Tuesday, May 1, 2012

Cannot tell a lie



Childhood mess-ups

My two children are in their middle to late 40s.  In their single digits, in the rare event of a mess-up, something broken or spilled, I would say "I won't be angry but please tell me what really really happened".

We have the example of George Washington and the cherry tree.  When asked about it, young George said "I cannot tell a lie; I did it with my little hatchet."

Legend or fact, this story about George Washington has been important to Americans for over 200 years.

Adult mess-ups

In the last 50 years, our business and political "leaders" created one of the biggest mess-ups in world history.  They sent or allowed the sending of manufacturing jobs overseas.  They created a lethal competitor, China, that did not exist before, by handing China on a silver platter the jobs, the technology, and the trillions of dollars.

The status of America today, with huge unemployment and huge deficits, is proof that a nation and an economy cannot survive without a full measure of manufacturing activity.  Already in the 1970s the damage to our manufacturing sector was apparent. But our business and political "leaders" took no notice and continued the process for another 30 to 40 years until now when it has become obvious to all ordinary Americans that sending the jobs away has created our present problem.

The non-George Washington response

The reaction of our "leaders" has not been "We cannot tell a lie; we made a huge mistake and we must begin immediately to change course and re-establish our former strength in manufacturing".

Instead, our "leaders" are telling lies, to try to hide what really happened, like a child hiding a broken lamp or cookie jar.  The lies are so childish and outrageous that it is amazing that anyone can spout them with a straight face.

About a year ago I started writing about what I called "fantasy explanations" of how we got to the terrible situation we see today.  But now a whole new generation of fantasy explanations, i.e., lies, can be seen.

New crop of lies

In this new crop of lies, everything has been turned 180 degrees.  Now, instead of the FACT that sending away manufacturing jobs has severely damaged the middle class, we hear the LIE that lower quality education has done the damage.

We hear the LIE that the wrecking of the economy is due to parents not raising their children correctly.  We hear the LIE that "mollycoddling" our children is a big factor in the wrecking of our economy.

There is a whole army of analysts, writers, and commentators working night and day to come up with these new, tremendously complex, intricate lies, filled with irrelevant/trivial issues, to explain our present situation.

Real, irrefutable, facts

Our business "leaders" began in the 1960s to send our manufacturing jobs away for the short-sighted reason of trying to increase profits by using lower-cost workers.  Over the next 50 years, thousands of companies jumped on the bandwagon.

The predictable result is that our country is now hemorrhaging over $500 billion per year to pay foreign countries to do our manufacturing for us.  This money is real money that we are sending to foreign countries, with the result that our country is impoverished.

While we send away over $500 billion per year ($1.4 billion every day), our own workers sit at home in despair (if they have homes), or stand in line at unemployment and welfare offices.

This is the giant hidden cost of "low-cost" imported manufactured goods.

What our business and political leaders pretend not to know

(Or maybe they really don't know)

Manufacturing enriches the economy in which it occurs.  Finished goods that consumers want to buy and use are more valuable than the materials and supplies used in their manufacture.  Even if the goods were made 100% by robots, the enriching effect occurs.

Manufacturing creates ripple and multiplier effects:

+ Other business firms provide components, sub-assemblies, materials, and supplies to manufacturing facilities.

+ Other business firms hire designers, engineers, technicians and manufacturing workers to build, sell, install and service robotic equipment.

+ Manufacturing creates a more complex economy in which people with many types and levels of skills can find employment.  

+ A critical mass of scientific and engineering skills and knowledge is created because everything is done together: design, engineering, manufacturing, problem solving, not separated by 10,000 miles.

Present and future

President Obama has been in office for almost four years.  It is a great disappointment to everyone who supported him that he has failed to act to increase manufacturing in America.

Nevertheless, manufacturing is coming back to America, due to the immutable laws of economics.  When a wealthy country trades with a low-wage country, wages in the wealthy country go down and wages in the other country go up.  We are now at the point where overall manufacturing and operating costs in America are in many cases competitive with costs in China and other "low-wage" countries.

A recent survey of 106 large American companies found that 37% of the companies are seriously considering bringing manufacturing back to America, or have definite plans to do so. 

The  only thing missing is that we need the manufacturing to come back more quickly.  Millions of unemployed Americans are having trouble keeping bread on the table. They can't wait five or ten years.

My simple solution

My simple, fair, and reasonable solution, as stated in previous posts, is to limit the total value of imported goods coming in from each foreign country to the total value of manufactured goods that country buys from us.

The immediate and hugely beneficial result is that the $500 billion plus yearly hemorrhage is wiped out. 

Further, with this simple program in place, entrepreneurs would rush to ramp up or re-start existing domestic manufacturing facilities, and create new manufacturing facilities.

Management of giant chain stores and small stores would have to carry and display American-made goods along with Chinese goods. They would not be able to continue their apparently preferred but short-sighted method, i.e., carrying Chinese goods exclusively. 

A win-win for everyone and for America!


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