“The consumer did not benefit as the marginal cost reduction from exploiting coolie labor was not passed on to the retailer and hence it went to the bottom line.”
True. The enhanced margins went into the hands of the speculators. Corporations divested manufacturing in favor of offshoring. The billions of dollars of capital once invested in productive equipment, as well as the improved margins, were handed over to the Wall Street banks to fund stock buybacks. Billions, if not trillions of dollars of capital were consumed in the stock market casino instead of being invested in modern equipment to make US manufacturing competitive.
Up to about 1970, American CEO’s followed a career path through sales and marketing where they learned to understand customers and producing products to meet customer needs or they came up through manufacturing and product development where they learned how to make products efficiently and deploy capital and labor effectively. Whether from sales/marketing or manufacturing, executives had to earn their stripes by actually producing something of value and being measured and rewarded for real results.
In the 1970’s the corporate staff financial executives and lawyers, with their MBA’s and law degrees, wrested power from the producer executives. These Ivy League educated administrative managers created “value” through financial manipulation and legal artifices, not by producing and selling products. Hence, instead of deploying corporate capital in the 1980’s and 1990’s to modernize the factories built in the 1950’s and 1960’s, the financial CEO’s teamed with Wall Street banks to put American industry through multiple waves of restructuring, downsizing, acquisition, divestiture, and offshoring. Production was sent overseas, balance sheets were leveraged, divisions were sold or shut down, employees were shed. Once great and mighty companies (US Steel, Burlington Industries, Westinghouse, and hundreds of others) stopped growing and innovating ceding entire markets and industries to foreign competitors.
Instead of innovating and investing in improving the productivity of their businesses, the financial CEO’s allied with big government to lower tariffs and quotas so the shedding of manufacturing assets could be financially justified. Once great American factories built in the 1950’s and 1960’s were shuttered and the capital to rebuild them was sent to build modern, efficient factories in foreign countries. The financiers also changed executive compensation from being primarily salary based to salary + megabonuses + lucrative stock options. Executive pay was manipulated to enrich the highest paid executives in the firm. In the previous era the CEO made 10 to 12X the annual pay of the factory worker. Under modern, highly manipulated executive compensation structures it is not uncommon for the CEO to make hundreds of times the wages of the lowest paid workers. Even the poorest performing CEO’s, many of whom destroyed their companies, walked away with millions of dollars in guaranteed bonuses, stock grants, and golden parachute severance payments. Meanwhile, US factory workers with decades of experience were forced to train their foreign replacements and then were cast aside with a few weeks of severance pay.
The modern concept of “free trade” has been an absolute failure for the US economy and the American worker. Like every failed government program its defenders and vested interests continue to claim success even in the face of facts that scream failure.
Slap a 30% or higher tariff on all imported goods. Put in place a corporate tax rate of 0% on profits made from US sourced raw materials and components in US factories while retaining a 30% profit rate on profits generated from overseas sourced products. Watch capital flow into US manufacturing and the creation of millions of middle class jobs. Better the IRA and 401K savings of American workers be invested in new factories, producing goods for American citizens, than continuing to put it in the hands of Wall Street mutual funds where it is churned in the stock market in order to siphon off billions in transaction fees which flow into the pockets of the speculators.
Excellent post just above this one - I posted a bit of thought prior to yours. While I agree in principle with what you said, it appears to me that we have all been sold the biggest lie in order to serve the interests of those who control both parties.
Increasingly, I think the people in charge are the ones who benefit from the theft. Consider our deficit - it went into someones pocket. Our infrastructure is not any better today nor is our quality of life. Where is our cut of 10 trillion dollars?
At the same time, more people are dependent on government for income and government grows. More of our wealth is transferred to the developing world. Serves the interests of the other side also.
They throw us all a bone every now and then, but Americans need to focus on the debt and wealth transfer that has occurred - this is at the center of everything. I am not saying the “issues” we get caught up in are not important - they are, but it seems like everyone ignores the biggest issue we face - debt. A debt that has been used by both sides to further the agenda of the moneyed interests that own them.
Our children and grandchildren have been screwed by both parties and it’s an absolute lie that we have been sold. We have mortgaged the future believing it would lift everyone in America up - it has not and will not. The uber rich left and uber rich right have become far more wealthy in the last few years. Jobs have been displaced from our nation to the 3rd world to make corporations and banksters more money without improving our standard of living. More people are on the public dole as a result.
What a lie we have been sold! On paper (like communism) it should have worked based on what we were told. It has not. I think many in the Tea Party understand this even if they have not admitted it the way I just framed it. Something is wrong. Perhaps Trump (who played the game quite well) is the person to open the eyes of America to the theft that has taken place. God help me, I sound like Elizabeth Warren for different reasons. My solution would be far different than hers, but maybe we are starting to see the same things from opposite banks on the river.
I said above that “it all revolves around the debt” and where it went. You were also correct in your excellent summary about the growth of corporate executive pay through bonuses and stock options. That money, a very significant amount, also went into the markets as you stated.
Again, the spending only benefits the few (executives/banks) at the expense of many (workers and the communities in which they reside) as their jobs were outsourced. The executives benefit even as they believe they are promoting capitalism and doing what is in the interest of their companies/stock with little consideration of their workers. They believe they are capitalist just as we believe if we are conservative Republicans we are capitalist. However, capitalism is not premised on destroying the host for profit. The government has even stepped in to help the transfer of jobs out of our nation through laws and regulations that make it more expensive to employ Americans and operate in America.
What a farce we have been sold. We think we are supporting capitalism and America. The left thinks they are supporting the poor. Entitlement spending is out of control and even while the left seeks more spending, it is only a drop in the bucket compared to the real theft that is close to 10 trillion dollars. Nothing changes for the majority of Americans despite historic levels of spending- even as we are all on the hook for the borrowed money. Everything is funneled to the market - the government retirement system, private retirement funds, executive bonuses, and the banksters get a percentage of everything.
When the real market can’t support the growth they need through real economic activity they simply have the Fed pump trillions into the system to keep siphoning off of the lie. It’s truly criminal what has happened to our country. It’s not ideology, it’s theft. They have screwed us and it seems far beyond our ability to fix because our nation is so divided over the issues they have created as distractions to hide the crime.
I am not a conspiracy theorist either, I just think we (the people) allowed the system to become what it is today. Everything is funneled to the market, but the part we rarely talk about is the debt - far bigger than everything else and seemingly hidden from our eyes.
Thank you.