedite small business loans through the Small Business Administration and Treasury Department to help firms expand, retool and hire.
• Convene a multilateral meeting to address global imbalances and in particular Chinese mercantilism. If China doesn’t agree to participate, designate it a currency manipulator. (China ships fully one-third of its exports to the U.S. and finances less than 10 percent of our public debt, so we have more leverage than some might suggest.)
• On the heels of the landmark agreement with automakers on fuel economy standards, secure an additional agreement from all foreign and domestic car companies to increase their levels of domestic content by at least 10 percent over the next three years.
• Direct the Department of Defense to leverage existing procurement to contractors that commit to increasing their domestic content of our military equipment, technology and supplies.
• Approve additional applications for renewable and traditional energy projects, contingent on the use of American materials in construction.
• Kick any CEO off of federal advisory boards or jobs councils who has: (1) not created net new American jobs over the past five years, or (2) is expanding the company’s foreign workforce at a faster rate than its domestic workforce. Replace them with CEOs who are committed to investing in America. Shame is a good motivator.

National Industrial Policy
Even long-term things like promising the development of a national industrial policy could have an immediate effect on jobs here and now. If companies know that the US government is going to stand behind them if they manufacture here, and enforce trade agreements, and aggressively push for balanced trade where our trading partners don’t just sell to us but also buy from us, they’ll put the US back into their manufacturing plans. If they know that the government understands and intends to assist key industries with tax policies, education and training policies, energy policies, infrastructure modernization,key research and development initiatives, and the other components of national strategy — which is what other governments do — they will know they are no longer going out to international markets alone, up against national systems.
By making it clear that our government is going to stand up for American manufacturers — and their employees — and won’t pull the rug out from under them again, companies will have a reason to change their strategies and start bringing these jobs back home.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
Sign up here for the CAF daily summary.

So You Want To Talk About Jobs?

Posted on by

Before leaving on vacation President Obama said he is going to talk about creating jobs in September. The latest word is he will give this speech next week. Campaign for America’s Future has put together some ideas for creating jobs. See our series Big Ideas To Get America Working:

The task is not simply to give the economy a stimulus, as if we were giving a charge to a dead car battery. We need to rebuild the engine and modernize the wiring, creating a new strategy for America in the global economy. We asked our writers and contributors to lay out the “big ideas” and framing you can use to push a jobs-first agenda to the forefront of the national debate.

Here is where we are: People need jobs and jobs fix deficits. We have to get people back to work and the American people deserve good-paying jobs, not just any new job at half the old wages. Lots and lots of regular people are not working or have settled for jobs that don’t offer enough hours or just don’t pay enough or provide benefits. And here’s a fact: people who are working are paying taxes, are not collecting unemployment and are less likely to be collecting food stamps, so putting people to work lowers deficits.
Of course people want their President to be reasonable and bipartisan and compromise to get things done, but more than that they want results. Mr.President, if you can’t get results any other way people want you to move the obstructers out of the way. Republicans in the Congress are blocking every effort to boost the economy and create new jobs – especially good-paying jobs. Many think they are doing this to sabotage Democratic chances in the coming elections.
Go Big
So, Mr. President, you have to take this to the public. Go big. Draw contrasts. Give the public a clear choice. You don’t have to propose something that Republicans will pass — because no matter what you propose, they won’t. Instead you have to bring forward proposals that will clearly put lots of Americans to work, so the public can decide what they want to do.
Above all, it is time to be reality-based in the approach. The country is sick of spin and propaganda and putting the best face on things. Reality and good policy are the best politics. Here are some “reality-based” ideas to help get this going.

  • Reality: Millions of Americans are out of work or are working in low-paying jobs and outside of the DC area it is not getting better.
  • Reality: Getting people back to work lowers deficits because they are paying taxes and require fewer government services.
  • Reality: Tariffs on goods made by exploited workers in exploited environments = jobs and good wages here. Our trade agreements have created huge trade deficits that are draining our economy. “Free trade” is a myth that has been used to drive wages down here, not to create trade partners who buy as much from us as they sell to us.
  • Reality: Other countries have national industrial/economic strategies. This means we increasingly send our companies out alone to compete with national systems and they won’t win that fight no matter how big they are.
  • Reality: Other countries use national domestic-content procurement policies, and we need a “Buy American” procurement policy.
  • Reality: For decades all income gains have gone to the top. This is distorting everything in our society and democracy.
  • Reality: Tax cuts for the rich cause deficits. They also incentivize predatory business models by rewarding get-rich-quick schemes over good, long-term, sustainable business strategies.
  • Reality: Climate change is real and it is serious and we have to address it. And addressing climate change means millions of green jobs will be created.

The same old same-old debt and bubble economy won’t work and got us into this mess. Last week in The Jobs Question, Robert Borosage described the problem:

Twenty-five million Americans are in need of full time work. One in four teenagers not in college can’t find a job. Wages aren’t keeping up with prices. Our trade deficit is rising, as more and more good jobs get shipped abroad. It’s projected that a staggering 48 percent of homes with mortgages could be underwater – worth less than the mortgage – by the end of the year.
Moreover, there is no recovery to an old, healthy economy. The old economy didn’t work for most Americans even when it was growing. The cancer was spreading before it metastasized in the financial panic. In the so-called Bush recovery years before the collapse, the few captured all the rewards of growth. The average income of the bottom 90% dropped. That economy was built on debt and bubbles. We were hemorrhaging manufacturing jobs and borrowing $2 billion a day from abroad. And we were in complete denial about global warming and the catastrophic climate changes that have already begun. We can’t recover to that old economy – and we wouldn’t want to.

Summary: The old way didn’t work and led to disaster. Don’t try to bring that back, thinking it will be better this time. We need a new vision, and new strategies.
So let’s get down to business. Here are the ideas presented in our Big Ideas To Get America Working series:
Today’s Big Idea To Get America Working: Fix The Housing Crisis by Liz Ryan Murray.
Today’s Big Idea to Get America Working: Hire the Young to Build Their Own Future by Richard (RJ) Eskow.
Today’s Big Idea To Get America Working: Revive American Manufacturing by Dave Johnson.
Today’s Big Idea To Get America Working: Make Work Pay by Anne Thompson.
Today’s Big Idea To Get America Working: Invest In Public Education by Jeff Bryant.
Big Ideas To Get America Working: Rebuild Our Infrastructure by Dave Johnson.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
Sign up here for the CAF daily summary.

How Free Trade Made Democracy A Disadvantage

Posted on by

This is my presentation from last week’s Netroots Nation panel session: Revitalizing Manufacturing: The Road to Renewed Job Growth. Click through for panel details and other panelists, here for a pdf of slides, including Jared Bernstein’s. See below for video — and be sure to watch Beri Fox!!!
Four Stories
I want to share four quick stories:
1. Democracy
The story of America
We fought a wealthy powerful few who had all the say and didn’t let us have a say, and made a country where We, the People made the decisions and share the benefits.
So 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… we protect the environment, we give out social security. We take care of each other.
And we used to protect that. 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. It was called the American System. Look it up. We’d let the goods in but we would use a tariff to strengthen our country, our infrastructure, our schools – our democracy.
But that changed. Superman left and we stopped protecting the American Way. We started letting goods in made by people who had no say, so the goods were cheap and they undercut us.
We have made democracy a disadvantage. We made it a disadvantage instead of an advantage.
Make no mistake, people who say they want things more “business friendly” they mean they want America to be less of a democracy, with fewer of the protections we fought to build for ourselves.
2. Trade
Once upon a time some areas made some things well, and other areas made other things well, and they would trade, and both areas could have the things they made AND the things made somewhere else, and everyone benefitted. And both areas increased the customers they had.
And so to most people “trade” means we buy things made somewhere else, and they buy things we make. In what world does “trade” mean closing a factory that is located here, moving it there where they don’t already make something, laying off all the people, and then bringing back here the same things that used to be made here and selling them in the same stores?
And the result is a lot of people have lost jobs, devastating our communities.
And then they tell workers who still have jobs that the same can happen to them, we can just close this factory, so shut up and don’t expect raises or benefits or safety or dignity.
What we see happening when a company moves production out of the country is not trade, it is getting around the borders of the democracy we built, and the things we fought and sacrificed to build.
Letting companies move factories away was giving up our ability to make a living. Sure a few people might get really rich from it, but look around you the rest of us, and our communities, and our economy have been sent sliding down a hill into the sewer.
3. The Deal
There once was a company. The company made a deal with a company in the next county, they make something you don’t, and you make something they don’t. So the deal is you’ll buy things from them if they buy from you. And you start buying from them, but they aren’t buying from you. And this goes on, and they still aren’t buying from you, but you are starting to owe them a lot of money. And they you’re borrowing from them to buy from them, and they still aren’t buying. And then they show up in your county selling the things you already made and sold, buy they used the money they got selling to you to set up to make what you made.
And by the way they say you have to pay them what you owe them.
That is how our deal with China is working out. We bought from them, they didn’t buy form us, and now they have accumulated $1.5 trillion which they were supposed to have been buying American-made goods with.
And they cheated. Or I would say they were smart and watched out for their own interests excessively, and we didn’t at all.
$1.5 trillion! So imagine what would happen if we said we’re going to default on the debt but these bonds are redeemable in the next 3 months for American made good. Can you imagine what $1.5 trillion of orders would do for our economy right now? $1.5 trillion in orders? Factories humming…
Well the picture of what that would do FOR our economy is a way of understanding what that has done TO our economy.
4. The Cost
I like to tell you a story about the cost of our free-trade deals and tax policies.
I took a road trip last fall, through four industrial states, MI, OH, WV, PA to visit some of the Manufacturing Town Hall meetings that Scott’s group put on. [Note – see posts about this tour here.]
They call it the “rust belt” because so many factories are closed and rusting.
From town to town you see downtowns devastated, because the way you make a living is gone and the cheap imported goods at wal mart competing with local businesses. Michael Moore wrote about Flint after the auto plants closed. That kept happening, town after town, year after year, and got worse.
You have to see to first hand. [Note – there are pics in this post.]
But I’ll tell you, we’re even seeing it now in Silicon Valley, seeing downtowns with lots of empty storefronts. Empty office and manufacturing buildings everywhere. That wave that hit the Midwest has reached the tech areas now.
So the moral of the four stories is that We the People have to protect the things we fought for and won. And we have to remember that We, the People have to take care of and watch out for each other because the wealthy and powerful won’t do that for us. And markets aren’t about that, either.
When we relax our eternal vigilance they will come back with a vengeance.
Progressive Solutions

    a. Industrial Policy
    We don’t believe in having the government help. We think the markets will fix everything. But other countries don’t see it that way.
    We are pitting our companies on their own against the national resources of governments. We can live in an ideological dream world and say we shouldn’t, but our competitors in the rest of the world DO.
    b. Protect Democracy
    Tariffs. Call it a democracy tariff. Or a thugocracy tax. Use this to help lift others out of their exploitation. By making democracy a disadvantage we are only encouraging the worst, and encouraging it here, too. “Business friendly” is a code word that means get rid of all the protections We, the People have built for ourselves.
    They can protect the environment, etc, or charge a tariff to bring those goods in.
    c. Renegotiate Trade Deals
    Trade can mean something different. We still have a huge market. We can require goods to either be made by people who are not exploited and who have a say so
    d. Enforce Trade Laws
    China cheats in so many ways, and we all know it. Currency rates. Indigenous innovation . Forcing companies to turn over proprietary IP…

We can do these things. Because of the strong prosperity that democracy brought us others really want to sell into our markets.
And my own favorite:

    e. Top tax rates
    With high top rates it takes time to build a fortune. You have to have long-term plans, sustainable businesses that are surrounded by healthy communities, good schools, good infrastructure.
    Lower rates, you can make a fortune in a few days. Business models changed, became short term, cash in, quick-buck schemes. Harvest infrastructure, close factories, no need for healthy communities, etc.

Video Of The Panel
Scott Paul opens
Jared Bernstein at 6:02
Rep. Jim McGovern at 17:00
Beri Fox at 31:29
Dave Johnson at 48:13
IF the video below doesn’t show up, click to see it here.

Sobotka
As always, Frank Sobotka explains what’s wrong:

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
Sign up here for the CAF daily summary.