The latest job numbers were dismal, as US real unemployment remains near 20%. America now has about 25 million people either out of work or underemployed.
At the same time, corporate profits in the third quarter of 2010 enjoyed the highest annual increase ever recorded. And even as they shed more and more American workers, taking in $1.7 trillion, American corporations were 28 percent more profitable than they were a year before.
“What’s going on?” asked Robert Kuttner on the Huffington Post yesterday. “Very simply, America’s corporations no longer need America’s workers.”
As Harold Meyerson documents in a brilliant piece for The American Prospect, our most admired corporations — GE, Apple, Hewlett Packard, Intel — are creating ever more jobs overseas and relatively fewer at home. This has the double benefit of taking advantage of cheap labor abroad and disciplining workers to accept low wages at home.
So it’s fair to ask: if these “American” companies have no loyalty any longer to the United States, do they deserve to retain the advantages of corporate American citizenship, from influence over Washington to big taxpayer subsidies? Isn’t loyalty a two-way street?
Free trade is bankrupting us
It doesn’t help that both Congressional Republicans and the Obama administration support the same disastrous free trade policies that originally created Ross Perot’s “giant sucking sound” of jobs streaming across our borders down into Mexico and off to Asia.
Even worse, in exchange for short-term profits, companies that offshore their manufacturing are making a deal with the devil that will hobble America’s ability to compete with other economies for decades to come. As Kuttner explains, “American industry is competing against an industrial system in China radically different from our own.” In China,
Companies are made to take on Chinese partners, to transfer sensitive proprietary technology, and to shift their production and R&D to China. In exchange, they get government subsidies and docile workers. Eventually, much of their production is displaced by their Chinese partners, but in the meantime they make a lot of money.
Corporations are truly selling America’s industrial birthright for a mess of pottage.
And what of the much hyped service sector of software developers and architects that was supposed to replace the old smokestack economy? Well, the American worker who loses her job in a GE plant today has few other options than to put on a Wal-Mart smock at a significant cut in pay, benefits and job security.
Expensive oil will trump cheap labor
Given that their whole industrial system is rigged, getting the Chinese to reform their currency is only a sideshow, Kuttner says.
“There is a whole other strategy available for dealing with the jobs crisis — a constructive economic nationalism. But neither the White House nor the Republican opposition is offering it.”
Repeal NAFTA, GATT and the WTO? Probably unlikely in the near term, but coming up with some way to protect domestic manufacturing needs to be back on the table.
An option that Kuttner doesn’t consider is putting a price on distance. Until now, cheap oil has meant that moving shipping containers from Shenzhen to San Pedro was almost free.
As economist Jeff Rubin explains, peak oil will make distance cost money, if we just sit back and wait. At some point the market will decide that shipping costs outweigh any savings from cheap labor from offshore manufacturing.
But waiting for price to disrupt international trade could leave us without any economy at all in the meantime. It would be far more prudent to plan now for the day when we can’t afford unnecessary plastic pumpkins (and other outright junk) from China.
A combination of a sensible energy policy that encourages conservation with some old-style trade barriers that could give a re-born US manufacturing sector some of the protections that it used to have, and that Chinese manufacturing still enjoys, would provide the balance needed. Whether we’ll go there depends less on corporate leadership and more on whether our voices raise up questioning the status quo.
Editor’s Note: We have replaced the original photo posted with this article, which offended some readers. We don’t mind offending people when we see the need. In this case, we did not see that compelling need but we did want to avoid distracting from the main issue of article.
— Erik Curren