Gentle Reminders: U.S. trade deficit in goods and services for 2010: $497.8 billion*
U.S. unemployment: 9.8%
Today’s Wall street Journal: “Germans in Talks to Buy Big Board”
We cannot hope to restore confidence in the American economy without first restoring the “lost jobs.” It takes capital to create jobs. If we take a good look into the “lost and found” department of the American free enterprise system we are apt to stumble upon the common denominator for “lost jobs” and “missing capital.” It is called “unemployment.” If we concentrate on tracking down the “missing capital” perhaps we will have found the key to our chronic unemployment conundrum.
Some people may find the concept of “missing capital” a bit far-out or too simplistic. In that case, one only needs to explore what happens when a U.S. factory employing 2,000 people suddenly shifts its entire production outside the United States in order to take advantage of lower labor costs…the purchasing power of 2,000 people is promptly extinguished.
—Dad, “Import Backlash and the Coming Unemployment Crunch,” 1975
For a moment, let’s not think about a company with 2,000 employees, as my Dad suggests above. Let’s think smaller. Let’s think about Lynn Deregowski and Jenny Maxwell’s 80-person company, The Cat’s Pajamas. Let’s think about what would happen if Lynn and Jenny suddenly moved their operations to, say, Mexico. They’re not going to do that, but let’s just think about this scenario. My Dad would like this approach. Let’s go with it.
First off, those independently-contracted sewers and cutters The Cat’s Pajamas / Lynn and Jenny so admirably keep busy would need to find new contract work. But the disappearance of this country’s manufacturing sector suggests they wouldn’t find any. So those now-unemployed sewers and cutters, whose earning power just dropped, would need to tighten their belts at home. Whatever businesses Lynn and Jenny’s employees typically patronized around town would lose a few customers. Their profits, in turn, would dip a tad. A tiny percentage of the economy in San Francisco’s neck of the woods would vanish. A few more houses–the sewers and cutters can no longer afford them–would be forced into foreclosure. And on it goes. It reminds me of that scene in “It’s a Wonderful Life” where suicidal George Bailey wanders through Bedford Falls and discovers how much his presence touched the lives of so many people. Lynn and Jenny’s company is important to 80 people. Should it disappear, the “missing capital” Dad worried about would have a ripple effect.
Now multiply that “missing capital” scenario across the fruited plain. I have no idea how many US companies in the last few years have moved their operations to lower-cost countries like Mexico, India, Vietnam, China, Lesotho, Malaysia, Thailand, the Philippines, etc. But a University of California, Berkeley study (published in 2003) estimated that about 14 million jobs in the United States were at risk due to the offshore outsourcing trend. Fast forward to 2011 and our current 9.8% unemployment rate. It’s no mystery where those missing jobs and subsequent lost capital went. Over there, over there. Over to anywhere but here.
This creates a vicious cycle: US employees lose jobs and earning power. The now-offshore US corporations must further ratchet down costs in order to produce products cheap enough for income-strapped middle class US consumers (their former employees) to buy. And eventually, once US companies are firmly entrenched offshore, they like the lower production costs. Maybe their sales go up in foreign places. Maybe they figure they don’t need middle class US consumers at all anymore. Until one day these heads of US corporations aren’t even sure America as an entity matters anymore. They start using words like “global economy.” Their products are “green,” “environmentally friendly,” “organic” and “sustainable.” They’re anything but Made in the USA. And one has to ask: Doesn’t all this shipping and flying of “sustainable” / “green” products back and forth from China or wherever to the USA harm the environment? “Green” indeed. I guess the dollars are green.
Problem is, I don’t believe in nor want the federal government to step in and “create” jobs. Surely Reagan had a point when he quipped: “The nine most terrifying words in the English language are ‘I’m from the government and I’m here to help.’ ” Instead, rely on the American people to force a change in the situation, one pair of pajamas at a time. If we, as a nation, become mindful shoppers, we can create a sea change.
That said, as mentioned earlier, trying to find the country of origin on a product shouldn’t be a needle-in-haystack chore. Here the federal government could help us all by tweaking The Fair Packaging and Labeling Act of 1966, section 1453. If we demand to easily see where products originate (not where they’re distributed), that’s a start. Slap a country of origin flag label on each and every product out there. That way, when American consumers walk into our local Walmart or Costco or Target we’d see thousands of Chinese flags on the tags dangling from clothing or on every microwave or iPhone or flat screen TV we want to buy. To me, this would create awareness. And awareness is the key to positive change.
Good news: The Cat’s Pajamas bathrobe I ordered for my Valentine’s Day gift from Don arrived, safe and sound. The terry cloth fabric is thick and lush and beautiful. Came wrapped with a shades-o’-pink striped cardboard band. On back I found these words in nice, big letters: “Proudly Made in America.” Way to go, Lynn and Jenny. And thanks, sweet husband.
PS: About that top-of-post headline: “Germans in Talks to Buy Big Board.” Hey, don’t blame me. Haven’t shopped at German-owned Trader Joe’s in over a month. Whew.
*Updated to reflect BEA’s 2/11/11 Press Release.