When you read the title of this article, the obvious question is this:
Who is “we”?
Well, when I say we, I pretty much mean all of us, collectively. I mean, I am not personally on the edge of financial failure, and I hope that you are not either. However, “we” might be. I am talking about we collectively, governments.
In the past few months, we have seen Greece at the brink of bankruptcy. Spain is there now too. I saw something on a TV news program yesterday, I think it was on CNN, that in Spain they are cutting the salaries of Government workers. Cutting the salaries! In my childhood, even in my adult years, this was unthinkable, that government workers would face salary cuts. Not only the mentioned European countries are on the brink of financial collapse, but the European Union itself is said to be on the brink. There is talk that the Euro as a monetary unit may not last the year. I personally think that the Euro will last longer than that, but I can’t say it’s here for the long haul.
Is the crisis ending, or just beginning?
Americans should not feel smug. The finances of the USA are in such disarray that frankly, it was the USA who started the instability of this entire house of cards. I saw an article yesterday that told how the State of Illinois is not going to be paying it’s bills now. California is in similar straits. Other States are not trailing far behind, and the United States itself is only being saved by the short term solution of the printing press.
Most people would say that the worst of times for the United States was the Great Depression in the 1930′s and 40′s, of course which kicked off by the Stock Market collapse in 1929. Funny thing is that according to CNBC, a financial TV network in the USA, the US Stock Market is mirroring it’s actions just before the Great Depression. Are we on the brink of collapse? It sure seems so. Today, the newspaper Telegraph in the UK reported With the US trapped in depression, this really is starting to feel like 1932. That’s pretty darn bleak, my friends. But, is The Telegraph correct, is the USA facing a second depression?
Oh, let’s not forget this one… the Financial Times reported that Investors are now worried that some US States are going to be defaulting on their debts. Oh, wait, that just hearkens back to the article I mentioned about Illinois not paying it’s debts. Oh well.
A lot of people all over the world are feeling despair
Earlier today, my friend Dave sent me a link to an article in Businessweek Magazine, written by former Intel CEO, Andy Grove. I have followed Andy Grove for a long time, and he is no doubt a wise man. I used to work in the Silicon Wafer industry and Intel was our #1 customer, so I always kept an eye on what Andy Grove had to say. In his Businessweek article, Grove talks about outsourcing of work to Asia, and why that is (obviously) taking away jobs from Americans. He talks about how Silicon Valley is no longer inventing, scaling and manufacturing. Now, they are sometimes inventing, but when they invent, they just send the rest of the work overseas. In fact, Mr. Grove goes on to say, in different words, that the United States has already either forgotten, or has begun to forget how to even do many of these manufacturing tasks itself. He cites the manufacturing of batteries, an essential technology for the coming wave of electric vehicles in the United States, and how the US farmed out battery production several generations ago. By sending that work offshore, the US basically has missed out on the loop of how batteries are even made now, and certainly has few, if any of the necessary contacts in the industry to even be able to ramp up for such production. Grove comes to the point that because of the outsourcing of almost every element of manufacturing, the USA is almost unable to produce jobs for it’s people now. Read the article. As I told Dave after reading the article, I found the article both interesting and also depressing.
Why do I find that article interesting as well as depressing? It seems that the USA in in a Catch 22 situation right now. If I were the owner of a big business myself, I would certainly be using outsourcing as a means to maximize my profits. Any good businessman would do it, or should I say is doing it. However, the catch is that after reading Grove’s article, one cannot deny that he makes a good point, and that the more Patriotic thing to do would be to create jobs for Americans. But, the next catch is that American salaries are too high, and if you manufacture in the USA, you cannot bring a competitive product to market at a price is on par with the competition. Next, the American people themselves go to WalMart and purchase the product that gives them the best value, which virtually eliminates American made products. So, what’s a businessman to do?
So, a lot of signs are pointing to economic collapse, or at least more years of extremely hard times, and plenty more belt tightening. How can we avoid it. What are the right steps to take. What seems “right” leads to more problems. What we have been doing has lead to serious problems too. So, which way should we turn?
Don’t ask me… I have no answers.
Bob,
My solutions would be so radical and extreme, I'd be branded a psycho.
But in the end, this financial mess we are in is due to simple factors: the dreaded Deadly Sins. I am not a religious person but I do believe the Bible does have lessons to teach, and to be learned. The concepts of greed, gluttony, sloth, envy, lust, and dishonesty are universal. And the USA has been taken over by these things.
I have gained an appreciation of Asian cultures (China, Japan, Korea particularly) recently and now I know they will outlast us. They are very industrious, value education more than anything else, they save their money, they think in the long term, they avoid debt when possible.
These are traits the U.S has lost.
Hi Mike – I hear you, my friend, and I agree with most all of the reasons that you give for why we are in the mess we are in. I am not sure if we have let it go too far to be able to recover or not, but I hope we can learn a lesson!
In addition to the points you have brought out about Manufacturing in the USA Bob, years ago we did not have to worry about such agencies as OSHA and the EPA. Yes, there is to " some " extent a need for these agencies but I feel in some respects they have gone way overboard and drive up the cost of running a factory here to the extent that it is either have the manufacturing done elsewhere or just go out of business. The ever skyrocketing cost of insurance of all kinds can even be more of a challenge.
Every few weeks I learn of another former USA manufacturer closing up shop here in the USA and going elsewhere. These days if it is a large bulky product I think Mexico has been the logical choice for many manufacturers. Just a hop across the border and no more high labor costs, no OSHA or EPA to worry about etc. No shipping or flying across the ocean with its ever increasing fuel costs. With Mexico you could call it " Drive Thru " manufacuring for the USA Market.
So many things that used to involve a human element to build them are now done by automation and robotics and other technological advances. A typical example, point to point wiring involved a lot of human labor which was replaced by circuit boards, then came wave soldering to replace soldering by hand followed by automation to assemble the parts onto the circuit boards, how many jobs were replaced by things like that ? The automation systems used for manufacturing can be put just about any place in the world and continue to turn out the same quality of product.
With the advances in Manufacturing so many things are made as " throw-away " or just not financially practical to have repaired here how many jobs has that eliminated. When I used to work in the consumer electronics service business in the 60's and 70's all of the parts distributors I dealt with then have been long gone !
Another factor I have felt in the past decade or two is it seems that a lot of people just don't have what I would describe as basic intelegence or common sense the workforce of the era when just about everything here was " Made In USA ". I am not trying to imply that everyone is " stupid " but it just seems to me that maybe people have become more lax in many ways. We never used to have so many beepers in cars to tell you to turn off your headlights, take the key out of the ignition switch, buckle the seat belt etc. Sure they may seem a convienience although at times more of a nuisance.
Consumer product manufacturing, yes, we lost that decades ago. There are a lot of manufacturers still in the USA for non- consumer or non- mass market products but I can see where one by one they are moving just over the border to Mexico. My latest dissapointment I recently learned about was that Friedrich ( air con and refridge ) moved all of their former USA manufacturing to Mexico about a year ago. In a way I can easily see why as other former USA manufacturers of window air conditioners are now having them made in China.
If all the things made here in the past were still made here we could not afford to buy them so I agree it is a " catch 22 " situation. It is both dissapointing and scarey to keep hearing how many people here each month are loosing their jobs. Fortunately, I am OK………………………..for now .
Hi Bob – A lot has changed during your lifetime and mine, no doubt about it. Things that were so common when we were kids are unheard of now. "Made in the USA" used to be the norm, and now it is a surprise when we see it. I really wonder what will happen with jobs for Americans in the coming years.
Ever since I was a kid, when there was a recession, I always remember hearing that "the jobs won't come back after this recession" – but the jobs did come back again. This time, though, it seems that it might be true. We can only wait and see, I guess.
Bob,
I agree with the comments above and what is even more worrying with the reductions in work force to become lean companies, and make more profit, companies have found they can still operate, as staff will now work harder to keep there job, longer hours, less wages and fewer staff.
The problem is that they are operating at critical staff mass, which in theory is more profitable, but when someone leaves due to retirement/ other work they have no backup and have lost skillsets not easily replaced due to experience.
Also In Europe they have decided to cut back on funding (yet invest in other countries) therefore work will dry up…I know a lot of colleagues without work in th UK.
So although companies are recovering in the US , but there is in reality no jobs from this recovery. I guess they plan to use this money to do more research -> create new products -> then be competitive (using parts from China!)
Now from another pont of view, as countries like India and China become wealthier then they themselves have cost increases and wage increases (see the amazing property prices in Mumbai, for example, salary increases in China) causing a global salary balance (a long way down the road).
Also the limitations of some of these countries end up spreading the globalization (outsourcing moving from India to the Philippines due to Filipino English is understood better than Indian English as an example)
I'm sure we'll see in the next year if the balance works or collapse occurs….worrying times I agree.
Hi Paul – Thanks for sharing your thinking on this. The economy is looking shakier as each day passes, and to me it is almost certain that we are facing a double dip in this recession. You are right that the skills these companies are losing are not easily replaced, which will make it hard for them to ever really come back again. Things are not looking good.