Sunday, March 20, 2016

Jobs, Corporations, Unions, and Trade Agreements. That's all.

Heavy manufacturing jobs have moved off shore, as they have been doing for many decades.  The ripple effect has been the loss of well paid jobs in related businesses that supplied and serviced them.  Who do we blame?

NAFTA comes to the top among the people I talk with.  Others have blamed greedy unions that priced themselves out of the market.  Some blame even greedier financiers who have made their fortunes by tearing apart going concerns, selling them off piece by piece.  What do you think?

Without any hard data to back me up, I find it difficult to believe that NAFTA, or any other free trade agreement, has had much to do with it.  During the time that many nations recovered from WWII, and others entered into the industrialized age for the first time, it was natural that they would capitalize on what they could produce in quantity and quality to make money on the world market.  That’s been going on since the early 1950s. It’s time to get over the idea that we can recover what we had over a half century ago.  Corporations don’t care where they manufacture things.  They do care that they can manufacture and sell things at a cost that will keep them in business.  What troubles me is that many of the newly industrialized countries are grossly corrupt, permit abuse of workers and the environment, and restrict imports with high tariffs.  Corporations don’t care one way or the other.  To the extent that trade agreements can do something about that, good for them. 

What about greedy unions?  Some American unions never got over the tough guy, we’ll teach them a lesson mindset of the early days when unions had to fight for their lives, sometimes literally.  It worked up to a point, but that point ended when enough states advertised their anti-union “right to work” laws, other locales bid against each other to attract jobs through legal forms of bribery, and other countries could produce the same thing for less money.  Unions could be a potent force for economic prosperity, but not based on a model that worked OK in the late 1940s, and not very well since then.

As for financiers, there is much I don’t understand and don’t like.  I skimmed an article this morning about United Technologies moving 1,400 Carrier jobs to Mexico by shutting down well paying historical operations in Indianapolis.  The article included a notation that Wall Street was demanding a 17% return on investment in United Technologies in the face of projected revenue growth of 8% or less.  The question I have is, who is making the demands and what authority do they have to make them?  In this case Wall Street no doubt means a handful of institutional investors, or maybe a cabal of speculators, who are threatening a hostile takeover that would dismantle United Technologies, selling off the parts at a huge profit.  Maybe that’s a good idea.  The curious thing is that United Technologies, being the person the Supreme Court says it is, has a strong survival instinct.  It would rather sacrifice the lives of a few workers than let itself be carved up by a gang of speculators, at least for a few more years. 

So what can be done?  I’m not sure.  Most of the lost jobs in heavy industry are not coming back.  It’s no one’s fault.  It’s just what happened when the global economy began to mature, but there are some steps I think worth considering.

Corporations are not persons, other than as an abstraction in law.  They have no rights under the Constitution.  They are whatever the law permits them to be, and we might want to think about what we want them to be. 

Modest changes in corporate tax law to bring down the marginal rate and make repatriation of foreign income more competitive might be a good idea.  

Sticking with corporations for bit longer, Eisenhower was right. We need to examine the military-industrial complex.  Do we want to be the biggest arms dealer in the world?  Should anybody?  Is that how we want to keep high paying jobs?  How moral is that?

Anti-union laws and rhetoric are obsolete and counter productive. They should go.  Along with them, union leadership needs to knock off whatever is left of their pugilistic attitude toward management.  Something akin to the German model might be worth considering.  Read that carefully please: something akin, not something the same as.

States and localities need to stop bribing companies to relocate to their jurisdictions.  It wastes public money and seldom results in a return on investment.  

Management needs to recognize that decent pay has something to do with efficiency, quality, and profitability.  And not just in heavy industry, but in every line of business.  In like manner, super salaries at the very top are egregious wastes providing absolutely no return.  Maybe we need to go back to a very steep marginal tax rate on income.  It would create disincentives for super salaries, and likely create incentives for improvement in other wages.

Trade agreements are not bad things.  Our tariffs are already low.  They have been without trade agreements.  If future agreements can be negotiated that lower the tariffs of our trading partners, combining that with negotiated protections for labor and the environment may improve prospects for American exports.  If you think they can stop the flow of jobs going over seas, forget it.  Other countries are going to be creating their own jobs in competition with ours anyway.   Trade agreements can’t stop that.

I have no idea what to do about reining in Wall Street sharks.  I think they are a bunch of opportunistic parasites.  On the other hand, why shouldn’t United Technologies be dismantled?  Near monopolistic corporate behemoths seem like bad ideas in so many ways.  They are amoral creatures with no loyalty to any place or nation.  The ideal of American capitalism delights in competition among many competitors.  Monopolies and near monopolies work against that.  Teddy Roosevelt understood.  It’s time we did too.

Finally, we must reverse Citizens United, and put an end to Super PACS.  That won’t be easy.


That’s all for now.

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