“Can America compete?” is the nations new No. 1 anxiety, the topic of emotional debate in bars and boardrooms, the title of seminars and speeches offered by the liberal Progressive Policy Institute, the conservative economist Todd Buchholz, and countless schools and Rotary Clubs. The question is almost right, but not quite. We’re wringing our hands over the wrong thing. The problem isn’t Chinese companies threatening U.S. firms. It’s U.S. workers unable to compete with those in China—or India, or South Korea. The real question is, “Can Americans compete?”
Geoffrey Colvin was on CNN, this weekend. It was Jack Cafferty’s show; but, don’t let that dissuade you from reading his article. “Can America Compete” is well written and documented. Give yourself some time. It ain’t an AP fluff piece. Maybe it should be “Will America compete?”
It’s time for a massive, urgent American response to the global challenge. As Cisco chief John Chambers says flatly, “We are not competitive.” Where to start? Venture capitalist John Doerr, one of Americas most passionate competitiveness campaigners, calls education “the largest and most screwed-up part of the American economy.” He’d start there. GE chief Jeff Immelt has attacked Americas newly restrictive student visa rules. Others focus first on R&D spending or the broadband infrastructure. But the greatest challenge will be changing a culture that neither values education nor sacrifices the present for the future as much as it used to—or as much as our competitors do. And you’d better believe that American business has a role to play—after years of dot-com-bust- and scandal-driven reticence, more corporate leaders need to summon the courage to lead.
It’s been a century since the United States attempted a leading role in education. Right now, we’re not only incapable of leading the world — we’re not even helping ourselves.
A feel good society can’t compete. In a contest you have winners and losers. We live in a country that’s so scared someone feelings will be hurt we stifle competition in education. We have taken individualism to an extreme and it has crippled creative group efforts.. Sacrifice and short term suffering is often part of an important enterprise.
Two problems with the US are the stock market and the MBA degree. Hear me out. Until the 50s Coke sold for 5 cents a bottle. Everyone at the company wanted to raise the price but the owner personally felt that 5 cents was enough.
That could never happen today. Nowadays corporations legally are bound to do anything possible to ensure profit for stock holders. Corporations don’t care about America. They don’t care about citizens. They don’t even care about consumers. The “right thing” is only done when it’s profitable.
This is due mostly to the fact that corporations are run by number crunching MBAers. These people reduce everything to numbers and take the low road in every endeavor. If it cannot be quantified into a profit, it’s not worth doing.
Until corporations become good citizens and work for a better America, we will never recover. But that’ll never happen because the stock holders would sue the board of directors into submission.
Fish is right. If a corporation doesn’t meet quarterly expectations they pay dearly, so they hardly look beyond the next quarter. That sure doen’t encourage long term vision. And let’s not forget the attack on science by the Christian right. Even if a student can get past the crap science in primary schools (intelligent design? Sure that’s science, Not!), s/he may not be able to actually DO any real science (stem cells? Outsource them to India!)
I strongly disagree with these kinds of arguments. (i.e., Thomas Friedman) When you compare America to nations that have the same, or higher, standards of living I think you will find our productivity to be on par or higher. But if you compare an American worker against a worker in a piss poor nation that has no workers’ rights, no unions or organized labor, no unemployment benefits, exploits child labor, where the employee is totally disposable [conditions like turn of the century industrial America] then, yes, of course that labor can do it for cheaper.
Unfortunately, since we have no fair trade agreements, our companies find themselves in an untenable position. In the race for increasing profits (what Wall Street calls growth, an all-important metric today [Ima’s post]) the company that uses the bare-bottom cheapest labor has an advantage. In the absence of any impediment that prevents their competitors from undertaking this devious and unpatriotic maneuver a company must also follow suit to be price competitive. (BTW, a similar effect is felt through the downward wage pressure of illegal aliens.)
Those that lack foresight see this as a wonderful thing – cheaper goods and services. However, by shear economics the euphoria is short lived. According to Samuelson et.al.:
Hence, when you are unemployed or take a pay cut due to off-shoring goods are not cheaper. And the Labor Department’s statistics pretty much show this effect. The “new” jobs being created, the ones globalization proponents claim offset off-shoring, are paying significantly lower wages than the jobs they replace.
Not to mention the detrimental tax evasion. When an American company pays a wage to an Indian worker essentially no income tax is paid to the United States. (that is why we are offering our corporations to repatriate earnings at very low rates, because otherwise we would get absolutely no tax revenue) Instead, that Indian worker pays income tax to India, thus building up Indian infrastructure. Meanwhile the United States is starved of tax revenue since the displaced worker here is not acquiring any income and may be seeking unemployment benefits. Thus, we have less revenue to build roads, docks, and schools (etc.) and to do research furthering our lack of competitiveness in a downward spiral all the while other countries are building up their infrastructure.
So if this is really a globally competitive economy then why are we not acting like it? I say we batten down the hatches and start taking actions that benefit America, because you can be sure our competitors are taking actions that solely benefit them.
We have all the best stuff. Just look at Snap-On® Tools http://www1.snapon.com I bought some off brand elcheapo ratchet, it can’t compare with Snap-On®. it isn’t even a contest.
These five U.S. Manufacturing locations produce Snap-on® hand tools, power tools and tool storage units.
Algona, Iowa
Tool storage units
Natick, Massachusetts
Pneumatic tools
Elizabethton, Tennessee
Hand tools
Johnson City, Tennessee
Hand tools
Milwaukee, Wisconsin
Hand tools
Fish claims the stock market is a problem, which is a good point. The solution is to not buy stocks, which is simple, if that’s how you think. I’m not a real believer in corporations. Until something better gets invented that’s all we have for large business units. You can’t have a mom and pop airline or automobile maker.
I think the stock auction will save a bunch of money. It provides value. It seems like the bankers don’t care for it. Here’s a piece on it
Morningstar’s IPO shows value of auction method
http://www.dailyherald.com/business/businessstory.asp?id=76547
The corporate effect can be countered ironically by repealing anti-business regulations. These regulations raise the cost of small businesses more than for big businesses, and they help eliminate the big guys’ competition. Eliminating the cap gains tax also helps.
> [sell Coke for 5 cents a bottle] That could never happen today.
That CEO would be fired because the company would go bankrupt and who would benefit from that? The concepts of overhead costs and manufacturing costs are apparently lost on someone who makes such a silly statement. There is a unit cost to manufacturing coca cola that has risen (inflated) over the years. The cost of doing business itself has gone up.
Regardless of legal pressure, companies seek to maximize profits. A common mistake of the capitalistically ignorant is to assume that “profit” is only measured in dollars. That is far from the truth. Intangibles such as employee happiness and consumer satisfaction are also be considered in the determination of profit.
Further, to state that companies care nothing about consumers is to forget that consumers “care” nothing for corporations. Rather, both care about the benefits gained in their exchange of products and/or services. Thus, corporations “care” about the country in so much as it affects their ability to conduct business just as citizens “care” about their country in so much as it affects their ability to pursue life, liberty, and happiness.
> This is due mostly to the fact that corporations are run by
> number crunching MBAers. These people reduce everything to
> numbers and take the low road in every endeavor. If it
> cannot be quantified into a profit, it’s not worth doing.
Clearly this is true sometimes. However, keep in mind that those techniques are only valuable when they increase profits. If companies treat their consumers poorly, their profits will drop (looking past monopolies for the moment) or competing companies that *do* treat their consumers well will surpass them. It is true that large corporations are bureaucracies and as such there is a great deal of politics going on amongst the executives. Stockholders and the business community are generally not tolerant of failure which creates an overly cautious approach to new ideas. However, companies do come along that force monolithic businesses to change. In other words, competition is what corrects these problems.
> Until corporations become good citizens and work for a
> better America, we will never recover. But that’ll never
> happen because the stock holders would sue the board of
> directors into submission.
This is idealistic dribble. None of us, including you Fish, has any idea what this means. How do businesses determine if they are “working for a better America?” I would argue that merely conducting lawful business is by definition working for a better America. In general, the market system is by far the best mechanism for finding solutions that “work for a better America.”
The problem is that we have subverted the market system in many areas such as education which has cause inequities in quality and availability.
(From Edward Dinovo)
> Meanwhile the United States is starved of tax revenue since
> the displaced worker here is not acquiring any income and
> may be seeking unemployment benefits. T
Keep in mind that the US is the only country as far as I know that collects income tax on money made outside the US. The US needs to learn that, as a country, it is competing with other countries for businesses on numerous issues not the least of which is taxes and wages. That means that businesses will move their production to counties with lower taxes if it is more cost effective. Globalization means that the citizens and the country as a whole are competing with low tax countries. American workers must provide benefits which outweigh their higher wage cost. Those benefits might include proximity, familiarity with consumer culture, niche skills and more. America like the American worker need to provide a better product rather than complain about losses due to competition from other countries.
Coke at 5c a bottle can be explained by the inflation by a factor of 10, so now it’s 50c a bottle.
Keep in mind that the US is the only country as far as I know that collects income tax on money made outside the US.
Actually, the US only collects taxes when the money is repatriated.
Until then it doesn’t count as part of the company’s income, but is merely noted as a footnote: “unrepatriated overseas profits.”
Of course those profits are taxed in the country where they are earned, and then reinvested in the local business.
Individuals get credits for foreign taxes paid, and I think businesses do, too. Overtaxing and double taxing would not be in the US’s best interests. But this “one time” amnesty is providing an unfortunate release valve from the pressure on companies to repatriate those earnings.
EU countries, however, have agreements with each other to withhold tax from interest and dividends paid on individual’s investments in other countries, and send those taxes back to their home country. There was a big brouhaha between the EU and Swiss Banks over this a couple years ago. Most EU countries tax all their citizens income, no matter where it is earned, and have complicated earnings thresholds that trap foreigners, too. The Europeans are much worse than we are, and want to force the same taxation regime on the newly admitted EU members whose economies are still in their infancy.
More inline with this topic: How do you tell a manager where and when they can create a new job? How do you link the loss of a job here and the creation of a job there and say a company is exporting jobs. Sometimes its obvious – like when you end up training your overseas replacement. But when a multinational has operations and profit centers all over the world, who is to say a new job should actually be located in the US instead of in the country where those services/products are being sold and used?
*** Especially when their workers are cheaper and just as talented and well educated as Americans. ***
Most companies are not shipping jobs overseas, just directing their job growth to lower cost countries. Meanwhile, their US workforce would decline due to natural attrition. I don’t like this, but when does one method of growing a business become traitorous, and when does it just make good business sense.
Everytime someone tries to take on the educational establishment, the unions take off their gloves and go to town. Have you seen the billboards and TV ads attacking Governor Arnold for supposedly attack teachers, nurses, and firefighters? Whether one agrees with them or not, I think they are unprecedented. And people act like corporations and the business lobby are all powerful, and the unions are still underdog revolutionaries storming the ramparts. The unions ran Sacramento under Gray Davis, and now they are blocking any sort of reasonable reform. Look to the unions and graduate schools of education to see where our education problems lie.
Thomas, that is the exact kind of argument that makes no sense. First off, you are wrong, I know Canada for one taxes corporations and individuals against world income. The real crux of the issue is there no way America can be price competitive with 3rd world countries. What you are proposing is that we try – the race to the bottom scenario. A better way of encouraging businesses to operate in the United States is to tax foreign goods. In this manner there is an incentive for both domestic and foreign companies to produce goods right here. Also, in case you missed it, I said we do have on par or higher productivity when compared against countries with equal or higher standards of living.
T.C., defining outsourcing in a meaningful way for trade purposes is indeed very difficult. Perhaps it can be weighted on the amount of business done in each particular country. (In any respect they have all kinds of crazy rules and formulas for dealing with these kinds of accounting things anyway.) But like you implied, call centers, for instance, are a gross abuse of the system. I simply think it is imperative for the sake of the entire nation that these issues be addressed. Maybe start by actually having some fair trade agreements like the Canadians do?
On another note, organized labor hasn’t been weaker in 30 years. (just look at the recent rift in the AFL-CIO) Compare the miniscule TV ads the teachers union manages to put out compared to the multi million dollar PR campaigns Wal-Mart issues in an attempt to fool Americans into believing they are the most patriotic, pro-employee corporation ever. (absolutely laughable claims… at least those commercials are amusing for those in the know)
The unions main political influence isn’t ads but get out the vote operations and ground game, brilliantly caricatured by Bob Novak in 2000. The union rift has to do with these issues, as the breakaway unions feel that too much attention is being paid to Democrats rather than winning on their issues. The AFL-CIO worked against the reelection of pro-union Republicans, going all-in for the Democrats. The NRA always endorses pro-gun incumbents, regardless of party.
Most countries will tax you and corporations on any money you bring into the country. Forget the double taxation crap. Even the U.S. does it. In fact, I pay Federal Income Tax, then State Income Tax, and finally, County Income Tax. Then if I use that already taxed money to purchase something, I pay a Sales Tax.
***
I agree that the Stock Market is a problem. It can be useful, but it is more of a problem. Americans are so attuned to a company’s performance. If a company doesn’t do well then its value drops. Because investor’s money is tied up in the stock’s value they insist upon a high value. In order to achieve this high stock value, most companies will sacrifice tomorrow for today. Instead of long term planning, they go for the short term profits which end up causing poor quality and designed goods into the market. This in turn creates warranty woes and costs.
An example: A few years ago the CEO of Ford Motor Company pulled back on quality and encouraged / demanded lower production costs. Product that should not have been allowed was being shipped. High warranty costs ended up hurting the bottom line and customer satisfaction. Ford lost a lot of dissatisfied customers because of that. And the CEO lost his job.
When CEOs stop being paid according to their immediate profits and are rewarded according to the companies solidity and long term planning then America will compete as the best.
> The real crux of the issue is there no way America can be
> price competitive with 3rd world countries. What you are
> proposing is that we try – the race to the bottom scenario.
> A better way of encouraging businesses to operate in the
> United States is to tax foreign goods.
NO! That’s exactly what I’m NOT saying. What you are suggesting is that we make jobs competitive for Americans by penalizing their competition. That does nothing to encourage American workers to be competitive. Instead we should let the market convince American workers to either compete on something other than price (quality, time to market, support etc) or they shouldn’t be in that market. In essence, they have priced themselves out of the job market by their standard of living.
RE: (AB CD) Education
There is no question that the teacher’s union is a major impediment to actually improving our schools. The liberals at heart shutter when people talk about schools actually competing for students instead of being handed them through the public school system. But at some point, it is going to have to change. Here’s hoping Arnie is actually able to effect some change in the CA school system.
WE should stop buying the garbage made cheap, and only buy quality made in the United States. We don’t need so much “future landfill” from Walmart and Target. So the first order for America is: stop wasting your money.
Next, we should ONLY patronize establishments that pay their employees well, and treat them well….so there goes Home Depot, Walmart, Target, etc…. Hello Costco!
Stop eating pre-packaged, over processed, garbage food, and stop eating fast food. Quit drinking sweetened carbonated sodas, and patronize quality food production: cage free, pastured, grass fed, and humanely raised animals. No farmed fish. Give your money to the local growers and farmers markets. Start eating well.
Then, make the sacrifice and patronize private schools and/or home education….and avoid the mess the schools have made.
Vote, and vote with your pocketbook…… and get a TIVO so you don’t have to watch the commercials any longer.
Take back our country from the corporate junk pushers.
seems simple enough to me.
Great idea if you have lots of money. At least you didn’t say organic, since this would cause massive deforestation.
AB…
you don’t need LOTS of money…. I keep chickens in the city (rooster comes in every night in a little cat-kennel) , feed them fresh leftovers, and kitchen scraps (along with chicken lay feed…it’s all of $12 for a 50lb bag) and every day I get an egg each out of the full-size chickens, and every-other day from the banty silkies. That doesn’t cost much…and the eggs are way cheaper than the pathetic things sold in grocery stores. The advantages….my yard has NO bugs, no slugs, no snails…and they chickens keep the weeds at bay.
Grass fed beef IS more expensive than regular grain feed-lot fattened beef. But, how much beef does anyone really NEED to eat? The vegetables at the farmers market….are reasonable enough…maybe not as cheap as the stuff trucked up from Mexico…but, the difference is major in taste. The price difference between .50 cents per pound of carrots and .70 cents…is not that huge….seriously! How many pounds of carrots can anyone eat, anyway?
As for costing money…hmmm….water with homemade fruit syrups costs….well..the price for fruit (during season….even a high of 1.49 a pound for peaches…isn’t much. I can take 4lbs of peaches and get two quarts of syrup….. which will be enough to flavor 2-4 gallons of water….. 2-4 gallons of Pepsi…would cost HOW MUCH? Especially if I buy it in single serving sizes…. a great deal more, and all I’m getting with Pepsi..is cheap corn syrup, fizz, and coloring, with some caffine added in. Heck, I even make my own fizz with a spritzer bottle and the CO2 cartridges. How hard is that?
As for NOT buying crap from Walmart or Target. That’s easy. Look how much I save…and how much is saved in dump fees..for when the junk breaks.
Look, AB, it’s way cheaper to not be the indulgent consumer. Healthier too.
AS for “organic” …doesn’t mean diddly-squat since the government got it’s grubby mitts into the fray. And, by patronizing locally grown EVERYTHING….I am reducing the amount of fossil fuels used…in the production of the plants AND in trucking them from god-knows-where. Same for locally raised beef/poultry…. I’d rather have my meat slaughtered and inspected locally….and NOT through one of the central hub mid-western packing houses (which is what all the major grocery chains use…..these monsterous caverns of carving meat chunks…is all about “more more more” for “cheaper cheaper cheaper”. They’ll carve up a sick, downed animal and move it through the line if they can get away with it (and it’s obvious they DO). Personally…I’d rather have something more “boutique” and over-seeable. I’ll pay the extra 2 bucks a pound.)
…..Try it, AB…try not buying crap for a month…and making your own food….and avoiding the corporate push to sell you more, more more. See how much money you SAVE. That’s the joke of it…better food, costs less, tastes wonderful.
Meetsy, while I do not agree that we should blindly “buy American” what you are saying is a perfect illustration of my point about American workers. You buy locally grown produce because you feel you get a tangible benefit that outweighs the cost (e.g. better taste and healthier quality for a marginal increase in price).
This exact same concept works in the labor market. (I’ll add that many liberals have a hard time accepting that labor works on market principles just like produce.) (Not that you Meetsy were disputing this or are liberal). American workers must provide some tangible benefit to American companies that outweigh their price due to standard of living. If a business considers that benefit does not outweigh its costs, it will seek labor elsewhere. In addition, countries, states, counties and cities compete for businesses through things like taxation, access to resources such as labor pool and supporting businesses, etc. All other things being equal, if a company can produce widgets offshore for substantially cheaper, they’ll do it (or their competition will).