Readers have lately been asking me to write about IBM. It seems the BBC has been on the case somewhat over imposed changes to Big Blue’s UK pension scheme. These mirror similar — though more draconian — changes imposed on IBM’s U.S. workers a couple years ago. Alas, this just seems to be a trend we’ll be seeing more and more of. The problem isn’t in IBM per se, it’s in the distorted reward structure perceived by most public companies.
Two years ago when I covered IBM’s yet-to-be-announced layoffs in some detail it sent the company into a tizzy of denial. Why? “Because you were right,” said a source who still works at IBM. “You called them on the big changes they were planning to make, forcing the company to issue denials then drag those changes out over a couple years where they’d intended to impose them all at once. They never thought one blogger could have that much impact.”
Explain that to my kids, who think I type for a living.
What happened two years ago was IBM deciding to move most of its jobs offshore to save money after a sobering look at the life cycle cost of its U.S, workers. If you look at the total future cost of an American employee for the next 15 years — it is a pretty big number. Then add the double digit inflation cost of U.S. health care and that number becomes bigger still. The only way companies like IBM see themselves being able to continue to operate is by cutting retirement benefits and/or shipping jobs off shore. In IBM’s case they are doing both.
This is at the heart of the current health care debate, because the cost of medical care is killing U.S. jobs.
The IBM USA pension plan was nuked a couple years ago. Many U.S. workers got less than 15 cents on the dollar for the present value of the pension they would have received. Retirement health care benefits for IBM workers are now down to the equivalent of about 18 months of present coverage. This trend is not limited to IBM. How many auto workers have just lost pension and retirement benefits?
A few years ago Congress was considering legislation that would separate pensions from companies so the company could not spend or lose it. We sure blew that one.
This downward trend is continuing. IBM — like nearly all its competitors — is shipping-in workers from India to staff many new projects. The work could be done as well — perhaps better — by the U.S. workers who were not long ago laid-off. There is something really wrong when a company will lay off its U.S. workers and then import Indian workers to do the same work on-shore.
Now some of IBM’s American workers are being asked to consider taking jobs in Bangalore and other foreign outposts. This program creates new expatriots, giving each a one-way plane ticket. Pay will be in local currency, possibly at local pay scales. IBM is being very elusive about these details. But it is clear that the transported workers will be off U.S. benefits.
But as I say, IBM is merely one example of how messed up things have become for U.S. companies.
During the recession IBM has done extremely well financially with profits better than forecast every quarter. They did this by relentlessly watching their money. Not only do they look at the numbers for the next quarter, but for the next several years.
The automotive industry on the other hand has ignored the long term in their business planning. As a result most car companies were completely blindsided by the recession.
IBM has watched the growing costs of maintaining its U.S. work force. For years they have been cutting staff and moving work offshore. The U.S. auto industry on the other hand was dependent on future car sales to cover obligations made in the past. IBM planned ahead and started shifting the business out of the U.S. Other firms did nothing and have suffered horribly.
What this means is that we should expect more of the same in all industries. Benefits will decrease and jobs will depart.
The new reality at IBM is that if you’re brilliant, work really hard, and earn a world-class degree from a U.S. university, IBM may well have a job for you at one of its U.S. research sites working as a “complementary worker.” But don’t expect that job to last for long. Be prepared to ship out to India or China as a “long-term supplemental worker” after you’ve soaked up knowledge for 13 months.
Newsweek recently reported that IBM, HP, Accenture, and others are finding it profitable to detach from the United States (even patenting the process).
“IBM is one of the multinationals that propelled America to the apex of its power, and it is now emblematic of the process of creative destruction pushing America to a new, less dominant, and less comfortable position,” Newsweek said.
This is the HR equivalent of a neutron bomb, which kills people but leaves structures unscathed. So all these companies will be leaner and meaner — mean enough that there may be nobody left to buy their products.
It comes back to the common perception that the sole function of public companies and their CEOs is to “maximize shareholder value” — a phrase that is interpreted to mean “maximize next quarter’s earnings-per-share.” This philosophy works beautifully with the slightly less than four year average tenure of a U.S. public company CEO. Long before the effects of these bad decisions can show the CEO has bailed, descending beneath his golden parachute toward some retirement heaven.
Where did this cult of shareholder value maximization come from? And who says that’s the prime directive and nothing else ought to matter? Not me. In fact it is bad policy both for the companies and for our society in general. Here’s a good explanation of this phenomenon and what’s wrong with it.
Companies like IBM that take this position are hurting America. The kids graduating from college now are the first American generation that is likely to do less well financially than their parents. My kids will do less well than me. One reason for this is that we’re eliminating high paying jobs and replacing them with lower-paying service jobs. IBM towns like Rochester, Minnesota and Armonk, New York thrived economically because Big Blue pumped money into the local economy by creating high-paying tech jobs. What happens to the local economy when those jobs are exported? It declines, perhaps permanently. That decline does not have to be inevitable unless we make it so.
Companies and countries follow certain life cycles, but we do ourselves and our culture a disservice by thinking those curves aren’t affected by the corporate decisions we make.
If we’re going to be analytical, let’s at least do it correctly.
Some of us have been calling this BS, and writing about it, for some time.
The end result is what Marx (Karl, not Groucho) predicted: the end of capitalism. What happens next is up for grabs. My expectation is full scale insurgency. While the Militias in Montana think they’ve got a Land of the Free, of course they don’t. The grain, cows, and such they tend are only worth money if city folk have some to spend on that sort of stuff. When only 1% of the population has the cash to buy what you want to sell, the entire process grinds to a halt, and nearly instantaneously. Watch.
With corporations reducing American incomes to Indian level, well, we end up looking like India. D’oh. The IBMs of the world won’t admit that, of course. Indian outsourcing is only profitable because it has American worker’s wages to exploit, and a diminishing number of Americans who need their services. Indian outsourcers exist because the Indian oligarches (including its government) refuse to distribute incomes such that Indians can buy Indian goods and services; they HAVE to export their poverty here, there is no other choice.
The downside for India (and China, and Russia, and …) is that they have to accept American $$$ in exchange. Aye matey, thar’s the rub. Export based economies face the same dilemma as self-sufficient ones: there has to be mass consumption to support mass production. Without consumers, capital is worthless. Some of our forebears saw this, and learned from it, in the 1930s. Most folks who had direct experience of the Great Depression are long since dead. This makes it easier for the Reaganauts (and all manner of other Right Wingnuts) to spin tales of Rand-ism as panacea. There are fewer and fewer who can say, “been there done that, you stupid shit”.
Henry Ford pissed of the rest of his capitalist friends when he raised the wages of his workers. He said why: they could then buy his car. Today’s capitalist isn’t even as smart as Henry Ford.
Hello again, R.Y. Like the blog(s), by the way — “both Dr’s” 🙂
Merci. Always take the medicine your Doctor prescribes.
What a load of waffle and ignorance, all wrapped up into one. So IBM should overpay its workers, compared with the rest of the world, so that they can still buy products. No matter IBM don’t sell directly to people, but lets imagine all industries do this, keep the jobs here, and pay them well. Well, once you allow other non-US companies to do business in your country, companies that don’t live under this insane rule, and do use cheaper employees elsewhere, you have a company that can undercut US companies by a lot. What do you do then, force people to pay more for the American made goods, rather than the cheaper foreign goods? So you do this, but the rest of the world doesn’t, and they stop buying US, and start buying the cheaper goods. You know what happens then, the rest of the world falls behind.
So how did we ever survive the mid 20th century without you free traders to save us from ourselves? Unless I’m mistaken, things were actually better for the average Joe when the US charged import tariffs. Or do you attribute the decline in real wages since the late 70s to the end of cheap oil, and nothing else?
Sorry, Cringley, you’re blaming the symptom and not the cause. IBM and other “American” companies are offshoring themselves to get away from the tragedy put on them and their employees by the federal government. You percieve this as “maximizing shareholder value” and you claim its bad for the company and for society.
Fortunately we have a perfect example of your policy put into work: The Auto industry. The auto industry was taken over decades ago by your kind of people, unions, and look what they have done when “maximizing shareholder value” is no longer the priority.
Notice how, massive layoffs of employees isn’t exactly maximizing the livelihood of the employees is it?
The government is the cause of these problems, and if you will take some time to study economics you’ll understand why (instead of attributing to the victims the guilt for the crime.)
I suggest Henry Hazlitt’s “Economics in One Lesson” which is really quite a short book. Believe it or not, economics is not a contradictory ideology of confusion and dry rambling. It is a science that allows clear, cogent and repeatable results. Or at least the ability to make accurate predictions. Study Hazlitt, or study Mises or even study Milton Friedman.
As long as government is wreaking havoc on our economy, businesses will leave. They will cut back where they are forced to maintain operations in america. And those who follow the “cringley” plan will go under.
This is no longer a capitalist country.
You mention “the tragedy put on them and their employees by the federal government,” but you don’t say what the tragedy is. What is it?
The subject of the column: Being fired or shipped overseas.
Let’s see: heavy taxes; fines for bogus environmental, structural, worker safety laws; regulation of everything; anti-business laws; assuming businesses must take care of employee’s health care benefits (and I am NOT for Obamacare); SS taxes; taxes on profits; taxes on employees. The list goes on and on.
Let me ask this question: would businesses in the U.S. simply go under because we didn’t have all this government regulation/taxation? I mean, how is it that black markets thrive???
BTW: Henry Hazlitt’s book is epic. Every American should read it.
“Being fired or shipped overseas”
How much clearer does it have to be? Its corrupt when its about *getting* your last dollar, rather then *earning* it.
You can read the entirety of “Economics in One Lesson” here: https://www.hacer.org/pdf/Hazlitt00.pdf
It’s in the public domain.
I particularly recommend the section on the “broken window fallacy” (especially in lieu of Cash for Clunkers.)
-Erica
> Believe it or not, economics is not a contradictory ideology of confusion and dry rambling. It is a > science that allows clear, cogent and repeatable results.
Economics is not a science and it’s results are not predictable nor repeatable.
Just ask any two economists to interpret some data. If they don’t always agree on
the results, then the results are not predictable nor repeatable.
Absolutely wrong. Have you read the book? The reason you can’t get two economists to agree is probably because they come from differing schools of thought. And when economists start playing with funny money (fiat currency) and say the government needs to run the economy, well then all bets are off.
Man left to his own devices will do just fine for himself. We don’t need bogus paper money and the heavy hand of government in a free society.
READ the book. It will take you all of half a day. It is truly enlightening.
Yeah! Take that CmdrOberon. If that’s your real name! The only real economics lessons are in the book, because it agrees with my preconceived notions of how things are supposed to work. Are you reading it yet?
How dare you question the wisdom of the book.
Fantastic, another one. Yes, the gov is, as always to blame for this.
The simple fact is we have other economies rising up, and doing the same things we in the US can do, but cheaper. There is only one way to compete, and that is to start using their resources as well. Just as we don’t make most of our clothes here, so it will be for IT related services. There is not magical way out of this, this is not the govs fault, this is the way of the world.
Anyone claiming to have a solution is a fool and a liar.
Ok, I didn’t read cringley’s link but I did see the table of contents and I suspect I already know what it says.
In Japan, auto workers in a position known as ‘the pit’ work there asses off bending over backwards servicing the under carriage where robotics can’t perform the more delicate tasks. This position is difficult and requires attention. In the US ( and I suspect this has less to do with government then it does corporate greed) it’s the lowest of the low positions. Least paid, no perks, and an entry position. In Japan it’s the best paid, highest benefits, most respected and a position you just don’t get handed, you have to work up to.
Now I’ll leave you to guess why American cars SUCK ( and if younare in denial … So be it ).
It should be noted that you can’t call it capitalism when it is the taking advantage of that which you have not earned. It’s called corruption, plain and simple.
Could. Not. Agree. More.
I don’t see Honda employees in Marysville, OH, losing their jobs. Why is that, Bob? I’ll tell you: no union. Fair wages. Management that wears the same work clothes. No spiffy offices.
Unions have wrecked capitalism in this country, and they are wrecking public services. Don’t look for any of them to lose their jobs, i.e. USPS. Nope. It’s in their contract!
IBM is a company free to do what they want as long as they don’t break the law. At least that’s how a free market works. But how would we know. We don’t have one.
I work for a major petrochemical company. While our retirement pay is still defined benefit, our retirement medical policy has always been a defined contribution program.
Robert gives us a prime example of the non-economics that holds today. When the government messes up the economy– blame capitalism! This has been going on since prior to the great depression, which is what created the federal reserve and IRS. The federal reserve creates the boom-bust business cycle.
After the dotcom boom, they lowered interest rates below the rate of inflaiton. Thus creating a housing bubble. It was obvious to anyone who understood economics. But caught all of the government by surprise.
But the first crash the government gave us was the great depression. At that time the socialists like Robert blamed capitalism for “Failing us”. The contrary was true- it was the fed’s manipulation of the money supply ,combined with criminalizing gold currency (Eliminating most of the wealth in private hands) and Smoot Hawly. All government actions.
But as a result, the government got more power and created the Social Security ponzi scheme (and now seniors are guaranteed poverty) and a huge raft of social problems.
Every time they manage to mortally wound the economy with their anti-capitalist programs, they always blame capitalism for the problems.
Then they take the power they get from that and work to destroy it ever more.
Obama’s stimulus bill will destroy 10 times as many jobs as it will create. This is easy to see by looking at what it does– all it does is spend money. It takes that money out of profits– the point at which jobs are created, by reinvesting profits, and spends it on non-economic pork.
Of course, when we enter the second great depression because of these government boondoggles, socialists like Robert will blame “Greedy capitalists.”
It’s really kinda astounding that people keep falling for the same trick, over and over and over and over. I guess its because government took over the school system and indoctrinated them well.
Oh, I see, the tragedy is federal reserve manipulation of interest rates? I found this list of US recessions interesting: http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States. The lists begins at 1797.
Robert, the only answer to your post is to ask, as Barney Frank did, “On what planet do you spend most of your time”. You really believe that economics is, and I quote: “a science that allows clear, cogent and repeatable results”? Wow. That is by far the most ignorant and uneducated thing I have ever heard. Are you sniffing the paint fumes from the Hitler mustache you paint on Obama posters?
Are you quoting me with that definition of economics? I didn’t wrte that, nor have I quoted it. What’s your point?
I do believe bobo is accidentally attributing the quote made by “Software Engineer” above to a “Robert”… most likely the first comment by Robert Young, rather than you, although both are clearly incorrect.
We’re in the mess thanks to the Bush Chimp. Thank you very much. Mr. C. is generally correct in his analysis. Were it not for Paulson (a Chimp crony, you may recall), Bernanke, and Tiny Tim there would be blood in the streets by now. Literally. I’d rather not that, if you don’t mind.
Darn the English language. I meant that both attributions were incorrect, not both Roberts. I happen to agree with you both.
Quoting Software Engineer: “Obama’s stimulus bill will destroy 10 times as many jobs as it will create. This is easy to see by looking at what it does– all it does is spend money. It takes that money out of profits– the point at which jobs are created, by reinvesting profits, and spends it on non-economic pork.”
You seem to be implicitly suggesting that “trickle-down” economics works to create jobs, stimulate the economy, etc.
I do have one experience that contradicts your notion. I work for a small trading company. The company is very profitable; it was started and originally funded by a few very wealthy people (folks whose net worth is in the 10s or 100s of millions). Granted, this company itself was created, and with it a few jobs. But consider that the company has, in only a few years, generated 100s of millions of dollars of net profit, yet created less than 10 jobs. The top dogs in this company aren’t rapidly building new business or creating new jobs. They just buy up US Treasuries to “protect” their wealth.
(On the other hand, I suppose since they are funding the government’s deficit spending, they are indirectly “creating” jobs by funding things like the stimulus package. But I doubt that’s the kind of “profit drives the economy” idea you were originally suggesting.)
I’m not going so far as to suggest that we need socialism. I’m just saying that, in my (limited) experience, I haven’t seen evidence that “trickle down” economics works as expected.
Never, in the history of modern (industrialized) economies can anyone point to a trickle down program that worked, for those other than your wealthy friends.
The most recent huckster for trickle down is Laffer (such a name, if it were mine I’d change it to Shitliptz), who gave us Reaganomics (“voodoo economics”, George I). And since then, except for the Clinton years, median income fell. Poverty is the only thing that trickles down.
The technical reason why trickle down (by whatever name) doesn’t work is that it’s based on a false assertion: that supply creates demand. NO capitalist produces product without real (purchases) demand for product. If the assertion were true, then capitalists would continue to produce more product in the face of falling real demand and falling real prices. They don’t. The Great Depressions (I and II) are proof.
If you want further proof, just look at the current stock market. All that money that went to the banks is the money that has re-inflated stock prices. The money funds are STILL not buying. GS and the others took the money, and rather than lend it, traded with it. Their 10Q’s say so.
Facts can be so inconvenient.
The more money I have the more I can spend. That’s all trickle down is. Actually it’s more of a flood and the basis of most economies.
Not exactly true. The money given to the banks, in particular the big Wall Street banks, went to covering debts. Otherwise the house of cards that is derivative trading would have collapsed and tens of trillions of dollars would have disappeared overnight. And that can’t be good for any economy. Think what would happen if the banks not only refused to lend, but if there were no banks to get a loan from, and everyone who had a mortgage lost their home because in the mass bankruptcy liquidation everyone’s loan was recalled.
I may not agree with the way Wall Street is run and I tend to think that derivatives should be reigned in via regulation, but letting the banks fail was not an option.
So what’s the alternative Bob? Are you saying that companies like IBM should act more like the moribund US auto industry?
It’s worth noting that IBM’s CEO’s have an average tenure of much more than 4 years, so I’d argue that Palmisano and the other IBM execs are off-shoring services for the very reason that they will be on the hook in 4+ years time for whatever state IBM is in at the time.
IBM is also now a larger company outside of the US than it is within the US, so why is it so outrageous that the company now concentrates on developing employees around the world (rather than just in the US as it would have done 10+ years ago)?
Why buy services from IBM if you can go straight to Tata services or other India-based outsourcing companies? IBM will end up being just a slightly more expensive Tata.
IBM is fighting for survival. They are implementing policies that make sense according to the environment. Fix this environment.
The current debate about health care in the US is not about covering those without coverage. It is about reigning in runaway health care costs to make American companies more competitive. At least I hope someone in power has the good sense to know this difference.
Once the health problems are resolved, we need to look at the legal system. One of the reasons for the uncontrolled rise in health care costs (after the ageing population) is a litigious society and legal fears making almost everything more expensive. When a Chinese company kills lots of cats and dogs with bad food, there is no one to sue. If it were an American company, the legal bills would overwhelm.
Mind you, no American company can match the price. We buy cheap Chinese goods because they do not have to pay our health and legal costs.
We live in a global society now. We must raise the living standards of our off-shore suppliers and lower our internal structural costs.
The moral of this story is that we should all go into law or health care. This is where the money is.
Yes, thank you for pointing out that once we fix our health care costs, the situation will improve. However, the idea that litigiousness is a reason for things being expensive is simply untrue. Lots of states have passed tort reform based upon this very theory, yet nothing has changed in terms of costs. It simply is not the problem that corporate bogeyman make it out to be.
I’m all for reigning in frivolous lawsuits. However, frivolous lawsuits typically never see the light of day – they get a big media splash, but they rarely make it through to any kind of trial (they are dismissed in preliminary hearings). This is done with lawyers the company already retains on staff (so no extra cost to defend). Believe it or not, judges are pretty good at sniffing out BS. Just because you see something on TV that looks like a dumb lawsuit, doesn’t mean anything came of it.
Bobo, when you said “Lots of states have passed tort reform based upon this very theory, yet nothing has changed in terms of costs. It simply is not the problem that corporate bogeyman make it out to be” where are your references?
Look at Texas, the tort reform there has been profoundly beneficial in only a very short amount of time: http://docisinblog.com/index.php/2009/07/27/texas-tort-reform/. But don’t let facts get in the way, you appear to want this to be an emotional exercise.
Implement tort reform nationally and allow insurance companies to sell health insurance across state lines. These are two fairly simple and straightforward changes that everyone could benefit from. Heck, if the government could grow some balls and throw a fraction of the ‘stimulus’ budget to investigating and prosecuting Medicare and Medicaid fraud you would probably see some slowing of the growth in spending.
Socialism causes capital flight? Say it ain’t so!
I agree with the others: You are describing the symptoms, not the disease. The US Government is ultimately to blame. This nightmare is rapidly unfolding before our eyes. “Acknowledging you’re sick is the first step to recovery”. To bad I don’t see any kind of of acknowledgement by Obama. Instead he’s throwing gasoline on the fire, so to speak.
What’s that you say? The driving force for corporations is to create stockholder value? Seems to me their driving force is to give the top people outrageous salaries, bonuses, and golden parachutes.
As to creating stockholder value (higher stock prices), seems that many corporations use stock buybacks, “tricky” accounting, and short-term thinking to accomplish that. Good work guys. Fire some more employees and give yourself another bonus.
I wish there was a +1 button I could click on to cheer this comment. Hopefully PBS will hire an american to do it.
Stockholders have been getting thrashed in this country – from weak dividends, unreliable retirement (I remember when stocks were a “play with money you can lose” option), and trading frustrations (think Enron employees) as well taxes (real cash paid on Alternative Minimum Tax for paper wealth.)
Let’s imagine a vision of where the US appears to be heading… Very few skilled jobs on these shores – every potentially high-paying job that can be either moved offshore or filled with offshore workers coming to the US at lower wages. US-born workers have mostly become low-wage. I see 2 problems with this scenario:
1: What sort of market is there in the US for people to buy anything? They haven’t got the cash. This has really been going on for at least a decade, but we’ve been hiding the problem with debt. Effective income for working Americans quit rising some time ago, most just refused to admit the fact, and used credit to maintain their standard of living. The housing bubble furnished the easy credit necessary. This trick is over and done, and won’t likely work again. Are the overseas markets mature enough yet to take over for the US market they’ve just killed?
2: I didn’t mention the “executive class,” the people who have been increasing their effective income in the recent economy. If every skilled job in America can be done by a foreigner, what about THEIR job? It’s even a natural progression – first-line managers simply MUST be overseas, to be near their workers. Middle managers move next, for the same reason, and for another way to save money. At some point, all of the expertise in running the company will reside overseas, and they’ll wonder why they’ve got these grossly overpaid American executives sapping the strength of their companies.
I take the greatest hope from Lester Thoreau, from MIT. He gave a guest lecture, focused on the fact that “present trends” never continue. The present trends are really awful – I’m just waiting for it to stop.
I’ve gotten the impression that the engineer-able population of India has been employed, and further growth is by paying to hire engineers away from your competitors. In my company, where US wages have been stagnant (sub-inflation) for years, I hear that in India they’re giving double-digit pay raises in order to attract and keep employees. We’re going down, they’re going up, I wonder when we’ll cross? More to the point, will we have a functioning educational system at that point, in order to take advantage of the changed situation?
After World War II, the United States had a vibrant industrial base while most other nations did not. Under these conditions it was natural that the United States would prosper for several decades, while other nations had to rebuild. During this period most Americans came to look upon a constantly rising standard of living as a given. Accordingly, the welfare state and the promise of gracious retirement were born. Unfortunately, existing trends do not always continue indefinitely, as everyone can now see.
So what will happen to the United States in coming years? Well folks, don’t get your hopes up. The politicians, as is their nature, will make promises they cannot keep. The top dogs will grab as much wealth as they can possibly manage. (Of course, being in control of the government is a great advantage.)
I can’t see the future. But I imagine that, after several years of chaos, things will get much simpler. Those that manage to survive may even come to enjoy their unpretentious lifestyle. But that’s just my opinion. Maybe I’m wrong.
Many years ago the US steel industry started its collapse. It started with the EPA requiring them to clean up their act. The US companies resisted, were fined. It was a very prolonged legal mess that everyone lost. One of ironies was the process by which we made steel was old and sloppy. There were newer processes that made better steel, and with them it was easier to control pollution. Our friends in Asia built new plants using the new process and began to take business away from the US firms. Before long the US auto industry and construction industry had to start buying its steel from overseas sources.
The result of a failing steel industry was the decline and demise of countless towns and communities around the rust belt. As the mills closed, jobs were lost, … Drive through parts of Ohio, Michigan, Indiana, and Illinois and you can see the aftermath. It has been 25 years and those towns still have not recovered.
Around this time the Japanese auto industry was starting to become a serious threat to the US firms. We THOUGHT we had an advantage — the Japanese had to buy US steel, pay to ship it overseas, make their cars, and ship them back.
Could the steel companies have retooled and survived, maybe. This was also at a time when loan money was expensive. We didn’t see the government helping out with low interest loans. In truth an industry bailout probably would not have made a difference. The steel industry had very stubborn management and they were not about to change to become globally competitive. They felt and acted as if their business was an entitlement.
In the 1980’s Dr. Deming observed GM was then spending more for health care than for steel. What did GM do? They charged more for their cars. They kept approving more and more benefits. IBM saw its health care costs go up too. What did they do? They increased their prices too. What if the USA Fortune 100 companies had united efforts and motivated some reforms in the health care industry? They didn’t and passed on the problem to the next generation.
We can’t increase our prices anymore. Other countries do not have all the USA’s legacy costs. So the USA’s only option is to lose a lot more income and jobs, or to seriously start cutting costs.
Mightn’t one of those extra costs of the US be the salaries of its executive class?
Invariably this thread comes up, and people attack environmental regulations and provisions that are for the benefit of the workers. Presumably absent such regulations, everything would be just peachy. I don’t believe that, and I think we’re seeing it play out in China today. Lack of regulations in the food industry have resulted in cases of sheer poison (melamine) being sold as “food”, just in the past week or two there were horrible cases of mass lead poisoning. For the Bejing Olympics the had to undertake massive cutbacks in transportation and industry for the duration, just to make the air breathable and a non-disgrace. (That’s not clean, just breathable.)
Maybe some of the regulation has gone overboard, but I don’t think throwing it all out is any answer. The costs of inadequate regulation are now well proven – including the fatalities.
But take a look at one of those other differences in the US – executive compensation. Current practice in the rest of the world is for a pay spread of 40 or 50 to 1 from the top of the company to the bottom. We’re way past that in the US, and as the past year or so in business has shown, those guy’s aren’t worth it. The Japanese car industry is doing much better with lower executive pay. If the US executives were worth what we were paying them, they would have foreseen the coming financial crises and take appropriate steps well ahead of time to avert it. After all, we’re giving them “walk on water” payscales, they surely ought to be walking on water, and they’re not.
Then we have our whole “investment sector” sapping our economy. It’s called “investment” and some of what it does is that. But it seems that far more of it is just a glorified gambling parlor, with more crews skimming loose change (not just pennies, either) that falls through cracks in the floor.
We’ve got an immense superstructure that is just concerned with money, and not real things. For that matter, sometimes it seems that most of the US industrial base has become more concerned with money than the real things they were founded on.
I assert that our overpaid executive class and oversized financial sector are as big a drag on our economy as “workers rights.”
As a foreign reader (French), it’s as much interesting to read the comments than the original post.
Something I never understood is that, even though, to my knowledge, the US government is probably imposing much less restrictions/regulations than most Europeans countries, American people are always yelling about “it’s the government fault, they regulate everything !”.
If you compare this with most of the recent analysis I’ve read (obviously biased by my own beliefs), which state that some of the causes of the bubble were destruction of the regulations of the Financial world that occured since the US since the end of the 80’s it’s even more intriguing.
Also, according to my reading, US health cost per capita is one of the highest of the world (even higher than in France, which our own government founds overwhelming), and I’d tend to believe that the legal externalities you have over there, and the costs they cause to both the doctors (need to take expensive insurance that will take of any lawsuit, or pre-trial compensations) and patients are quite contributing to that.
I’d be interested to know what the government did that they shouldn’t have according to the above contributors 🙂
I like your blog Bob !
A root cause of the political (and business) problems seems to be a dumbing down of the citizenry, er, “consumers” (moo!). The very idea that a passing knowledge of history, critical thinking / rhetoric and basic mathematical ability are of any use is considered evil “elitest” thinking. We believe stuff “as seen on TV!” Ignorance is strength, I guess, and the former slaveholders didn’t like the slaves to know how to read, either.
So when a corporate spokesperson comes on TV advocating this or that policy often enough, most people just believe, I guess. Politicians get away with rewarding companies, and knifing the public at large in the back, because people allow it. When a corporate PR flack says “government is evil”, it doesn’t register that in a representative democracy, “by of and for the people”, he just called “us” evil! Of course, a citizenry that stands up for itself is evil, if you consider unbounded self interest of the already rich “good”.
That said, corporations that seek to maximize profit by any *legal* means are doing exactly what the should and must do in order to keep their executives from being fired or sued. The real problem lies with *us* for not changing the laws and society in which they function.
If “taxes are always bad”, then how did businesses survive in the 1950s and 60s with a top marginal tax rate of around 70%? Oh, and people need to learn what a *marginal* tax rate is, as well.
Regarding health care costs: I’ve heard it reported that we spend twice as much per person in the US as a typical European country, but have shorter life spans. I’ll ignore the fact that these costs and results are unevenly distributed, and make a logical suggestion: we should cut costs. We need to save 50%. If private insurers have a 30% markup, vs a 5% markup for govt medicare and the like, then we could cut 25% of the needed 50% just by doing away with them (at least for primary coverage). If we could cut down the services provided by one third (yes, “rationing”, especially of useless / harmful treatments, perhaps coupled with *some* malpractice lawsuit reform), that would cut another (1/3 of 75% = ) 25% off, and we are down to a comparable cost. Then, allow private insurance or whatever for supplemental stuff.
Regarding protectionism: it needs to happen. The race to the bottom otherwise is what we got. Other countries, like China and India, do it. This is really the core issue in this article. *We* allowed our government to set us up, using Milton Friedman’s libertarian B.S. as the sales pitch.
China: ugh. The government there is rotten, and they are playing us like a fiddle. That’s not racist, I just don’t like authoritarian government (here, or abroad).
“China: ugh. The government there is rotten, and they are playing us like a fiddle. That’s not racist, I just don’t like authoritarian government (here, or abroad).”
/facepalm
Haha, they set us up the bomb.
Ok seriously though, we’d love to tariff the hell out of the Chinese, but that won’t happen while China holds the majority of our government debt over our heads, like a guillotine. That debt is exactly why when presidents visit China for trade talks their all like, “Yeah, we need to even out that import imbalance thing!” before the talks, and all “Yes, dear.” with their tail tucked between their legs afterwords. It’s the trade equivalent of the mutually assured nuclear destruction of the cold war era. We could destroy their economy but cutting off imports and they could destroy ours by calling in the loans.
Cringley,
Since consumer spending is the largest pool of money in the USA, what do you predict will happen with this pool of money? Who will be able to afford IBM’s products and services? It sounds like it’s time to bring back the “Made in America” bumper stickers and everyone else be damned!
As someone who did a graduate paper on “corporate social responsibility”, I can tell you it’s a load of crap. Shareholder value maximization within the constraints imposed by law is the only rational way to run a corporation. The only significant problem with corporations today is that Delaware/Federal law allows management to bully the shareholders into making sub-optimal decisions (see “agency problem”). Stock options with 5-, 10- and 20-year time horizons would focus management across the nation on building long term wealth.
But it’s not IBM’s fault that they cannot compete on America’s cost structure. IBM has no control over the larger social trends; only the Federal Government can change the direction of the nation. We (the private sector, including IBM) can only play the game by the rules they set up. How is IBM supposed to compete with high healthcare costs, a poorly educated workforce and the taxation that will be necessary to finance a $1.9 Trillion deficit? They can’t. No one can. Even profit-monsters like Google and Microsoft are building their Indian, Chinese and Brazilian facilities.
The health care, education and government sectors are the least efficient sectors in the American economy, and they are less efficient than many of their foreign counterparts as well. Is it any surprise they are the cause of high costs? They’re dragging the rest of us down and using legal barriers to prevent competition, innovation and cost-lowering. We need them to be MORE like Toyota (or Wal*Mart) than GM, not less, if we’re going to get out of this mess. When the soil of the American business environment is fertile, IBM will return.
It would also certainly help if the Fed Reserve stopped helping with the inflation of bubbles, but we don’t have to go to a gold reserve system for that. The Fed knows how to keep inflation under control. The problem is conflicting incentives, where some people think it’s the Fed’s job to keep unemployment low and growth up. Wrong. Regulation and spending determine those. The Fed’s ONLY job should be to manage the money supply for low and predictable monetary inflation, as they do in New Zealand.
Thibaut Fagart,
France (and the EU generally) has a sub-optimal taxation and spending policy (from my point of view) but the real problem in the USA is regulatory framework. It’s not the size of the game that matters, but the quality of the rules, if you will. Too much legislation in the USA is written by lobbyists (and Congressional aids paid off by lobbyists) instead of the legislators, and their short term and personal interests are written into law instead of the broad, national interests that would benefit everyone and SHOULD be the body of the law. Agricultural subsidies that benefit farmers at the cost of everyone else (in terms of wasted land and higher food prices) are a good example that both US and French readers should understand.
What should the government have done? Market-friendly regulation that promotes competition and exposes costs rather than hide or cross-subsidize them. This might not have stopped the housing bubble entirely, but there’s no question that Federal regulations poured gasoline on the fire. Further there are all the undreamed of innovation that was never invented (and we can never know) because established interests killed entrepreneurial ventures before they were born.
OK, “Ron Paul” Jr. 🙂
Seriously, though, I think I agree with you on these specifics. Too many subsidies for the wrong behaviours. Too many regulations that really only serve as a fixed cost barrier to entry, rather than something to improve quality and safety that might have had a (gasp! horror!) cost per unit.
Perhaps an occasional use of the Sherman anti-trust act might be helpful as well. Or maybe just a periodic “jubilee”? (perhaps not literally, I’m just teasing) Does any church in the US ever even mention the concept of jubilee?
As an IBM employee, I can certainly confirm that jobs are moving offshore, (and Indian jobs on-shore) as well as the general decline of “value for the dollar” in terms of health and retirement benefits. However, one of the (many) elephants in the room has nothing to do with government, doctors, lawyers, capitalists, socialists or an uneducated citizenry. It has everything to do with demographics: the mean age of western populations is getting older, and the birth rate is declining. At the same time, retirement laws, established in the 1930s, have not kept up. To be a bit more blunt about it: there are more old people now, living longer lives, dependent upon a (relatively) smaller population of working people to cover their health care and retirement expenses.
Tongue firmly in cheek, unless we want to countenance a Logan’s Run type of future, there is no real solution except, (perhaps) to pass a new “stimulus” package that offers free access to internet porn and dating sites, and outlaws prophylactics.
Ha! And (yet another) good point made. So we need a *legal* immigration policy to bring in a younger (and hopefully talented as well) population?
Liars (not to say you) lie a lot about the change in life expectancy. Life expectancy at birth (one of many):
https://www.infoplease.com/ipa/A0005140.html
Life expectancy at 65 (a bit dated, but close enough):
https://www.ssa.gov/history/lifeexpect.html
The point: if you make it to 65, you make it quite a long time thereafter, no matter what year you were born. But let’s not truth get in the way of opinion.
Bob,
are you sure the “complementary” and “supportive” schemes you pointed to are aimed at American students and not at, say, Indian students graduating from US colleges, invited to work in the States for a year (drinking the company coolaid) and then going back to India to work there, but with the idioms, values, and connections necessary to function well with US customers?
It just doesn’t make sense to relocate Americans to India – for one thing, as you pointed out yourself, emigrating there is just not that easy.
Thanks for writing this, Bob.
[…] https://www.cringely.com/2009/08/neutron-bomb/ […]
Bob: is this post, and some similar “only content is copied” posts something to start filtering out? “Page rank” link spam?
>Where did this cult of shareholder value maximization come from?
errr …. Pension fund dictature ? Ok, nada, I’m going.
[…] I, Cringely » Blog Archive » Neutron Bomb – Cringely on technology "What happened two years ago was IBM deciding to move most of its jobs offshore to save money after a sobering look at the life cycle cost of its U.S, workers. If you look at the total future cost of an American employee for the next 15 years — it is a pretty big number. Then add the double digit inflation cost of U.S. health care and that number becomes bigger still. The only way companies like IBM see themselves being able to continue to operate is by cutting retirement benefits and/or shipping jobs off shore. In IBM’s case they are doing both." (tags: ibm healthcare economy outsourcing insourcing cringely) […]
In evolution what cannot adapt goes extinct. IBM had foresight and is adapting. Ford had foresight and adapted too (remarkable isn’t it? Ford didn’t need a bailout). Chrysler and GM and the others aren’t adapting. Useless management, overpaid and ineffective, brought them down.
Yes, there is a short sightedness. If costs were the only issue, places like New York City, Tokyo & London would not exist. It you could drive 100 miles from those locations but they lack some value that a place with expensive rent. Yes, it is more expensive to run a business in the US but for some companies that seems irrelevant. Apple would never consider moving its designer & engineers offshore.
Bob performs a slight of hand by equating pension costs to the health care debate. They are two separate issues. Pensions are a legacy of the time when the United States was THE global economic superpower. They are also a legacy of wage caps and 70% marginal tax rates of the 40s, 50s and 60s. No private sector can support a defined benefit pension plan and stay globally competitive. Likewise, for many workers, an individual retirement plan is superior given its portability and independence from the employer’s long-term viability. To say IBM is doing something nefarious to eliminate pension costs is an overreaction. Better for IBM to stay solvent than to bankrupt itself, like GM, with retirement costs.
On health care costs Bob also misrepresents the situation. No one puts a gun to HR management and makes them commit to pay “too much” for employee health care. For one, companies can and have been requiring employees to pay more out of pocket for their health care benefit. Second, large companies like IBM can self -insure and compete directly with those “greedy” insurance companies. So at the end of the day IBM is under no obligation as a company to overpay for US health care benefits and it as a company it will be just as effective as Uncle Sam in reigning in health insurance costs.
So why is IBM doing this? Because foreign workers are less expensive than US ones. This is not an indictment of US health care or the US government. It is a celebration of the global economy. IBM can see the future from the past and knowing the balance of future revenue will originate from countries outside North America it is only logical it increase hiring and training of employees who live outside North America.
I was laid off from IBM-Rochester in January. I was lucky enough to quickly find a new, higher-paying job in the Twin Cities. Working for a new company was the best thing to happen to me professionally in years. IBM is still doing all that Java/J2EE stuff that more advanced software companies abandoned years ago. It’s nice to work in a company that uses the latest technologies and in which the team leads are technically accomplished, not political appointees.
The rot at the center of IBM is, in my opinion, the zero-sum game of annual evaluations that IBM calls “PBC”s. If there is anything more disheartening than having someone dumber than you (i.e., the typical IBM manager) tell you you’re dumb every year, I don’t know what it is.
And the answer is…………..
IBM does not give a rat’s ass about the state of the US economy nor cares about the US workforce nor the quality of IBM service and products. IBM products and services to the people in the know are way overpriced and are very low on the functionality scale.
IBM does care about stock prices. Not for the “shareholder” as is claimed, but for the CEO and upper level management. It’s all about executive bonuses and stock options.
When you accept this as it is, which is the truth, then you will understand the rapid and the “damn the torpedoes” attitude about shedding the American workforce. Americans developed the technology IBM is peddling. The Indians and Chinese are copying this technology without understanding it.
I am ashamed to admit I am in IBM management for now, but I will speak my mind until I’ve located another job.
Indeed this is the reason.
The stock price is everything, but the motivation isn’t for the investors.
The executives and the board get most of their compensation through options.
This is why IBM borrowed more than 30 Billion dollars to buy back stock. It reduced supply and increased demand.
Similarly, IBM contracted services has cut staffing so severely that basic commitments can’t be met. The costs are reduced, but the contracts remain in place for the time being. Sure the contracts won’t be renewed, but that won’t be an issue until after many options have been exercised.
In the mean time, IBM’s profits are way up while their revenues are down. This cost-cutting model of profit-making will run out when there aren’t sizable numbers of American jobs to cut. It will be difficult for IBM to pay back the Billions of long term debt that the current executives and board saddled the company with.
Its interesting to observe the American economy and health systems from Australia.
In Oz, we have:
– compulsory superannuation; 9% of your wage goes into your chosen superfund. Sure there is an old age pension, but the government about 20 years ago forced everyone to save for their retirement
– Medicare: we pay a 1.5% levy on our income to fund the public health system. High income earners (over A$73,000 pa which compares to the average earnings of around A$60,000) pay a higher tax if they don’t have private health insurance
– a public welfare system for unemployed people
– a marginal tax rate of 48% on income over A$180,000 (with no deducibility for mortgage repayments)
On the whole I would not want to live in the USA as without a job I understand there is little welfare or health care. Employees aren’t relying on their employer remaining a going concern to keep funding their retirement and health care benefits.
[…] low and predictable monetary inflation, as they do in New Zealand . … See original here: I, Cringely » Blog Archive » Neutron Bomb – Cringely on technology Share […]
“… mean enough that there may be nobody left to buy their products.”
“Companies like IBM that take this position are hurting America.”
G’day Bob thanks for another thought provoking article. It’s got me thinking back to the economic 101 subject I did last year. Isn’t there an assumption that’s coming through in the above quotes? The assumption is that Company A offshore jobs (to reduce costs, maximize profits and remain internationally competitive) and new jobs aren’t created in the country the company fled?
Aren’t new jobs, in new sectors being created in the US? This obviously isn’t the first industry that’s been offshored. Are you saying that this is the proverbial straw that’s going to break American’s backs and result in you all becoming proles? I mean American’s have still been able to buy clothes even though the bulk of those manufacturing jobs fled a long time ago?
Good God, I’ve been saying this for years: the theology of free-market capitalism is wonderful for consumers and efficient production of goods and services (perhaps, with caveats), but it sometimes makes incredibly poor social policy, since profits don’t respect borders. Now we have companies too large to fail, but also too large to save (Fortis Bank, anyone?), and their sheer size and political throw weight allows them to influence public policy to the detriment of the citizenry. Yet they are surrounded by political allies who are blinkered to the long-term social consequences. I suppose that we will have to have an actual full-scale financial or industrial collapse before things can change. Tragic.
Of course part of the problem is government — because politicians are also short-term thinkers, concerned about re-election and the extraordinary costs of campaigning and fundraising. By the way, much of those costs goes to television ad time, which benefits (ahem) corporations. We could lower campaign costs by requiring political ads to be a free public service as a condition of licensing the public airwaves. We could also outlaw corporate contributions, period. Otherwise corporations have overscaled influence on the political process, which allows for distorted public policy. And by the way, the benefits of such distortions aren’t evenly distributed throughout the corporate world: think tax breaks and subsidies embedded in targeted earmarks that go to a few –- sometimes a single — entity.
“Now some of IBM’s American workers are being asked to consider taking jobs in Bangalore and other foreign outposts. This program creates new expatriots, giving each a one-way plane ticket.”
I believe you mean “expatriates”, not “expatriots,” which I don’t think is a real word.
“Expatriate” — someone who leaves his or her nation of birth to live elsewhere.
“Expatriot” — hmmm, maybe someone who used to buy into the lazy, fundamentally irrational exercise of nationalism, but has since come to his or her senses?
I suppose an IBM engineer from Altanta who now has to fight cows for commuter lanes might qualify as both.
Speaking of spelling errors, I wish that many of the comment writers (not you) would realize that it’s “reined in” (like you do with a horse), not “reigned in”.
It’s as likely a Freudian slip. They who write such wish to reign over the rest of us. 🙂
An expatriot is someone who expatriated.
I guess having your own blog, free from the annoying interference and demands of editors, means that it’s time to enjoy some well-earned self-indulgence.
Well, that’s not what I signed on for, particularly not the increasingly “progressive” slant to the preachiness of a number of recent columns so it’s arivvederci Bob, let me know when the technology beat is once again not beneath you.
I agree except for the word “increasingly”. I’ve enjoyed this column ever since 1997 but the liberal slant is the price you pay. It least it keeps us alert and aware of the insidiousness of liberlalism, socialism, communism and the idea that it’s better for people who don’t create value to spend the money of those who do.
The way globalization was handled is looking more like a ponzi scheme every year, looks great until one runs out of well-paid consumers. And the defense implications of off-shore manufacturing are sobering at best (Review WW2 history before you tell me I’m wrong.). We have maybe a few more years to do something constructive about American competitiveness, if it can be done at all without it being hijacked by 1%ers. I expect a crisis soon, with a demand for trade protection that Washington will be unable to ignore, and will overreact, again.
Great Bob, the “voice” returns! Now can we put the little player above the text, I think that would make sense (then I wouldn’t read the whole thing THEN discover I could have listened to it!)
Ta!
A problem well stated is a problem half solved. The problem is that it costs a lot more to employ an American than it does to employ anyone else. The question we ought to be asking is why. Among those who don’t want to blame the government for this, I haven’t heard anyone offer up any other explanation for why this is.
Western Europeans are also expensive to employ which may explain why IBM, GE and CISCO are busy hiring in India and China. You’d think are policy makers who cared about job growth would be encouraging us to adopt the Indian economic model. It is certain if we adopt the Western European one unemployment in the US will go higher and stay higher.
“The Indian economic model”, where 42% of the population lives on $1.25 a day?
http://en.wikipedia.org/wiki/Poverty_in_India
Thanks, but I’ll take the European model.
Reasons why it’s not the fault of the US government:
1. Poor countries who export want to keep the international value of their currency low, so naturally their salaries will be low.
2. It usually takes years for a poor nation’s wages to gradually increase as their standard of living increases. So their salaries will be low until their standard of living catches up with that of richer nations.
3. If you live in a poor country where your parents or grandparents eked out a subsistence life as farmers, you probably will be happy with whatever salary you can get as an engineer or other professional.
By the way, I *do* blame the US government (and Wall Street, Western central bankers, various other power brokers, etc.) for *most* of our problems.
There of course is the matter of human nature. But that’s like blaming myself (when deep down I know what a sweet guy I am.)
Heresy !
There is no god but Profit, and we shall have no gods before Him.
Like Moloch, Profit requires constant bloody human sacrifices, which His worshippers are happy to provide as long as their bonus schemes are left untouched.
Bravo! Well stated arguments about what is wrong with the current corporate attitude in America. Only thing I would add is the effect tax laws passed in 1999 time frame are having to encourage sending American jobs overseas. I think the current offshore trend is caused by a combination of benefit costs in the U.S., tax laws that benefit the use of foreign workers (both inside & outside the U.S.) and the corporate greed culture that exists (“I got mine, you go get your own”) in America today.
Bob, you need to add a Share Button for Facebook.
“Costs more to hire an American”, no great mystery there, high cost of living, byzantine regulatory environment, private sector bureaucrats striving to be worse than the government ones, a health care system more interested in stockholders than patients – an interesting opinion here: https://www.theatlantic.com/doc/200909/health-care
and “Dark greens” agitating for de-industrialization, I could go on.
I, as a target of the “AMERICA’S MEDICAL SENIOR HOLOCAUST” (TM) am out of touch with your age bracket THE MESSIAH CRINGEMEISTER. Alas when the journey is the destination, one does well to store his or her feelings, in a sealed jar, in a dark cave. Since we left the caves of yore, our species has tried and tested many economic models. Never mind which model has been optimized in perpetuity, but to overlook the incentive of achievement and greed, smacks of hallucinating.
Yes TMC you broke the story, which may I presumed added to your larder of fame and talent recognition. And you remain (thankfully) an engine of sun light and transparency.
I have no quarrel with thee holiest of holy one, but no amount of sugar coating or editorializing can so much as nudge by one iota this journey’s trend.
The object is to robotasize (for cost effectiveness) all enterprise, no matter the species thereby affected!
Me? A grumpy senior, out of touch, but not out of…. oh well you know :O)
1. Level the playing field between US and foreign companies. Require other country’s companies to follow same/similar human rights and safety requirements or adjust tariffs in proportion to the differences.
2. Create a Vow to Increase Shareholder Value Long Term. Those taking the vow who are shoreholders themselves must hold stock for an extended period of time. CEOs taking the vow will have their performance judged based on longer time horizons, not the next quarter. The general public can use the Vow as one way to judge a company before investing in or doing business with the company.
To add another dimension to the discussion, the average American workers wage should be likened to the average American’s income, ie. those at the top are distorting the values of the masses. In other words, top management salaries have been increasing tremendously, while non-management wages have remained stagnant, or declined versus inflation. One of the reasons Japanese auto manufacturers are able to compete effectively is that wages are much less flatter within a company, while a sense of teamwork still exists–as opposed to the American model where the boss tends to justify their salary by stepping down on his or her charges as much as possible. Too much top-heavy management and an itinerant marginalized staff turns an enterprise into a Potemkin operation. Kind of like what Arthur Andersen learned with all of its twentysomething Senior Consultants.
I wouldn’t worry too much about this issue. When America becomes a third-world nation, the wages will then be lower than the new first-world nations — that’s when the jobs shall return! Let’s look forward to becoming poor so that we can become rich again! 🙂
Good god! I honestly though all of you Ayners would do the decent thing and crawl back under your rocks! I guess not.
Bob, this was a well reasoned and well stated article. In keeping with your last column, we are considering how technology companies and corporations in general are allowed to change the course of the economy, and the course of our lives, without any regard to the welfare of our nation and her citizens. Greed is the only value.
You ask us if this is really the way we think things should be done. ‘If these are the sort of values we should fight to defend. I say no!
Bob, do you think you are attracting a different sort of audience now that the blog is not on PBS? Sure seems like it some days.
For you neo-conservitives (aka. radicals) out there, I have a couple of favorite tee-shirt quotes I recently enjoyed:
“Stupidity is not a crime. You are free to go.”
“Have a pheasant plucking day!”
Don’t be so hard on yourself. You’re not stupid. You just have the mental disease known as liberalism. Russia got over it, so will you or your descendents.
The government creates all of the problems they claim they want to protect us from.
you have a target on your back.
[…] has just published an updated post that (sadly) demonstrates both the veracity of the original post and the all consuming corporate […]
Great piece. You nailed this one again, and the numerous comments on this article attest to that.
1980s: How terrible that those poor third worlders live in such poverty. Lets hold big charity rock concerts.
1990s: That didn’t work so well, lets integrate with their economies drasticaly reducing the cost of consumer goods and improving productivity world wide usign advanced technology. Hey, this is working realy well!
2000s: What the f*$k, they’re stealing our jobs!
This is what capitalism does, it exploits differentials in markets and economies, working towards evening things out over the long term. We’ve experienced fantastic advances in standards of living over the last few decades and it turns out such advances aren’t sustainable in the long term becasue they were fueled by massive differentials in the global economy. As those differentials even out, the scope for abnormaly high profits will even out too. There’s not much IBM or anyone else can do about this, and it’s no bad thing.
I am not against competing with others with my skills. I am glad the economy is improving in India and China. I am more concerned that companies like IBM (and many others) are taking advantage of their new workers. They are definitely under compensated for their education and value of their skills. The same can be said of the auto workers in Mexico. When people are paid FAIR salaries and given reasonable benefits, it improves the whole economy. With the number of jobs moved to Mexico, their economy should be a lot better than it is. Instead the poverty and violence continues. The good people of Mexico deserve much better, and so do the people of India and China.
History has taught us many times that taking advantage of workers is never a good thing. It has given rise to violent change (revolutions) and non-violent change (unions). Hurting one group of people to help another forced many abrupt changes in society.
John,
Good point. We seem to care deeply about “fair trade” so that a coffee or chocolate farmer can get a good price, but skilled labor? “@#$! ’em!”
right on the money again, Cringely. IBM US is s disaster and working there is enough to drive anyone crazy (literally). Over 10K employees have been fired since January 2009. And the bloodshed is not stopping. More rules and processes are in place to help facilitate the exit to the door faster and faster. And the offshore replacements? They suck.
Sam and company should just move the entire US company to India and be done with it.
The real issue is the tragic, and pervasive lack of IT leadership across swathes of corporate America (both private, and governmental). In my opinion, even after getting royally shafted (which is by far the case with most external resource based delivery), weak, and incompetent CIO’s keep coming back for more. It appears that providers like IBM know they don’t need to fear client backlash from poor delivery (in most cases a well feigned mea-culpa suffices), hence, the license to bluntly cuts costs to meet short-term bonus objectives. It’s a case of Dumb, and Dumber, and their incestuous cycle of life that often results in absolutely nothing.
While I believe IBM has a right run their business as they see fit (within the bounds of the law), could I at least be spared the indignity of having my tax money used to support such companies? Why is the US government awarding IBM billions of dollars in contracts if they are not acting in the best interests of Americans? Why is the President talking about stimulating the economy with health-care IT and infrastructure spending while awarding those contracts to companies that are blatantly off-shoring jobs? If IBM can do without American employees then they should do without American taxpayer money. Let’s award contracts to “real” American companies.
Amen. No US taxpayer money should go toward funding jobs that are intended for overseas workers.
The cost of HAVING government health care will be our freedom. After we lose that we’ll lose everything else.
American workers cost too much because the government meddles too much. Stop the stupid high taxes. Stop the employer has to pay social security too.
We’re uncompetitive because we have a perverted form of capitalism that is commonly called “socialism”.
Actually, this is quite opposite. USA has the truly rotten real capitalism with too little government regulation, where workers are real slaves, no health care, 2 weeks vacation (which you often times can’t take all at once) etc.
If you want to see what gentler more social capitalism looks like look at European countries like France, Austria and Scandinavia, where people have 40 days of vacation a year, 2 year maternity leaves, national health care that covers everything, Austria even has free university education for every citizen willing to study, unemployment benefits that sound too attractive that some people would rather not work at all (and certainly majority of the rest of the word would love to be unemployed in these countries).
USA in comparison sounds more like Roman empire with slave labor.
IBM is a captilist machine doing exactly what its suppose to do to survive. IF it did not move offshore, it would end up in the situation Detroit is in now (doomed).
The overiding problem is that the Rest of the World (ROW) is beating America at its own game (captilism), and nobody likes that -do they…either you beat them, or join them. And join them they must to survive within the existing rules of the game.The simple fact is we have had it too good for too long, and the world average is catching up to us..
The only mediation I see is tthat American policy could change national rules so that the average American can gain (employment or otherwise) when IBM or other national companies profit through appropriately crafted contract awards or tax breaks within the USA (as the “shafted taxpayer” has eluded to), This has to happen ASAP, before all the money from available spending simply leaves our shores. Ah heck, maybe its already too late given our debt…the banker in our Monopoly game (China) won’t like this “pro America” slant.
Currently there are tax benefits for hiring immigrant labor vs. citizen labor. As long as there are disincentives to hire Americans it should surprise no one that corporations will do that.
Many corporations are choosing to leave the U.S. entirely. A large part of this is related to U.S. taxes and regulations, and it should surprise no one that when it is easier to do business elsewhere, that many corporations will choose to do that.
The issue of healthcare is another issue which is more complicated, but no legislation currently being considered will do anything to control costs. At best the politicians may change how it is paid for and by whom.
There is no part of any of this which the politicians have not had a hand in, and there is no part which they have gotten right in the past, or are likely to get right in the future. I may be unduly pessimistic, but in my lifetime I’ve seen very little from them to justify any measure of confidence. I lost whatever faith I had that leaders could be responsible a decade ago when I entered my late 20’s.
It’s not the US tax policy that’s the issue; it’s the non-existent policies elsewhere.
How about ‘fair-trade’ where we tariff work performed off-shore so that it’s the same cost as doing it locally?
Also, don’t ban H-1Bs or similar visa programs. Require that the recipients stay in the States for a period of years so that they don’t just run off with the experience gained and start their own companies elsewhere, but benefit our society with taxes paid here.
It’s interesting that of the top 3 technology company in this country (perhaps the world) in terms of market cap, only #3 – Apple – is thriving based on innovation and creating products that are desirable and not yet duplicable everywhere in the world, while #1 MSFT is hanging on by sheer inertia, and I have no idea how IBM can remain ahead of Apple still at #2 with no product or service not replaceable by any decent open source/freeware company, perhaps by pure brand name and salesmanship. IBM is essentially on a sliding slope like Dell, IMHO. No amount of government tax cuts will bring back those jobs unless you bring back slavery and child labor.
So I have a few simple questions that I hope to hear your take on it – since we do not hear it ever discussed by the so-called financial experts and economists. Exactly what is the end game? They say about 10% of the people own 90% of all the wealth in this country (perhaps similar worldwide), and the trend is only accelerating favoring the rich-side. All we hear from commentators is that “consumers” must start spending to improve “the economy”. So I’m not savvy at economic math, but how can a population majority with ever dwindling collective spending power hope to turn this around? Doesn’t this prove that the trickle-down economics is dripping down ever less on the increasing mass below who now owes more debt than they are worth on average? In case of IBM, it’s even clearer that corporate profits have no correlation to employee head count or wage. So my question is – What is the rich doing with all that money? We now know the boom in the last few years came from historical rise in average personal debt. The only way “the economy” can continue to grow is by creating ever more “consumers” from new population in Asia and Africa that will eventually be used up just like the current crop of used American consumers. Isn’t that just like a Ponzi/pyramid scheme? Is the economists/politicians’ only hope relying on our children (whose health and education we are investing in less and less) to come up with some kind of scientific breakthrough to keep sustaining an economy? Isn’t that kind of like sticking in “… then a miracle occurs…” as a variable in our scientific equation like the famous cartoon?
“[…] I have no idea how IBM can remain ahead of Apple still at #2 with no product or service not replaceable by any decent open source/freeware company, perhaps by pure brand name and salesmanship.”
Yes, it’s salesmanship, basically. IBM sells ‘enterprise’ software. Read what Paul Graham says on IBM and ‘enterprise’ software here: https://www.paulgraham.com/colleges.html
The problem is that the people who are in charge of choosing and buying ‘enterprise’ software, that is, CTOs or CIOs of large companies, aren’t the same people using the software, that is, the low-level workers. If the workers have trouble using the software, the CIO/CTO doesn’t care. He’ll just tell them to ‘deal with it’ or whatever. Of course, bad enterprise software does cause a loss in productivity and a drop in profits, but the link between cause and effect is so diffuse that it’s easy to ignore or explain away.
Apple on the other hand sells their products directly to the people who use them (and, I guess, their parents in the case of teenagers). If their products aren’t good, people will simply stop buying them.
Another reason why Apple creates better products than IBM is that Apple doesn’t mind employing creative oddballs and letting them loose on the things they’re good at (which is maybe because they have a CEO who is a bit of a loose cannon himself). IBM is willing to take the bad (i.e., a certain amount of rebelliousness) with the good in hiring creative, intelligent people. This used to be true of IBM in the Seventies and earlier, but is no longer true. To get ahead in today’s IBM, with it’s Stalinist PBC system, it’s best not to have too strong of opinions on how to improve the product if those opinions differ from others.
The people who survive and thrive in today’s IBM are those who would have survived and thrived as Soviet apparatchiks in Stalinist Russia. I know that sounds like hyperbole and I admit it’s not true of everyone who succeeds in IBM, but it is, by and large, the case.
I meant to say: “*Apple* is willing to take the bad (i.e., a certain amount of rebelliousness) with the good in hiring creative, intelligent people.”
Bob, could you correct my comment, please, and delete this one?
I proof-read it twice and I *still* make a mistake. 8-).
You should read Tom Friedman’s book “Hot, Flat, and Crowded”. He talks about how the current model is about to collapse. Lets face it, globalism has been nothing but a lie. First, they told us don’t worry, only meanial jobs that nobody wants and don’t pay very much will go offshore. We’ll get training the for those high paying jobs like engineers, scientists and the like. Jobs went offshore, but training didn’t materialize. This caused all manufacturing to go overseas, whether to Mexico, China or India to the point where you can’t find a single thing that’s made in America on the shelves. Now that they have decimated manufacturing, they are moving those high paying jobs overseas. In a couple of years, the only jobs available to Americans will be slave wages. They have accomplished what they wanted. Which is to reduce America into a two class system. Either you are rich or you are poor. No middle class. And by the way, whatever class you are born in that’s the class you die in. The American dream RIP 2009.
Hear hear!!
Public companies these days put Shareholders first, customers second and employees dead last. There’s no balance. We need a new business model.
This is a great piece; very insightful….but it’s only dealing with the tip of the iceberg.
Others have mentioned that publicly-held corporations are here to create “shareholder value,” which is to say a return on one’s investment. There are so many short-term investors out there, wanting immediate returns…so companies live and plan to make quarter to quarter data look good. We no longer need visionaries because our leaders don’t think much beyond a few quarters out. And our corporate leaders are motivated by quarterly data because it drives their paychecks and bonuses.
Our corporate leaders have made friends in the White House, Congress and various state governments, leading to laws that allow them to manipulate data, cut benefits, discriminate against workers and receive incentives with no intention of fulfilling the intent of the agreements.
The *real* problem (aka root cause) is that virtually all of our elected officials take donations from corporations and advice from lobbyists, and are beholden to someone other than the population they’re supposed to be representing (aka “us”).
If all or most decisions in our country are motivated by what corporate America wants, we have a much bigger problem than just IBM.
I just cannot agree to comparing Apple to IB ie apples to oranges. Let’s focus on “better products” for a while. While Apple employs creative people to devise cute, cutting-edge consumer devices and software features (plus some hardware engineering but nit THAT much) that now seem to sell themselves off Apple Stores, IBM is a different kette of fish. IBM does invent technology down do basic physics and material research. Putting the IBM’s internal patent competition and its nuances, the result of this research and engineering are USUALLY products very well designed, planned and delivered (yes, there are excetions, of course).
As Paul has said above, IBM sells its products and putting the CEO issue aside it is sober to notice these will never sell themselves as in Apple’s case. Putting $1+ servers and other gear even in the funkiest would-be-IBM-Store won’t do. Ordering those takes weeks. Delivering those takes months. Like it or not IBM is big and provices toys for boys working for analogously big companies.
Now, these two companies differ in most everything but it so happens that the products of both fall in the same broad IT category. Just like apples and oranges are fruit.
On another account. Everything has its own cycle and so does Americas superemacy in economy, technology, innovation etc. Europe used to be central to world’s progress and it definitely is not by now. We have produced quite a bit of history artefacts to draw American tourists so future looks not that dim, after all :- ) Asia is rising and considering America’s structural weakness and inability to move swiftly in strategic areas like economy/currency/bond/healthcare/military complex and others makes Asia’s soon-to-be supremacy even more inevitable.
Regards,
Tom
Check out Bright Future Jobs, on my id’s link. It’s not a total fix, but it addresses one aspect of offshoring.
I’m rolling in my grave.
I’m rolling in my grave too.
It’s this kind of ignorant piece that shows your grasp of economics is limited at best. As much as you bemoan the loss of a job at IBM for the American IT worker, this is great for American consumers as prices drop from using Indian IT workers. Further, those American IT workers are now freed up to think up the next big thing, from which a bunch of new jobs can spring. If they can’t think of anything, they SHOULD either move to India or take a lower-paying service job as that’s all they are good for. As for your kids, they’ll have a far better life than you ever did, just for being lucky enough to be born later in this time of explosive growth rather than earlier like you.
The problem with that argument: the “consumers” of those Indian workers are not American “consumers”, but the managers of corporations, who turn the savings into bonuses for themselves. Self serving arguments tend to be transparent. If Indians were so much better and not just cheaper, India would be employing themselves in support of their domestic corporations. They aren’t, of course. Indian IT is simply exploiting other Indians and a corrupt exchange rate system.
Robert, you’re throwing around a bunch of silly accusations and hoping something sticks. The consumers of cheaper IT work see the value of Indian IT workers in lower prices for goods everyday, just because US corporations sometimes share in that value through higher profits doesn’t make them the sole beneficiaries. Precisely what argument is self-serving? It isn’t transparent to me. Nobody said Indians were better, only cheaper. If they’re worse, then clearly the laid-off American IT workers can start their own companies and destroy IBM: what’s their excuse? Indians don’t do it because they’re coming from poverty and are content with the marginal wages from BPO, they’ll work their way up to more advanced tech soon enough. How precisely is Indian IT exploiting Indians? And blaming corrupt exchange rates? C’mon, you’re really digging in the bottom of the barrel for that one. The fact is Indians are willing to work for less, that’s great for the consumer as the work gets done and it frees up higher-paid workers to think up the next big thing. If they’re too stupid to think up something new and unwilling to compete for BPO-type work at Indian wages, perhaps they should get out of IT.
btw, interesting blog, I think you’re right with your skepticism about cloud computing and the web as a thin client, as you can see from my earlier blog link.
Ajay – you are full of crap!
It’s “expatriates”, not “expatriots”…
Thanks for the correction. I guess an expatriot is someone who used to be a patriot. Although if they shift their patriotism from one country to another due to a change of homeland then they are both an expatriate and an expatriot of the former country. Hence the association.
You forgot to mention why American workers affected do not complain. It is because their severance is held hostage by either the existing company or the outsourcer. If you want the three months promised early on, they you need to sign the 14 page document with paragraphs like this:
————————
Employee represents and agrees that he/she will not disclose the terms of this Agreement,
or the terms of the negotiations leading up to this Agreement, to any persons, except (a) to members of Employee’s immediate family, Employee’s attorneys, accountants, tax or financial advisors, provided that Employee informs each such person of this confidentiality obligation, each such person agrees to be bound to its terms, and Employee shall be responsible for any violation of the terms of this Paragraph by any of those persons; and (b) to the extent required by a subpoena or court order or otherwise required by law.
OR
Future Cooperation.
Employee will comply with all reasonable requests from any Releasee for assistance and/or information in connection with any matters relating to the duties and responsibilities of Employee’s employment, including without limitation, consulting with any of the employees in connection with the transition of on-going matters, consulting with attorneys of any Releasee and/or appearing as a witness in connection with any dispute, controversy, action or proceeding of any kind, and making himself/herself available to attorneys of Releasees in advance of witness appearances for purposes of preparation upon the request of the Company and with reasonable advance notification without the need for the Company to issue a subpoena. In connection with any of Employee’s cooperation efforts mandated by this Paragraph after the Termination Date,
Employee shall be entitled to receive a reasonable hourly or per diem amount to be determined in the Company’s sole discretion (or reimbursement of actual and proven lost wages as the case may be) and reimbursement of reasonable travel and other out of pocket expenses, provided that those expenses are submitted pursuant to and are in conformance with the Company’s then applicable policy relating to expense reimbursement.
————–
So when they call because the indian who took your job cannot figure out how to do anything related to it, you are obligated to answer and they (at their discretion) can decide your efforts are worth $3/hour.
AND Screw with us and we will sue you under:
——
a violation of any of the terms of such Paragraphs will cause the Company irreparable injury for which adequate remedies are not available at law. Therefore, Employee agrees that the Company shall be entitled to an injunction, restraining order or such other equitable relief (without the requirement to post bond) in a court of law restraining Employee from committing any violation of the covenants and obligations contained in Paragraphs xxx,yy,zzz. These remedies are cumulative and are in addition to any other rights and remedies the Company may have at law or in equity.
HP’s Web Sites have a selection for login for
“HP Employees and Contingent Workers”…
‘nuf said
At least the BBC picked up on the story of IBM pension changes in the UK. The USA press barely noticed it. One would think that such a dramatic change that affects 300,000 workers might be big news. Not in the USA.
While some like to blame the unions for the ills of society, the union workers who have recently lost their pension and health care benefits received a lot more attention in the press; and more consideration and protection by the government. As much as we have we want to complain about the unions the simple truth is we still have not learned how to treat our workers fairly or equitably. Those without union representation are much more at the mercy of their employers whims.
Let’s not forget one of the reasons IBM was not unionized in the early days. IBM made a commitment to treat its workers fairly and with respect. Kiss that promise good bye.
The US media hasn’t said anything because it too is part of the problem. Over the last 10 years there has been the decimation of all media rules. The big media companies, such as Clear Channel have bought most of the independent media outlets, and have grown to an enormous size. Today, only a handful of companies control all of the US media, and control the message with an iron fist. They censor any story that is against their interests, and their interests are driven by money and politics. These media companies aren’t in the business of reporting the real news. Instead, they are more interested in “infotainment”. If you look at the headlines or the lead-in story on news programs, you will see the majority of them have no real news value. As a US citizen, I no longer rely on these programs to get my news, because they are worthless. I get most of my news from overseas outlets, such as BBC, EU Observer, India Times, and China.com. Although they focus more on their own region of the world, they actually provide better reporting of the US than any of the US-based outlets.
How about they don’t hand out health benefits?
The ‘problem’ is that other countries have become worthwhile enough to conduct business there.
If IBM keeps high paying jobs here, then they will lose business to companies hiring offshore. You can put a tariff on a car, but how do you put a tariff on 2000 lines of code?
The real answer here is to change the economics so it is more profitable for business to have U.S. workers. My three steps for this are:
1) Get rid of the Corporate income tax (and optionally Personal income tax) and replace it with a VAT tax system. So regardless of where products are made there is a cost for selling them in the U.S. This will level the playing field with those that build offshore and import virtually tax free.
2) Nationalize health insurance so it is no longer a corporate expense. (or not nationalize, but come up with a plan where it is not paid for by the corporation). Again leveling the playing field.
3) Balance the U.S. budget so we dont need to continue to borrow money from China, and then play hardball on the currency exchange rates that we have allowed them to manipulate for the last decade. Force the dollar down so that the cost of doing business is more balanced. So all the people constantly arguing for lower taxes (but not willing to massively cut spending) are selling us to the Chinese.
A close friend at IBM had to train his 3 Indian counterparts on his job in order to receive his severance package…….2 years ago. He recently learned that his job is once again being performed in Essex Junction, Vt. – by 2 of those people that he trained. Wake up America!
—————————————————————————–
What we have is biblical capitalism in the US…..and it’s not sustainable. Key industries play the power game in DC via the highly secretive group known as The Family (also The Fellowship). There will be no chance of reforming our economy’s broken business model and to focus on sustainability and jobs for the working class as long as the fulcrum of power for the Republican Party is based on C Street in Washington D.C. And as long as the Republicans remain the 2nd party, then we need to deal and solve the problem of this power center coming from the religious right……..and their push for biblical capitalism.
We talk about a broken tax code, we talk about health care, we talk about green cards and foreign labor laws, we talk about energy dependency, and etc….. Every single one of these key and very important areas and major changes in those areas over the past 10 to 15 years can be traced directly to the industry and policy focus groups of the highly secretive THE FAMILY (C Street, The Fellowship, The Brotherhood…).
Restore the separation of church and state…….push C Street out of our government……..and end the theocracy. Then we’ll begin to solve things for the greater good of our nation, for the good of our democracy, and for the good of the majority of Americans. Religion has its purpose and place – but it doesn’t belong in congress, or in the white house, or in our military……in belongs in the private & civil sector of our nation. Look at the Air Force Academy and how it is still dominated by evangelicals and religious extremists…….that is the tip of the problem.
The Theocracy and C Street is the fulcrum of power behind the Republican Party these days. That is where the talking points and scare tactics originate and are designed to stop any and all health care reform in its tracks. They are the same people who supported our costly (in deaths and treasure) two front religious war in Iraq and Afghanistan – they are the same one’s who refuse to talk about the full costs of wars…..while making cost the center point on health care. They are the same one’s who designed the Bush tax cuts for the rich – they knew it wasn’t covered under a balanced budget. Wake up……we can have tax cuts for the rich that result in a swelling deficit……..but we can’t provide health care to 50 or 60 million fellow Americans because it will increase the deficit. Biblical capitalism = American Greed by the so called Have’s. The HYPOCRISY needs to stop or we’re doomed…….they need to be removed from government functions and policy decisions.
People like Brownback, Enzi, SC Gov. Sanborn, Bush, Ed Mease, James Baker…….the list of king pins from this secret group is very telling.
I’ve been arguing for years that there is nothing wrong with sustained profits; why is growth on top of that so necessary?
I work for one of the TARP receiving banks.. We have strict policies (now) around trading shares; any shares. We must hold them for 30 days minimum. If discovered doing differently, one is subject to disciplinary action, up to and including termination.
It’s a start.
If there were a tax on trading shares (as there once was) that would render it less profitable to trade shares too often, perhaps we could put some slack back in the system.
[…] Neutron Bomb « What happened two years ago was IBM deciding to move most of its jobs offshore to save money after a sobering look at the life cycle cost of its U.S, workers. […] “IBM is one of the multinationals that propelled America to the apex of its power, and it is now emblematic of the process of creative destruction pushing America to a new, less dominant, and less comfortable position,” Newsweek said. This is the HR equivalent of a neutron bomb, which kills people but leaves structures unscathed. So all these companies will be leaner and meaner — mean enough that there may be nobody left to buy their products. Companies like IBM that take this position are hurting America.» […]
This process is inevitable in the long run.
Just like bicycle manufacturing moved to Taiwan. Then that manufacturing moved from Taiwan to China and Vietnam.
But it doesn’t mean that the U.S. must artificially increase the pain by allowing foreigners to displace U.S. technology workers at home. It’s an abuse of the visa system.
The current heads of corporations are typically, solidly, “Baby Boomers”.
The baby boomer generation has done more to screw up more than any single generation in the history of America. It is the original “me” generation. The idea of sacrifice with this generation has dissolved. They are the most greedy, self-serving, self-centered generation. Perhaps coming of age in the age of “free love” warped their sense of values and their sense of right and wrong.
When the boomers have finally moved on, either in retirement or in death, will the next generations re-establish the fundamentals of wealth building such as hard work, frugaility and saving that enabled the boomer’s parents to improve their lives and the lives of their children, the boomers.
Or will it devolve into further manifestations of the boomer generation’s self serving greed.
Tom Brokaw’s book, “The Greatest Generation”, detailed the work and sacrifice of the boomer’s parents. Will all that the boomer’s parents achieved be destroyed by the boomers?
Will we, the children of the boomers find our way back to greatness?
Meanwhile in the real, non-legacy part of the tech world in the U.S., we’re still short of qualified and skilled knowledge workers.
BOLD 2 is coming.
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I have a few simple questions that I hope to hear your take on it – since we do not hear it ever discussed by the so-called financial experts and economists. Exactly what is the end game? They say about 10% of the people own 90% of all the wealth in this country (perhaps similar worldwide), and the trend is only accelerating favoring the rich-side. All we hear from commentators is that “consumers” must start spending to improve “the economy”. So I’m not savvy at economic math, but how can a population majority with ever dwindling collective spending power hope to turn this around? Doesn’t this prove that the trickle-down economics is dripping down news , Style and info
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No, because all the currency rate are adjusted to prevent such arbitrage opportunity as you have mentioned. Not to mention you’ll need to pay for the transaction as well. The idea is this, the world of finance is so efficient at one point in time, that any good money-making opportunity around would have already been long exploited by the experts/professionals.
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The overiding problem is that the Rest of the World (ROW) is beating America at its own game (captilism), and nobody likes that -do they…either you beat them, or join them. And join them they must to survive within the existing rules of the game.The simple fact is we have had it too good for too long, and the world average is catching up to us..
No, because all the currency rate are adjusted to prevent such arbitrage opportunity as you have mentioned. Not to mention you’ll need to pay for the transaction as well. The idea is this, the world of finance is so efficient at one point in time, that any good money-making opportunity around would have already been long exploited by the experts/professionals.
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And join them they must to survive within the existing rules of the game.The simple fact is we have had it too good for too long, and the world average is catching up to us. The overriding problem is that the Rest of the World (ROW) is beating America at its own game (capitalism), and nobody likes that -do they…either you beat them, or join them.
it’s as Techno News Yeah – The simple fact is we have had it too good for too long, and the world average is catching up to us..
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What happened two years ago was IBM deciding to move most of its jobs offshore to save money after a sobering look at the life cycle cost of its U.S, workers. If you look at the total future cost of an American employee for the next 15 years — it is a pretty big number. Then add the double digit inflation cost of U.S. health care and that number becomes bigger still. The only way companies like IBM see themselves being able to continue to operate is by cutting retirement benefits and/or shipping jobs off shore. In IBM’s case they are doing both.
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