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NOT MADE IN AMERICA: TOP 10 WAYS WALMART DESTROYS US MANUFACTURING JOBS

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NOT MADE IN AMERICA: TOP 10 WAYS WALMART DESTROYS US MANUFACTURING JOBS

Amy Traub  |  July 2, 2012  |  Demos

Why is it that America no longer makes things the way we used to? Between 1980 and 2011, the United States lost 7 million manufacturing jobs,[i]many of them middle-class positions that enabled workers to support their families with dignity. Today, the nation’s largest employer is not a manufacturer, but mega-retailer Walmart – which is celebrating its 50th anniversary this week. Walmart pays its associates just $8.81 an hour on average.[ii] In this economy, a quarter of full-time working-age American adults are not earning enough money to meet their families’ economic needs.[iii]While the decline of American industry was caused by a variety of complex factors, the actions of the nation’s biggest corporation and largest retailer play an under-estimated role.

As America’s biggest company, Walmart wields tremendous market power. Walmart could use this might to help build up the American economy, offering good jobs to its own employees, encouraging contractors to do the same, and helping to strengthen U.S. manufacturing through its relationships with its suppliers. Instead, Walmart has wielded its market power to eliminate good-paying manufacturing jobs and lower labor standards in the retail sector and throughout its entire supply chain. On this Fourth of July, here are 10 ways Walmart has facilitated America’s industrial decline:

1. Buying billions of goods that weren’t made in America.

The vast majority of merchandise Walmart sells in the U.S. is manufactured abroad. The company searches the world for the cheapest goods possible, and this usually means buying from low-wage factories overseas.  Walmart boasts of direct relationships with nearly 20,000 Chinese suppliers,[iv] and purchased $27 billion worth of Chinese-made goods in 2006.[v] According to the Economic Policy Institute, Walmart’s trade with China alone eliminated 133,000 U.S. manufacturing jobs between 2001 and 2006 and accounted for 11.2 percent of the nation’s total job loss due to trade.[vi] But China is hardly the only source of Walmart goods: the company also imports from Bangladesh, Honduras, Cambodia, and a host of other countries.

2. Pushing U.S. companies to move their factories overseas.

With $419 billion in annual net sales, Walmart’s market power is so immense that the even the largest suppliers must comply with its demands for lower and lower prices because they cannot afford to have their goods taken off its shelves. Companies that used to manufacture products in the United States, from Levi’s jeans to lock maker Master Lock, were pressured to shut their U.S. factories and moved manufacturing abroad to meet Walmart’s demand for low prices.[vii]

3. Making it easier for other U.S. retailers to buy from foreign factories.

Walmart was a leader in sourcing goods overseas, establishing a centralized purchasing system, technological infrastructure, and linkages to foreign factories that other companies imitated and built on.  While researchers find that Walmart still imports disproportionately more goods than other apparel retailers,[viii] its innovations accelerated the use of offshore suppliers by its competitors, speeding the loss of American manufacturing jobs.

4. Forcing layoffs among its U.S. suppliers.

Even when Walmart products are made in the United States, manufacturing jobs still get eliminated as suppliers cut costs to meet Walmart’s demands for low prices. A spokesman for the National Knitwear and Sportswear Association noted that producing goods for Walmart “forces domestic manufacturers to compete, often unrealistically, with foreign suppliers who pay their help pennies on the hour.”[ix]  A Walmart spokesperson admitted that this was the point of the company’s efforts to buy domestic goods: “one of our big objectives was to put the heat on American manufacturers to lower prices.”[x] Even as manufacturing costs increase, Walmart demands that suppliers’ prices go even lower, a dynamic that helped push Kraft Foods to plan the closure of 39 factories and lay off 13,500 workers. [xi]

5. Promoting domestic sweatshops.

Layoffs aren’t the only way manufacturers contrive to meet the low prices Walmart demands. Walmart’s domestic suppliers lower wages, cut benefits, aggressively fight employee efforts to unionize and bargain collectively, and skimp on worker comfort and safety. For example, Louisiana seafood processor C.J.’s Seafood, which sells an estimated 85 percent of its processed crawfish to Walmart, has recently come under scrutiny for allegedly abusing employees working in the U.S. on temporary immigrant visas (known as guestworker visas).[xii] A complaint to the U.S. Department of Labor claims that the Walmart supplier “engaged in extremely coercive employment related actions, including forcing guestworkers to work up to 24-hour shifts with no overtime pay, locking guestworkers in the plant to force them to continue to work, threatening the guestworkers with beatings to make them work faster, and threatening violence against the guestworkers’ families in Mexico after workers contacted law enforcement for assistance.”[xiii]

I’m an 81-year-old retired apparel manufacturer. I had five factories, and all of them were here in Texas. I was producing apparel for JC Penney’s, Sears, Montgomery Ward’s, and a multitude of independent stores, small chains. I had a business and I built it up to $50 million a year, which was a pretty good size back in the 60’s, 70’s and 80s.

When I started my companies, I said we’re going to do everything possible to make conditions as good as possible and wages as good as possible. Not out of the goodness of our heart, but I believed if we treat people right and pay reasonable wages and have good working conditions that we’ll have good, productive workers. And it worked for us. I hired the best engineering firms in the country to come in and make my plants the most modern plants in my industry: productive, efficient.

I’m out there competing with the rest of the manufacturers in this country—I probably had a thousand competitors. But we had the best, most efficient plants, I could be priced efficiently.

Walmart would squeeze you so much on prices that you couldn’t do these things and remain manufacturing in this country.

I was president of the Southwestern Apparel Manufacturers Association. There was a meeting sometime between 1985 and 1990. Walmart had contacted our organization and asked if they could meet with us at our beautiful Apparel Mart we had here in Dallas, which has now been razed, because all the independent merchants don’t exist that used to come to it. Two people from Walmart came down and they said they were going to be sourcing goods from overseas and we would have to meet those prices for consumer products and to get ready for it—we are going to be sourcing the world. Walmart was the only company that came out and said this.

It was sort of shocking: I was selling them some merchandise at the time. On the back of their trucks it was saying “Bring it Back to America!” They had the big “keep it in America” program going at that time on the big signs in the stores. Meanwhile when I reminded the buyer of that, she told me, “that is just for domestic consumption, we’re going to buy at the cheapest we can anywhere on earth.”

I could see that if you’re going to be a player in the apparel industry you’re going to have to sell Walmart: they were just too big a user. Their orders were like telephone numbers— the quantity. You don’t negotiate prices with Walmart because they can just tell you what they’re going to pay and that’s it. You got to make it cheaper than you did last year.

People didn’t start importing from overseas because they wanted to. They did it because they had to, to survive. Those that didn’t join in the club are not around anymore.

I could see the handwriting on the wall.

6. Squeezing U.S. manufacturers out of business.

Walmart’s unrelenting push for low prices eats into the profit margins of its U.S. suppliers, often weakening companies in the process. Journalist Charles Fishman provides a vivid example: Walmart provided 30 percent of Vlasic Pickles’ overall business and insisted that if the company did not allow Walmart to sell a gallon jar of pickles for the ruinously low price of $2.97, they would stop buying Vlasic’s other products. “The pickle maker had spent decades convincing consumers that they should pay a premium for its brand. Now Walmart was practically giving them away.”[xiv] According to Fishman, Vlasic’s profit margin from pickles shrunk 25 percent or more.  Nor is Vlasic alone in seeing its business cannibalized by Walmart: of the top ten companies supplying Walmart in 1994, four sought bankruptcy protection by 2006.[xv]

7. Discouraging American innovation.

By squeezing its suppliers, Walmart leaves companies without the resources to make new investments in research and development. And once companies become dependent on Walmart as a massive purchaser, their greatest incentive is to keep producing the products Walmart has decided to sell, making it unnecessary and unprofitable to innovate.

8. Driving competitors to squeeze manufacturing.

If discount retailers like Target and Kmart want to remain competitive with Walmart, they must demand similarly low prices from suppliers. As a result, the pressures pushing down costs and propelling the elimination of American manufacturing jobs are magnified.

9. Lobbying for policies that make it easier to move U.S. jobs overseas.

According to the non-profit Center for Responsive Politics, Walmart spent $7.8 million on lobbying in 2011 alone.[xvi] While this money was paid to influence a range of legislation, from promoting corporate tax cuts to opposing a bill to guarantee paid sick time to working people, trade policy was among the issues Walmart lobbied on most aggressively. In fact, Walmart has lobbied to make it easier to push American jobs out of the country for years, playing a key role in in lobbying for NAFTA in the early 1990s.[xvii]

10. Making growing inequality the accepted norm

Walmart has set the template for today’s economy: one in which increased economic productivity is not shared with working people, and the vast inequality that this creates is seen as normal. Today the six members of the Walton family who inherited the Walmart fortune enjoy wealth equal to that of the least-wealthy 30 percent of Americanscombined.[xviii] These billionaires are the ultimate beneficiaries of Walmart’s push to cut costs, condemning retail employees to work in poverty and American factory workers to unemployment.

Walmart is the nation’s largest employer and one of America’s most profitable companies, netting $15.7 billion in profits in 2011.[xix] With the great resources at its disposal, Walmart could afford to take the high road, supporting good manufacturing jobs in America by allowing for higher wages and more investment in its supply chain and paying its own employees – from retail “associates” to warehouse workers and cleaning contractors – a living wage. That would set the template for a new American economy, one in which Americans might once again “make things” and also find greater dignity and stability in selling them.


[i] Demos calculations based on data from the Bureau of Labor Statistics.

[ii] John Nichiols, “Supreme Court Decides That Walmart’s a ‘Too-Big-for-Justice’ Corporation,” The Nation, June 20, 2011. Citing independent market research group, IBIS World.

[iii] “Living Below the Line,” Wide Opportunities for Women (2011).http://www.wowonline.org/documents/WOWUSBESTLivingBelowtheLine2011.pdf

[iv] “Walmart China Factsheet,” Walmart Corporation, http://www.wal-martchina.com/english/walmart/index.htm.

[v] Nelson Lichtenstein, The Retail Revolution: How Wal-Mart Created a Brave New World of Business. Metropolitan Books: 2009. p 159.

[vi] Robert E. Scott, “The Wal-Mart Effect,” Economic Policy Institute, 2007.http://www.epi.org/publication/ib235/.

[vii] For an account of this history, see: Charles Fishman, “The Wal-Mart You Don’t Know,” Fast Company, December 1st, 2003,http://www.fastcompany.com/magazine/77/walmart.html

[viii] Emek Basker and Pham Hoang Van, “Wal-Mart as Catalyst to U.S.-China Trade,” working paper, Department of Economics, University of Missouri, Columbia, MO, 2007.http://economics.missouri.edu/working-papers/2007/WP0710_basker.pdf.

[ix] Nelson Lichtenstein, The Retail Revolution: How Wal-Mart Created a Brave New World of Business. Metropolitan Books: 2009. p 158.

[x] Nelson Lichtenstein, The Retail Revolution: How Wal-Mart Created a Brave New World of Business. Metropolitan Books: 2009. p 157.

[xi] Barry Lynn, “Breaking the chain: The antitrust case against Wal-Mart,” Harper’s Magazine, July 2006. http://www.harpers.org/archive/2006/07/0081115.

[xii] Richard Rainey, “Striking guest workers from Breaux Bridge crawfish plant protest Sam’s Club in Metairie,” Times-Picayune. June 06, 2012.http://www.nola.com/business/index.ssf/2012/06/striking_guest_workers_from_br.html

[xiii] Jennifer J. Rosenbaum, “Complaint To The Wage And Hour Division: Violations of The Fair Labor Standards Act And H-2B Regulations By CJL Enterprises, Inc. Dba CJ’s Seafood and Michael Leblanc,” National Guestworker Alliance,  June 2012.http://www.guestworkeralliance.org/wp-content/uploads/2012/06/CJL_DOL-complaint.pdf

[xiv] Charles Fishman, “The Wal-Mart You Don’t Know,” Fast Company, December 1st, 2003, http://www.fastcompany.com/magazine/77/walmart.html

[xv] Barry Lynn, “Breaking the chain: The antitrust case against Wal-Mart,” Harper’s Magazine, July 2006, http://www.harpers.org/archive/2006/07/0081115.

[xvi] “Lobbying: Wal-Mart Stores Summary 2011,” Center for Responsive Politics,http://www.opensecrets.org/lobby/clientsum.php?id=D000000367&year=2011.

[xvii] Bethany Moreton, To Serve God and Wal-Mart: The Making of Christian Free Enterprise. Harvard University Press: 2009.

[xviii] Sylvia Allegretto, “The few, the proud, the very rich;” The Berkley Blog, UC Berkley,December 5th, 2011, http://blogs.berkeley.edu/2011/12/05/the-few-the-proud-the-very-rich/.

14 Responses to “NOT MADE IN AMERICA: TOP 10 WAYS WALMART DESTROYS US MANUFACTURING JOBS”

  1. Mo says:

    One of the biggest problem’s with trade today is fiat money. What trade is based on is prices. Un-sound money distorts prices and exchange rates. Un-sound monetary policies distort exchange rates by causing them to be either undervalued or overvalued and cause over-consumption. Hayek over 75 years ago described how economies devoted to too much consumption would lead to capital consumption and lower living standards. Countries with over-valued exchange rates would notice the emergence of “rust-belts” where there would be less domestic capital investment and increased imports of goods leading to deteriorating current account deficits as the economy became more services oriented. In such an economy one should expect to witness an excessive expansion of the financial and service sectors along with delirious claims that the economy has now entered a “post-industrial” phase (1). A country with an over-valued exchange rate engaged in policies to artificially stimulate consumption would only accelerate this process. Under sounder money in the past it must be remembered that the US manufactured more goods, had lower inflation, lower wage inequality and had a growing standard of living.

  2. Bruce Bishop says:

    Before I had ever heard of Walmart, Chinese products began to arrive, unbidden, into the boardrooms of corporate America. At a delivered cost of one-third to one-tenth of the U.S. cost, only a fool did not recognize the writing on the wall.

    Walmart, too, recognized that there was no way for U.S. manufacturers to compete with China. Although they did what they could to help their U.S. suppliers become more efficient, they were eventually forced, along with all other U.S. retailers to accept Chinese goods.

    Walmart’s model has always been “lowest price.” The lowest price was China which forced the U.S. manufacturers either shut down or outsource their labor. Now, China is the “only price.” There are NO U.S. manufacturers producing consumer products that are competitive with the stuff that Walmart sells.

    Walmart survives by economies of scale. They also incorporate the latest in technology and are constantly striving to improve in all aspects of the business.

    Walmart’s profit margin is 3.5%, among the lowest of the Fortune 500. Target’s 4.2% is slightly higher by capturing the “snob appeal” of folks who just wouldn’t be caught dead in a Walmart, and will pay a little extra to avoid that shame. Those higher prices have limited Target’s growth to about one-sixth that of Walmart. And, of course, Target’s stuff comes from China, too.

    Walmart is a favorite target of the elitists on the intellectual left. They imagine a world (that never existed) of tiny bodegas and botiques, run by hippies and retired PhDs, who would discuss politics while sacking your arugula. They also believe that enough organic apples could be produced in Central Park to supply the entire city of New York. Yet, as loopy as they are, they still have a disproportionate influence on our political class.

    The ONLY rational solution to our job loss is “balanced trade.” You can Google it. Unfortunately, all of these irrational excursions involving Walmart and currency manipulation serve only to divert attention from the real solution.

    • Arthur Taylor says:

      Bruce:

      You know very little about WalMart as is evidenced by your post. Sam Walton was one of the first retailers to use Chinese and other foreign made products to drive traffic into his stores. Go educate yourself on his use of women’s panties in dump bins to attract the Southern belles into the aisles of WalMart. His buy America program was a sham that was unmasked by 20/20 long ago. According to Sam himself, Walmart’s “Buy America” program was responsible in totality for the purchase of $5 billion dollars worth of goods while his stores did hundreds of billions in sales.

      Hillary Clinton served on Walmart’s Board of Directors from 1987 to 1992. Walmart’s executives donated $22 million to Clinton’s 1992 Presidential campaign and in return they were given NAFTA, GATT, the WTO, Permanent Most Favored Nation Status for China et al. Walmart rose from the fortieth largest corporation in the US to the largest corporation in the history of the world in a mere fourteen years and if you think it didn’t have something to do with their hired man being the President of the United States then I’ve got a bridge you may be interested in in Brooklyn.

      Sam Walton began using Chinese imports from the beginning – 50 years ago – and prior to that in his other retail ventures. He was never “forced” to do anything. He is probably one of the most unAmerican individuals that ever came down the pike and more responsible for the current situation than any other individual sans Bill Clinton.

      • Bruce Bishop says:

        Arthur,

        The incident you described with the three for $1.00 panties happened in 1955. There is no evidence that China was involved. (See p.48 of “Made in America,” by Sam Walton.)

        Walton’s “Buy American” campaign (1985) did help to save some U.S. manufacturers, but only those who were willing to follow the Walmart playbook for improving quality, productivity and on-time delivery.

        According to “Wal-Mart and China: A Joint Venture,” by Sam Hornblower (www.PBS.org/WGBH/pages/frontline), “. . . Sam Walton was playing catch-up. Sears, K-Mart, Target and JCPenney all had established procurement networks in Asia long before Walmart arrived.” “All the retailers in the world participated in the development of the Pacific Rim” before Walmart got involved with China.

        Also, please keep in mind that, in 1985, the “experts” here were saying, “We don’t need no stinkin’ manufacturing; we are going to be a service economy.”

        As to your throwing Bill and Hill under the bus, I am right there with you. Unfortunately, the statute of limitations has probably run out on most of the crimes they committed.

  3. Tom T says:

    Mo, with the U.S. currency being the reserve currency of the world and the currency where everyone runs to in cases of uncertainty, we will always have an over valued currency (until we mismanage so badly that we are knocked off of that position). That will be the case as long as there are free exchanges of money.

    With the case of China, there is no real free money exchange. They can and do manage their currency to accelerate the conditions you describe. In so doing, they hollow out the production ability of our country and we buy almost everything from them. We won the cold war largely due to our economy and the long wait out with Russia. I see China using the concepts you describe to do the same thing only this time using the incompetence and greed instituted in our crony capitalism model to do so.

    The question is can we, if we are smart enough (I am not sure our politicians are that smart at this moment), make policies to change that. It seems that Germany has been successful at doing so. They are Europe’s economic power house. In doing so, they have all sorts of “socialist” policies that protect their domestic economy, some of which I have posted. Germany seems to be helping China tool up to sell the U.S. market so that China can take advantage of the transfer of technology our most unpatriotic industrialists and their crony politicians who incentivize the destruction of our economy.

    This may be a natural consequence of the monetary policies of the major trading nations, but are there things that we can actually change to avoid it? Again, Germany has done so but they don’t seem to have the worries of trumped up “socialism” we have here today nor the “free trade is good” mentality that is ruining our production economy.

    We have to have a real shift from the ways we are thinking about the major issues. Politicians don’t have a grasp on that kind of thinking as they think for their self interests which are so easily manipulated by the money trains out there.

    For instance, it would have been far better if we had not bailed out the banks and instead, put all of that money into the govt. completely funding health care. It would have made us much more competitive on world markets and instead of a strong dollar being used against us in a mercantilist war, it could have been used for the benefit of the people in our country. It is one of the things that most of the industrialized world has already done but we are caught up in the propaganda (sales pitch) of those benefiting from the money trains. The policies we did adopt didn’t transform the old system as much as it catered to it. It was a system that failed and we bailed it out instead of the needed reform. This, I believe, is largely due to the influence of money and power on politicians. Politicians cater to these interests because it is in their self interests to do so and even in failure, the public does not hold them accountable. How many politicians do we have that have not instituted the basic rules of the game that Glass-Steagal put in place? Instead, they made a law that is so dependent on good governance (in the many regulations required to be written) that our current political state where politicians sell out those rules to the highest bidder almost dooms it to failure. Republicans will argue that govt. can not manage well and it should be left to the private sector and free markets, and democrats will be left to explain how and why it failed (almost guaranteed to fail given our soundbite political races). The wealth will continue to be concentrated into the oligarchs who game us all for their benefit.

    Sorry for the convoluted post. Yes, I know I made up a few words but I think all interested can figure them out.

    My larger point is that we have perverse incentives in our economy to continue to do the wrong things. Our politicians are so dependent on money that they do not have the incentives to govern well. Instead, we get policies that cater to the oligarchical structure that was described George Orwell’s book, “1984″. It is not a rosy picture of our future (present).

    Tom T.

    • Mo says:

      The problem is we don’t have free trade but managed trade where certain sectors benefit at the expense of others. Un-sound money along with managed trade agreements are the main distortions to trade. A trade deficit is not necessary a problem but the current trade deficit is a problem because of the horrendous terms of trade. A country can have trade deficits and a vibrant manufacturing sector. When the US had sounder money from 1850-1900, average GDP growth was 2-3% a year and the US ran trade deficits because it incurred debt to import capital goods where it then used these imports to manufacture goods to pay back the debt. Today the US exports jobs, factories, technology and trades ownership of US companies to import consumer goods, and to fund overseas military bases and conflicts. This is like trading the cow for milk which is a horrendous terms of trade.

      Even if the exchange rate with China is adjusted, what’s to stop a country from just selling the product below cost and then printing the money to subsidize their exporters under the current un-sound monetary system? The question then is why would a country in the first place want to sell a product below cost because that would be subsidizing consumers in the importing country. The reason countries do this is because with dollars they can buy up US companies with their capital. A possible solution to currency manipulation would be to prevent any countries that manipulate their currencies from buying up US assets if it was found to be the case. Also with US having the worlds reserve currency and it being overvalued according to many economists; why not just print money and buy all the high tech goods in the world that’s avaliable to make US industries the most productive?

      • Tom T says:

        Mo, I totally agree. Whether you are being gamed with this game or that one, it does not matter. China will indeed be quick to respond any way we challenge them on their practices. Meanwhile our country will continue to be drained.

        I mentioned health care because it is solely in the U.S. When we began passing money around (easy money policy and outright spending it), we just spurred China’s economy because that is where we get most of our consumer manufactured goods.

        China is gaining competitive advantage in manufactured goods because at the end of the day, Bruce is right, and we are just getting the cheapest goods off of plantation China. The slaveholders are capturing that wealth because they are doling out the dollars earned to the Chinese workers and doing as you say, either buying U.S. businesses or U.S. debt (IOUs our children have to pay back).

        We are exporting jobs to China and allowing the Chinese government and a few oligarch partners here in the U.S. profit while we deflate the economy and jobs.

        The incentives to do this are there and that is why it is being done. Our politicians are responsible for these policies and they are easily played. The score card is the balance of trade. We have traded our jobs for cheap goods. We have basically traded our cow for the milk, our fishing skills for the fish. The last 12 years before the collapse was hidden by low interest rates and people spending money they were borrowing, much from the equity in their homes. The fed put out publication after publication that home prices were increasing because interest rates were low as consumers leveraged their wealth to keep up with their standard of living. China continued to buy U.S. jobs and the effects were hidden because of the above. We now have politicians who will not admit what just happened and correct it. Instead they continue with the delusion that they were never wrong. It is hard to correct policy when you can’t figure out that you just engaged the nation in bad policy (or allow the people to figure it out with a competitive political system).

        While we could produce goods below cost to beat out the Chinese or other mercantilists, why not just pay for health care for every person in the nation? That way we don’t have to get into the trade, currency, fiscal and monetary games with the much more agile Chinese. Allow the Chinese govt. to see that they are paying for health care for all Americans in America instead of using that money to bail out banks and a financial system that is broken with IOUs to the Chinese government. We already know that they are amassing those IOUs to their best interests, not their people’s best interests (or they would have floating exchange rates and allow Chinese to buy U.S. goods with their earnings). I don’t see much difference between a sovereign game being played by the country of China and plutocrats or oligarchs here or there. Either way, politicians are selling their power to the elite instead of serving the public as a whole. We are left with the baggage of language like “socialism” while our lunch is being eaten before our eyes. The wealth of our nation is being concentrated into the hands of those paying off the politicians and amassing wealth whether it is on this side of the Pacific or that.

        Mo, I agree with you on many of your strategies but as Bruce says, the Chinese have a much tighter hand on their plantation labor than we do. In our plantation we at least have to pay the slaves, even though it is at an increasingly lower rate in relative terms. Monetizing through the manufacturing sector still has many more structural problems than monetizing through the health care system and subsidizing manufacturing that way. At least more people are served. As it is now, we monetize through the banking system when they make bad bets because that is the way Phil Gramm and the Washington elites which included Clinton and democrats) set up that scam on the nation.

        A case in point on this issue is the Solyndra deal. We have a political system that the Chinese can use against us when it comes to monetizing the industrial sector. It must be done with, as Bruce says, with a plan similar to the Balanced Trade plan put forward by Warren Buffet. The benefits of an imbalance of trade would stop accruing to those selling out the country’s economy and actually help pay for governing it. As it is, our current politicians are not able to collect the revenues from those making the wealth and so we must put the IOUs on our children. We are a nation that has developed a very bad credit card debt because credit terms and rates have been so low. Our politicians have also been the beneficiaries of this because they are the ones spending on the nation’s credit card with no end in sight.

        I am with Bruce on this one. We will not be able to tinker with the little edges to make us more productive than China. They can buy the best technology (and have been) as well as we can and they have a plantation where they don’t even have to pay market wages. We will be forced to the lowest common denominator and that isn’t too good of a place.

        Tom T.

        • Mo says:

          What needs to be done is that every state in the US should create their own state bank where tax payer funds get deposited into. North Dakota is an example of a state with a state bank. The state has regular budget surpluses, low unemployment, low taxes, low foreclosure rates, low bankruptcy rates and a growing GDP. If every state had a state bank like North Dakota, state tax funds that the people pay can be recycled within state to fund industrial activity.By having state tax funds in the bank and encouraging workers, companies within the state and other banks to deposit funds into it, funds can be regularly recycled to increase supply chains.

          Why deposit state tax funds in some bank that may lend the funds out of state or to fund offshoring investments? One great thing about the Bank of North Dakota is that the funds are not FDIC insured but insured by the State. This forces the bank to not become too over-leveraged and to fund real economic activities and not speculation. Some people will say because North Dakota has oil that’s why their booming. Yes oil has helped the state economy but other states have more natural resources and are not growing as fast or have as low unemployment.

          • Tom T says:

            Mo, I am with you on your banking idea but it is not enough to stop the bleeding. It would be one step in the right direction. With the free flow of capital by the super rich, it will go to the sweatshops of the world if that is where the biggest buck is to be made. The underlying rules of the game have to be changed and mega banks are not main street banks. My cousin is the comptroller of the largest private bank in Texas. They didn’t get caught up in the banking fiascos but their competitors in town, the big banks, did. Who got bailed out because they got in trouble? Was it banks like his that invested locally or the mega banks selling the easy flow of capital out of the U.S.? I think you can guess the answer of that one.

            The mega banks were winning customers because they were out competing the main street banks but they were much riskier. The more I look at the bank bail outs and how it was handled, the more perverse incentives (moral hazard) I see and the less banking for main street. Your solution does go to this structural problem the banking system but it is only one of the things that needs to be fixed and it alone will not fix the capitalist game that has failed us so miserably.

            Tom T.

        • Mo says:

          One thing to remember Tom is that slave labor can’t compete with higher paid workers with capital. Workers with capital and high tech goods can make more goods in a given period than workers that lack capital. Instead of trying to compete with workers at low prices the US with it’s reserve currency should monetize and buy up all the high tech capital it can so that it takes much less labor to make any good. The manufacturing process can never be automated enough.

          • Bruce Bishop says:

            Mo,

            Warren Bennis once said, “The factory of the future will have two employees, a man and a dog. The man will be there to feed the dog, and the dog will be there to keep the man from touching the machines.” Unfortunately, Warren Bennis didn’t really know very much about manufacturing.

            The truth is, there are relatively few opportunities for automation or robotics in manufacturing. Those that do exist, like surface-mount technology for populating printed-circuit boards, not to mention printed circuits, were in common use in the eighties. Apparel manufacturers had gone to computerized layout and cutting of pattern pieces for garments by the late seventies. But, unfortunately, the real labor-intensive work of sewing the pieces of cloth together does not lend itself to automation.

            One of the main factors preventing automation is the fact that we humans demand variety in our consumer goods. In a totalitarian society, where everyone could be forced to wear the same outfit, and there was only one model of TV or toaster, then the opportunities for automation would be much greater.

            James Sherk (a senior policy analyst for labor economics) at The Heritage Foundation has claimed that it was automation and robotics that took away our manufacturing jobs — not China. James Sherk doesn’t know very much about manufacturing either.

          • Tom T says:

            Mo, I am with Bruce on this one. China has enough money to buy all the capital intensive equipment they need— they are ordering it from Germany. Slave labor could not compete with industrialization that brought in the combine, or the cotton gin, but let us face it, that is not what is happening. China has bought and continues to buy the all the capital equipment they need with the profits they got off of slave labor and the capitalists who moved their production to China but kept their markets here in the U.S. Our fine Congress and POTUS of the recent past made up the rules for this to happen and it did.

            I am with Bruce on this one. The magnitude of needed change may be helped with your ideas but it won’t be solved. We are way too far down the road for that.

            It would be nice if China’s govt. and oligarchs along with their capitalists partners from the U.S. didn’t capture so much wealth that the slaves couldn’t create demand that creates an expanding economy. Unfortunately, that is what we have with the current set of rules.

            Tom T.

    • William Ryan says:

      Its become a widely known fact that most labor intensive manufacturing work is now in China and India… It is not just Wake up Wal-Mart any more, now its wake up America where the greatest focus of the problem lies… We cannot have an economy that works for only 60% of the citizens. The ecomomy must work for citizens and all industries that we feel are important for America and all Americans…

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