Tuesday, March 13, 2012

Displacement of Labor from West to East, Core Principles of American Capitalism Trapped Under Ice...

The buoyancy of American Capitalism is in serious Jeopardy as a troubling paradigm shift in the cost of labor is forcing manufacturing/labor/jobs to exit East, and there's little anyone can do to stop it. 

The decision of U.S. corporations like Apple to manufacture their gadgets in Asia, in addition to an over-regulated big Govt landscape, signals that great socioeconomic pain is still ahead but especially for blue-collar Joes. 

Labor Displacement from West to East is similar to the physics that the brilliant Greek mathematician Archimedes presented 2,300 years ago, but instead of water being displaced we're witnessing jobs flowing out and the potential to extinct the American middle-class.   

U.S. CFOs are saying 'No' to the U.S. and investing aggressively in less regulated and lower cost labor markets in the Far East. Capitalism has never been under such pressure as the U.S. manufacturing sector has been decimated, this must be our wake-up call to take bolder and necessary political corrective actions. 
Many economists are miffed as they debate the past and future merits of Capitalism. I feel the debate is wrongly focused on healing today's trough which is much deeper as a result of too many regulations, bailouts, stimulus packages, and central bankers' insistence that a ZIRP (Zero Interest Rate Policy) is the answer. 
Most risk-takers have lost trust in this plastic Capitalistic model the West offers. They are investing in the more friendly pastures of China, India, and Thailand. Banking, credit, and real estate psychology is fractured as the U.S. government refuses to get out of the way and allow the necessary extremes of Capitalism to cycle: rewarding risk-takers that make good business decisions and never bailing out bad risk-takers but allowing them to use the Judicial system and file for bankruptcy. Bankruptcy must remain a free-market choice, yet lately the U.S. has embraced big Govt bailouts which will cripple the private-sector.   
U.S. and European austerity ahead is bound to hurt China's and India's GDPs. But since their economies are chugging along at 8% - 10% clips with the average Chinese laborer earning $2.00/hour vs U.S. $20.00/hour, the global Employment situation is in the midst of very powerful and secular change, this is definitely not a temporary phenomenon in my opinion.  
The macroeconomic riddle of the 21st Century is whether Western austerity will cause a Polish Solidarity type of Labor Uprising in China and throughout Asia, this would no doubt be a positive for the U.S. manufacturing sector. 

The Capitalistic paradox is that China has witnessed our failed Union labor system both in the public and private sectors, as well as the entitlement failures of Social Security and Medicare and now able to take big Advantage regarding political policy measures. 
Will supporters of a global 'fair free-market' agree to impose tariffs and shrink Govt to stop this dislocation of jobs and wealth from West to East, though that would be against the core principle of free-markets times are so desperate that I expect many unorthodox possibilities.
Some American economists believe that China's lack of respect of foreign patents and intellectual property rights has crossed the fair free-market line of competition and drastic political actions must be taken. Then layer the near slave wage the average Chinese laborer makes along with less than human working and living conditions, this leaves the U.S. with a crystal clear labor disadvantage. Yet in its truest sense, the Eastern model is mimicking the early form of Western Capitalism, no? The paradoxes continue~      
Imposing tariffs on some Chinese goods may cause their authorities to move more quickly and loosen their dollar pegged currency that occurred under President Bill Clinton (former Arkansas Governor and 'friend' of Walmart pioneer, non-believer in Unions and huge buyer of Chinese goods early, Sam Walton). A Capitalist in the truest sense was Walmart's Sam Walton, no arguments from me.
Admittedly, the U.S. is stuck inside an extremely complicated problem. And wasn't it inevitable for men, women, and children from Far East emerging economies, *4+ billion hard working and educated, to eventually want/desire 'stuff'; that John Wayne form of Western Capitalism, Pilgrim
Yet many know that some factories in the East are engaging in unfair practices, like not paying the average laborer a decent enough wage to live on and not respecting human standards for daily work hours, breaks, etc. If it sounds like I am for Union shops and against Right to Work states you are dead wrong. I'm actually for abolishing the minimum wage, welfare, and other work programs before imposing tariffs on any country, though I realize this is merely wishful thinking.    
I have little doubt why Secretary of State Hillary Clinton's 1st trip abroad was to China while Treasury Secretary Timothy Geithner addressed the undervalued currency and hinted at manipulation in early '09. click for Youtube link-> Hillary must understand the vicious that has dunked the West since sat on Walmart's Board of Directors. Yet she has accomplished nothing to slow this ugly geocorporate wealth and labor displacement.  
Just like separation of Church from State, there should be an Amendment to the Constitution for the separation of ex-Corporate CEOs or ex-Corporate Board members from Government, and vice verse. This would ensure that people like Hank Paulson, Jon Corzine, and Hilary Clinton never had the power to affect the average Joe American. 
And instead of bogus regulations like Sarbanes Oxley and now D0dd-Frank, I propose corporal punishment. If Jon Corzine was forced to ponder a caning stick or waterboard he would either never lose that $1.2 billion or quickly divulge what happened to all that money.   
Can the U.S.'s over-regulated economy with its expensive labour force compete effectively against $2.00/hour Chinese wages or will we continue to outsource our middle-class?
It will be very difficult for a Western 'free-market' economy to ever grow at 3%+ from this day forward. To better granualize my feelings:
'The United States' manufacturing wage compared to China's is like a 50 lb. child and a 230 lb. adult trying to find balance on a seesaw, you decide who has the leverage.'  
Imposing more tariffs on the East would no doubt throw us into a prolonged recession and perhaps depression, but in conjunction with shrinking the Govt could place ourselves back on more solid free-market track. The West should act now as cos like Apple leave as they find the approximate $720.00 per week wage gap (40 hours X $18.00) a no-brainer. 
The combined European Union and U.S. GDP is *420% greater than China's, and here's where the West still has leverage. It is sad that trade with the East must be leveled through unorthodox measures like tariffs but the free-market thermometer must be calibrated sooner than later. 
It's sad to admit but most Asian nations have a friendlier regulatory environment for business, so is it right to punish a U.S. corporation if they move overseas in order to cut costs and fatten-up their bottom-line (net income) and improve Shareholder wealth?  The definition of Capitalism is changing directly because of the huge Cost of Labor Gap -from West to East - yet the pro- Union Yanks have no answers as they Wallow in a World of Fantasy.  
Pig thanks to all my friends and readers,  
Psychology of the Call's Capitalist Pig Bob

*Largest Continents in Population
1. Asia - 4,055,000,000 (Over 4 billion)
2. Africa - 1,108,500,000 (Over 1 billion)
3. Europe - 729,871,042 (including all of Russia)
4. North America - 522,807,432
5. South America - 379,919,602
6. Australia - 20,434,176
7. Antarctica - No permanent residents but up to 4,000 researchers and personnel in the summer and 1,000 in the winter.

1European Union$16,242,256
2United States$14,526,550

Capitalist Pig Bob, in the flesh. 

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