The “Occupiers” are Right

I think it’s no secret that the Occupy Wall Street movement is right, I just think they are not sure why, or what to do about it.  A short history lesson should help.  It was Henry Ford who said, “There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible.”  He believed that every one of his employees should be able to afford the products he was manufacturing.  Taking this to heart, he worked with the unions to set the United States on the road to prosperity and helped make the US the greatest nation in the world.  But in the early 60’s, the morals of corporate leadership started to change.  It began with the idea that products could be made cheaper in countries that had lower labor costs.  The electronics industry was the first to leave the US.  It went to Japan, where we taught the Japanese the technology to make the consumer products that would be imported and sold in the US.  We even taught them how to build automobiles.  Consumer prices didn’t go down, so the difference in the cost to manufacture and the selling price became profits for the corporations.  The CEO’s that sent the factory jobs over seas became corporate heroes.

In the 70’s, the Middle East wanted to get into the high profits arena, so they tripled the price of a gallon of gasoline virtually overnight and that has helped make Exxon the most profitable company on the planet.  This put increased pressure on the corporations to maintain profits so that in the 80’s even more industries, seeing the success that the electronics industry was having, started to move more factory jobs out of the US.  By this time, however, the Japanese people had reached a level of prosperity that rivalled the US, and they no longer had the lowest labor cost.  The Japanese started to move their manufacturing to China.  The cost of labor was cheap and natural resources were plentiful, since China had no consumer market to speak of.  Again, seeing the success that the Japanese were having in China and South East Asia, the US corporations started transferring US factory jobs there.  Soon, the furniture industry, the clothing industry, and even the toy industry followed the electronics industry to Asia, all in the name of profits for the US corporations.

It was in the late 90’s – early 2000’s that the folly of sending your consumer products manufacturing jobs to another country hit Japan.  Their economy started to falter and has yet to recover.  The US didn’t get caught up in Japan’s turmoil at the time because we had the infamous Internet bubble that was going to make everyone in America rich.  We know how that turned out.  To keep the economy going after the Internet bubble, Congress and the Federal Bank came up with a scheme to make housing a consumer product.  The effects of that boondoggle will be around for years, as the banks still have millions of foreclosed homes in their inventory that they won’t put on the market until the US economy turns around, if ever.  After all, putting the houses on the market would only further depress housing prices and put even more people “under water” in their mortgages.  At the same time, there’s nothing in particular the banks can do with whatever cash that they would get from selling the houses.

The last thirty or so years of off-shoring “value-added” manufacturing jobs of consumer products from the US is what has caused the disparity in incomes that the Occupy Wall Street people are protesting.  The Government’s own figures show that the incomes of the top 1% have increased 275% during this time while the incomes of the lowest 80% has improved only 3%.

But, there is some good news.  Even though the late Steve Jobs’ Apple factory in China is still little more than a “sweat shop”, the Chinese factory workers now want to be able to afford the products that they have been manufacturing for years, so they have started unions of sorts and have had strikes to force the US corporations to increase their wages.  The Communist government likes this idea because they get increased payroll taxes when the workers’ wages go up.  You would think that our Congress would understand this principle and do whatever they could to get consumer product manufacturing back in the US instead of creating “free” trade agreements with the countries that take the high paying factory jobs from us and then allow the finished products into the US with no taxes or tariffs imposed.  The US is the only country that does this.  Almost all of our “free” trade partners, and in particular China, have “local content” regulations that literally ban finished goods from being imported into the country.  That’s one reason why you see the likes of Ford, GM and Caterpillar building manufacturing plants in China.  Our Congress finally did pass a “local content” regulation recently with regards to, of all things, windmills.  The CEO of Vestas, the Danish company that manufactures windmills in the US, has stated that this boondoggle will disappear once Congress lets the alternate energy subsidy expire next year, the same as what happened to the solar panel industry this year.