Post by Menehune on Oct 29, 2011 3:39:43 GMT -5
"As far as hiding 80% of their income by investing it, don't those investments go toward company growth, R&D, and other places that create opportunities of wealth for the common workers? The "hidden investments" do not just sit stagnant. Furthermore, every time this invested income results in the creation of a job, that income is then taxed. The rest is then saved, invested, or spent where it is taxed again creating expansion to our economy."
We haven't created a single job over the last decade. And you don't need to grow a company here to make money. Why do you think that companies like Apple are sitting on a horde of cash but yet the unemployment rate won't budge? Because Apple doesn't make computers in the US but overseas. They make them overseas and then sell them here, so they have money from the sales but we have no jobs making computers. They've been telling us for the last 15 years that it's an ever increasing service economy. Of course, build the new manufacturing plant in China, Taiwan, Indonesia, Malaysia, etc., and whoosh go all those jobs, but they can't outsource the counter help at McDonalds, the bell hop at the Waldorf Astoria, and the ticket taker at Disneyland, and so those are the jobs in the service industry, and it's not like we're gaining more jobs in those endeavors simply and only that the proportion that those jobs represent gets larger in relation to manufacturing and so ever increasing service based economy.
Our Congressional Budget Office boasts with pride that the main benefit of NAFTA is US companies locating just on the other side of the US-Mexico border and taking raw materials and parts and assembling/manufacturing them into finished goods. Where are those goods sold? In the US? We are the world's no. 1 consumer. So what is happening is that the company that used to have a plant here decided to screw the upgrade here when the time came and built a new plant just a stone's throw over the border in Mexico. They get their parts and materials from the same sources as before, that doesn't change. All that changes is the plant location and that is designed solely to take advantage of cheap Mexican labor just a stone's throw over the border. That isn't "free trade" but instead the destruction of the US middle class.
And you hear some like Krugman speak to startups, startups and even more startups. Startups employ almost no one. Startup is Jobs and Wosniak in their garage. What happens in reality is that when the time comes for the company to scale up the operation, they do that overseas and not here because rather less expensive to build the factory in China, Taiwan, Indonesia, Malaysia, etc., and to that savings gets added the further savings of paying their workers there rather less than would be paid to the US worker here. When was the last time that you heard of some company spending hundreds of millions, maybe the low billions even, upscaling their operation here? The only ones who do are the financial services folk, as they don't have to necessarily build anything new but can simply move into new or otherwise existing office space, ie., their business simply needs a place with offices, a waiting area, a lunchroom and the bathroom(s).
I forget who it was, think it was former Intel CEO, Andy Grove, thought maybe not, but someone well placed remarked that he finally understood the destruction of our economy when he noticed the ships coming and going out of SF Bay. The ones coming are low in the water, weighed down with goods, while the ones going out, you can see the barnacles. Andy Grove did, however, write another piece I read, and I'll post the link below, but here is a response from a blogger on the Wall Street Journal:
"So what if we have outsourced 100,000s of low-level semiconductor manufacturing jobs to China? Silicon Valley has continued to innovate with Google, Facebook, Ebay, Amazon, etc. There are lines around the block still for the latest Apple iPhone and the chipmakers for the iPhone (BRCM, TXN, OVTI, etc) don’t seem too worried that they have to outsource to Foxconn in China. If we bring the jobs back here, would the iPhone suddenly become twice as expensive. Would a trade war start that would drive up prices even further? Furthermore, would the resulting spikes in unemployment in the third world countries we outsource to suddenly dip into massive recessions, causing a global spiral down in the economy?"
That related, a bit from Grove's piece in Business Week:
"Today, manufacturing employment in the U.S. computer industry is about 166,000, lower than it was before the first PC, the MITS Altair 2800, was assembled in 1975."
Did any of you know that?
Next, note the reference to Foxconn. From Grove's piece:
Meanwhile, a very effective computer manufacturing industry has emerged in Asia, employing about 1.5 million workers—factory employees, engineers, and managers. The largest of these companies is Hon Hai Precision Industry, also known as Foxconn. The company has grown at an astounding rate, first in Taiwan and later in China. Its revenues last year were $62 billion, larger than Apple (AAPL), Microsoft (MSFT), Dell (DELL), or Intel. Foxconn employs over 800,000 people, more than the combined worldwide head count of Apple, Dell, Microsoft, Hewlett-Packard (HPQ), Intel, and Sony (SNE).
Until a recent spate of suicides at Foxconn's giant factory complex in Shenzhen, China, few Americans had heard of the company. But most know the products it makes: computers for Dell and HP, Nokia (NOK) cell phones, Microsoft Xbox 360 consoles, Intel motherboards, and countless other familiar gadgets. Some 250,000 Foxconn employees in southern China produce Apple's products. Apple, meanwhile, has about 25,000 employees in the U.S. That means for every Apple worker in the U.S. there are 10 people in China working on iMacs, iPods, and iPhones. The same roughly 10-to-1 relationship holds for Dell, disk-drive maker Seagate Technology (STX), and other U.S. tech companies."
Did any of you know that as well?
And remember what I said about startups and then scaling up the operation? From Andy's piece:
"My point isn't that Intel was brilliant. The company was founded at a time when it was easier to scale domestically. For one thing, China wasn't yet open for business. More importantly, the U.S. had not yet forgotten that scaling was crucial to its economic future.
How could the U.S. have forgotten? I believe the answer has to do with a general undervaluing of manufacturing—the idea that as long as "knowledge work" stays in the U.S., it doesn't matter what happens to factory jobs. It's not just newspaper commentators who spread this idea. Consider this passage by Princeton University economist Alan S. Blinder: "The TV manufacturing industry really started here, and at one point employed many workers. But as TV sets became 'just a commodity,' their production moved offshore to locations with much lower wages. And nowadays the number of television sets manufactured in the U.S. is zero. A failure? No, a success."
I disagree. Not only did we lose an untold number of jobs, we broke the chain of experience that is so important in technological evolution. As happened with batteries, abandoning today's "commodity" manufacturing can lock you out of tomorrow's emerging industry.
***
The story comes to mind of an engineer who was to be executed by guillotine. The guillotine was stuck, and custom required that if the blade didn't drop, the condemned man was set free. Before this could happen, the engineer pointed with excitement to a rusty pulley, and told the executioner to apply some oil there. Off went his head.
We got to our current state as a consequence of many of us taking actions focused on our own companies' next milestones. An example: Five years ago a friend joined a large VC [my note, Venture Capital] firm as a partner. His responsibility was to make sure that all the startups they funded had a "China strategy," meaning a plan to move what jobs they could to China. He was going around with an oil can, applying drops to the guillotine in case it was stuck. We should put away our oil cans. VCs should have a partner in charge of every startup's "U.S. strategy.""
We wouldn't have Detroit what it once was if Henry Ford had went from design room to scaling up in Indonesia. That's the problem we have now, since as Andy makes plain, all the investors can see is that there's more short term profit if we can move as much as we can to other locales with both lower scale up and labor costs. As I said, I'll post the link below, but read Andy's piece and note what China does. Their govt isn't setting back letting China's venture capitalists outsource jobs. Instead, the Chinese govt has a plan to grow China, to include the employment of its citizens. We have no such plan. As Andy makes plain above, we have the reverse China plan, outsource as much as we can.
And consider this as well:
"Already the decline has been marked. It may be measured by way of a simple calculation—an estimate of the employment cost-effectiveness of a company. First, take the initial investment plus the investment during a company's IPO. Then divide that by the number of employees working in that company 10 years later. For Intel this worked out to be about $650 per job—$3,600 adjusted for inflation. National Semiconductor (NSM), another chip company, was even more efficient at $2,000 per job. Making the same calculations for a number of Silicon Valley companies shows that the cost of creating U.S. jobs grew from a few thousand dollars per position in the early years to a hundred thousand dollars today. The obvious reason: Companies simply hire fewer employees as more work is done by outside contractors, usually in Asia."
So the investment is not made here, but overseas. We all need to understand that will mean over the long-term. Our friend in the Wall Street Journal misses the point entirely. Again, link below, but note Andy's remark about a thoroughly two tiered society, with the ultimate wealthy and then the great mass living in poverty. That's where our "China strategy" ends. Why the unemployment rate budge, even though recession has been declared over for a while now. That whole spending on credit spree masked the destruction and now we see it, well, those with eyes and a functioning cerebral cortex do.
Lastly, here is the WSJ piece and Andy's piece:
blogs.wsj.com/financial-adviser/2010/07/06/andy-grove-from-intel-is-wrong/
www.businessweek.com/magazine/content/10_28/b4186048358596.htm
Note that the fellow from the WSJ is otherwise wrong. Japan leads the way in car and television sales owing to protectionism. First they simply banned the import of US made autos so that they could get their auto industry off the ground (their own people paid more for the cars they bought but they got an industry with jobs out of it). In contrast, owing to our empire in the Philippines, we've had a trade agreement with the Philippines that gives them duty free access to our market and us to their market. So they have never been able to develop any industry whatsoever while the poor peasants of Luzon, etc., wiped out King Sugar and Prince Pineapple in locales such as the Hawaiian Islands. So no more C&H pure cane sugar, growin' in Hawaii, growin' in the sun (for you who remember the tv commercial from back in the day). And re the television, what they did was allow only a partial limited import, coupled with, here's the key, a technology transfer. Then they engaged in price-dumping here in the US. I will never understand the one US court case concerning that matter as long as I live, well, I understand why the outcome, ie., stupidity, but I can't understand how a finder of fact could ever be so stupid. They weren't making the tvs in the US but overseas, either in Japan or relatively close. Yet the tvs cost more in Japan than in the US. That is the dead give-away of price-dumping, and again, note what they did, they had their own people pay more but they got an industry with jobs out of it. Maybe our man from the WSJ could grasp that point, except I won't be holding my breath, since he's a book economist and not a guy like Andy Grove, who you can see from his piece, had to ask the board for a tidy sum of money to produce a product that he wasn't sure anyone would buy and in a market that couldn't sized. By the way, that's another reason for going to China with the factory and the workers. Since if the thing fails, meaning that not so much demand compared to investment, at least the loss will be smaller owing to lower cost of scaling up the operation.
Almost forgot, but I wouldn't go quite as far as Andy. We can start with a hefty tariff or duty slapped on goods made by US companies overseas. You're a US company and want to sell here? Then make it here. We can have free trade, but keep a close eye on price-dumping, with the likes of New Zealand, Australia, Japan, South Korea, Canada, and the European Union, since for the most part, the respective labor rates are within reasonable comparison (as it were). For everyone else, a case by case basis. And to finally address the WSJ fellow once again, what he forgets is that our trade deficit is ever skyrocketing. That can't and so won't go on forever. The persistent rise of the trade deficit should have put to bed the notion that some spout about how free trade, since increased volume of trade between nations means that the living standards of both are increasing. Yes, in the short term, that is true. But not over the long term when your trade deficit just keeps rising each and every year. That game has to end, much like the credit fiasco had to end (wasn't based on anything real in our economy, since when adjusted for inflation real wages haven't increased over the last two decades and to make that matter worse we're actually working longer hours as well). Oh, and for a bonus freebie, I vote Republican. And I don't want to hear any more nonsense about how tax breaks for the rich create jobs. They haven't created any. And the employment numbers over time bear that reality out. Dubya's less taxes for the rich meme didn't create the upside was instead the cheap and easy credit, to include the infamous no income check, no asset check, no down payment mortgage. And so you Dems don't get all happy, there's that vid on YouTube that Mr. Raines calling the home mortgage "riskless" (nothing is riskless, not even your next step).
We haven't created a single job over the last decade. And you don't need to grow a company here to make money. Why do you think that companies like Apple are sitting on a horde of cash but yet the unemployment rate won't budge? Because Apple doesn't make computers in the US but overseas. They make them overseas and then sell them here, so they have money from the sales but we have no jobs making computers. They've been telling us for the last 15 years that it's an ever increasing service economy. Of course, build the new manufacturing plant in China, Taiwan, Indonesia, Malaysia, etc., and whoosh go all those jobs, but they can't outsource the counter help at McDonalds, the bell hop at the Waldorf Astoria, and the ticket taker at Disneyland, and so those are the jobs in the service industry, and it's not like we're gaining more jobs in those endeavors simply and only that the proportion that those jobs represent gets larger in relation to manufacturing and so ever increasing service based economy.
Our Congressional Budget Office boasts with pride that the main benefit of NAFTA is US companies locating just on the other side of the US-Mexico border and taking raw materials and parts and assembling/manufacturing them into finished goods. Where are those goods sold? In the US? We are the world's no. 1 consumer. So what is happening is that the company that used to have a plant here decided to screw the upgrade here when the time came and built a new plant just a stone's throw over the border in Mexico. They get their parts and materials from the same sources as before, that doesn't change. All that changes is the plant location and that is designed solely to take advantage of cheap Mexican labor just a stone's throw over the border. That isn't "free trade" but instead the destruction of the US middle class.
And you hear some like Krugman speak to startups, startups and even more startups. Startups employ almost no one. Startup is Jobs and Wosniak in their garage. What happens in reality is that when the time comes for the company to scale up the operation, they do that overseas and not here because rather less expensive to build the factory in China, Taiwan, Indonesia, Malaysia, etc., and to that savings gets added the further savings of paying their workers there rather less than would be paid to the US worker here. When was the last time that you heard of some company spending hundreds of millions, maybe the low billions even, upscaling their operation here? The only ones who do are the financial services folk, as they don't have to necessarily build anything new but can simply move into new or otherwise existing office space, ie., their business simply needs a place with offices, a waiting area, a lunchroom and the bathroom(s).
I forget who it was, think it was former Intel CEO, Andy Grove, thought maybe not, but someone well placed remarked that he finally understood the destruction of our economy when he noticed the ships coming and going out of SF Bay. The ones coming are low in the water, weighed down with goods, while the ones going out, you can see the barnacles. Andy Grove did, however, write another piece I read, and I'll post the link below, but here is a response from a blogger on the Wall Street Journal:
"So what if we have outsourced 100,000s of low-level semiconductor manufacturing jobs to China? Silicon Valley has continued to innovate with Google, Facebook, Ebay, Amazon, etc. There are lines around the block still for the latest Apple iPhone and the chipmakers for the iPhone (BRCM, TXN, OVTI, etc) don’t seem too worried that they have to outsource to Foxconn in China. If we bring the jobs back here, would the iPhone suddenly become twice as expensive. Would a trade war start that would drive up prices even further? Furthermore, would the resulting spikes in unemployment in the third world countries we outsource to suddenly dip into massive recessions, causing a global spiral down in the economy?"
That related, a bit from Grove's piece in Business Week:
"Today, manufacturing employment in the U.S. computer industry is about 166,000, lower than it was before the first PC, the MITS Altair 2800, was assembled in 1975."
Did any of you know that?
Next, note the reference to Foxconn. From Grove's piece:
Meanwhile, a very effective computer manufacturing industry has emerged in Asia, employing about 1.5 million workers—factory employees, engineers, and managers. The largest of these companies is Hon Hai Precision Industry, also known as Foxconn. The company has grown at an astounding rate, first in Taiwan and later in China. Its revenues last year were $62 billion, larger than Apple (AAPL), Microsoft (MSFT), Dell (DELL), or Intel. Foxconn employs over 800,000 people, more than the combined worldwide head count of Apple, Dell, Microsoft, Hewlett-Packard (HPQ), Intel, and Sony (SNE).
Until a recent spate of suicides at Foxconn's giant factory complex in Shenzhen, China, few Americans had heard of the company. But most know the products it makes: computers for Dell and HP, Nokia (NOK) cell phones, Microsoft Xbox 360 consoles, Intel motherboards, and countless other familiar gadgets. Some 250,000 Foxconn employees in southern China produce Apple's products. Apple, meanwhile, has about 25,000 employees in the U.S. That means for every Apple worker in the U.S. there are 10 people in China working on iMacs, iPods, and iPhones. The same roughly 10-to-1 relationship holds for Dell, disk-drive maker Seagate Technology (STX), and other U.S. tech companies."
Did any of you know that as well?
And remember what I said about startups and then scaling up the operation? From Andy's piece:
"My point isn't that Intel was brilliant. The company was founded at a time when it was easier to scale domestically. For one thing, China wasn't yet open for business. More importantly, the U.S. had not yet forgotten that scaling was crucial to its economic future.
How could the U.S. have forgotten? I believe the answer has to do with a general undervaluing of manufacturing—the idea that as long as "knowledge work" stays in the U.S., it doesn't matter what happens to factory jobs. It's not just newspaper commentators who spread this idea. Consider this passage by Princeton University economist Alan S. Blinder: "The TV manufacturing industry really started here, and at one point employed many workers. But as TV sets became 'just a commodity,' their production moved offshore to locations with much lower wages. And nowadays the number of television sets manufactured in the U.S. is zero. A failure? No, a success."
I disagree. Not only did we lose an untold number of jobs, we broke the chain of experience that is so important in technological evolution. As happened with batteries, abandoning today's "commodity" manufacturing can lock you out of tomorrow's emerging industry.
***
The story comes to mind of an engineer who was to be executed by guillotine. The guillotine was stuck, and custom required that if the blade didn't drop, the condemned man was set free. Before this could happen, the engineer pointed with excitement to a rusty pulley, and told the executioner to apply some oil there. Off went his head.
We got to our current state as a consequence of many of us taking actions focused on our own companies' next milestones. An example: Five years ago a friend joined a large VC [my note, Venture Capital] firm as a partner. His responsibility was to make sure that all the startups they funded had a "China strategy," meaning a plan to move what jobs they could to China. He was going around with an oil can, applying drops to the guillotine in case it was stuck. We should put away our oil cans. VCs should have a partner in charge of every startup's "U.S. strategy.""
We wouldn't have Detroit what it once was if Henry Ford had went from design room to scaling up in Indonesia. That's the problem we have now, since as Andy makes plain, all the investors can see is that there's more short term profit if we can move as much as we can to other locales with both lower scale up and labor costs. As I said, I'll post the link below, but read Andy's piece and note what China does. Their govt isn't setting back letting China's venture capitalists outsource jobs. Instead, the Chinese govt has a plan to grow China, to include the employment of its citizens. We have no such plan. As Andy makes plain above, we have the reverse China plan, outsource as much as we can.
And consider this as well:
"Already the decline has been marked. It may be measured by way of a simple calculation—an estimate of the employment cost-effectiveness of a company. First, take the initial investment plus the investment during a company's IPO. Then divide that by the number of employees working in that company 10 years later. For Intel this worked out to be about $650 per job—$3,600 adjusted for inflation. National Semiconductor (NSM), another chip company, was even more efficient at $2,000 per job. Making the same calculations for a number of Silicon Valley companies shows that the cost of creating U.S. jobs grew from a few thousand dollars per position in the early years to a hundred thousand dollars today. The obvious reason: Companies simply hire fewer employees as more work is done by outside contractors, usually in Asia."
So the investment is not made here, but overseas. We all need to understand that will mean over the long-term. Our friend in the Wall Street Journal misses the point entirely. Again, link below, but note Andy's remark about a thoroughly two tiered society, with the ultimate wealthy and then the great mass living in poverty. That's where our "China strategy" ends. Why the unemployment rate budge, even though recession has been declared over for a while now. That whole spending on credit spree masked the destruction and now we see it, well, those with eyes and a functioning cerebral cortex do.
Lastly, here is the WSJ piece and Andy's piece:
blogs.wsj.com/financial-adviser/2010/07/06/andy-grove-from-intel-is-wrong/
www.businessweek.com/magazine/content/10_28/b4186048358596.htm
Note that the fellow from the WSJ is otherwise wrong. Japan leads the way in car and television sales owing to protectionism. First they simply banned the import of US made autos so that they could get their auto industry off the ground (their own people paid more for the cars they bought but they got an industry with jobs out of it). In contrast, owing to our empire in the Philippines, we've had a trade agreement with the Philippines that gives them duty free access to our market and us to their market. So they have never been able to develop any industry whatsoever while the poor peasants of Luzon, etc., wiped out King Sugar and Prince Pineapple in locales such as the Hawaiian Islands. So no more C&H pure cane sugar, growin' in Hawaii, growin' in the sun (for you who remember the tv commercial from back in the day). And re the television, what they did was allow only a partial limited import, coupled with, here's the key, a technology transfer. Then they engaged in price-dumping here in the US. I will never understand the one US court case concerning that matter as long as I live, well, I understand why the outcome, ie., stupidity, but I can't understand how a finder of fact could ever be so stupid. They weren't making the tvs in the US but overseas, either in Japan or relatively close. Yet the tvs cost more in Japan than in the US. That is the dead give-away of price-dumping, and again, note what they did, they had their own people pay more but they got an industry with jobs out of it. Maybe our man from the WSJ could grasp that point, except I won't be holding my breath, since he's a book economist and not a guy like Andy Grove, who you can see from his piece, had to ask the board for a tidy sum of money to produce a product that he wasn't sure anyone would buy and in a market that couldn't sized. By the way, that's another reason for going to China with the factory and the workers. Since if the thing fails, meaning that not so much demand compared to investment, at least the loss will be smaller owing to lower cost of scaling up the operation.
Almost forgot, but I wouldn't go quite as far as Andy. We can start with a hefty tariff or duty slapped on goods made by US companies overseas. You're a US company and want to sell here? Then make it here. We can have free trade, but keep a close eye on price-dumping, with the likes of New Zealand, Australia, Japan, South Korea, Canada, and the European Union, since for the most part, the respective labor rates are within reasonable comparison (as it were). For everyone else, a case by case basis. And to finally address the WSJ fellow once again, what he forgets is that our trade deficit is ever skyrocketing. That can't and so won't go on forever. The persistent rise of the trade deficit should have put to bed the notion that some spout about how free trade, since increased volume of trade between nations means that the living standards of both are increasing. Yes, in the short term, that is true. But not over the long term when your trade deficit just keeps rising each and every year. That game has to end, much like the credit fiasco had to end (wasn't based on anything real in our economy, since when adjusted for inflation real wages haven't increased over the last two decades and to make that matter worse we're actually working longer hours as well). Oh, and for a bonus freebie, I vote Republican. And I don't want to hear any more nonsense about how tax breaks for the rich create jobs. They haven't created any. And the employment numbers over time bear that reality out. Dubya's less taxes for the rich meme didn't create the upside was instead the cheap and easy credit, to include the infamous no income check, no asset check, no down payment mortgage. And so you Dems don't get all happy, there's that vid on YouTube that Mr. Raines calling the home mortgage "riskless" (nothing is riskless, not even your next step).