A friend recently forwarded an article about how US based multinational companies are not concerned with bringing jobs to America, but with making money for their shareholders. The writer’s purpose was to make US based multinationals seem unpatriotic at best, and anti-American at worst, but it cuts both ways.
European, Brazilian and companies of many other countries including the U.S., are primarily run by the profit motive rather than politics. They all base decisions upon a combination of labor costs, taxes and transportation of materials to and goods from their factories. The nationality of the workers is way down their list of considerations.
Since the profit motive is relatively straight forward compared to politics and I have a healthy distrust of political decisions, I find some comfort in this. The challenge is to keep politics from polluting and perverting business while upholding legitimate public interests.
Each attempt to impose political will onto businesses has the potential to drain a little lifeblood out of the goose that lays the golden egg. Some politicians don’t realize or seem to care that the goose can bleed to death.
The irony in the jobs issue is that the U.S. exports are at all time highs, and not by a small amount. It is easy to think US industrial hegemony has been in decline since the 1960′s, yet our exports now are 100 times greater than they were back then.
It is impossible to export both jobs and goods. To be exported, goods have to be made here. Clearly we are making more goods, so why does it feel like we are losing jobs? Because we are so unbelievably productive. Our high-tech robots and assembly lines can produce goods more inexpensively than low wage workers in Sri-Lanka or wherever. Think about that statement. That is what the export numbers are saying.
Sure, we could have more workers working if we tore down the ultra-efficient factories and tried to compete head to head with the sweat shops of the Far East, but those aren’t really the kinds of jobs we want, and we might lose that battle. We are winning this one.
Free enterprise is the ultimate form of democracy. Each time one of us spends a dollar we are saying we want more of what we spend our money on and the corporations are the ones that count the votes and respond to give us even more of what we vote for. The voting says we all want the less expensive goods more than sweat shop level jobs. Sadly, the voting also says that we want the efficiency and value offered by the Wal-Marts of the world more than the warm and fuzzy feeling that we get from mom and pop stores that remind us of days past.
The pundit class likes to peddle a victim mentality, but we are not being taken advantage of. We are competing in a global competition and the competitors are doing exactly what we tell them with our “votes”.
The solution for more and better jobs here is for our workers, our kids really, to become the masters of the robots. Study hard sciences, like engineering and math instead of warm and fuzzy, but less productive fields. We will all live better and have more good jobs, too.
One of the other dynamics at play in this issue is that of deflation. Inflation is described as too many dollars chasing too few goods. Deflation is the opposite; too many goods chasing too few dollars (although the central banks are printing money like crazy, much of it is getting sucked into the black hole of debt repayment and is not available for general economic spending). With the increasing efficiency, we and every other manufacturer around the world continue to flood the market with too many goods, fueling deflation.
Only when the least efficient producers are taken off line (think of all the photos you have seen of factories and warehouses closed in the 1930′s, never to reopen.) will the production of goods fall in line with demand and get the economy back into equilibrium. I just hope it is the sweatshops overseas that prove to be less efficient than our factories here.
Will Hepburn is the President and Chief Investment Officer of Hepburn Capital Management, LLC, in Prescott, Arizona. He specializes in developing, implementing and teaching innovative investment strategies that Adapt to Changing Markets®.
Will began helping clients make smart decisions with their money in 1977. He practiced as a Certified Financial Planner from 1994-2006, and currently focuses exclusively on investment management.
His academic record includes a major in business and economics at Ottawa University where he studied under Dr. Wayne Angell, a former Federal Reserve Board Governor prior to transferring to the Institute of Computer Technology in Chicago where he graduated first in his class. He has also completed a number of post-graduate level courses with the College for Financial Planning in Denver.
Will is also a college instructor. He taught classes on investments and estate planning at Yavapai College in Prescott, AZ for 20 years. His articles on financial topics have been published nationally and his ideas have been included in best-selling books such as Rich Dad, Poor Dad, by Robert Kiyosaki and leading investment newsletters such as Dow Theory Letters and John Mauldin’s Thoughts from the Front Line. In addition, he frequently gives expert interviews to national media, including InvestmentNews, Kiplingers, Forbes, Fortune, CNNMoney and The Wall Street Journal. Will is a past-president and currently on the Board of the National Association of Active Investment Managers (NAAIM).