Tuesday, October 25, 2016

No favors to companies that send jobs overseas

By George Templeton
Gazette Columnist
We thought we could help the world without hurting ourselves.  Markets grow when competition replaces poverty, but sometimes profit becomes more important than value.  To create or consume, that is the question.
It was 35 years ago.  We had a new president, Ronald Reagan.  It would be 12 years before the election of Bill Clinton, the man that Republicans incorrectly blame for lost jobs.  It would be 27 years before irrational over-exuberance and banking deregulation led to the Bush Administration’s financial disaster and 8 more years until Donald Trump blamed it all on the Carrier Corporation.
I was on the opposite side of the earth, moving manufacturing to Petaling Jaya, Malaysia.  It seemed distant in those days because there were no cell phones or internet.  A telephone connection to America was like contacting Mars by ham radio.  Communications used a TWX machine.  You placed your message into a discarded bathtub to be sent.  It overflowed with hundreds of messages and new messages, on top and ever coming, would be sent ahead of yours.
It was like that at the grocery store.  Lines were a novelty.  You could not stand there waiting for your turn because it would never come.  Instead, you had to behave like everyone else, elbow yourself to the front, and along with half a dozen other people wave your money at the cashier.  When she grabbed your cash, you were next.  You bought fresh chicken alive.  You did not pay for refrigeration or worry about out-of-date meat.  There was only a single can of beer in shoppers’ grocery carts because it did not come in six packs.  There was a shocked look on the cashier’s face when I bought the beer for the company party.  She thought she had met Satan incarnate.
Colonel Sanders chicken was just like in the USA, but waiters, fancy tablecloths, silverware, beer, and a quart bottle of sweet hot sauce to be slavered over everything in copious quantities were features not found in America’s fast food version.
Natives took their left-over dinner to the roadside and sold it cheaply without license or regulation.  It eliminated the problem of hunger and built community, but page two of the newspaper was an ad for worm medicine.  In America we could eliminate food stamps this way.
Malaysian cooking was a delight, lacking the overemphasis on red meat so common to the American diet.  A chicken dinner at a restaurant was a drumstick and a large plate of coconut rice.  When you ordered satay, the fiery hot sauce was served separately in a tiny bowl.  In America we have chili cook-offs, but we are missing the amazing pallet of curries.
Our plant was air conditioned but birds lived within the air conditioning ducts.  Their nesting materials, gathered from the company cafeteria, hung from never cleaned vents.  Bird watching and song was our reward for sharing our table and a grain of rice from our plate with them.  Lunch choices included expensive American sodas and potato chips instead of much cheaper papaya, mango, pineapple, and fruit juices.  
Streets crossing modern high-speed freeways created huge traffic jams that tied up the police.  Because of that, drivers could run red lights, straddle the center line, and go off-road or on the wrong side of the road without apprehension.  You could get where you were going without expensive overpasses. 
Hollywood movies led the envious to believe that Americans were wealthy.  Natives could not afford air conditioning in their petite homes.  The limp newspaper did not rustle when its pages were turned.  It kept the electricity bill low.
A television set on display at the department store drew crowds who gazed through the window to take in what they had never seen before.  It was showing Grizzly Adams, an American TV show, but government censored the bear.  Malaysians were spared the sex, guns, and violence of banal American TV.
As I walked around town, I looked for a garbage can so I could throw candy wrappers away, but there was none.  Political correctness called for it to be thrown on the ground.  It was swept up and raked into large piles where monkeys played.  These were set on fire every weekend eliminating the need for waste disposal.
The Malaysian “Superman”, a creation of their own film industry, must have weighed 105 pounds but otherwise was just like America’s 1952 version.  When I rode the train to Butterworth and took the ferry to Penang Island my 140 pound body barely fit in the frugal quarters. 
In the jungle, daytime temperatures reach 110 F with near 100% humidity.  Temperatures rarely go below 85 F.  I waited in the steamy night at eight pm to catch a taxi to Kuala Lumpur.  The lights at the guard shack attracted clouds of hungry jungle bugs that were periodically fended off with cans of insect spray.  As I waited there, I noticed that the telephones were not politically correct.   Their ring was constant, annoying, lacking cadence, and persisted until the phone was answered.  There were thunder-storms every day.  Unregulated taxi drivers picked up soaked riders before servicing your call.  The wait to catch a cab was hours.
In the guard shack there was a painting of a snow-covered cabin in the Alps.  The workers knew what snow was, but did they really?  In a world where everyone drives on the “wrong” side of the road, did I really understand what culture was?
A power transistor that cost twenty dollars in 1965 now costs twenty cents.  It leads to slim profit margins and low cost electronics for American consumers.  Big companies need more profit than bank interest to convince them to take a risk.  Sunset products are preferred by some users, but grow incompatible with new manufacturing technology.  They provide the stepping stone for countries to modernize and develop a middle class that can afford to buy American products.  A USA head count reduction is part of the justification for relocation programs, but when companies make more profit they can afford to invest in new jobs in America.
Our overseas plants were competing with one another, so they needed to be productive.  They had to become self-sufficient.  That night the production crew was holding its weekly unpaid overtime Participative Management meetings.  It would extend their working day to 10 pm.  There were millions of dollars in complicated computer controlled systems that required workers to engage in dialog with the apparatus and make quick decisions.  Our broad customer base and small order size meant that there would be a change in process every fifteen minutes.  How does one know things are working correctly?  One machine can take the place of twenty workers, but it can also make costly mistakes twenty times as fast.
My first thought was that unpaid overtime would not go over very well in America; however this was compensated.  Our company fed its employees, provided transportation to and from Klang by bus, and set up the same number of holidays as in America, but that had a complication.  It was necessary to make a place inside the plant to allow religious celebration during normal working hours.  It contained idols, burning incense, and piles of broken coconuts that were used in religious observances.
Government conducted regular audits to guard against abuse.  They had to do this, because the newspaper published regular accounts of firefights with Communists who wanted to upset the apple cart.  I felt uneasy when we were stopped by what looked like 12 year olds armed with 30 caliber machine guns and hand grenades.
Our media televised how we made things in foreign sweat shops.  Our plant in Petaling Jaya ran the air conditioning at 80 degrees.  Americans found it hotter than the production crew who had grown accustomed to the year round heat.  Almost sixty years ago I had a summer job in an Arizona factory that lacked air conditioning.  I turned boxes that came lengthwise on a conveyor belt sideways so they would fit into a gluing machine.  We won’t make America great by bringing back jobs like that.
Some things were sent overseas that weren’t perfect, but when your operation on the opposite side of the earth supplies the entire world, you want equipment that works.  We had reconditioned everything.  Our apparatus was actually in worse condition when it was used in the states.
Malaysia is a melting pot of nationalities and religions, like what America is becoming.  It seemed that the Chinese ran the country, but the government discriminated against them.  The newspaper said, “Wanted, male Bumiputera between the ages of 21 and 30, must have a degree from Oxford”.  The dominant religion was Islam, but Hinduism, Buddhism, Confucianism, Shinto, Taoism, Christianity, and strands of ancient indigenous religion existed.  The plant was once shut down when a worker saw a ghost through a microscope.  That problem was cured by an exorcism.
Culture shock occurs when the past meets the future.  In Malaysia it was where modern skyscrapers abut old architecture.  It was fifty gallon barrels of giant N-Nitride bi-directional, tri-state integrated circuits, but the nearest 100 watt soldering iron had to be ordered from Singapore and would take a month to arrive.  In America, it is immigrants who have a dream to share with us.  It is discovering that we depend on the rest of the world.  We are only one of many players in the game.  They will become competitors as well as collaborators.  It is not winning or losing as Donald Trump seems to see it.  There are benefits from the game well played and rules that stimulate competition.
Economic Honesty
It is failure to understand complexity that makes Republicans see dishonesty.  What are open borders?  Are they travel, trade, immigration, or all of these?  How do we deal with agriculture versus manufacturing, big business versus the working man, competing communities, and personal reality instead of statistical abstraction?
Trade includes intellectual property, the environment, and health.  It can bring war or peace.  The 640 employee, 164 country World Trade Organization (WTO) writes trade rules that must be consistently applied.  They require consensus and government approval.  However, our president can issue orders to protect an industry, our economy, or national security. 
Will isolationist backlash increase American prosperity?  When Donald rambles that he would quit the WTO and impose a 35 percent tariff on Carrier products built in Mexico, he would replace Adam Smith’s unseen hand with his own.  That isn’t free enterprise.  It is a knee-jerk response to opportunities stereotyped as threats.  It appeals to justifiably angry people who remember the good old days when they purchased a new American car every year.
Trade grows our economy.  When the pie becomes bigger, it is not so important to worry about the size of our piece, but if we are starving we might need to grab a slice immediately.  The Peterson Institute for International Economics has warned that Trump’s promises would cause the US economy to lose more than 4 million jobs and plunge the world into a recession.  The pro-labor Economic Policy Institute claims that Trump’s proposed tariffs won’t help American workers or the economy.  Trump’s money will come from tax cuts for the wealthy and big business.  Republicans refer to the Laffer curve to argue this point, but it is not in college economics books.  That curve is like a hill where maximum revenue occurs at the high point.  At first, revenue increases with taxes, but as you pass the peak of the hill, revenue declines with further taxation.  The problem with this model is that the hill has many holes.  There are income taxes, payroll taxes, sales taxes, property taxes, capital gains, dividends, carried interest, estate taxes, and corporate inversions.  Donald Trump and his economic team of wealthy financiers and billionaire friends don’t experience the same tax reality as we do.
A Solution  
Universities and big business have adapted to globalization, but blue collar workers lost their jobs because of outsourcing, automation, and union busting.  They have a stake in globalization.  Trade deals that prioritize creating over consuming, unions with apprenticeships, and vocational-technical education with a path to a PHD, will create American jobs.  We should not give favors to companies who send jobs overseas, ignoring the fate of communities and their workers.

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