Terrifying Truth: American Business No Longer Needs American Workers
Harold Meyerson, editor-at-large at The American Prospect, has written an extremely important article that all Americans should read (“Business is Booming“), about a new, fundamental and apparently permanent shift in the conduct of American business, a shift which he himself terms “terrifying.”
Here’s a fact that I’m sure even those of us who only casually follow economic news have noticed: corporate profits are at an all-time high at precisely the time when American workers are suffering depression-level unemployment.
What’s going on?
What does Apple, Hewlett-Packard, Dell and Nintendo, among other well-known American corporations, have to do with this story?
And what the hell is “iPod city?”
When he was CEO of General Electric, in 1998, Jack Welch pithily summarized his vision for corporate America: “Ideally, you’d have every plant you own on a barge to move with currencies and changes in the economy.”
Since then, corporations have discovered that they don’t need barges in order to unmoor themselves from the American economy. As corporate profits skyrocket, even as the economy remains stalled in a deep recession, Americans confront a grim new reality: Our corporations don’t need us anymore. Half their revenues come from abroad. Their products, increasingly, come from abroad as well.
Consider, for example, the crucial role that a company called Foxconn plays in the American economy. Scarcely any Americans had heard of Foxconn until a wave of worker suicides shook its immense factory complex in China’s city of Shenzhen last spring. Within the space of a few months, 10 workers inside the company’s walled-off Longhua industrial village, a 1.2-square-mile development where 400,000 employees live and work, killed themselves.
What made the stories particularly troubling, though, were the revelations about Foxconn’s place in the American industrial system. It’s at Longhua that Apple’s iPhones and iPods are manufactured (which is why Longhua is also referred to as “iPod City”). At Longhua and Foxconn’s other Chinese factory complexes, 937,000 employees also make computers for Dell, games for Nintendo, and several products for Hewlett-Packard. Indeed, the number of Foxconn employees who assemble these companies’ products often exceeds by a wide margin the number of workers these companies employ directly in the United States. At Apple, the ratio of Foxconn employees at work on Apple products to U.S.-based Apple employees is 10-to-1: 250,000 Foxconn workers to 25,000 Apple workers. The same ratio exists at Dell.
Meyerson notices what few policy-makers or economists have noticed, much less discussed: something unprecedented and frightening is occurring in this Great Recession:
The implications of this shift in the conduct of American big business are profound — and terrifying. At a time when small business can’t expand because high unemployment and the decline of home values have depressed consumer demand, big business is increasingly committed to expanding its sales and production abroad rather than at home. That’s why the current downturn is different from its predecessors: Unlike any recession in American history — including the Great Depression — this one has come at a time when America’s leading employers can return to profitability without rehiring large numbers of American workers.
Successful companies in today’s global economy relentlessly lower labor costs, and this can be achieved in several ways: offshoring, hiring of temps (“In November 2010, employers hired 40,000 temps — a number exceeding the total of 39,000 net new jobs created that month.”) and reducing wages for those few American workers who remain employed.
Meyerson finds little reason for hope:
With small business floundering at home, and big business flourishing abroad, where, exactly, will the economic recovery come from? Who will do the hiring? America’s private-sector economy is no longer structured to generate anywhere near the number of jobs it would take to return us to the levels of employment we had in 2007, before the crash.
If you want to understand the new uncharted territory into to which we as a nation are wandering, read Meyerson’s excellent article here.