by Ed Schultz
While all eyes were on Wall Street and the investment bank shenanigans that triggered an economic heart attack in the economy, most people didn’t realize that there was an underlying cancer eating away at America, which had weakened us and made us more vulnerable to an economic crisis.
THE RIDICULOUS REWARDS WE GIVE OUTSOURCERS
North Dakota senator Byron Dorgan, a Democrat, detailed the insidious way bad trade deals and bad policy are rewarding the turncoat companies that ship jobs overseas in his book Take This Job and Ship It: “When a U.S. company closes down a U.S. manufacturing plant, fires its American workers and moves those good-paying jobs to China or other locations abroad…the tax code allows these firms to defer paying any U.S. income taxes on the earnings from those new foreign-manufactured products until those profits are returned, if ever, to this country.” Contrarily, a domestic manufacturer “is required to pay immediate U.S. taxes on the profits it earns here.” Dorgan proposed legislation to close the tax loophole, which would not only save jobs but save taxpayers $15 billion over ten years. Sadly, the American worker will lose Dorgan’s voice in Congress. He has announced that he will not run for reelection in 2010.
When it comes to bad policy, the North American Free Trade Agreement was a whopper. NAFTA alone increased the trade deficit with Mexico and Canada from $9.1 billion to $138.5 billion between 1994 and 2007, according to the Center for International Policy. The net loss in jobs attributed to NAFTA was almost a million.
Bad trade agreements are at the core of the problem, and when countries like China violate trade agreements, it begins to erode the economy even faster. Part of the problem with these bad trade deals is the indifference and ignorance of the American consumer and international businesses like Walmart, whose drive to squeeze every last penny of profit from each transaction has been pursued at the expense of the American worker.
No, this won’t be another long-winded harangue about the evils of Walmart. I documented that in my last book, and Senator Dorgan and a host of others have dissected the issue even more thoroughly in theirs. But when the world’s largest retailer exploits the global job market to buy goods as cheaply as possible, and American consumers go along with it, it truly becomes, as I’ve mentioned before, a race to the bottom line. American manufacturing jobs go to China.
“The simple reality is that what these trade policies are about—and [they] have been forced upon us by large multinational corporations—they are asking American workers to compete against desperate people in the developing world, who in some cases make pennies an hour,” said Senator Bernie Sanders (I-VT) in a statement in 2007, which can still be found on his website. “And if you are a large corporate leader, it doesn’t take a Ph.D. in economics to understand that, yes, you will throw American workers out on the street, who make $20 an hour, have health care, and where you have to obey environmental regulations. And yes, you’ll run to China, pay people 30 cents an hour. If they stand up for a union, they go to jail. If they stand up for environmental regulations, they go to jail. Why wouldn’t you go to China? And of course, that’s exactly what many, many American corporations are doing.”
The Department of Labor reports that the U.S. manufacturing sector lost 791,000 people in 2008 and 4 million manufacturing jobs since 2000. Unemployment rises. With a glut of workers available, it becomes an employer’s market. Employers can keep wages down. Wages stagnate. From 2000 to 2007, according the U.S. Commerce Department, the median income actually fell by $324. Thanks, Dubya. But I guess those tax cuts for the richest of the rich worked out OK for them, didn’t they? Hey, will someone please remind them to trickle down?
With so many American factories shuttered and so many jobs lost to the Great Recession, what happens? The unemployed and underemployed start to put more pressure on social programs. They stress the health care system. They get food stamps. Fuel assistance. Your taxes rise. Why? Because you are subsidizing underpaid Walmart employees and the people in international corporations that profited by putting Americans out of work. What drives me crazy is that Republicans, who spent the last decade cheerleading outsourcing, now complain about the added pressures the unemployed are putting on social programs. I don’t think it is simple hypocrisy—most of them just don’t get it! The rest don’t care.
Here’s an example of how the deck is stacked against American manufacturers. In 2006, according to the New York Times, only 5,000 American cars were sold in South Korea, because of trade barriers. Meanwhile, 800,000 South Korean cars were sold in America. Even more ominously, the U.S. auto industry is bracing for Chinese cars, which will be test marketed in other countries before hitting the U.S. market within five years. GS Motors, a Mexican company, imports the cars from China’s First Auto Works—4,000 in 2008—but expects the cars to be built in Mexico by 2010. The cars sell for $5,500. Is Detroit in any condition to withstand any meaningful pressure from Chinese/Mexican automakers? I don’t know the answer, but I do know that if the cars are allowed to flood the market, Detroit may be sunk.
Among the industries in America that are virtually extinct is the garment industry, once the largest employer in America. Today, according to the HBO documentary Schmatta: Rags to Riches to Rags, 95 percent of all garments sold in the U.S. are made mostly in sweatshops in China, Vietnam, and Bangladesh.
When Levi Strauss, which had employed 37,000 American workers, moved its operations to China in 2003, Clara Flores, an employee of the company for twenty-four years and president of the plant’s union, told the New York Times that the $18-an-hour job and benefits would be hard to replace. Marivel Gutierez, another twenty-four-year employee, told the Times, “There still probably is an American dream. But what about us? What happens to our American dream?”
It’s obvious that when trade policy is constructed in America, the focus is on what’s good for international corporations and not the American worker. The American worker is not regarded as a flesh-and-blood human being, a mother, a father, a son, or daughter. No! You are an expense, an impediment to profit.
WE DESERVE SOME OF THE BLAME
As American consumers, we have encouraged this behavior because we’re like shoppers at a shady pawnshop. We don’t want to know the story behind the goods; we just want them cheap. It’s cool until you get your pink slip. It doesn’t matter until it matters. You have to ask yourself, How much am I really saving when I don’t buy American?
For eight years we heard the mantra “Support the troops,” despite Republican efforts to cut troop pay, their votes against funding the VA, and stop-loss programs. Damn right we should support the troops, but while we’re at it, let’s start putting up ribbons for the American Worker, too. We ought to tie a blood-red ribbon on every tree and light pole in America to signify the jobs shipped overseas. I’m serious. It’ll be good for the ribbon business. I hear they’re on sale at Walmart.
The trade deficit in 2008 was $677 billion, which, due to a floundering economy in the second half of the year, was actually down from $700 billion in 2007. One word you will hear from economists about the deficit is that it is “unsustainable.” Peter Morici, a former director of economics at the U.S. International Trade Commission, said in February 2009, “To finance the deficit of recent years, Americans have borrowed more than $6.5 trillion from foreign sources, including foreign governments, and the debt service comes to more than $1,500 for each working American.”
This transfer of wealth from America to the Chinese and the Middle East (oil accounts for $450 billion of the trade deficit) gives these countries the ability to buy up America piece by piece—real estate, stocks, bonds, and businesses. Translation: If we don’t buy American, they buy America.
The Bureau of Economic Analysis reports that foreign investors own more of America than American investors own of the rest of the world. Fortune magazine’s Geoff Colvin wrote in 2008 that as foreign ownership grows, “we must send more dividends and interest to foreign owners, giving them more money with which to buy more U.S. a
ssets, earning more dividends, and so on.” I don’t want to sound like Lou Dobbs with hemorrhoids, but we need to be talking about this issue now. At what point do we draw the line?
It is just one of many reasons for making the trade deficit more manageable, but the key to our economic resurgence is the awesome power the engine of job growth can provide. After World War II, with favorable economic conditions, the middle class grew and thrived, becoming the backbone of an economic juggernaut.
So even though the stimulus package has boosted the U.S. economy and job retention and growth, one of the main drags on the economy—the trade deficit—will have to be addressed in order for the U.S. economy to recover in the long term. Otherwise, Morici warns, “a pattern of false recoveries, much as occurred during the Great Depression, will likely emerge. Conditions will not be as bad, and unemployment will stay at unacceptable levels.”
When it comes to trade, the Chinese do not play Ping-Pong. They play hardball. According to Senator Dorgan, China has pressured Boeing, saying that if they want to sell planes to China they must open a factory there. It sounds like something you’d hear from the Mob.
I wrote earlier in this book that America never seems to muster the will to react until it perceives a crisis. The trade deficit is a crisis, but it is subversively quiet—it’s like slowly bleeding to death. It hurts a little at first, then you get sleepy…and then you wake up dead. I believe the Obama administration understands how important this issue is to America’s future. However, there are many supporters of free trade who are seemingly oblivious to the harm the agreements have done to American workers. There will be millions and billions of corporate lobbying dollars spent to fight what they will brand protectionism and I will call survival.
SETTING GOALS
Our goal should be to cut the trade deficit by half in the next decade—and that may be too modest a proposal. Meeting such a goal will require a national focus on energy independence, since that is a huge part of the problem. When it comes to other imports, we will need to exhibit the same kind of toughness Obama showed on the tire issue. By all means, let us encourage trade, but we no longer need to treat all of our partners like ninety-eight-pound weaklings. Those with mature, robust economies cannot be allowed entry into our market without extending the same invitation to U.S. exporters.
I recognize that trade is necessary. I also recognize that unless we renegotiate bad treaties and enforce the laws of existing ones, we cannot hope to have a stable economy. Trade wars serve no purpose, but we have to stick up for the American worker and give the American manufacturer an even playing field. Obama has already taken the first step, which is to enforce trade agreements. Second, we must renegotiate NAFTA and other suspect agreements. Third, we have to amend U.S. tax laws so that we stop rewarding companies who outsource and start punishing those who do.
Finally, we have to address the issue of international currency “fixing.” As discussed in the chapter on China, by keeping its yuan pegged artificially low to the dollar, China’s goods remain attractively priced in the U.S. market and American products are at a price disadvantage. Specifically, the Obama administration has to follow through on its challenge to China over currency manipulation.
This is all eminently doable, but it will not come without fits and starts and bumps in the road as each trading partner negotiates for the best possible advantage. I’m not sure who has negotiated some of these past treaties, but if his name was Curly, Larry, or Moe, I wouldn’t be shocked.
IT’S ABOUT BASIC HUMAN RIGHTS
At its core, the whole issue of outsourcing is really a reflection of the value we put on human dignity and human rights. Ultimately, if we are to stop this devastating race to the bottom, we have to include in these agreements workplace protection and economic standards for workers in emerging economies, just as unions did in America.
Rather than forcing American workers to compete in the gutter, this serves the purpose of elevating abused workers, including child laborers, in other countries. Under no circumstances should we be encouraging and enabling workplace abuses in other countries by allowing the import of goods produced in that manner.
According to the International Labor Organization, there are an estimated 250 million children, ages five to fourteen, working in hazardous conditions. Senator Bernie Sanders said, “Most of us would be horrified to support a business that exploits children. But chances are you may have done just that on your last shopping trip. Perhaps you splurged on a handcrafted carpet, without knowing it was made by a seven-year-old from India, where children are chained to looms for 12 hours a day. Maybe you just bought a soccer ball for your son or daughter, without realizing five-year-old hands inside a dark and silent factory in Pakistan produced your gift…. Children’s rights groups estimate that the U.S. imports more than $100 million in goods each year which are produced by bonded and indentured children.”
When we, as a country, import products produced by child labor, it says as much about our moral standards as it does about those who enslave children.
According to Reuters, “the annual cotton harvest in Uzbekistan depends on the forced labor of some 2.7 million children, who are all removed from school for six to eight weeks to work in the fields and enrich the elites of the country’s authoritarian regime.” The story quotes a new study, Invisible to the World: The Dynamics of Forced Child Labour in the Cotton Sector of Uzbekistan: “Uzbekistan represents a rare instance of state-sanctioned mass mobilization of children’s labour. The principal beneficiaries are not households or primary producers, but state-controlled trading companies.”
As a response to child labor abuses, the U.S. Labor Department, with $92 million allocated in 2010, funds 220 projects in 82 countries to address the issue. Compare that to the Bush administration, which proposed a $66 million cut, to $15 million, in 2008. Congress, instead, allocated $91 million.
It’s important that our trade agreements reflect similar environmental standards, too. No more allowing into our playpens the flood of Chinese toys with lead paint. Nor can we allow crops treated with chemicals banned in the United States to appear on our shelves from other countries. What message do we send and what is the cost to American manufacturers when we import Chinese goods made in plants that do not have to adhere to the same pollution standards we have in America? In the end, the pollution from the very same Chinese manufacturing plants that put Americans out of work floats over American cities.
Trade can be a powerful tool for improving lives in America and abroad, but the benefits have to be balanced among the businesses that should make a profit, the employees, and the overall health of the economies of all countries involved.
All negotiators ought to know when they sit down that their goal is to benefit America as a whole, not just one sector at the expense of another. Trade agreements influenced by the corporate traders themselves, as has been the case, have led us down the wrong path, to shuttered factories, unemployment, and stagnant wages in America.
CHAPTER NINE
ECONOMIC SLAVERY
How Debt Reductions and Unions Can Help Set You Free
I WANT TO TALK ABOUT FREEDOM FOR A MOMENT. NOT THE DRAMATIC “let my people go” freedom but rather the personal freedom that comes with making smart personal decisions. You live in the land of the free, but are you really free? If you are underwater on your mortgage and facing $1,200 health insurance premiums, payments on that Hummer you just had to have, credit cards maxed out, and a 401(k) that’s going south in a hurry, well then, freedom isn’t all its cracked up to be, is it?
I remember when I was growing up the television commercials warning about shady drug dealers and how they would get you hooked in a heartbeat. But no one ever warned us about the guys in the suits offering instant gratification. Buy now, pay later! Easy credit!
Don’t get me wrong. Credit can be a wonderful tool for improving your quality of life. But too much debt limits your choices in life. As Ralph Waldo Emerson said, “A m
an in debt is so far a slave.”
The way I see it, being debt-free and having something socked away for a rainy day offers peace of mind—and peace of mind is invaluable. Isn’t peace of mind the point of it all? Unfortunately, this materialistic generation has been slow to learn. We really are the Greediest Generation. We’re working so hard to weed the roses that we no longer stop to smell them.
In the rush to own flat-panel big-screen TVs and BMWs, people soon discover that those things start owning them. The monthly payments demand you get up each day to pay for it all—sometimes at a job you don’t like. I believe you have to love what you do to be successful at it. I also believe there ought to be some joy in our lives. It’s just hard to get there if you’ve created your own economic prison and a cycle of living from paycheck to paycheck.
It’s easy to point fingers and complain about the inequities in the system, but ultimately, you have to take responsibility for your actions. I’m an old-school, pull-yourself-up-by-your-bootstraps kind of guy. I admire a good work ethic, and I believe in working hard to achieve what I want to achieve. That’s what America is all about.
I have spent a good deal of time taking the system to task because a combination of deregulation and corruption has put too much power in too few hands. Capitalism often operates without regard to human rights and justice, and I think the system needs to better address those issues. Despite that, I embrace the risk/reward concept of capitalism.
I believe in paying my way, and I respect those who own up to bad decisions and pay their debts instead of taking the easy way out and declaring bankruptcy. But it seems to me that this generation has gotten fiscally sloppy—personally and as a nation. We have been so busy hedonistically living for today, we have not thought much about the future.
I remember even as child looking around and recognizing that some of the adults in my world were working at jobs they detested. Others found fulfillment in theirs. I resolved then to find an occupation that would make me happy and would make me feel at the end of the day that I had made a difference. I have been blessed to have that, but along with the blessings came an awful lot of work.
