Sauce for the Goose

Evidently, sauce for the goose is not sauce for the gander.

We’ve become accustomed to the breast-beating and recriminations that accompany decisions by American businesses to manufacture goods in other countries, or to move existing operations overseas. In the latter case, the loss of jobs is a genuine “hit” and efforts to retain them are understandable–although, as we’ve seen with Trump’s Carrier deal, often costly and counterproductive.

We almost never hear about the other side of the equation, however. Indiana, in particular, has benefited mightily from outsourcing decisions made by foreign companies. According to the Indiana Business Research Center at Indiana University, in 2015, Indiana had 152,700 workers employed by foreign-owned firms. (Think of the Honda plant in Greensburg, the Isuzu plant in Lafayette, etc.) Of the jobs created by foreign companies located in Indiana, 97,900 were manufacturing jobs that accounted for 3.1 percent of the state’s private employment.

Similarly, automation–not trade– accounts for most of the job losses in the United States. Trade actually creates jobs (although often the jobs created are different from those that are lost, and that does make for winners and losers). According to a January 2010 report from the Business Roundtable, at that time, 761,500 jobs in Indiana depended on trade.

In 2008, 20.5 percent of jobs in Indiana depended on trade, up from 10.0 percent in 1992. Indiana’s trade-related employment grew more than five times faster than total employment from 2004 to 2008.

This is not to minimize the issues raised by job losses; the impact on workers who find themselves unemployed–and often, due to age or lack of other marketable skills, unemployable–is very real. The impact on communities when a major employer closes or downsizes are equally real, and challenging. But addressing the consequences requires an accurate understanding of the causes.

To use a medical analogy, prescribing the proper remedy requires a correct diagnosis of the disease being treated.

The globalization of the economy has proceeded too far to be undone, even if we wanted to mount a retreat. History teaches us–or should teach us–that erecting trade barriers, punishing companies with tariffs on their foreign operations, and the other measures Trump has threatened–simply invite retaliation that hurts everyone.

It’s comforting to have a target for our economic frustrations, a “bumper sticker” solution to a problem. Unfortunately, modern life is more complicated than such “solutions” recognize. Automation has multiple virtues, but it does cause troubling job losses. There are good trade agreements and bad ones. Losing jobs as a result of American outsourcing is painful; gaining jobs as a result of Japanese or Canadian or British outsourcing is gratifying.

The world is a complicated place.


  1. The Indiana legislature had many opportunities to address this problem but opted for RFRA, politicizing education and the constitutional amendment to “save” hunting and fishing, e.g. So when they blather about job-killing regulations, unfair trade agreements, etc., they never mention (and maybe never think of it) how little they have done. It’s time to vote for change.

  2. “Similarly, automation–not trade– accounts for most of the job losses in the United States.”

    Supporting the copied and pasted statement above; I must repeat my frequent reminder of Alan Watts warning statement from the 1970’s; “Man is going to computerize himself out of existence.” Quite prophetic and proof that progress does not always mean improvement – in many ways. In the early 1950’s my uncle, who was a manufacture representative (a traveling salesman) was one of the first to sell household plastic items. He told me the day would come when almost everything would be made of plastic; I thought he was off base but… Here we are, now endangered due to the mass production of plastics produced locally and abroad and causing much of the pollution problems today due to the fact is is not biodegradable and the hazardous fumes produced during fires. Too bad Uncle Bill didn’t see this coming.

    “The globalization of the economy has proceeded too far to be undone, even if we wanted to mount a retreat.”

    We can’t unring this bell, neither can we “walk it back” in Trumpspeak. What we can do – IF he is elected – is track which outsourced businesses are charged his “promised 35% tariff” and which are not. He and his daughter both have multi-million dollar outsourced businesses.

    BTW; I saw a Facebook post this morning stating that some Electoral College members want to vote for Kasich on December 19th. Probably bogus but…wouldn’t be any stranger than this entire 2016 presidential election fiasco. The only thing stranger would be for them to all vote to reelect President Obama – no one pays attention to the Constitution these days, why not ignore the XXII Amendment?

  3. As noted by several economists, a 35% tariff would only hurt American consumers. It makes much more sense to tax any company that leaves and use that tax to retrain the workers left behind. All branches of our armed forces give enlistees a Military Occupational Specialty (MOS) test. We should do the same with those who lose their jobs. Find out what they would be good at and teach them to do it. Note that we usually do best at things we enjoy doing.

  4. Some years ago I saw a Toyota executive from Japan being interviewed on a new factory Toyota was building here. I recall at the time I felt humiliated. The interviewer suggested to the executive that the reason Toyota was building here was to deflect criticism in this country from buying cars made in Japan. The executive said that had nothing to do with it, that it was rather cheaper to build cars here than Japan because wages were higher there and the market was here. I recall distinctly that I felt after hearing that interchange like America’s workforce had been reduced to coolie status in the name of profit, that this was unacceptable and that I resented it.
    I set about identifying the factors that had brought us to such a state of affairs, and that was the easy part. Right to work laws stand out. The Rust Belt that recently elected a nincompoop just got rustier with the addition of Michigan and Wisconsin (with Republican governors) to the right to work states. German auto makers showed up in the right to work state of Tennessee (Chattanooga) as well because Volkswagen factories in Germany are totally unionized and wages are good while unions here are in decline and wages are poor due, among other things, to Wall Street theft of worker productivity for the last forty years. Witness the Dow.
    When our politicians provide a work platform that expands wage inequality to such a point that we welcome foreign investment, this is not globalization and all the wonders globalization was supposed to bring to American workers and consumers; it rather results in a further hollowing out of the middle class and expansion of those in poverty. I am familiar with the argument that foreign investment brings money to our shores that we would not otherwise have, and it is one I reject. We have far more money in this country than Germany and Japan combined; money that could be invested in plant and labor but isn’t because Wall Street has found more productive investments to make as they roam the world looking for good deals involving the exchange of paper, not investments in our real economy of actual provision of goods and services.
    So yes, Sheila, foreign investment has brought jobs to this country, but they are jobs we would have had via domestic investment anyway given our huge market and, most critically, such jobs from foreign investment not only suppress wages for those working in their plants here but keep a lid on the wages of ancillary employment here as domestic employers join the parade in keeping and expanding wage inequality to match that of foreign investors in our race to the bottom.
    The real culprits in this charade of wage inequality which has invited foreign investment are to be found in state houses around the nation. They are the ones with their right to work and other suppressive labor gimmicks who have set the table for impoverishment of the people who voted for them and the consequent lack of demand in the economy. Apparently they don’t understand that you can’t take away the means of making money from people and expect them to spend more to beef up the economy, like, where’s the beef, one may rightly inquire?

  5. Gerald; and some years ago Americans were buying Toyotas because of the excellent workmanship and they were much more economical to drive and to maintain. America was still manufacturing huge, showy, gas hogs with smelly exhaust systems. I had a number of UAW family members who were aware of the poor decision by American auto makers and could see the decline coming.

  6. JoAnn – Bodies and motors can easily be changed to meet market demand, and I am sure that Toyotas are good cars, but that is not my point, which is not that we were tardy on design of our domestic cars but that we allowed our politicians to set the stage for expansion of wage inequality with their ALEC-inspired legislation which in turn was an open invitation to foreign investment to take advantage of both our resulting cheap labor and huge market, which spilled over into ancillary employment as well to the detriment of all of us. Witness the stagnant median wage levels and our underperforming economy with its tepid demand.

  7. I’d be careful about normalizing job loss to automation. It is true that high labor intensive jobs HAVE gone to places like China, India and Mexico. They went, because corporate America didn’t want to pay $15-$25 per hour for that labor. Yes, many private sector jobs have been added over the last 6 years, but the rate of pay has dropped by almost half. The result is, we are a much poorer nation.

    I’m sure you’ve read extensively of Hayek and Friedman and their horrific ideas about supply-side economics. The Republicans have been trying to implement that since 1981. Now they have their chance and we will go the way of Chile, Argentina, Uruguay, et. al.

    Trump and the Republicans must be stopped.

  8. This is in line with Gerald and Vernon’s comments:
    1. when Apple puts a manufacturing plant in China, they do it so that they will not have to payer a higher wage for basically unskilled labor. From what I have seen, there is nothing technological about it.
    2. when a Japanese manufacturing plant is established in the United States, often the senior management is Japanese and is intended to remain that way. Further, though the wages to workers stay here the profits and the manufacturing offshoots such profits might initiate go back to Japan. Yet, the profits and the manufacturing offshoots (for instance in the machine tool industry) are precisely what we need to re-start American manufacturing.

  9. Let’s face it, like it or not the world now has only one economy. We can’t change that any more than dinosaurs could turn back the climate change that disgavored them.

    We have to adapt to it.

    We decided to halt all adaptation to the changed world in Jan.

  10. From what I understand, Trump’s clothing lines are all manufactured offshore. Do you suppose that the Great Man will repatriate his brands by having them made in the US? Probably not.

  11. IMO automation is like abundant energy. It amplifies labor; allows each hour to accomplish more. So all else being equal we could choose to work 35 hours a week in an automated world and have the same amount of stuff.

    The problem is that would have the means of production idle some of the time which stirs up the oligarchs. So their solution is to continue 40 hours a week and sell us more stuff and continue to suck resources from our only pile.

    We are at a time of reckoning to see whose world it is, worker’s or oligarch’s, the vast majority or the wealthy minority.

    I predict that they won’t give up easily.

  12. From the comments posted here to her daily essays, it’s apparent that almost all the people who read and follow Professor Kennedy’s Blog are interested in the facts. What are the facts, and what do those facts tell us we should do to at least attempt to solve the real problems in this Country?

    The new (just as the old) Repub/Trump/Pence/Tea Party people don’t care about facts. They are only interested in what they believe, regardless of what the facts might be. The “Post-Factual Age.”

    Hence, we’ve seen well over 30 years of supply side economics, privatization of essential government services, lack of investment in civic infrastructure. Low taxes for the wealthy and corporations, and “trickle down” to everyone else. It has never worked! Well actually that’s not really true either. It has been wildly successful for the already wealthy and large corporations.

    The middle and lower classes, however, are getting “trickled down” on, but it isn’t with a fair share of the economic wealth of this country. Everywhere it has been tried in earnest, i.e., see Kansas, Indiana, it has been a dismal failure. 30+ years. Never worked for the vast majority of the citizens. Most non-Kool-Aide drinking economists believe — based on real world facts — that it never will. It’s a sham; “voodoo economics” as one Republican famously said. Nonetheless, here we are, almost 2017, and we are about to double down on an economic philosophy that has been a failure for most of the citizens of this Country, except for the 1 and 2% at the top, for 30+ years.

    What I’ve never been able to figure out with any certainty is whether the “conservative” politicians the citizens of this Country — at least the ones who vote — continue to elect truly believe, in spite of the facts, that low-tax, low-regulation, supply-side economics will work, if we just give it a “real” chance? Or do they actually know it won’t ever work for the middle and lower classes, but are cynically carrying the water buckets for the 1-2%, the large corporations, the Koch Brothers of the world in exchange for the money necessary to stay in office and in power? The answer is probably some of both depending on the individual politician.

    But the larger and more important question is why do the folks, who are at the bottom of the economic heap, keep on voting for the guys who have their foot on their throats trying to keep them there?

  13. Art – In re your commentary – I read a few months ago that a Chinese industrialist said he was introducting robotics into his factories because wages were so high that he was forced to automate! So where is our next cheap labor source to be found – Malawi? Madagascar? I think finding new cheap labor venues (in addition to competing with Chinese influence with their neighbors) is one of the aims of the TPP which, as an extension of our policy, I reject.

  14. David F. It isn’t the fact that neoliberalism doesn’t work yet gets voted in that’s the problem it is that it does work exactly as planned which is to enrich oligarchs who reward Republican politicians who make up unrelated problems which voters fear and fall for and therefore they vote Republicans into office and the circle of life repeats endlessly.

    Do you really think that Pence is pandering to Christianity? No. He’s using Christianity like TV envangelists do, to build an empire. He and Trump and Ryan et al are in the same business but using different styles.

    Where can the circle be broken?

    This blog tends to think by making voters better educated. It will be wonderful if that works. Has it so far? Apparently not.

  15. I don’t know about foreign employers in Indiana but workers at the Volkswagen plant in Chattanooga are paid about half what the German workers are paid.

  16. Excellent points Pete. I agree to a large extent, but I think Pence is a true evangelical Catholic who believes in the regressive, repressive social dogma he spouts and wants to impose on everyone. Admittedly a different area than economic enrichment and power where I believe he is just another cynical politician looking out for his own best interests.

  17. Capitalism itself has has no morality. The governing creed is anything that impedes profit is by definition wrong. Clean Air, Clean Water regulations impede profit and thus must be eliminated. Human Rights, Labor Rights, worker safety all impedes profits.

    Thus, the quest for the Holy Grail of Capitalism to find those places where political corruption and authoritarianism can control the population. Communist China among others an ideal place. Volkswagen decided the environmental standards were too strict, so the answer for Capitalism – Just Cheat. Companies can manufacture their products off shore, sell them here in the USA and stash their profits in some country where taxes are low.

    I grasp the fact robotics and automation have led to fewer jobs. A steel mill today can make just as much steel as one with 1930’s technology but with fewer people and less environmental damage. However, those robots must be designed somewhere, programmed, and built some where. There must also be a maintenance crew that can repair them.

    The idea that we have a global economy is fine with me. What is not acceptable to me is how Capitalism has been allowed to find the lowest common denominator and tell us Americans – this is what we must compete against.

  18. Economies around the world are imploding. Eliminating jobs that pay well enough for people to have discretionary money to spend on anything other than basic necessities has caused market demand to drop. When demand drops supplies must also drop, which in turn creates more unemployment, which in turn creates a further drop in demand. It has become a never ending cycle of decreasing demand for goods. As long as all of the money continues to filter up to the top 1% or so, there will continue to be less demand for the products they produce. At some point in time this will come to a screeching halt – and that is when the oligarchs will recognize that they cannot keep it all for themselves while watching the rest of us starve to death or forcing us to be their slaves.

  19. Do I remember from years ago, a temporary wage and price freeze in hopes of stabilizing the economy? Living on Social Security; I am forced to deal with the “wage” freeze then forced to attempt to deal with the escalating prices. By the way; the new year is only three weeks away and we have not yet received our Social Security and Medicare notices for 2017.

    I somehow feel no pity when I repeatedly see on Facebook that our members of Congress cannot live a decent life on $174,000 annually and they want to vote themselves a raise. I also somehow wonder if they believe we do not know that, for the majority of them, they have additional sources of income. Any chance they will drown in all that sauce?

  20. It seems to me that the odds of an orderly transition from the past era to the future one are dropping like a rock.

    That is unimaginably troubling but more and more realistic. The suffering will be immense.

    We will be sorely tested and only our faith in humanity will keep us moving forward a day at a time.

    We all will have to lean on each other to keep imagining what must emerge from all of the trauma.

  21. Robots won’t be able to purchase products and services that the oligarchs are selling. The oligarchs need living, breathing customers with incomes to do that. Unfortunately, too many oligarchs haven’t figured this out yet.

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