It is worth remembering that the average American consumes an exceptional amount of resources. Compared even to the relatively profligate Europeans, the average American consumes twice as much energy, twice as much water and lives on more than twice as much land. The disparity with even wealthy urban Chinese or Indians is greater still.
This lifestyle has in part been justified by the very high historical levels of American productivity, but it is clear that American productivity is not increasing at nearly the rate of that in emerging markets.
We are left with an obvious conclusion - as a factor of production, American citizens continue to be very resource-intensive, but are becoming comparatively less productive.
It seems to me that America is unique in a culture that sees consumption of scarce resources as tantamount to a human right. Much of the cultural divide in the US seems to rest on this basic notion. Many political issues in the US are really debates about resources that no-one seems prepared to engage with - the US healthcare debate ought to be a debate about why Americans spend such incredible sums on medicine, but is instead primarily a debate about what kind of accounting we use to pay those incredible sums.
The idea of what it means to be American is obsolete. The sprawling suburb, the hour-long commute, the SUV, the McMansion, all artifacts of an empire in terminal decline. American citizens simply cannot consume such vast resources if they do not have the productivity to match. I see every reason why Chinese and Indian productivity will continue to rise, but little reason why American productivity would suddenly rally. The American people are left with an obvious choice - produce more or consume less.
I don't really see why the rate of productivity should matter as much as the absolute value of productivity in regards to distribution of wealth.
I agree the American suburban lifestyle is and will continue to decline as it just simply is not sustainable. These will be the new ghettos as more and more poor are pushed out of the cities into the now decaying suburbs.
As to why American productivity would rally, I can only imagine vast advances from nano and bio-tech and machines that build other machines.
Well, to your first point, I'd say that productivity in relative terms is a more useful measure in this case because that's generally where the best investments are to made - if we're sticking with the "investors don't need america" part.
The issue with using absolute productivity in a global world is that comparative advantage in production (i.e. higher productivity growth, and with it higher real incomes in the developing world) are the driver for lifestyle.
Think of it this way: if others are wealthier, they'll put upward price pressure on supply side of goods that American's buy (look at copper for example) - while at the same time American productivity (vis-a-vis real income) decreases (or at least remains flat) make these goods less affordable from the demand side.
This means lifestyle, even with a fixed absolute productiviy, will decrease.
As long as it's the rich who have the money to pay for increasingly expensive resources like gas, what's their motivation for moving away from the suburbs?
There aren't enough rich people to sustain the suburbs. I think what these people are talking about is the suburban middle-class entitlement mentality. The vast majority of middle-class americans live in suburbs and subscribe to the philosophy that they are compelled to consume as many resources as allowed by their bank account and/or credit cards. Frugalness, philanthropy, and community are not mainstream American values.
If you consider any donation to a non-profit as charity, then sure. The article you linked uses a very loose definition of charity: any discretionary income received by non-profit entities. This covers pretty much all donations given to religious institutions (which covers 32%, by far the largest slice of the pie) and a huge amount of money given to educational institutions (which came in second place with 14%). There's very little charitable about the vast majority of modern churches and educational institutions (specifically private colleges and grade schools).
I view charity as giving money to an organization from which you receive no benefit. This pretty much wipes out the majority of US "charity."
GDP in America is inflated with more useless things that net each other out (say, two competing marketing campaigns for different brands of bleach) than GDP anywhere else.
I think American values are an evolving thing across generations. The baby boomers grew up in a time where getting a home and all its effects were the thing to do because people were moving to a time of common homeownership. The boomlets grew up in a world where everybody already has homes, and it's hard (I think) to actualize yourself by doing exactly what your parents did. I think we're already experiencing somewhat of a shift to more abstract forms of actualization and values in younger generations. While I'm not trying to plug a politician here, I think the way President Obama's election campaign resonated with so many young people is some evidence to this effect. Some of these values may be what you consider not mainstream now, but give 20-30 years, they might be more prevalent again.
I sadly have to agree with jd. Another way of seeing the article is that americans no longer contribute enough skills effort,value to the new economy to justify their lifestyle and that they should leverage taxes on the wealthy to compensate for that. I'm not rich, but I can see why this is not a winning proposition long term.
All it would take to 'fix' our economic woes would be to reindustrialize. Coupled with high import tarrifs - in the range of 30-60% as was set historically during the periods of growth in the US, it wouldn't take long to restore the US 'productivity' and industrial output. It would mean that the large profit-seeking organizations in the US would make less money over time, but it would be better for the average American workers.
Unless you are referring to the recent recession (from which the graphs indicate we are recovering), we never de-industrialized. Our industrial output is higher than ever before.
I wonder what those graphs would look like when normalized by the growth in total GDP over time. (I took 're-industrialize' to mean as a percentage of output).
They both increased by about 6.5x from 1950 to 2007.
Of course, I'm also not sure why the growth of non-industrial sectors of the economy is a bad thing, or represents a decline at all. I've learned a bit of martial arts over the past year or two - does that mean I need to "re-computerize" my skillset?
I'm no economist, but I believe the concern over manufacturing continuing to shrink as a percentage of U.S. economic activity comes from the question of whether the segments that are replacing it are things that bring money into the national economy. Do service sector jobs represent exportable economic activity? Are the sectors that replace manufacturing easily outsourced?
I think the issue is a little too complex than for a single rising trend-line to put us at ease.
I don't know the situation in the US, but in France, most shrinkage of the industrial sector is due to outsourcing within the same country. For example, car manufacturers did almost everything by themselves 30 years ago in France, and they know depend a lot on "equipementier" (not sure what the right English translation would be - this refers to companies like Faurecia, which make seat, etc...). Those are counted as services, not industries. Yet, they build exactly the same thing.
This has been studied extensively in France, I would be surprised if it were not the case in the US as well.
No sector has "replaced" manufacturing. Some sectors of the economy may have grown faster, but manufacturing has also grown.
It's much the same with skills. My martial arts skills have grown more quickly than my computer skills recently, but I've become more skilled at both programming and fighting. Our economy provides both manufactured goods and massages - historically it only produced the former. That's a good thing.
That's not true if you think structurally, as a percentage of the whole.
The analogy to skills is dubious. A closer parallel might be the time you spend at a given activity. If you become obsessed with your martial arts, and you quit your job without finding a way to make your kata profitable, then you would have need to worry about your finances, yes?
That clearly has not occurred, since (let me point this out one more time) we manufacture more now than ever before.
But lets run with your time analogy. We became more productive at manufacturing, and we now manufacture more stuff with less human input. Humans have been freed up to perform other useful work (services).
It's kind of like me becoming really good at my job, finishing all my work by Tuesday night, getting a pay raise, and then spending Wed-Fri at a second job (e.g., martial arts instructor). Oh noes! I hope this never happens to me!
I don't understand how you can expect this statement to carry your thesis in isolation.
Let's say you earn more money in your job than you ever have before.
Does that mean you're running "in the black"? No, because you might have also increased your expenditures out of proportion with your increase in income.
It's not enough to observe that manufacturing has increased, for imagine a country with ever-increasing manufacturing but declining exports of manufactured goods. Clearly it's possible for your observation to be true whilst not indicating a strong economy.
Again, I'm no economist, but I know enough to distrust one Pollyanna graph when I see one.
While there's some fiscal rules in place to benefit society in those countries, the main cause of this disparity is purely greed in American executives. With the way that the current top players are willing to sit on production startups, there's no way to reindustrialize without complete societal change. Namely, reducing everyone's consumption and increasing the uptake of domestically produced, high-quality and long-lasting goods.
Since the current system favors shameless outsourcing and cheap goods, your simple, effective plan is completely stonewalled.
If we passed high import tariffs then other nations would pass reactionary import tariffs and make it harder for our goods to be sold overseas. In general, it would lower trade. See: http://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act
(Seriously, that productivity multiplier is not more than a decade away. Humanoid and mostly remotely controlled. Americans will put these to a far greater effect than Indians or Chinese.)
Before globalization and free trade it was roughly true that what was good for American industry was good for the American people. Now that money can be transferred from country to country easily, that factories can be transferred easily, etc. it is no longer true, necessarily, that what is good for American industry is good for the American people.
The economic and political beliefs of the masses have not caught up to this new reality. They still think in terms of Ford being an American company rather than a company whose headquarters are in America. The interests of a corporation are to its shareholders and not to any particular country.
Mega corporations like Shell transcend the nation state. They are able to influence the national policies of multiple countries at once. Unfortunately politics is local and the big picture is lost on the majority of people. People are largely stuck in the paradigm of my country versus your country. This is allowing corporations to commit morally dubious acts on a grand scale.
Last night I told my wife that the future seems scary with all these rich multi-international companies starting to stick their legs deeper in foreign countries infrastructure.
Oils, Natural Gas, Minings, Banks.
I can only pray that these giants won't create a huge ticking time-bomb such that governments all over the world had to bail them out in the future in case something bad happened.
(The conversation happened when I saw HSBC advertisement saying that they are the "local bank everywhere you go").
It's an interesting point to make. There was a particular cable from Wikileaks that talked about how Shell had infiltrated a large portion of the Nigerian government. Who knows what else is in the works?
I've been semi-following wikileaks but I didn't know about this Shell-Nigerian infiltration issue.
Sometime I feel that whatever noble cause Bill Gates and Warren Buffet do will eventually be overridden by these issues in the future.
What we're seeing is a humongous circle of evil:
A company started with a decent intention: just to make a living. Once its existence is threatened by competitors, it is forced to expand in order to be competitive.
When all "ethical" routes to expand had been explored, they started to do a less "un-ethical" moves (i.e.: infiltrate, spy, bribe, etc). Government is the first and foremost primary target for these kind of activities. Once it happened, government is no longer a pure entity that can lead a nation. Government turns into a commercial entity where it tries to make every single employee rich.
When every dirty little secrets are exposed, citizens might turn against their own government. Probably in the form of militants, rebels, and whatnot.
What once was an ideal movement to overrule the corrupt government might put these idealist in the same spot as the previous governments: "hey, we fought for this country and it's time for us to enjoy the best time of our lives ... while we can". Thus the circle of corruption in the government continues.
It all started with "Money". It is truly the root of all evils.
Somehow I've seen these things unfold in most Hollywood movies. WikiLeaks, corrupted government, overruling militants.
On the other hand, it looks like China is trying to stay away from all the debacles by rebuilding and reinvesting on its own infrastructure. While China has its own issues with human rights and freedom of speech, it is probably one of the nations that "seem" less corrupt to foreign interests (they're still corrupt within themselves) compare to other nations.
Why do you feel it is bad for the American people to have our computers and televisions made in China? Are consumers enjoying cheaper goods not also Americans?
(Note: Ford is a silly example. Many of our cars are already made in the US by machines owned by domestic subsidiaries of foreign corporations. The machines are operated by a small number of non-union laborers earning high wages.)
The problem is that it costs money to buy those inexpensive computers and TVs. If there aren't the jobs in the US to make these things, then there aren't the wages necessary to buy them. For a while, this wasn't a problem but as time goes on the lack of production in the US is hurting the public more and more.
There is no lack of production in the US. Except during recessions and minor blips, it has not dropped since the early 70's (maybe earlier, my graph only goes back that far).
There is a lack of production in key industries though.
Yes, Americans have managed to purchase more stuff. There is a cost to this production of the items that we import that isn't currently being paid for. The damage to the environment is one notable such cost. It doesn't show up in the economic charts as a cost but it is a real cost nonetheless.
Also, a large part of our ability to purchase 'more of these items' comes in the form of a massive increase in our debt. At some point the party will stop. Our present system is not sustainable for much longer unless changes are made.
I suppose I can see some strategic issues with mining, particularly given China's recent protectionism regarding rare earths. But on the other hand, if they really cause us problems, we can quickly make them capitulate by repudiating all their bonds and cutting off trade.
Also, I agree that the current "party" in which China taxes their citizens to lower the cost of goods they send to us will eventually stop. But it's unclear to me what this has to do with our increased production levels - in fact, such a move will likely increase our production levels.
"the only thing missing is a non-voting immigrant mercenary army, whose legions can be deployed in foreign wars without creating grieving parents, widows and children who vote in American elections."
That is already well under way, the Marine Corp in particular recruits heavily amongst immigrants without asking many questions about their legal status and promising (and delivering) citizenship afterwards.
SERVICE GUARANTEES CITIZENSHIP. WOULD YOU LIKE TO KNOW MORE ?
The US military does not enlist illegal immigrants.
What is more, the military does not enlist non-English speakers. The US military does however enlist English speaking permanent resident immigrants and offers them a quicker path to citizenship. That isn't much of a scandal.
This is equivalent to killing people until they agree with you, which is basically just making war on a different group of people in the name of "stopping war". And as the Vietnam era shows, it's not even immediately effective, nor a lasting effect.
But there were easy ways for the rich (and middle class) to have their children avoid being sent. The essence of believing we need to bring back the draft so that war will be waged less often is that if you make the ruling class' children fight then they will be more careful about making war. If it becomes the case that war stops being a poor man's fight but a rich man's prerogative then possibly wiser decisions will be made.
I don't think the war in Iraq and Afghanistan would still be ongoing if the ruling class were forced to send their children into harms way.
No. If everyone is personally in danger of losing a loved one they will be reticent to go along with an unnecessary war, precisely because of the lessons learned in Vietnam.
If everyone is personally in danger of having a loved one enslaved or killed, they will be reticient to go along with an unnecessary policy of {free trade, socialism, net neutrality, fish&game regulation, pigouvian taxes on alchohol}.
Since I oppose the current fish&game regulations, we should enslave random people and force them to work as commercial fishermen (note: this is even more dangerous than the military) until the regulations are changed. This will cause people to agree with me.
Instead - let's vastly decrease our standing army, and focus more on quick reaction elite troop and ask for volunteers when we have a big war worth fighting. In WWI&II, the military was far out-gunned and under-manned compared to Germans in the beginning, but the threat was very real - so we mobilized a massive force.
If we did this - we'd never end up in wars like Iraq / Afghanistan - imagine trying to raise the volunteers. Maybe the Republicans would go, but then again at least they could vote with their feet - where it counts.
germany had an anemic gdp growth in the last two decades, significantly worse than most countries of comparitive size (population and gdp-wise). Look at gdp growth of other big european countries, or worse USA, it is quite striking
Part of that slow GDP growth can be attributed to having to absorb an entire communist country (East Germany) into a capitalistic society (West Germany).
This is indeed no small accomplishment - but I doubt that that's what people have in mind when they say Germany's economy is an example to follow. It seems to have become a popular meme in the US (has been for a long time in Europe media), but it has little rationale. Generally, it goes around Germany exports a lot, and Germany has not followed the model of shareholding as much as the US (or UK).
Those ideas are extremely popular in general, and even more so in Europe, I think partly because it can reinforce anti-americanism (the US became a symbol of companies owned by shareholders instead of families, supposedly more geared toward long term).
There, precisely, is the problem. Not every nation can be like Germany. It's not possible for every nation to have an overall trade surplus. Being like Germany is not a solution.
German law states that people who help, instigate, prolong or support the stay of an illegal immigrant can be penalized. That means that doctors, nurses and other hospital staff is required to report people to the authorities when the illegal status of an immigrant seeking medical help. The medical profession opposes this rule that is a lot stricter than in many other european countries, where help can be given to aliens without revealing their identity.
I wasn't suggesting that as a "species" they could flourish and continue to do so (though that's possible) but that just as one can profit by driving a company into the ground (remember naked short selling) one can profit by destabilising a whole economy and destroying entire industries. Generally speaking if you've made billions of dollars you don't care that you can't earn any more the same way.
Indeed if I can destroy US car manufacture and have stakes in Japanese car manufacture then it's a plus for me.
If you make money destroying society then you switch to selling anti-depressants, DIY divorce kits, handguns, etc. and make more money. It's the capitalist way. Ain't it fine.
"New York Mayor Michael Bloomberg recently revealed the plutocratic perspective on immigration when he defended illegal immigration by asking, "Who takes care of the greens and the fairways in your golf course?""
Any ambitions Bloomberg may have had to run for President, are pretty much put to rest by this quotation.
Indeed, but it's still a fair question, just framed badly. What he should have said was "who works in every kitchen in every diner, and who maintains every public green space, and who builds every house?"
Other first-world countries get by just fine without an illegal-immigrant underclass to do the menial jobs. In Australia, building houses is a respectable and well-paid trade. Kitchens in fast-food restaurants are worked by high school students with part-time jobs. And public green spaces are maintained by... well I dunno, some low-skilled worker making a decent wage.
We also have a 5.2% unemployment rate, and no real social underclass the way there is in America.
Based on some of the replies to my comment, I think people might have misunderstood what I was getting at. The main purpose of my comment was to say simply that Bloomberg could have made an equivalent rhetorical point in a way that didn't make him sound like a plutocrat arguing that he needed illegal immigrants in order to keep his golf club maintenance fees low.
Also, there's an important difference (to me, anyway) between 1) a descriptive statement about who does certain kinds of work in today's US, and 2) a prescriptive statement about who I think ought to be doing those kinds of work, and under what conditions they ought to be doing so.
> Indeed, but it's still a fair question, just framed badly. What he should have said was "who works in every kitchen in every diner, and who maintains every public green space, and who builds every house?"
I've done farm labor. My father did the "follow the harvest" thing for years.
I completely reject the idea that there are jobs that "Americans" won't do.
Maybe you won't do them, but if you won't, why should anyone be taxed to support your choice?
Not every house. There are still lots of small companies that play by the rules - Of course they are at a disadvantage for that integrity, but when a company takes shortcuts in one area they are likely taking shortcuts in other areas, ultimately producing inferior products. You get what you pay for.
He is not partisan enough to get through a President primary anyway. Republicans hate his gun laws and Democrats hate his support of charter schools, to name just two things he has done that piss off either side.
There are so many reasons manufacturing in US is declining.
It used to be the US was one of the few places you could set up a factory without it getting bombed or confiscated. It then had a monopoly on manufacturing and the rest of the world competed to produce commodities to trade for the finished products. With protracted peacetime came establishment of factories elsewhere and competition for manufacturing without a corresponding increase in commodity production. So now an American worker has to compete with a Chinese or Hindu worker, and if he's more expensive, he'll lose and the Asian will win.
An American worker is more expensive than his Chinese counterpart at any exchange rate because of the prices of commodities they consume. A worker can't work without a car in most US cities, but in China he sure can. Beside commutes, housing is expensive (for whatever reasons). Then you have healthcare costs that are globally superlative and that the employer has to pay for, and taxes that are by no means small.
Then you have the legal system, which themselves are a huge burden. Court awards and consequently settlements are very large by global standards. This also costs a business more than money; it costs it time and requires the bureaucratic complexity to deal effectively with liability. Then there's Sarbanes-Oxley and lobbying. On top of that there's IP law: if part of a product is patented in the US, that product can't be imported by foreign companies, but it can be sold outside the country. But an American company can't sell it in US or export it. And on and on.
Under such conditions, who would want to build a factory here?
I don't think it's that the American people in particular are obsolete I think that we have over-population and that a proportion of the worlds population are not required for industry, food production. That the rich elite would choose to pay as little as possible in wages is simple capitalism enabled by a global market; it's basically a war for survival. Those in power offer barely enough to work yourself to survival and we get to battle amongst ourselves to see who gets those scraps - my view of the next few decades is pretty bleak.
If most Americans are no longer needed by the American rich, then perhaps the United States should consider a policy adopted by the aristocracies and oligarchies of many countries with surplus populations in the past: the promotion of emigration. The rich might consent to a one-time tax to bribe middle-class and working-class Americans into departing the U.S. for other lands, and bribing foreign countries to accept them, in order to be alleviated from a high tax burden in the long run.
This is an amazing bit of backwards reasoning. The rich, who don't need the rest of us, will pay us to leave? In what kind of sense, even if the author is correct on all other counts, would this work? Why pay a thousand people to leave when you can just leave yourself?
I liked this article because it spotted a lot of trends, but to me it looked at them all backwards. The rich have a lot more and are a very small minority that no longer depend on us. But heck, that was true 100 years ago. I'm not aware of any rich people that stayed in the United States because of the military or the market here. Yes, if you go back to the robber barons they needed to be near the workforce, but that's assuming that we have two states, robber barron and the currently rich. The word "rich" covers a helluva lot more ground than that.
In my opinion, the wheels are coming off the wagon, for whatever reasons. This means that everybody will pull out their pet theories and causes and try to nail them on to reality, as this author is doing.
The upside to this is that it doesn't matter which theory you choose: things aren't working and folks are looking for people to blame for it. Emigration might be a wise choice not for the poor and unwashed, but for most people, middle-class and rich alike, leaving the truly poor helpless people the only ones left. (along with the folks who prey on them, which, like the robber barons, can't be very far from their "market")
I consulted with a startup 8 years ago that was doing just this: finding and disseminating information about cheap foreign locations for middle-class Americans to retire to. Looks like this is going to be a really good growth industry.
This is an amazing bit of backwards reasoning. The rich, who don't need the rest of us, will pay us to leave? In what kind of sense, even if the author is correct on all other counts, would this work? Why pay a thousand people to leave when you can just leave yourself?
The article seemed an obvious satire to me. You read it literally?
> The rich, who don't need the rest of us, will pay us to leave? In what kind of sense, even if the author is correct on all other counts, would this work? Why pay a thousand people to leave when you can just leave yourself
This doesn't happen directly in a naive way, but indirectly through various pressures and constraints. For example when IBM is offshoring its jobs, it is basically providing an incentive for its workers to just move to another country. It is not a direct bribe but is a presented as an alternative to losing their job.
> Why pay a thousand people to leave when you can just leave yourself?
Again I think this is highly allegorical and we should differentiate between "rich individuals" and "rich corporations". "Rich individuals" already can move freely, they are sort of trans-national. They move from one metropolis to the next without much regard to what country it is located in. But it seems that the article talks more about "the rich" as the "rich corporate entities". These are also becoming transnational, but it is a little harder for them to move. They are not controlled by 1 or 2. Individuals there could be a small upper managerial class on top that would be required to relocate. Those people cannot all pay for a private bodyguard, lots of maids, large walled-off estates, and they cannot all afford private airplanes, they still need the protection and peace offered by America. So instead they just outsource their labor requirements to other countries.
> But heck, that was true 100 years ago.
That's true, but it wasn't as true 40 or 50 years ago. A middle class American family had a higher real wage income. Factories were still open, and both American consumer market and labor market looked pretty good. Yes, in effect we are reverting back to older times. As the article points out, there might soon be just the super-rich and armies of hired illegal immigrant labor serving them.
> Emigration might be a wise choice not for the poor and unwashed, but for most people ...
Exactly. The problem with the globalization (and its proponents that hail it as simple and obvious market liberalization) is that only large corporate entities and rich individuals can engage in it. The other 99.99% cannot simply pack up and leave.
This has been exacerbated by large amounts of debts that Americans have been accumulating in the last 10-20 years. These are student loans, mortgages, health related expenses and also plain old credit-card dept. What this means is that a lot workers are effectively slaves to whomever they owe the money. If they lose their job they could lose their house, might not be able to treat their illnessm, and feed their children.
Those are the just indirect contraints. Add to that the existence of national borders. The immigration procedures in some countries are highly restrictive for an "average Joe". For example, there is simply no way for a regular person to just get on a plane and choose to move to America. It is either a work visa, a marriage visa, a rich investor visa and so on.
Then of course, comes the politics. And there nobody in power really discusses any alternatives or ways out. The parties might as well just form a single party and stop pretending there is any form of debate or disagreement. They are effectively discussing what color the bicycle should be painted, instead of maybe discussing if we need a truck or an airplane instead of a bicycle.
While labor is shifting overseas, consumers are not.
America is the most consumer driven economy in the world and should remain so for a bit even given the recession (thank quantitive easing and low interest rates for that). All those trade surplus countries like Germany, China most sell to someone when their domestic consumers are not buying.
China will probably catchup at some point (in consumer demand) but that won't be for another generation or more.
Let's get down to brass tacks. It's not the American people who are obsolete, it's the notion that corporations are something more significant to us than a place to temporarily lay down our investment bet for a brief while. Anything more is asking for heartbreak. Just because the government personifies a corporation doesn't mean we have to as individuals.
Hows about this for a radical idea: We don't NEED our corporations, or our rich. No, seriously, we don't.
"But who will make our products," you ask. Well, who does that now? Not us, not anymore. Does it matter? Consumer products will always be relatively easily manufactured, and why would we focus on making easy stuff?
Look at the Germans: They have trade surpluses not because they make the latest Christmas toy craze or plates and sporks, but because they make precision tools, gauges, and other engineered products for industry. Their concept of manufacturing, called Mittelstand, sees small and mid-size companies -- over 90% of German companies are that size and they employ over 70% of the German population -- doing the lion's share of manufacturing, much of it for export to other countries.
Germans are, as a people, self-reliant to the detriment of their corporations; we in the US are the opposite. But, if this article is true in any measure, that will have to change.
It's unfortunate that Obama and others in our government don't place enough emphasis on things like YC and the SBA. We need _everyone else_ to see that there is an alternative to becoming a 99er and/or relying on either Big Government or Big Corporate (BG/C) to save us. BG/C will always stand together, whether through regulatory capture, (de)regulation that only serves to curtail competition from upstarts, or blatant TBTF corporate welfare.
I know, Germans and Chinese small business ownership is a very cultural thing, and I can't pretend that it takes a certain mentality to start and run a business. But, that's the excitement of risk. I think everyone can agree that we're at a really low point in American morale. That "can do" spirit that used to pervade our psyche is replaced with rage and finger-pointing. What we need to do is learn to bootstrap again. I want people who have been or know someone who has been affected by this corporate "pivot" away from America to ask them what do they have to lose by starting their own business. The hustle atmosphere is what causes job growth in the first place. If ideas are too expensive to bootstrap, join or start an incubator. I see life science and biotech incubators in every r&d park in every major city in the US, more so than other technologies. Why? Pooling of resources, and volume discounts on lab and materials.
It's all in how you look at things: It may be a lot harder to start a business than to work for a corporation, but what if it's impossible to find a job at one now? What is the possible alternative? Becoming a 99er, then switiching straight over to welfare? Is that really what people are resigning themselves to when the corporations won't hire them?
Trite but apropos movie quote conclusion? "It's only after we've lost everything that we're free to do anything."
Refugees viz Albert Einstein & H1Bs viz Linus Torvalds contributed to the prosperity of America.
Talented Americans should now migrate and contribute to the rest of the world.
no but marxism is. the author's classification of people into these sets of workers and owners is a product of his imagination; pension funds made them the same people a long time ago to say nothing of entrepreneurs, professionals and folks like us that old karl couldn't have imagined. this thinking shows even more disregard for people than the author's facetious proposals.
'Of course there are alternative options, which would not require the departure of most Americans from America for new lives on distant shores. One would be a new social contract, in which the American people, through representatives whom they actually control, would ordain that American corporations are chartered to create jobs in the U.S. for American workers, and if that does not interest their shareholders and managers then they can do without legal privileges granted by the sovereign people, like limited liability.'
I think too, in addition to what you suggest here, is that the size and scope of corporations needs to be limited. A company like Citi is too big to control. It is so big that its collapse would cause problems for the country even if the source of the collapse comes from its dealing in other countries.
We need a new system but it appears to me that what we have in the U.S. and elsewhere is regulatory capture. I don't see anything changing in the near term.
How about breaking the country up into smaller pieces? Citi can only be too big to fail, if there's a big country behind for the guarantee. Small countries would also ease regulatory capture, since all those small regulatory regimes would have to compete with each other.
It would be a race to the bottom. We largely already see that in the "developing" world. When a factory causes sufficient growth that a country demands higher wages, the multinational that owns the factory picks up and moves to an even more impoverished nation, and the worse-off are climbing over each other trying to create the most lenient regulations to attract business.
Then once the corporation has departed, the original country collapses back into poverty. Rinse and repeat over decades.
Venezuela or Nicaragua. Though obviously the departure isn't necessarily the choice of the corporation in either of those cases.
Well, in Nicaragua I'd say the most recent event was the hurricane, and so regulation wasn't the cause of industry's (tourism's) departure. But I still stand by the general theme, that multinational corporations are engaged in something of a bait-and-switch, even if there's no intentional malice behind it.
And in Venezuela, one can blame Chavez, but clearly his platform resonates with people because of a pattern of exploitation, even if Chavez himself turns out to be merely a new vector for exploitation.
I agree that corporations departing can cause (or be caused by) a bad economy. But neither of your examples are part of the chain of events you described:
I fully agree with all steps in this chain besides the last.
As you say, Nicaragua was a natural disaster and Venezuela was an unnatural disaster. I agree that both of these things can cause a nation to decline, and can also cause foreign corporations to flee the country. But I wasn't asking whether disasters can harm a country and also chase away foreign investment.
Doesn't China's currency manipulation really support his argument? If the currency floated at its "correct" levels, China would instantly be uncompetitive and the factors would move to another country. I've already seen several companies moving their production to countries other than China (from China) based on increasing costs relative to other countries.
I fully agree that low wage seeking companies might leave the newly prosperous country. I was asking for examples where "once the corporation has departed, the original country collapses back into poverty."
That has not happened in China, as far as I'm aware. Or India - in fact, India is becoming a seller of higher quality labor, and wages are skyrocketing [1].
[1] A girl I went out with told me she left Bombay (for NY) for the experience. The money would have been better had she stayed (though admittedly Manhattan is cheaper).
Creating an attractive environment for international corporations has largely been good for Ireland, and not the root cause of our current woes - that would be the ridiculous decision by our Minister of Finance to issue a blanket guarantee to our major banks, which were oversized relative to the size of our domestic economy. This has resulted in the current bailouts and humiliation.
The 'Celtic Tiger' (booming Irish economy) went through two main periods - c.1995 - 2001 (Celtic Tiger part 1), and 2003-2007 (part 2). The first period was fueled by foreign direct investment by American multinationals - if I recall correctly, American companies have more net investments in Ireland than they do in China. Ireland exported more computer services in 2002 than the US did, which is pretty mind-boggling. This export-led growth teed up the next stage, which was simply an out of control housing bubble. See this for more information:
I'm hoping our open nature, which leaves a country vulnerable in a global recession, will allow us to recover quickly. Iceland seems to be doing ok and they were worse off than we were. There are some signs of a recovery e.g. Facebook recently announced expansion in their Dublin office. Google and Apple are also expanding here, exports are up, and curtailing the out of control public servants wage bill will make us more cost competitive internationally.
I don't know much about the situation in Ireland. My understanding corresponds with what you wrote in your first paragraph. I wonder, though, if there was a perceived need to guarantee the banks in order to keep Ireland attractive to multi-nationals. Iceland, I believe, did not guarantee its banks' deposits outside of Iceland. Iceland has been able to recover much better than Ireland has. Iceland had no need to placate the business environment for multi-nationals though.
I'm interested in knowing your thoughts on Ireland still being part of the Euro. Do you think it's a good idea? Is it a good idea simply because it's good for multi-nationals?
"I wonder, though, if there was a perceived need to guarantee the banks in order to keep Ireland attractive to multi-nationals. Iceland, I believe, did not guarantee its banks' deposits outside of Iceland. Iceland has been able to recover much better than Ireland has. Iceland had no need to placate the business environment for multi-nationals though."
I don't think it was to placate multi-nationals that the banks were guaranteed- it was partly to keep peoples' confidence in the banks (preventing a run on the banks, see this for an explanation of a bank run: http://en.wikipedia.org/wiki/Bank_run) and partly to keep investor confidence up so that the banks could continue issuing bonds to investors in London and New York. The first part worked, I can still get cash from an ATM as normal, without fear that my current account will evaporate. The second part, investor confidence, failed spectacularly and now the government is pouring billions into the banks, as is the European Central Bank, which is into the Irish banks for well over a €100bn and no end in sight yet. It's necessary for government intervention because the markets won't touch the banks with a 10-foot barge pole at the moment.
The boys in Brussels and Berlin are getting completely fed up with this situation I'd imagine.
"I'm interested in knowing your thoughts on Ireland still being part of the Euro. Do you think it's a good idea? Is it a good idea simply because it's good for multi-nationals?"
Up until the current recession, I'd have said the euro has been good for Ireland. It's great for tourism, trade, it's very convenient and yes, it's good for multinationals too. It's easy to see how much you're getting screwed buying a meal in Paris, and lowers transaction costs from currency exchanges. However, what we really need now is more control over our fiscal policy, currently impossible due to ceding that power to the ECB - which is mainly concerned with keeping inflation under control in Germany, and keeping the whole Euro project from collapsing. The ECB doesn't really care about Ireland as such (our economy like a tiny bug on the hide of a massive elephant), but they need to keep us afloat due to contractual arrangements and to keep the euro alive. Currently, we really need to devalue our currency, something our government did in 1993, which would make us more attractive to investment and make us more competitive. We also need to keep interest rates low for a long, long time, so homeowners don't start defaulting on their mortgages in massive numbers like the US subprime situation. If the German economy starting picking up as people start buying Mercs and Beemers again, the ECB will hike up interest rates, which will be disastrous for Irish homeowners potentially leading to an even worse situation than we're in now. So it would probably be good for Ireland to not be part of the euro at the moment, but if the world doesn't fall apart and things get better (and the euro doesn't collapse, which is still a very real prospect) then the benefits of the euro will start to outweigh it's disadvantages once again.
I think there is a fine balancing act that governments need to do. Generally it's nice to have companies do business in your country (provided they don't engage in shoddy business practices or cause too much damage to the environment) but if it's done to quickly or there becomes too great a reliance on attracting large multinationals then problems follow. It's not good for a country to be beholden to multi-national corporations or for there to be regulatory capture.
Why do you believe Ireland's attractive business environment caused their current problems? Do you believe Ireland would be better off without Google and various others locating HQ in Ireland?
My own suspicion is that the high levels of inward investment to Ireland primed the asset bubble that developed there, Of course, the problem wasn't caused by the likes of Microsoft, Google etc. setting up their offices there but it probably did contribute to the irrational exuberance that keeps these bubbles growing.
What this article describes is what I've been noticing but I've tried to focus on my startup. Although, that said I worry that there are big shifts occurring that people are not paying attention to. While we are are trying to create our business we need to remember that we are part of a community. Whether it be our country, state, county, city, district or neighborhood we need to ensure that those communities stay functional by participating as a citizen in this country.
I fear that some (not all) of the mega corporations are so motivated by profits that they forget any duties to their country. Although, why should they as many are now multi-national and stock holders consist of many rich foreigners that do not live here.
If we want to be able to do business here and be successful we need to make sure that the country continues to be a high quality place to live (and work) for the average US citizen.
Are you suggesting socialism as the answer to the issue?
I don't understand how in a place where we talk about building fortunes via startups and innovation, we also talk about stifling the very motivation for these companies to exist.
You do this, and suddenly every company moves overseas and chooses to pay taxes in another country, at which point we lose the possibility of jobs and the tax money that these companies provide.
Not every company has moved out of socialist-like Sweden. There are motivations beyond just profit and profit isn't always the best form of motivation.
Wtf is wrong with this board? This is the place for getting shit done, and all I find are a bunch of whiney people, with the same complaints you would find on the democratic underground or counterpunch.
This lifestyle has in part been justified by the very high historical levels of American productivity, but it is clear that American productivity is not increasing at nearly the rate of that in emerging markets.
We are left with an obvious conclusion - as a factor of production, American citizens continue to be very resource-intensive, but are becoming comparatively less productive.
It seems to me that America is unique in a culture that sees consumption of scarce resources as tantamount to a human right. Much of the cultural divide in the US seems to rest on this basic notion. Many political issues in the US are really debates about resources that no-one seems prepared to engage with - the US healthcare debate ought to be a debate about why Americans spend such incredible sums on medicine, but is instead primarily a debate about what kind of accounting we use to pay those incredible sums.
The idea of what it means to be American is obsolete. The sprawling suburb, the hour-long commute, the SUV, the McMansion, all artifacts of an empire in terminal decline. American citizens simply cannot consume such vast resources if they do not have the productivity to match. I see every reason why Chinese and Indian productivity will continue to rise, but little reason why American productivity would suddenly rally. The American people are left with an obvious choice - produce more or consume less.