The Jobbing of Americans

Insight Magazine ^ | July 3, 2003 | Paul Craig Roberts

[Nick Danger]

a division that was tossing money out the door in mismanagemnt... That money could be wasted, as long as it kept taxes down.

I've been reading all week that George Bush is a liar, so I've become suspicious of one-sided judgement calls. Here's what I think: I think that if by some mechanism I could identify and talk to the people who were running the place, I would not hear, "Oh yeah, we we're throwing money out the windows! Hell, they told us to waste it, so we did."

I'm sorry, but I seriously doubt they would tell me that. They would be able to describe what they did with the money, and why they thought that would be a good idea, and whether or not the idea panned out the way they had hoped.

I've been around the block too many times not to know that the engineers think the marketing department does nothing but waste money, the manufacturing guys think the engineers never found an expensive, hard-to-get part they didn't like, and blah blah blah like that, all around the building. Half the world consists of people lobbing mortars over the cubes into the next department. If we all listened to that, we'd go blind.

Everybody's a frigging genius who knows exactly what to do next, except in his own job, where he knows damned well that life is hunt-and-peck.

major NY bank merger, two of the top eight .. why? Because the CEO of one was screwing the CIO of the other, so the story goes.

And you believed it? Do you have any idea how many lawyers, accountants, investment bankers, regulatory authorities, and assorted consultants and pukes it would take to put a deal like that together? You have to get it past both boards, get the shareholders to vote for it, plus get four or five buildings full of state and federal naysayers to sign off on it.

And you're telling me that the deal was done over the pillow talk? That's somebody who got laid off in the deal throwing spears.

[Euro-American Scum]

I've been out of work for 10 months now. All the factories in my area of North Carolina have closed down except one, and they're boxing up their equipment and moving to Mexico soon. The unemployment rate is close to 15% here.

The ominous thing about this is that nobody cares. And nobody is talking about it in any media outlets except tech journals. Makes you wonder just how bad things will have to get before the whole thing reaches critical mass and somebody starts paying attention to the fact that the heart of the country is being cut out.

[Euro-American Scum]

This nation has had it. And we can thank our Robber Baron owned politicians for selling us out. Welcome to the newest Third World country.

My partners and I had a meeting today to discuss our increasingly apparent ever decreasing sales market. I mentioned that it looks like we jumped out of the airplane without checking to see if we had a parachute.

I suspect you're right about the return of what looks to be serfdom. About the only realistic prospect is Hillary in 2008, who will promise to do something about the exodus of jobs, but of course will do nothing. Maybe some government stipend for the long-term unemployed. But that will run out when the wealth of the nation is centered in the hands of a dozen or so multi-national super conglomerates, and the mountain of cash they'll be sitting on makes a one-way trip overseas. What remains for the peasants will be starvation, poverty and death.

[Euro-American Scum]

Our customers love the quality of work that we do for them. We've saved them mountains of money. Still, they are very short on cash this year. We can't save them money on projects that they have no money to even initiate.

We're looking at the same conditions every day. And it's getting far too widespread to ignore.

[snopercod]

To them it looks like if they don't move the plant to Mexico, the whole damned company will go out of business because the American consumer does not care one whit how many American flags you print on the box, they care about the $10 price difference. At least this way we can save the accounting department and the sales force.

I have a friend who works for CooperTools in South Carolina. This is exactly what they are going through. Out of consideration for their employees, they are trying to send production overseas as slowly as possible. The engineers and machinists will be gone, but the accountants and salespeople will remain.

The problem that worries me the most is that these companies deal with metallurgy - forging, machining, heat treating, plating, etc. - many of which are pretty much "black arts". There is a lot of expertise which goes into the making of something as simple as a "Crescent" wrench - my friend has told me stories - and all that is going to be lost to America.

It's happening in every industry. I don't know what the answer is, but I fear for the future of America.

We're coming up on the anniversary of what I consider to be the peak of America's technological achievement - the landing of Americans on the moon. How low we've fallen in the intervening 34 years.

In another 34 years, american "industry" will consist of ragged people squatting in vacant parking lots selling trinkets that they made back in their huts. On their way home after dark, some of them old enough to remember might look up at the moon and think, "How did this happen to us?"

[waterstraat]

The question really is, how can the US compete on the world market. That is a very different question than how to stop jobs from going to India (something that probably cannot be stopped).

It is NOT a "different" question.

The long time republican policy of being nationalistic, of creating jobs and factories in the United States thru protectionist policies, resulted in america being very competitive in the world market. The United States was dominent in the world market when they were protecionist and were able to compete very well.

When american jobs were protected, the money was here, not in china and not in India. The technology was here, the factories and know how was here.

The reason why we can no longer compete, is because we are shipping all of our jobs, all of our factories, and all of our know how to foreign countries so they can learn how to make things, and we are now building factories over there to compete against us. Foreign countries could not compete against america if we did not teach them, if we did not build factories and provide jobs for asians and mexicans.

The old republican policies worked. The new republican policy of being global and for trying to build a "new world order" is what is not working.

We competed very well in the world economy and we were able to get a very high standard of living in the United States with protectionist policies for over a hundred years:

" NATIONAL REPUBLICAN PLATFORM, ADOPTED AT MINNEAPOLIS, MINN., JUNE 9, 1892 We reaffirm the American doctrine of protection. We maintain that the prosperous condition of our country is largely due to the wise revenue legislation of the Republican Congress. We believe that all articles which cannot be produced in the United States, except for luxuries, should be admitted free of duty, and that upon all imports coming into the United States coming into competition with the products of American labor there should be levied duties equal to the difference between wages abroad and at home. "

[rmmcdaniell]

Those robots are still coming. The computers have gotten a lot cheaper in 20 years. The software has gotten better. And that keeps happening. The experiments with "humanless factories" in the 1980's will be run again. And one day, it will all be cheap enough that not even Chinese slaves can touch it.

The sad thing is that companies are not going to invest billions of dollars into developing this robotic technology as long as there is cheap human labor. It'll happen alright, but long after America is reduced to 3rd world status. This technology won't be needed until the rest of the world is equalized in the standard of living and a global labor shortage occurs.

[A. Pole]

The problem that worries me the most is that these companies deal with metallurgy - forging, machining, heat treating, plating, etc. - many of which are pretty much "black arts". There is a lot of expertise which goes into the making of something as simple as a "Crescent" wrench - my friend has told me stories - and all that is going to be lost to America.

Chinese were very good in keeping their technology secrets. They managed for example to protect their lucrative silk industry for many centuries.

[Nick Danger]

The sad thing is that companies are not going to invest billions of dollars into developing this robotic technology as long as there is cheap human labor.

This is auto-insertion machine.	This is an auto-insertion machine in China.

If you're expecting the robots to look like R2-D2, you'll be disappointed. That thing does the work of about 250 people. They have them in the maquiladoras in Mexico, too, along with wave-solder machines and all the other toys.

Look at that woman on the right. Think about the skill level required to do what she does. Her job is to sit there and watch the machine. and to run screaming into the next room if sparks should suddenly come flying out of it. She also gets to push the big red button at the end of the day. Is that a "high paid manufacutring job"? No. But she's churning out two or three thousand completed circuit boards per day. When people did that by hand — putting little components in the cards and hand-soldering them — one person might make 7 or 8 a day. How many Chinese do you suppose machines like that are putting out of work?

Consider the possibility that the people who say this is caused by the lawyers, and the green weenies, and the OSHA stooges, and the tax man, are on to something. And that when we get rid of those, the jobs watching the machines and pushing the big red button at the end of the day will return to our shores.

[Nick Danger]

In another 34 years, american "industry" will consist of ragged people squatting in vacant parking lots selling trinkets that they made back in their huts. On their way home after dark, some of them old enough to remember might look up at the moon and think, "How did this happen to us?"

It's hard to tell what might have happened. If you look at this picture of Mission Control back in those days, it's hard to see any difference between then and now.

[bvw]

All right Nick, you're right. Dr. Pangloss has vouched for you. Major mergers never happen just because the CIO of one starry-eyes the CEO of the other, and the me-too politics of the board rooms don't go along with it. As you say -- they really have to spread the wealth around to really get it through. And I guess that for erasons unknown to me, but clearly known to you, a CEO of a major bank is unable to spread the wealth around or grab enough lapels to make it happen.

On to another issue ... The project at the colosus I referred to was paid for by EPRI. The Elecrtic Power Research Institute. Every year they tossed a few million at it. It had three managers, each differently disabled than the other. One was a just plain incompetent, one overfocused on an esoteric technology peripheral to the project, and one used a year-plus of project time to write what was essentially his own computer language compiler. Three plus years, EPRI was easy money. Taught me what easy money could do: nothing and nothing. I arrived just after a fourth manager -- and she knew wtf she was doing, and after three years of waste, brought the thing home. But the flying team of accountants didn't care a wit about that, they were only interested in making sure that every tax-avoiding I was dotted.

From them and others I heard other stories of business managed not for business but to manage taxation -- I mean that's not a bad thing to think of at first, on deeper refelection ones sees that avoiding tax is not doing business -- it is a resistance factor, a drain.

One involved a complicated scheme that had electronic equipment being manufactured in Puerto Rico from foreign parts. In PR the colosus collected government grants and tax bennies and was able to use off-shore parts without trade barrier or tarrif. The equipement was then shipped to Tenessee where it was disassembled and the low-cost offshore parts used. They could not have been used otherwise. (I may have the details mixed up, but that is close enough to the complicated nature of the scheme.) This shows how pervavsively government regulation and easy money perverts business in the US.

* * * *

You also missed or didn't comment on a bigger issue. That the books of publically traded stock companies are simply NOT reliable anymore for making rational buy or sell decisions on the basis of fundamental analysis.

Today, everybody is a momentum player, a chartist.

That is NOT investing. Not according to Graham and Dodd.

[Nick Danger]

I guess that for erasons unknown to me, but clearly known to you, a CEO of a major bank is unable to spread the wealth around or grab enough lapels to make it happen.

I think that's an accurate statement, in that you don't seem to have a clue why that wouldn't happen, but I do. I suppose if we had a Bill Gates or a Ken Lay who founded the company sitting there, with enough shares to replace half the board if he felt like it, we could have the Saddam Hussein scenario where the autocratic ruler just tells everybody what to do.

But very little of the real world looks like that. For sure no big bank in the U.S. looks like that. Guys who sit on the boards of major banks are not exactly egoless drones. All of them have F-you money, and probably their own billion-dollar shows to run as well. Nobody is going to grab them by the lapels and tell them anything. The CFO is sitting there looking at the qualifications and experience of his counterpart in the other place, and figures that he's the guy who will get thrown over the side in the merged entity. All the analyses coming out of his department will show the whole thing being a giant mistake. In fact everybody in the place starts thinking, "Do I get an even bigger empire, or do I get the shaft if this thing goes through?" Most will opt for the bird in the hand.

It's just not as simple as one guy getting starry-eyed and deciding that he is personally going to jam these two sets of shareholder investments together by claiming that it will be all be great. Maybe it will. Maybe it won't. But nobody who has to approve it is going to do it on the basis of some energetic sales pitch. Maybe after an army of green eyeshades comes back and shows a pro-forma income statement of what the combined entity might look like, the board will take a second look at it. But it won't be the CFO's green eyeshades, because everybody on the board can see the same thing the CFO sees: he is not Mr. Impartial in this thing.

Only on TV do corporate CEO's run around telling board members and federal regulators what to do. What you're describing is the comic book version, where they not only do that, they churn billions of dollars in assets on a whim.

One was a just plain incompetent, one overfocused on an esoteric technology peripheral to the project, and one used a year-plus of project time to write what was essentially his own computer language compiler.

I see. So in your judgement, one of these people was incompetent. Another was overfocused, the objective standard for 'correct amount of focus' being undefined except by you. Plus they were working on esoteric technology, something we would never expect to see in a Research Institute. Not only that, it was peripheral to the project... or at least, to whatever part of "the project" you were privy to. These are damning indictments to be sure.

Would the 'computer language compiler' be a simulation language by any chance? The sort of thing one might use to model flows across a nationwide grid as this or that shock is applied to the system? There has been a lot of work in that area, because the over-simplified ones they have aren't really very good. If you're telling us this work was going inside an Electric Power Research Institute though, I can see why you would be alarmed.

You have a lot of horror stories, but they all sound to me like a guy sitting in the 24th row yelling at Bret Favre for missing the receiver who was open in the flat.

I have a policy when I do interviews that if the guy is coming from a company where everybody was an idiot except him, I go out of my way to wish him luck in his future endeavors. I figure every company needs a resident genius to point out the flaws in what everybody else is doing. But we don't have any openings in that area right now.

[Nick Danger]

a bigger issue... That the books of publically traded stock companies are simply NOT reliable anymore for making rational buy or sell decisions on the basis of fundamental analysis.

I think that's true. I don't know what to do about it.

Some years ago, there was a final exam in accounting at a well-known Eastern business school. The exam was a fiasco. Most students were so far off the beam that more than half would be declared "F's". Absolutely no one got the right answer.

The professors retired to their conference room to discuss what to do about this. Here they discovered that no two of them had the same "right answer." In fact the more they discussed it, the more right answers they came up with, all of them wrong. Or right. You could make a good case either way.

They decided that if six accounting professors at one of the leading business schools in the country could not agree on what the answer was, it probably did not make a very good exam question.

So they junked the whole exam and announced that they would come up with a different scenario where at least they agreed themselves on what the answer was.

They also warned everybody that the scenario was real. It had come from an actual company. It had been sent to the school by one of the company's auditors, who said, "Here's an interesting problem... what would you do?"

The world is filling up with these systems that have become so complex that humans cannot fathom them anymore. Accounting is not just counting beans in some mechanistic fashion. It's getting to be almost like the kind of physics where the things-to-be-watched are at two places at once, flitting in and out of existence seemingly at random. If you measure how much, you destroy your ability to tell when.

This sounds incomprehensible to people who aren't close to this, but the answer to even a simple question like "How much is Bill Gates worth?" is a probability distribution. There is a precise answer, but only God knows what it is. If He told you, it would be off by several billion before you could write it down. The same is true for almost every number on every income statement and balance sheet, for virtually any company over five or six hundred million in sales. That's the world we live in now. Maybe "fundamental analysis" is just not going to cut it anymore.

Imagine getting a balance sheet where instead of numbers, you got probability distributions. "It might be as much as this, it might be as little as that, but 95% of the time it would be between here and here." We can run little Monte Carlo simulations on it and pretend this will help us predict something.

If you told me there was room in this to pull a lot of Enron's, I'd agree. One possible tool is to require firms over a certain size to publish a set of books on a cash accounting basis. As a tool for making investment decisions that sucks, but as an aid to smoking out chicanery it might have value in some industries.

[bvw]

There's an interesting thing about the words anyone writes. They can be read for good or for bad. For example you read that WSJ excerpt one way, they (the WSJ, by their own headline) read it another. I'll say theirs and mine was for the good because it allows a correction to be considered, your own read interesting, yet by its denial, not for good.

So it is with my words. You have pecked them apart like a buzzard rips through the carcass of a deer. Yet my words are no car-struck deer, enviscerated and rotting by the side of the highway.

I continue to think extremely highly of your own posts -- excepting those in response to myself, for in those you are, surely, addressing other issues. I think that your one post about Marx's Revolution, and how there should be some property-rights respecting way of countering that inevitable and now dawning circumstance (hopefully I am being fair to your intent and meaning in that post) -- that was a watershed, and superlative post.

Yet I cannot discuss with you further, for you are reading every thing I post in the most small and derogatory way -- unfair to both the truth and reasonable inference. If you wish to continue discussing, then please revisit my posting and reply in good form, and not to such rudeness achieved by the twisting of meaningful words replied to you in good heart.

[samuel_adams_us]

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[snopercod]

you look at this picture of Mission Control back in those days, it's hard to see any difference between then and now.

That's not mission control. That's Firing Room 1 at Kennedy Space Center. I used to work exactly where those guys in front are standing. After 4 years gone, I still know the phone numbers to those very consoles. The headsets we wore every day are probably the same Plantronics units those guys wore - really. Nasa never saw any reason to change them.

The consoles in the back are facing the other way, now - e.g. the engineers face the glass windows in front, not away from them as in the Apollo days.

Aside: I spent 9 very happy months refurbishing ML-1, the mobile launcher from which Apollo 11 blasted off to the moon. We turned it from a one-holer to a three-holer, and renamed it MLP-3. I spray painted the new numbers on the Tail Service Masts myownself.

FReegards--

[dirtbiker]

Yea, those pesky regulations are really an impediment.... fire extinguishers, clean water, lighted exit signs, safe electrical wiring, dust-exhausting fans, child labor rules, drug-free workplaces, hand-rails, construction safety harnesses, indoor plumbing and sanitation, building codes, asbestos insulation etc are something America should get rid of to compete with countries where people live in cardboard boxes and sh** in the street but work really cheap.

NO, I'm talking about licences, tax regulations, etc.....I'm talking about how government DIRECTLY affects how a company operates. For instance, did you know that the IRS has an agent, complete with his OWN office, at the headquarters of GM? Did you know that GM's tax return is taken to the IRS, in SEVERAL TRUCKS!!!!!! THIS IS THE STUPID, "PESKY" REGULATIONS THAT I REFER TO!!!!!!!!!!!!!

[cp124]

Yea, those pesky regulations are really an impediment. The ones about fire extinguishers, clean water, lighted exit signs, safe electrical wiring, dust-exhausting fans, child labor rules, drug-free workplaces, hand-rails, construction safety harnesses, indoor plumbing and sanitation, building codes, asbestos insulation etc are something America should get rid of to compete with countries where people live in cardboard boxes and sh** in the street but work really cheap.

---

Handicap ramps, urinals 1 foot off the ground, every bottle of liquid marked to MSDS standards, etc, etc......all on and in a closed boarded up building where the business closed or moved.