Posts Tagged ‘offshoring’

You Didn’t See That Trump Voter Coming.

November 15, 2016

This place has changed for good
Your economic theory said it would
It’s hard for us to understand
We can’t give up our jobs the way we should

“We Work the Black Seam” – Sting

__________

You didn’t see him. He blindsided you. You didn’t catch a glimpse of him out of the corner of your eye. You couldn’t feel his presence every time you traveled past the shadowlands of the Rust Belt, or through those rural counties you had to tolerate while you drove to some place where the sun still shines. You couldn’t hear his heavy breathing, seething at the realities that were descending upon his disintegrating existence.

You didn’t notice that Trump voter, that 50-year-old former tool-and-die maker with 25 years of experience.

That 50-something tool-and-die maker knows how to cut metal to a thousandth of an inch, knows how to set up a job blindfolded. His job was taken over by some kid who is the victim of a dysfunctional education system, willing to take half the salary; little matter his inexperience cut productivity of the position in half.

Or more likely, that tool-and-die maker saw his job shipped overseas, all in the name of free trade and globalization. The tool-and-die makers in Southeast Asia work for a fifth of what that American tool-and-die maker earned. Why should that American keep his job, unless he’s willing to accept a fifth of what he made last year?

You were hoping that tool-and-die maker would simply drop into a deep crevice somewhere, and he was supposed to accept life in that crevice, because that was the way of “free trade,” of “globalization.”

In fact, “free trade” has little to do with the trade of goods, and more to do with American corporations finding overseas sources of the lowest-cost labor. But the tool-and-die maker hears the phrase “free trade,” and his hatred of this misnomer grows, exponentially.

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Profit Maximization is Self Annihilation

April 21, 2015

“Some states (i.e., nations – ed.) have lost their liberty by particular accidents: But this calamity is generally owing to the decay of virtue. A people is travelling fast to destruction, when individuals consider their interests as distinct from those of the public.” – John Dickinson, Letters of a Pennsylvania Farmer, 1768

 

Profit maximization is self annihilation or, PM = SA in economese, should one feel the need to mathematize the phenomenon, but profit maximization first emerged not of mathematical modeling, or validated by empirical evidence, but by commentary that tickled the vice of greed.

In 1970, Milton Friedman wrote an article for The New York Times, “The Social Responsibility of Business is to Increase Profits.”

And with that commentary, Friedman kicked off one of the most singularly damaging ideologies that would go on to send the global economy over a cliff.

In this writing, Friedman argued for the singular focus of business to be profits. This myopic view of business endeavors completely ignored the negative externalities that could unfold from such a concentration and, being an economist, Friedman should have understood the concept of negative externalities.

No doubt he did, but only in areas of economic theory that supported his ideology. That’s the beauty of neoclassical economic theory, the orthodox teachings of most economic departments today: With its mathematical elegance and a priori thinking, one can make neoclassical economic theories say anything one wants. For the uninitiated, such theories appear “scientific” thanks to the abstruse mathematics. And while the mathematics provides a patina of science, in fact neoclassical economic theories are diametrically opposed to sound scientific endeavor, as a conclusion is assumed before a hypothesis is empirically tested.

And that is exactly what Friedman does in this perennial favorite of C-suite management: he assumes the conclusion, otherwise known as “begging the question.”

Ignored in his argument is that a singular, obsessive focus on profits completely discounts the reality that profits are a means to an end, not an end unto itself.

The ultimate goal of business – yes, and even economics – is social welfare. Business and economic institutions reside in a society to serve the needs of that society’s individuals, its citizens.

For those in the audience who are thinking, “Uh oh, here comes the corporate social responsibility speech,” or for the lesser minds who enjoy clinging to hyperbole, a case for “socialism,” guess again.

A singular focus on profit maximization not only destroys markets, an economy or other macroeconomic entities, it also destroys that other twin-obsession to profits, “shareholder value.”

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