D-Kos is once again being flooded with diaries about one of the worst GOP talking points and destructive conservative memes that continues to plague the national dialogue and the American psyche:
"American manufacturers can't compete unless they use cheap foreign labor."
I am of course referring to the diary:
Apple comes out and says it
The diary is excellent and the author draws on the NYT article that states:
Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.
A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames.
It would be sad if it were true that the only way American manufacturers can compete is by turning our workforce into wage slaves living in dormitories on call 24/7 working for a bare subsistence living... but it isn't!
In point of fact Americans have been sold a bill of goods that is just patent bullshit and repetition in the press continues to be a destructive force in the debate and prevents us from finding solutions to our employment problems.
This meme appears to be true until begin to examine other countries like Germany and Canada... especially Germany.
Germany has one of the highest paid, most highly unionized workforces in the world, with universal healthcare and higher education support and yet...
1. Germany has the lowest unemployment that it has had in 20 years and its economy is based on manufacturing exports and they have a huge trade surplus!
2. German Savings banks didn't suffer from the subprime meltdown and neither did Canada's bank which are heavily regulated.
3. Germany and Canada's economies were hit by the recession but recovered faster and their unemployment is much lower:Canadian Unemployment - 7.5%
German Unemployment - 6.8%
All the GOP ass-hats all pay lip service to "helping small business" but in reality they do nothing but do the traditional one trick pony stance of "deregulate and cut taxes on the uber rich." All of this despite eight years of Bush’s deregulation and cutting taxes on the wealthy that produced in their words:
Bush On Jobs: The Worst Track Record On Record
So what is going on in Germany and what do they know that we don’t?
In recession battle, Germany and China are winners
Most Americans, I suspect, believe we're losing manufacturing because we can't compete against cheap Chinese labor. But Germany has remained a manufacturing giant notwithstanding the rise of East Asia, making high-end products with a workforce that is more unionized and better paid than ours. German exports came to $1.1 trillion in 2009 -- roughly $125 billion more than we exported, though there are just 82 million Germans to our 310 million Americans. Germany's yearly trade balance went from a deficit of $6 billion in 1998 to a surplus of $267 billion in 2008 -- the same year the United States ran a trade deficit of $569 billion. Over those same 10 years, Germany's annual growth rate per capita exceeded ours.
Germany has increased its edge in world-class manufacturing even as we have squandered ours because its model of capitalism is superior to our own. For one thing, its financial sector serves the larger economy, not just itself. The typical German company has a long-term relationship with a single bank -- and for the smaller manufacturers that are the backbone of the German economy, those relationships are likely with one of Germany's 431 savings banks, each of them a local institution with a municipally appointed board, that shun capital markets and invest their depositors' savings in upgrading local enterprises. By American banking standards, the savings banks are incredibly dull. But they didn't lose money in the financial panic of 2008 and have financed an industrial sector that makes ours look anemic by comparison.
So even as Germany and China have been busily building, and selling us, high-speed trains, photovoltaic cells and lithium-ion batteries, we've spent the past decade, at the direction of our CEOs and bankers, shuttering 50,000 factories and springing credit-default swaps on an unsuspecting world. That's not to say our CEOs and bankers are conscious agents of foreign powers. But given what they've done to America, they might as well have been.
The comment about the banking structure is critical to understanding that it is policy decisions regarding our financial structures that make the difference.
The German savings banks mentioned in that article are required by law to invest back into their businesses. Here is the "money quote"... pardon the pun... in case you missed it.
The typical German company has a long-term relationship with a single bank -- and for the smaller manufacturers that are the backbone of the German economy, those relationships are likely with one of Germany's 431 savings banks, each of them a local institution with a municipally appointed board, that shun capital markets and invest their depositors' savings in upgrading local enterprises.
We have no such incentive in our banking system and small business loans are miniscule in our financial system because they banks go chasing high profits by selling securitized junk and seeking arbitrage opportunities by borrowing money from the Fed at almost zero interest and then buying high yield US Treasuries.
Small businesses produce over 65% of the jobs in this country but they can't get the support they need from the banks.
You want to change this country... change the financial institutions by changing the regulations on them!
So how did the Germans structure their savings banks and bank regulations to get them to work so well?
Germany: a banking ecology that supports the real economy
In Germany, federal and regional governments have created a set of rules around local and regional banks that obliges them to invest primarily in local businesses. This is critical as most lending to German SMEs comes from these sources. In 2010, 43.4% of the €440 billion of loans to German enterprises came from Sparkassen and Landesbanken (only 14% came from the big commercial banks), with Sparkassen providing the greater share.
Sparkassen are economically and legally independent credit institutions. They have no owners in the sense of having shareholders. They are incorporated under public law; a municipal trusteeship applies. They can be compared to foundations under public law: the municipal authorities are not shareholders and cannot sell the banks. Each savings bank has an executive board composed of executives who run the bank. These executives report to the supervisory board of the bank. Two thirds of the supervisory board’s members are appointed by the municipality and the remaining third are appointed by employees.
There is a savings bank law in each of the regions (Länder) and it is these laws which decree that a savings bank must fulfil a “public legal obligation”. In practice, this requires a “dual bottom line” business strategy. The dual bottom line means that the Sparkassen make a profit but must also serve their local community and foster sound local businesses. The law in each Land is likely to stipulate that the savings bank satisfy the credit demands of local businesses and private customers (financial inclusion).
Linked to these goals is the further stipulation that any trading surplus should be used to build up financial buffers and to pursue their wider social objectives. This is not to say that profit is not important for the banks; in many ways, it is of greater importance than for some commercial banks. The savings banks are unable to issue shares so their equity stems from retained earnings. Further restrictions, such as not being allowed to engage in risky trading or investment activities, mean that the savings banks are run on a very cautious business model.
Another advantage of the rooted nature of the Sparkassen is that they pay local corporate taxes which reflect the profits they obtain from their economic activity in that same region. There is a virtuous economic cycle whereby local deposits become local loans, and local profits become local taxes. The supervisory boards hold the banks to account and ensure they remain dual bottom line oriented. Prudential oversight is conducted by the association of regional savings banks and by the authorities.
OWS even has a financial group that is working on this:
Meet the Financial Wizards Working With Occupy Wall Street
They say all politics is local… well maybe banking regulation and management should be too!