July 20, 2012

The Business of Business

In this era of troubled times, Nouriel Roubini's web site, EconoMonitor, has proven to be a reliable source of even more bad news. If you don't know who Nouriel Roubini is, he is an economist and professor who achieved some notoriety by correctly anticipating the collapse of the American housing market and the worldwide recession. Since then, he has made a cottage industry out of bad news, and business is booming.

His web site recently posted an essay by Robert Reich, former Secretary of Labor under Bill Clinton. Reich argues that, despite the current political brouhaha, out-sourcing of American jobs isn't the problem. He quotes an Apple executive Apple executive who told the New York Times, “we don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.” Reich goes on to argue that the best product is made by the best and the brightest workers, who no longer are reliably to be found in the United States.

For that, Reich says we can thank the inadequacies of the American educational system. We all know that America world ranking in education has fallen steadily. The latest three-yearly OECD Programme for International Student Assessment (PISA) report, which compares the knowledge and skills of 15-year-olds in 70 countries around the world, ranked the United States 14th out of 34 OECD countries for reading skills, 17th for science and a below-average 25th for mathematics. Add to that a crumbling infrastructure--just check out any highway overpass ... you will most likely see rust spots and flaking paint--and you have less and less incentive for companies to use our workers to make things in America.

Here is where Reich makes his essential point:
"But big American-based companies aren’t pushing this agenda, despite their huge clout in Washington. They don’t care about making Americans more competitive. They say they have no obligation to solve America’s problems.
They want lower corporate taxes, lower taxes for their executives, fewer regulations, and less public spending. And to achieve these goals they maintain legions of lobbyists and are pouring boatloads of money into political campaigns."
 I thought one of the comments on the article, posted by someone identified only as a guest, really hit the nail on the head:
"Talking about 'improving' US schools as the cure-all replaces one simplistic notion with another. German workers are better educated because companies use their services for their entire working lives. That gives German companies an incentive to insist that students are properly schooled before they enter the workforce, and then to keep them productive by ongoing training.

American companies, by contrast, see workers as expenses, resources to be used up as they leave college and then discarded as soon as their classes become irrelevant, or the workers build up seniority and demand higher wages. This model ensures that Americans never reach the level of expertise that takes a lifetime to acquire; they are the ultimate disposable temps, just what 'third world' workers used to be."
This sense that employers don't value their workers is one reason why the American Dream seems to be more and more out of reach, especially for middle America. Look at what's happened to pensions, if you call a self-financed 401(k) a pension. Look at what's happened to health benefits, if you get any. Look at what's happened to jobs, where part-time and temp work is on the rise. If you don't like it, then leave it, because there's plenty more who will take your job for less pay. Too often, this is how it is these days.

People put up with it because they are scared of losing what little they have. At the end of the day, the average wage-earner is at the mercy of the employer. Until American companies see their employees as integral parts of the enterprise worth retaining and retraining instead of just another cost to be dealt with ... until everyone agrees that we all have to chip in to make America more competitive in the global economy ... we will be stuck on the glide path downwards towards mediocrity.

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