How Low Can Wages Go?

Moving your business offshore to China is so old. Vietnam is the "in" place for free traders according to David Sirota who reports that our government is publicly pushing for a new free trade deal with Vietnam. And, as the latest issue of Businessweek indicates, a Michigan company plans to open a factory there.

"A big reason for the [new investment] is rock-bottom wages. As labor shortages in some regions of China drive up costs, factory hands in parts of the mainland can earn more than five times the $55 per month that Vietnamese workers in foreign-owned factories are paid. That differential is a big reason why Sparton Corp. (SPA ) of Jackson, Mich., chose Vietnam over China last year when it made its first investment outside North America... And Vietnam this year might wrap up negotiations for World Trade Organization membership. That would be a huge boon."

Chinese wages of $225 a month are too high? So, where does it all end? As Sirota points out:

We inked a free trade deal with the wildly corrupt government of Mexico - a deal that eliminated environmental and wage protections. Then we inked a free trade deal with communist China - a deal that eliminated human rights standards. Recently, we began finalizing negotiations to sign a free trade deal with the United Arab Emirates - a deal that ignores all national security concerns. And now our government is pushing a free trade deal with Communist Vietnam - a deal that allows corporations to not only undermine American workers, but undermine workers in our trading partners who we promised would benefit from our trade policies in the first place.

Honestly, I can't decide who's more corrupt and unethical - big business or politicians. Is there anyone who cares about the American worker anymore?

Thoughts on Corporate Colonialism

Abi at Update America expands upon my earlier post on outsourcing.

People who lose their jobs to outsourcing are the obvious and immediate victims of globalization. But there is a larger price being paid as well, as this letter in yesterday's Boston Globe makes clear:

[I]t is all too obvious that India has become a colony for foreign corporations. If the Western world ever changes its mind about doing business in India, the consequences will be calamitous.

It is time to stop pretending that corporations should enjoy the same rights and protections of a free society as you and me. Their actions have a profound effect on individuals and entire countries, yet they are responsible to no one but their shareholders and their bottom line.

Read the rest of his post, and particularly the comment section. Corporate regulation needs to be addressed by us - and soon - for as Abi concludes, "colonialization and exploitation go hand in hand. If we don't recognize and manage this evolving, corporate-controlled globalism, we will all become its subjects."

UPDATE: Motherlode also has a great post about outsourcing as discussed on a recent Lou Dobbs show. Lou really blasted the president and then filled viewers in about the jobs of the future.

"So we thought you might be interested in knowing just exactly what those jobs in the 21st century are. And we wanted to use the most reliable source possible. We turned to the Labor Department. Well, here we go.

"Nursing assistants will be the fastest-growing job. The government says the job involves changing bed pans and offers low pay, little opportunity for advancement. As for education requirements, no high school diploma needed.

"And the restaurant industry proud to say it's a leader in job creation and the cornerstone of the nation's economy -- 12.5 million people, in fact, work in restaurants. Nearly as many employed in manufacturing. That, by the way, should please Gregory Mankue (ph), a professor at Harvard. He, of course, the president's economic adviser. He's the one who said making hamburgers should be classified as manufacture."

Welcome to the future, boys and girls.

The Court-Martial Of Willie Brand

Willie Brand told 60 Minutes correspondent Scott Pelley what he did wasn’t torture, it was his training. The Bush administration also maintains we do not torture. Yet, Brand was charged with assault, maiming and manslaughter in the deaths of two men who died only days after they had been brought in on suspicion of being Taliban fighters. What did the medical examiner find?

Habibullah and Dilawar were found dead in their cells, hanging from their chains. The military medical examiner says Dilawar’s legs were pulpified. Both autopsy reports were marked "homicide." But the Army spokesman in Afghanistan told the media that both men had died of natural causes.

The pulpified legs were probably the result of one method soldiers used to control prisoners – "a knee to the common peroneal nerve in the leg, a strike with so much force behind it that the prisoner would lose muscle control and collapse in pain."

Medical experts say that Dilawar’s injuries were so severe that, if he had lived, both his legs would have required amputation. Even worse, one soldier testified that most of the interrogators thought Dilawar had been arrested only because he was in the wrong place at the wrong time. They had come to believe he was just a cab driver.

Willie Brand was convicted of assault and maiming and faced 16 years in jail, but the jury of soldiers let him go with a reduction in rank. An additional 15 soldiers have been charged in the Bagram abuse so far with sentences ranging from letters of reprimand to five months in jail.

Brand continues to maintain he was trained to interrogate in that fashion and that his methods were condoned by his superior officers.

Retired Col. Lawrence Wilkerson, after serving 31 years in the Army, has drawn his own conclusions about how interrogation procedures were changed in Afghanistan and later in Iraq.

How did it go wrong?

"It went wrong because we had a secretary of defense who had never served on the ground a day in his life, who was arrogant and thought that he could release those twin pressures on the backs of his armed forces, the twin pressures being a wink and a nod, you can do a lot of things that you know don’t correspond to Geneva, don’t correspond to your code of conduct, don’t correspond to the Army field manual, and at the same time I want intelligence, I want intelligence, I want it now," says Wilkerson.

Rumsfeld's arrogance cost an innocent cab driver his life.

42 Million Jobs Susceptible to Offshoring

Bush, Republicans and Democrats have all maintained that the answer to outsourcing is education, but experts are no longer so sure according to an article in the Los Angeles Times.

"More education has been the right answer for the past few decades," said Princeton University economist and former Federal Reserve Vice Chairman Alan S. Blinder, "but I'm not so convinced that it's the right course" for coping with the upheavals of globalization.

Not that Blinder or other experts think workers would be better off not going to school. Rather, they point to emerging evidence that education may not offer as much protection against the effects of globalization as Bush and others claim.

"One could be educationally competitive and easily lose out in the global economic marketplace because of significantly lower wages being paid elsewhere," said Sheldon E. Steinbach, general counsel of the American Council on Education, an umbrella group that represents most of the nation's major colleges and universities.

Some analysts think that something like what Steinbach described is already underway.

Starting in 1975, the earnings difference between high school- and college-educated workers steadily widened for 25 years. But since 2000, the trend appears to have stalled. Census figures show that average, after-inflation earnings of college graduates fell by more than 5% between 2000 and 2004, whereas the earnings of those with only high school degrees rose slightly.

Most studies suggest that beyond the manufacturing sector, the "offshoring" of jobs has been comparatively modest. But some analysts say the ground has been laid for a substantial pickup. In a recent paper, Blinder offered a rough estimate that suggested that as many as 42 million jobs, or nearly one-third of the nation's total, were susceptible to offshoring. [Emphasis mine.]

These analysts warn that more education alone will do little to stop the flow of jobs to other countries.

"What's missing here from both parties is a global economic strategy and a worker adjustment strategy," said Anthony P. Carnevale, a scholar at the National Center on Education and the Economy who was appointed to major commissions by Presidents Reagan and Clinton.

"When they don't know what else to do," he remarked, "there's a tendency among politicians to stand up and say 'education.'

The whole problem of outsourcing needs to be reexamined. It's no longer enough to push education. Maybe we need to look into a little targeted protectionism. Maybe we need to "Buy American" whenever possible. One thing is certain, the key is to find a job that is less vulnerable to offshoring.

Until the last decade or so, most of what could be traded were manufactured goods that could be boxed up and sent abroad or bought overseas. Therefore, it was mostly American manufacturing workers who faced the brunt of competition. Services workers appeared immune and that seemed especially true of highly educated doctors, lawyers, computer programmers and financial experts.

But with the growth of the Internet, analysts say, many — although not all — sorts of service work can be performed almost anywhere in the world. Now many kinds of service workers are finding themselves exposed to the same global competition as their manufacturing counterparts. [...]

The crucial distinction in the future may not be between the more-educated and less-educated, but between "those types of work that are easily deliverable through a wire … and those that are not."

Manufacturing states have stuggled for some time now, but I'm afraid the pain of outsourcing is just beginning for the rest of America.

Andy Rooney's Take On Dubai World Ports

What does Andy Rooney think about the plan to outsource six of our biggest seaports to Dubai World Ports? He thinks the idea is nuts and we should consider outsourcing the White House and Congress instead. Sounds like a plan to me.

A lot of Americans have complained because they think that having another country run our ports in New York, Newark, Philadelphia, Baltimore, New Orleans and Miami could be a security risk.

Well, security isn't what bothers me. What I don't understand is why the hell can't we run our ports ourselves? Is it too hard for us? Aren't we smart enough? Sometimes it seems as if we aren't doing any real work ourselves in this Country.

Most of our clothes are made in China. More and more of the cars we drive are built overseas. About all we make in the United States these days is money.

The credit card companies are using people in India to do their customer service business. If you call them with a problem, you get someone who speaks English, sort of, but she's sitting in New Delhi.

Too much of our work is being what they call "outsourced." "Outsourcing" means having it made in another country. What's the matter with doing it in our own country?

Have we lost our ability to do anything for ourselves?

Why don't they outsource The White House, or outsource Congress. Get some really smart people from other countries to run our country for us. A congressman gets $162,000 a year and all he can eat. I'll bet we could get some natives of Dubai to do the same work twice as well for half the price.

Andy, I bet we could find quite a few unemployed Americans willing to do the job too.

Warren Buffett on Executive Compensation

Buffett's opinion about the overall state of executive compensation in the United States:

"[R]idiculously out of line with performance," a fact that's unlikely to change in the current environment.

He said corporations should pay their CEOs relative to performance but added that CEOs today can receive a bigger payout for being fired than "an American worker earns in a lifetime of cleaning toilets."

Looking ahead, Buffett predicts the following:

As for the overall stock market, Buffett braces investors for more modest returns to come, citing increased "frictional" costs that eat away at performance. These include costs related to trading, advice and money management.

"These costs are now being incurred in amounts that will cause shareholders to earn far less than they historically have," writes Buffett.

Reduced earnings will also hurt the millions of retirees who have their money invested in pensions, 401K's, etc. Social security is still the safest investment for lower and middle income Americans who don't have the financial liquidity to ride out the lean years.

Michigan Ranks No. 4 In Nation For New Facilities

This is nice to hear.

LANSING - Although Michigan ranks near the bottom of all states in unemployment rates, it remains near the top of Site Selection magazine's Governor's Cup rankings just behind Texas, Ohio and Illinois.

The rankings track new facilities and expansions worth at least $1 million with 50 or more new jobs, a group that included 505 projects in the state in 2005.

The number of projects in Michigan trailed the 842 in Texas, 598 in Ohio and 510 in Illinois last year, and was above the 412 in North Carolina. The projects, submitted to the magazine by the Michigan Economic Development Corporation, included a Hyundai-Kia Technical Center in Superior Township, Toyota Technical Center in York Township, Hemlock Semiconductor in Thomas Township, Detroit Diesel in Redford Township and Smiths Aerospace in Grand Rapids.

Since the magazine was founded in 1997, Michigan has consistently been among the top-ranked states and won several Governor's Cups. Over that period, it is the only state that had more than 11,000 projects on the list (the 11,387 projects easily topped the 7,987 in second-place California) and Detroit was the 4th best metro area with 208 projects.

Talk To The Hand

President Bush is in India today where he said the United States should welcome rather than fear competition.

"People do lose jobs as a result of globalization and it's painful for those who lose jobs," Mr. Bush said at meeting with young entrepreneurs at Hyderabad's Indian School of Business, one of the premier schools of its kind in India. Nonetheless, the president said, "globalization provides great opportunities."

Mr. Bush, reiterating a theme of his trip, strongly defended the outsourcing of American jobs to India as the reality of a global economy, and said that the United States should instead focus on India as a vital new market for American goods. [Emphasis mine]

What American goods? At the rate outsourcing is going, there won't be any goods left to export. Just ask the people who will be working their last shift today at the Electrolux plant in Greenville, Michigan.

Sweden-based Electrolux announced in January 2004 that it was closing the 1.7 million-square-foot factory, whose 2,800 employees produced 1.6 million refrigerators annually under such brands as Frigidaire, Kenmore, White-Westinghouse, Gibson and Kelvinator.

Electrolux has been transferring Greenville's work to a new refrigerator plant in Juarez, Mexico. The Juarez plant, which will pay assembly line workers about one-tenth of the salary of their Greenville counterparts, is to eventually have 3,000 employees. [Emphasis mine.]

The Greenville workers aren't the only ones feeling the effects of globalization:

Electrolux, the world's biggest white-goods maker, said yesterday it had reached a deal to end a strike at its AEG plant in Nuremberg, Germany, confirming the 2.3 billion crown ($438 million) closure of the plant.

Workers have been on strike at the German plant since late January over Electrolux's plans to close the factory, cutting around 1750 jobs, and move production to Poland and Italy.

Electrolux has said it will relocate about half of its plants in Europe and North America to Asia, eastern Europe and Mexico.

By the way, manufacturing wage costs in Germany are the world's second-highest. That seems to be the trend. Take good-paying jobs away from people with children, mortgages, etc., and give them to countries where people are willing to work for one-tenth of the wages. I'm all for raising the living standards of people across the world, but it needs to be done incrementally, equitably and fairly by people at all income levels. So far, most of the sacrifice seems to be coming at the expense of the lower and middle classes.

Political Marriages Split on Dubai Deal

Political marriages on both sides of the aisle are divided over the Dubai port deal. First we heard about Bob and Elizabeth Dole's differences of opinion, and today we learn that Hillary and Bill Clinton are on different sides of the debate too. According to a story on Truthdig, the Financial Times is reporting that our former president advised the UAE on the port deal:

Bill Clinton, former US president, advised top officials from Dubai two weeks ago on how to address growing US concerns over the acquisition of five US container terminals by DP World.

It came even as his wife, Senator Hillary Clinton, was leading efforts to derail the deal.

According to Clinton’s spokesman, "About two weeks ago, the Dubai leaders called him and he suggested that they submit to the full and regular scrutiny process and that they should put maximum safeguards and security into any port proposal.”

He also added that Mr Clinton supported his wife’s position on the deal and that “ideally” state-owned companies would not own US port operations.

Ideally? I take that to mean that this deal is not in our best interest. Clinton could have said that of course, but he was paid $300,000 to address a summit in Dubai in 2002 and finds himself in a pickle now. He has to keep Hillary and the UAE happy.

Bob Dole is also walking the same tightrope. The North Carolina Democratic Party called for Senator Elizabeth Dole to recuse herself from the debate. So what was paid lobbyist Bob Dole's response? He says he'll limit his involvement to discussions with Bush administration officials and efforts to "help the American people understand the real facts."

The only thing I want to understand is whom do we believe in the end - the Democrats or the Republicans?

Insight Into Bush's Compassionate Conservatism

Kudos to p m carpenter for catching this example of the Bush administration’s execution of compassionate conservatism.

From the New York Times, February 27, 2006:

The Army has decided to reimburse a Halliburton subsidiary for nearly all of its disputed costs on a $2.41 billion no-bid contract to deliver fuel and repair oil equipment in Iraq, even though the Pentagon's own auditors had identified more than $250 million in charges as potentially excessive or unjustified.

The Army said in response to questions on Friday that questionable business practices by the subsidiary, Kellogg Brown & Root, had in some cases driven up the company's costs. But in the haste and peril of war, it had largely done as well as could be expected, the Army said, and aside from a few penalties, the government was compelled to reimburse the company for its costs.

Under the type of contract awarded to the company, "the contractor is not required to perform perfectly to be entitled to reimbursement," said … a spokeswoman for the southwestern division of the United States Army Corps of Engineers, based in Dallas, where the contract is administered.

Then recall, from a February 5, 2003 NYT story, who the Bush administration does expect “to perform perfectly to be entitled to reimbursement”:

President Bush's budget proposes new eligibility requirements that would make it more difficult for low-income families to obtain a range of government benefits, from tax credits to school lunches.

Arguing that much of the federal money intended for poor people is diverted through error and fraud, the administration wants to require families to supply more proof of their income and living arrangements before they can qualify for aid.

It makes me think the Bush administration discriminates against the poor.