Export Emergency
General Electric's CEO Jeff Immelt gave a speech in Detroit on Friday announcing a new manufacturing plant. What he said went beyond the usual corporate-speak into the realm of essential truth.
Many bought into the idea that America could go from a technology-based, export-oriented powerhouse to a services-led, consumption-based economy - and somehow still expect to prosper. That idea was flat wrong. And what did we get in the bargain? We've seen a great vanishing of wealth. Our competitive edge has slipped away, and this has hit the middle class hard.As a nation, we've been consuming more than we earn, saved too little and taken on far too much debt. Growth in research and development has slowed. Our country has made too little progress on some of the defining challenges of our time - like clean energy and affordable health care. Our budget and trade deficits have reached levels that are clearly not sustainable...
Recently my colleague Peter Loescher, the CEO of Siemens, extolled the importance of Germany as an exporting country. In my career, I have never heard an American CEO say that the United States should be leading in exports. Well, I am saying it today: This country ought to be, and we can be, not just the world's leading market but a leading exporter as well.
As I have been saying, the consumer economy will not rescue us from this crisis. We have to become an export power again. And this transition has to come soon. Bob Herbert pointed this morning to a shocking study on labor underutilization (unemployed+part time employed+given up looking for a job).
"By May 2009," according to the Center for Labor Market Studies at Northeastern University in Boston, "the total number of underutilized workers had increased dramatically from 15.63 million to 29.37 million -- a rise of 13.7 million, or 88 percent. Nearly 30 million working-age individuals were underutilized in May 2009, the largest number in our nation's history. The overall labor underutilization rate in May 2009 had risen to 18.2 percent, its highest value in 26 years."
If a year from now we still have 30 million underutilized workers the civil unrest could be exploited by demagogues of the right and the left. Take your pick. It could get ugly.
Both the left AND the right. And ugly is putting it mildly.
C
June 28, 2009 1:53 PM | Reply | Permalink
Quick! Symbolic analysts to the rescue!
June 28, 2009 2:14 PM | Reply | Permalink
Oh goody, Michigan will kick in over $54,000, money it doesn't have, to GE for each job -- $54K per job! -- that MAY be added at some future date.
June 26 (Bloomberg) -- General Electric Co., the world’s biggest maker of power-generation equipment and jet engines, plans a research center that may add more than 1,100 jobs in Michigan, the state with the highest U.S. unemployment rate.
GE, also the world’s biggest maker of locomotives and medical-imaging machines, said it will invest about $100 million to build the new site and benefit from more than $60 million in state incentives over 12 years.
“We’ve found the state of Michigan to be aggressive and a good partner,” Chief Executive Officer Jeffrey Immelt said in a news conference with Governor Jennifer Granholm today in Birmingham, Michigan. “We view this as a long-term commitment. We’ve looked at this downturn as a way to launch more investment faster.” //
Sure, make money off other's misfortune. The state is a good partner to GE, but to Michiganders.
LANSING, Mich--The state Legislature agreed early Monday to raise the income tax and expand the sales tax to services in a historic deal with the governor that quickly ended a partial state government shutdown. The Legislature agreed to raise Michigan's income tax rate from 3.9 percent to 4.35 percent and expand the 6 percent sales tax to some services. The tax increases should erase most of a projected $1.75 billion deficit in Michigan's next budget. The final budget for the new fiscal year will include $440 million in spending cuts, including no inflationary funding increase for public universities and community colleges, Governor Granholm said.//
But GE needs the money, no? No.
GE, which has a stake in almost every sector of the economy, from light bulbs and credit cards to windmills, on Friday reported net income of $2.74 billion, or 26 cents per share on recently declared first-quarter earnings. GE Profit from continuing operations in 2008 was $18.1 billion.
So all of Immelt's blather about exports is just what any good con man would do -- justify the scam. Sixty million bucks is a lot of money in Michigan, with the highest unemployment in the nation, but it's chump change to GE, only a third of a percent of its annual earnings. But they had to stick it to Michigan.
June 28, 2009 3:02 PM | Reply | Permalink
It is actually 60 million over 12 years, which is about $4,500 per job, per year. Not that bad of investment considering the tax revenue those jobs and that plant will provide.
I think the larger point is that an American CEO of a global conglomerate is talking about bringing manufacturing back the United States as a way to stem the hemorrhaging in the economy and take us back to an export footing.
Granted, this first effort was in the same tired form these things have always had, but GE is hardly the first to take incentives to make a decision that could be in any one of fifty states. I have a lot of critiques for GE on a number of important areas, but this sort of strategic change wouldn't be one of them.
As much as I would love to design a new system from the ground up, it is never going to happen. Further, I would stipulate there simply isn't enough time for it to happen soon enough to save us from our current trajectory. The sooner progressives understand that Lockheed Martin and GE will be intimately involved in pulling our chestnuts out of the fire, the sooner we can co-opt the corporate survival instinct for our needs.
June 29, 2009 8:15 AM | Reply | Permalink
Yup, Immelt is sure dedicated to the US, at least when he gets huge tax advantages.
But Immelt doesn't put all his eggs in the Michigan basket:
GE news report:
The network of 30,000 technologists working across GE now have more elbow room to find the next high-tech breakthrough. Our technology development arm, GE Global Research, just announced the opening of its newest research space — a 350,000 sq. ft. building at its technology campus in Bangalore, India. The new facility, which will house nearly 2,000 researchers, adds to expansions at the group’s headquarters in upstate New York, the addition of a new center in Munich and further expansion of research operations in Shanghai.
http://www.gereports.com/doubling-down-on-global-rd-investments/
So the thousand jobs in Michigan is peanuts for the gullible.
June 29, 2009 2:41 PM | Reply | Permalink
No argument, but it is a start and GE is nothing if not susceptible to public attention and pressure if properly mounted.
I would prefer to see openings exploited than to hear laments that they aren't wide enough. This is going to be an effort at least a decade in the making, if not two.
I try not to get discouraged in year one.
June 29, 2009 4:39 PM | Reply | Permalink
Now whatever gave you the impression that GE, or any corporation, is susceptible to public attention rather than being responsive to its stockholders to show a profit. Whatever it is, you should be smoking another brand, and take the pronouncements of corporate heads (like politicians) with a grain of salt. They're conning you.
June 29, 2009 11:25 PM | Reply | Permalink
Nice ad hominem attack in the place of actual debate. Perhaps you need to stop smoking, it is making you paranoid and is precisely the reason why democrats have yet to build a governing majority in this country since at least 1964.
Now, to my actual point, who are stockholders? The public. As soon as the "public" became focused on "green" issues, low and behold a change began to occur. There are many industries where change is beginning to occur, even absent stricter government oversight. We are at the beginning of the trend, so obviously things are still going to look bad. It's not about being conned. It's about seeing an opportunity and seizing it.
Companies bow to public pressure all the time, so I am not sure what your objection is based on in the first place. Standing on the sideline and tossing insults is not going to change a thing, Don. If you want to bleat about your powerlessness, forgive me if I don't join in.
June 30, 2009 6:09 AM | Reply | Permalink
You Dems will never get anywhere until you learn to accept reality, which in this case is that Jeff Immelt read a nice speech telling you what you want to hear. Any good salesman knows that that the best way to sell his product, in this case it is that GE is a good corporate citizen, is to tell you that his motives and yours coincide. But if the product comes at a high cost to you, while the con-man is giving it away in large numbers to your competitors, that really isn't true, is it, that your motives coincide?
Stockholders want maximum return on their investment, nothing else. Like WalMart shoppers looking for cheap goods, they don't care if the product is designed in India and produced on Mars by Martians as long as they get high dividends. That's the way the world works, whatever your fantasies might be.
June 30, 2009 10:04 AM | Reply | Permalink
Since you don't really like all the research stuff, I'll tell you I am actually a republican. That assumption, like the rest of your tin-foil tirade, isn't representative of how change occurs in large, complex systems like ours.
The evils you point to are largely recent in their ferocity and can be changed through some fairly simple consensus building and long-term strategic thinking. I don't care what GE's current CEO really has up his sleeve. The simple fact is that outside forces are coming to bear on American companies that are independent of market forces.
When some of the market's biggest cheerleaders now question its very existence, the system is in flux.
June 30, 2009 12:31 PM | Reply | Permalink
Nice to know that a rich guy is finally coming around to say what the left has been saying for decades. This highlights (once again) how complete is the failure of our ruling class to use the power they have held responsibly and productively and for the benefit of the entire nation. Instead, they did what was good and easy for themselves alone. They have no plans to "sacrifice" while we once again become an exporting nation (if we ever do). No, it will be everyone else, but especially those at the bottom who have no belts to tighten, no bootstaps with which to pull themselves up by. Everyone in the ruling elite needs to be cut out like the cancerous growht they are so our country can heal and become healthy once again.
June 28, 2009 3:43 PM | Reply | Permalink
Every so often the plutocracy skins the sheep and find they can no longer harvest wool. Now they must rehusband the flock. That's about it.
We spend more - around 15 percent of GNP on health care than any other nation. We rate about 32 notches from the top in health results. For profit health care insurance corporations are in business to make money. They run by managers who are primarily motivated to perpetrate raises for themselves. It is only logical that they would take premiums and then refuse coverage. The health of their policy holders is of no concern.
Ditto the MIC and the sorry state of our defense capacity.
And so on.
June 30, 2009 10:42 AM | Reply | Permalink
This is vintage Taplin: take words of a CEO of a US manufacturing company openly whining about the decline of US manufacturing (source of his CEO bonus), then weave them into a predictable whine about labor issues.
Perfect specimen of liberal spin, where everything, and I mean EVERYTHING, is made to prove the left-wing talking points.
Does this mean that Taplin's and Marshall's recent noisy whining about credit industry getting too big a share in the GDP at the expense of manufacturing has been, well, clueless spin against the unfavorable industry?
Or perhaps it means that Taplin wants the Government to control US manufacturing by legislating that they cannot move their factories to countries with cheaper laber in their naive hope that it will allow them to compete with China and the asians.
Taplin clearly has no time for contemplating things like international currency fluctuations; the impact oil prices had on transportation costs of manufacturing in the past several years.
He doesn't care to look into the nature of the difference between US commodity exports and consumer good exports; first undermined by developing countries while second cut by better quality from the likes of Siemens.
He also has no time for small details like the export boom that happened in the US farm industry until the crisis.
Because all that would complicate a beautiful heartwarming story about the struggle of labor.
And all Taplin wants is a simple catchy "deep thought" for the faithful.
June 28, 2009 5:12 PM | Reply | Permalink
I have no problem with those companies moving their factories to cheap-labor countries. I DO have a problem when they continue to call themselves US companies. There's where we should draw the line. When more than half their manufacturing is done elsewhere, they should no longer be considered American.
Why? Because they're no longer American.
June 28, 2009 6:19 PM | Reply | Permalink
They call themselves American because they pay taxes here on their worldwide earnings and many of them originated here, I would think.
The reality is that 100% of the "workers" go to Wal-Mart once a week and spend their money on foreign-made products - because they are cheaper.
And despite Taplin's crocodile tears aimed at stoking the liberal voter base for mid-terms, the truth is much more complicated and blind to ideology.
June 29, 2009 8:01 AM | Reply | Permalink
They actually only pay taxes on profit earned in the United States, but are able to calculate expenses on a global scale. That was one of the changes Obama wanted to make to the tax code.
June 29, 2009 8:18 AM | Reply | Permalink
"Or perhaps it means"... that Taplin said only what he said. And the rest is just you riffing on your personal list of generic beefs. This is another case of a winger knowing what a correspondant is really thinking whether it jives with what he wrote or not.
June 28, 2009 8:01 PM | Reply | Permalink
That's what Lowlife does.
June 28, 2009 10:15 PM | Reply | Permalink
Barring some miraculous inventions which can't be easily copied by the Chinese, to who are we going to export? The Africans? They don't have two cents. The developing world? They'll never allow it. The rest of the first world? You're kidding, right?
Nope. There's world wide overcapacity and/or oversupply of labor. Especially cheap, unskilled labor. Reclaiming at least some manufacturing capacity is better than not doing so...but it will not solve our problems. Sorry.
Americans are in for some very, very hard times as the middle class slowly (or not so slowly) descends to working class standards and the working class descends into abject poverty and starvation. Nor will we have to wait long to see it. In a few days California will either deprive huge numbers of its vulnerable of a safety net or/and renege on its bond obligations.
June 28, 2009 5:51 PM | Reply | Permalink
Got any suggestions there, Sparky? Or are you just here to make noise?
June 28, 2009 10:16 PM | Reply | Permalink
Absolutely. Begin by deporting useless trash like you.
June 28, 2009 10:33 PM | Reply | Permalink
You're welcome to come and try, asshole. They can pick up what's left of you at the local sewage treatment plant.
June 29, 2009 12:55 AM | Reply | Permalink
Old Fart wants to be the only one making all the noise, as always.
June 29, 2009 8:08 AM | Reply | Permalink
Thanks for the support but I don't need it. I enjoy baiting such fools.
More seriously, I think Taplin seriously underestimates the extent of the problem and fails to grapple with the underlying realities. I don't want to fault him too much since I think he's doing better than almost everyone else.
Mankind has always dealt with really serious unemployment and/or resource shortages by means of the most destructive kind of population reduction; war. Population reduction is necessary, and we have the means and knowledge to do better...but not the political will. By "we" I mean humanity, all of us. This problem cannot be solved by nation states acting alone and entirely in their own interest.
June 29, 2009 10:06 AM | Reply | Permalink
Hey, stop talking about the big picture. You'll confuse people.
They don't want to hear about GE manufacturing our new power grid when we finally straighten out spending priorities. They certainly don't want to think how other companies might be motivated to do the right thing through their own self-interest.
I would love to design a new system from scratch but I am afraid we are stuck with the system we have. We might try to figure out how to point it in the right direction before we are all seriously fucked.
Good comment.
June 29, 2009 4:45 PM | Reply | Permalink
I think you're on the right track; different power sources and more efficient use of that power. General conservation of resources. That'll buy us time to rethink our age-old way of organizing and doing business. To wit "be fruitful and multiply" is the wrong advice in our present situation.
June 29, 2009 5:56 PM | Reply | Permalink
Good point. I also think assuming even Christians all believe that stuff anymore is a mistaken assumption. I believe liberals, and by extension all progressives, have much more support than is readily apparent in our propaganda.
June 30, 2009 6:11 AM | Reply | Permalink
Somebody ask you in, shite-for-brains?
June 29, 2009 4:57 PM | Reply | Permalink
Along with the stimulating points that you deliver, does it make sense to think of our economic recovery strategy as a “trickle-down” strategy? I had not really thought of saving the banks as another effort at a trickle-down strategy until I saw it in an editorial by Samah El-Shahat, Al Jazeera's resident economist. http://english.aljazeera.net/focus/2009/06/200961881243654538.html
Her piece seems to add to your line of thought.
I would like to see opinions by other economists about whether or not the current U.S. strategy is another trickle-down strategy similar to those that failed in the past.
Bob Spencer
June 28, 2009 7:42 PM | Reply | Permalink
The US should be studying Apple, to see how design can enter into this equation. It is one thing to make cell phones that will do everything, but only for those who can figure out the code for making them do that, and another thing entirely to make cell phones that work as they should work, so anyone can use their capabilities. That is good design at work.
Apple has maintained their share of the market solely by good design. Their computers work as they are supposed to work, and don't require a 13 year old prodigy at your side before you can get them to do anything, as PCs often do. The iPhone works like a multi-tasking device should work. The iPod does its job just as anyone would expect it to, again not requiring a 13 year old prodigy to explain it.
Good design can change US automobiles back into a product the world respects and wants. And, the same goes for all consumer products. At the moment, we have a wide open door to utilize good design to make our products the world's best. That door will close as soon as the rest of the world discover good design. Unfortunately, I see very little effort being put into good design in this country today.
Bioengineering, with DNA as the basis is another field that is just waiting for an inventive business to generate products from it. The US seems to be in the lead so far, but has not yet been able to counter the nay sayers who are afraid of super hybrid plants.
In short, there are still many opportunities for the US to lead the world in technological products.
June 28, 2009 8:47 PM | Reply | Permalink
Hoppy I read your posts a lot but on your proclamations about Apple I don't agree.
Apple is very much about a closed and completely controlled platform and marketing, marketing and more marketing. The fundamentals of the technology Apple delivers is identical to a PC but at a premium price that is unwarranted. The internals of an Apple computer are exactly the same as a PC. And if you look at the failure rates for the graphics subsystem controllers of the recent MacBook and a screw up with the disk subsystem controllers, they have problems. The same holds true with the just introduced iPhone GS with connectivity issues which they are scrambling to address. In a recent Black Hat Security conference the Apple Safari browser was the easiest one to crack and compromise the system.
Apple is not what you suggest and indicates you aren't in possession of information that would probably make you rethink your statements. And please don't rely on what I've said. Take some time to examine this for yourself. Apple products are OK but not as you've stated.
June 29, 2009 2:37 AM | Reply | Permalink
Apple's share of the market is still around 4 percent for computers, and they have "only" sold about 21 million so far, which is way less than their share of the computer market. Apple will always be a strong, niche company with their current pricing and strategic focus.
June 29, 2009 8:22 AM | Reply | Permalink
Sorry, should have read, "...they have only sold around 21 million iPhones so far..."
June 29, 2009 8:24 AM | Reply | Permalink
But what are we supposed to export. I'm happy trying to export culture, art and ideas but... don't really want a manufacturing or factory job, thanks.
June 28, 2009 10:59 PM | Reply | Permalink
ipods?
Oh yeah, we do....
You might not want one destor, but plenty of out of work manufacturing and factory workers would.
June 29, 2009 12:02 AM | Reply | Permalink
Good point.
June 29, 2009 8:33 AM | Reply | Permalink
But there are 30 million people who do. (Unless I missed the snark....)
June 29, 2009 9:24 AM | Reply | Permalink
Of all the corporations in the world GE is one of those I would trust the least. In the top five for sure. Remember all the years of their, "We bring good things to life", advertising campaign? At that same time they we invested heavily in the defense industry making all kinds of weaponry.
That has changed today. The business portfolio of GE looks very different than it did thirty or forty years ago. The products they make and services they provide are more people friendly.
One thing hasn't changed though. GE is 100% about profits. Every job, every contract is scrutinized and and tracked and MUST be on budget. Not one manhour of time, for anybody, can be charged unless the money exists in a contract. They might spend $100M to buy equipment for a contract. When it is done every piece of that equipment is sold off, chopped up or otherwise disposed of. For a contract duration of three or five years with equipment that is intended to have a twenty year lifecycle makes no difference. It is costed up front. I don't know if all the brutal cost accounting policies of the Welch era are still in place but I suspect they are.
GE is very much into finance and banking and has a growing portfolio in that segment. When you couple everything else with that piece you have a company that has an incomprehensible reach with unbelieveable diversity. The technology pieces especially are precisely targeted in green growth segments and health care. This is both good and bad. GE has been in the forefront in moving in this direction and rightly should be applauded for that.
What is scary is their sheer size and scope in a marketplace as unregulated as ours. With all the resources available to them, especially information, they are positioned as the perfect corporate predator of this age. If history is any indicator they will act the part. Lastly, GE is an untouchable. The way Wall Street wields power was invented by GE.
Here is a list worth looking at:
http://www.ge.com/products_services/directory/by_product.html
June 29, 2009 1:56 AM | Reply | Permalink
I don't know. Seems to me the problem has always been in the currency game.
The post WWII breton woods system is simply unsustainable. As long as the US is the reserve currency, our production costs are going to be more then the rest of the world simply because the dollar will always be weighted as more valuable than everybody else. This system where we buy and the rest of the world lends us the money has been the economic engine of the last 50 years, but at the cost of our manufacturing industry (and its jobs).
In the long run our system is unsustainable, but until the world comes up with a new currency regime we will continue to bleed industries. However this same mechanism allows us to borrow for next to nothing- which leaves us the opportunity to replace these jobs or subsidize these industries with government funds. Which is exactly what is happening.
This will continue until the rest of the world stops wanting to fund us at which point our currency will nosedive but our exports will then be competitive again. Of course that will mean we are broke- so we'll have to stop buying Asia's crap or the ME oil (and, of course, their dollar holdings would nosedive also).
I doubt it is going to happen soon.
June 29, 2009 2:24 AM | Reply | Permalink
Well the rest of the world can write off our debt. We can keep being the consumer juggernaut if that happens. Or maybe the rest of the world can provide universal health care for us...that would free up a lot of money to buy stuff with. A lot of very rich people are making serious money off of the US consumer without the US consumer being paid a wage to sustain that consumption. And with the 'borrowing against inflated and unrealistic home value' scam has come undone so has our mythic purchasing power. Either corporate interests need to lower the profit margins or the American worker needs to be paid more...
Then all those foreclosed homes can be torn down and tenements can be built in their place for the former middle class to live. But that just might be the building boom that the wealthy need to maintain their wealth.
June 29, 2009 11:40 AM | Reply | Permalink
I say it is high time for a class war. Us against the uber-wealthy Feudal Lords of capitalism and their handsomely paid bi-partisan representatives in Washington DC. Because God knows the people in Washington don't represent the other 98% of us anymore...they're unaccountable and defiantly proud of it as Senator Feinstein remains unmoved. Of course all for our good...we are too uneducated and ignorant to understand the intricacies of economics.
June 29, 2009 11:58 AM | Reply | Permalink
Stop talking like a republican. You should know that the government always knows better than an average unwashed like you and me. I can't wait to be told what do to do in my upcoming health care plan.
June 29, 2009 4:15 PM | Reply | Permalink
I will be happily awaiting to be told I can pay much less for it. I am like that, a bottom line kinda guy Lalo...
June 29, 2009 4:21 PM | Reply | Permalink
Seriously Lalo isn't that what conservatives boast about in their love affair with capitalism? Lower prices through competition. Time for the government to provide some actual competition. Let's see how the marketplace reacts to something they refuse to/can't provide on its own.
June 29, 2009 7:59 PM | Reply | Permalink
Libertine, they had the president of Aetna on Where We Live this am on NPR. It made me so angry. It's all OUR fault for the rate hikes, Aetna is the poor lil rich insurance company. There was so many logical fallacies and out and out lies spoken, it was a wonder he didn't explode into flames!
These people are scum. Total scum, they make money off sick people.
It's...amoral.
June 29, 2009 8:10 PM | Reply | Permalink
It makes me mad too Bwak. Not necessarily that health care is for profit per se...just that it has to be for obscene profit. People are dying just so the bottom line can be protected and no other reason. It is immoral and represents a societal rot that puts the future of our country at risk. It is more important to make money than it is to keep people healthy. Making money trumps all of humanity...
June 29, 2009 8:16 PM | Reply | Permalink
But you aren't like that. Neither am I.
Neither are the people I know, so why do we suffer these jerks? The worst thing is, Obama is starting to sound just like them.
June 29, 2009 8:30 PM | Reply | Permalink
Unfortunately you and I really don't matter in all of this Bwak...and Diane Feinstein just unmovingly reaffirmed that fact. I just saw you comment on the Corporate Personhood thread...those are the only 'people' who matter in these matters. =(
If it was up to us and the tens of millions of people who think like us it wouldn't be.
June 29, 2009 8:35 PM | Reply | Permalink