The following article is forwarded by Ecopilgrim. She writes: “Gerry Agnew runs a mini stock market report on the Energy Resources list. Due to Labor Day and holiday closure, Gerry makes some interesting remarks re: labor and debt. What’s really interesting when one thinks about it is that the real problems that plague us cannot be addressed by politicians because they could never get elected if they speak the truth about what is really going to be required to set things straight. No one wants to hear the truth, so the politicians dare not tell it the way it really is.”
Gerald T. Agnew
Last Monday was Labour Day across North America and with all markets closed up tightly we did not publish. Why should we drag people in from a late Summer BBQ to read our scribblings? Let them all rest and enjoy life ahead of some nasty economic times which we believe will arrive before the next such holiday!
With the foregoing as a somewhat sombre introduction, let us share with you a truly grim BBC story that came out yesterday and which was shared with us (thank you ed) by an old friend. The article is about the growing shortage of electricity in China which is squeezing out small businesses. What caught our eye immediately was the description of a small textile concern whose employees labour a seven days straight, or 95 hours a week (!). We thought that Communism was set up to avoid such egregious exploitation of workers! Where are the unions when you need them?! Anyhow, tongue-in-cheek thoughts aside, we have to ruminate on this. Working more than twelve hours a day means that one is a virtual slave for wages which are not going to buy much of anything, and which are probably sent back to one’s village to help a starving family get by. The fact is that for virtually no input costs, a company can manufacture a huge amount of product to sell in the United States.
We saw, a few weeks ago, an excellent article in the prestigious FT of London which told of a small textile firm in China which boasted that it could manufacture 100 million T-Shirts for sale in the US. The wholesale cost would be a mighty $ 1 each, and we wondered how American firms (what was left of them) could compete with such pricing? We now ask how these same firms can compete with a workforce which labours 95 hours a week at low wages to produce something similar? The answer is that a textile firm in North Carolina simply cannot do this what with wages far above Chinese levels, high local taxation rates, environmental rules and regulations which are costly to comply with, FICA taxes, pensions, medical benefits (if applicable) and I am sure the list simply goes on and on. It is little wonder why some US think tanks are looking at a form of world wide minimum wage to try and take away this sort of non-level playing field!
Let us take this line of reasoning one step further. Americans have lived the high life, as a nation, for the two post war generations (that’s WW 2 for you younger types). Some have lived better than others, and these have mortgaged their homes with a 125% Ditech home loan, and maxed out half a dozen credit cards. In other words, they have borrowed with no real prospect of paying things back unless the price of their home continues to go through the roof and/or they get a huge promotion at work which brings in (on an after tax basis) some serious money. Are these realistic expectations for the tens of millions of Americans who have purchased frivolous items on what we used to call the “never-never plan”? Manifestly, they are not.
Americans have borrowed amazing amounts of money in the last few years to spend on maintaining a lifestyle that is rapidly becoming unaffordable. Millions of them have been shown, by innumerable studies, to be living from one pay cheque to the next. What happens, we have asked frequently, if they see their job outsourced? This is the standard refrain for all of the doom and gloomers who write as we do. Now there is more to the story, thanks to the BBC article. If American companies are looking to do business in China to cut costs (let us say the automotive industry) then it stands to reason they may very well export finished goods from that country to the US. With Chinese assembly line workers earning perhaps $ 5 an hour versus perhaps $ 50 an hour in the unionised US plants, guess what happens?
US workers find themselves manufacturing less and less in the way of marketable cars and as such will be laid off when their factories close. They lose high paying jobs, and when the unemployment payments run out they are caught. They still have huge debts to pay and if we assume that the new bankruptcy laws are put into place (likely if Bush wins big and increases his Congressional representation) they will be obliged by court order (if need be) to pay. In turn, this can only mean taking several lower paying jobs and working some very long hours. We might even see both husband and wife caught on this treadmill, as they struggle to pay off debts that may have been onerous even before the plant closing. While we do not see Americans working 95 hours a week for $ 1 an hour, we do see many of the lower paying jobs having all of the people they need and hence lowering wages and benefits. To this we must add the growing possibility that laid off Americans (or those outsourced) will find much in the way of competition from even more people who are in the same position.
We have read, via letters from people in the United States who are starting to see this, of job applicants being told that twelve hour shifts will be expected and if this is not acceptable, well too bad. It is not that hard to see this being raised to 16 hour shifts four days a week, or twelve hour shifts which can be at any hour of the day. The impact on home life will be devastating which will only add to the total misery that these poor souls will be saddled with. In the brave new deflationary world of globalisation, debt is a killer. Huge debts have to be paid back with wage packets which may shrink 25-50%. People – please do the math. You ARE vulnerable to this sort of financial horror, and your job will NOT be secure. If you drive a truck, a Mexican can be hired under Bush’s Mexican immigration plan – Guest Workers. You will lose your job for financial reasons not your own.
They say debt is a cruel master, and we are genuinely afraid for tens of millions of unknowing Americans who are going to find this out, probably before next Labour Day.
“We must all hang together,
or assuredly we shall all hang separately.”
—Attributed to Benjamin Franklin a t the signing of the Declaration of Independence.