America became rich and strong on the backs of men and women who worked hard. Without laborers, Rockefeller and Ford would have produced nothing. The Koch brothers aren’t mining their own coal. They profit from the back breaking labor of others. A few of the rich people accumulated their wealth by inventing something. Others achieved their wealth through celebrity as with entertainers, writers, professional sports, etc.
But a vast majority of the very wealthy made their fortunes by leveraging the labor of others. The economy of America does not run on money alone. It takes a collaborative engagement of money and labor to produce our GDP. The rich claim that they provide the fuel (money) to grow business and provide jobs. But labor can rightfully claim that they provide the workforce that produces the goods and services that get measured in GDP.
As a former Republican, I get angry with the Republicans now, who claim money or capital is the answer to job creation and economic prosperity. Henry Ford knew what it would take to make his company successful. He openly spoke about his own conviction to assure his workers had sufficient earned income to buy one of the cars they were building. Ford saw that the only way he could prosper as an auto manufacturer was if the masses had sufficient income to buy his cars. It was as clear seventy five years ago as it is today that if we produce products that our own people could afford to consume, then we could self generate a strong domestic economy.
The BRICs, Brazil, India, Russia and China, are all significantly adding to their economic growth by delivering goods and services to their own people. But what happens when declining wages curtail domestic consumption? What happens when the products we want are produced cheaper by some other country? We get the stagnated American economy we have now. The Republican agenda has harped about the need to lower taxes to generate more capital for investment and thereby job creation, and it really is not about the supply of investment capital.
In fact that notion is absolutely absurd. We currently have over $5 trillion in investable resources parked on the sidelines in treasuries and money market funds unwilling to invest in America because there is no confidence we can get our bitter partisan politics behind us, and adopt a meaningful agenda to move this country forward. Don’t get me wrong, I am a devout capitalist! Capital needs to be rewarded. The money sitting on the sidelines is waiting for some assurance that any investments now made will produce returns relative to the risks. But human capital needs to be rewarded as well to assure that our workforce is able to participate in domestic consumption.
The most interesting thing to me about the current state of America’s domestic economy is the opportunity it is providing to others. While we bemoan the inability to get our economy fully rejuvenated, foreign manufacturers, like Audi and Hyundai are continuing to expand production facilities here. The available US workforce, together with our trade regulations, tariffs, material supplies and transportation have caught the attention of both companies. Audi, in announcing their decision last month to open a Western Hemisphere manufacturing facility in Mexcio, credited the decision in part to the ability to efficiently source common parts from the plant of their Volkswagen parent in Chattanooga, TN. Hyundai, has said it is considering an expansion of its Alabama manufacturing facility not just to meet US demand but as the logical choice for manufacturing vehicles intended to be shipped and sold in Europe. Wind turbine manufactures Vestas (Denmark), Gamesa (Spain), and Goldwind (China) are all developing US manufacturing plants. Abengoa the largest Spanish solar development company (Seville, Spain) is building a massive CSP solar project in the Mojave Desert and will sell the power to the two largest California public utilities. Why are these very credible foreign companies able to see the opportunities and make the investments in the US when our own top business leadership complains about over regulation, excessive taxation and job-killing public policy?
Arcelor-Mittal (India) is now the top producer of steel in the US. How did that happen? They simply bought up all the financially struggling US based steel companies who said they simply couldn’t compete on the global stage while saddled with our labor unions and environmental regulations. Arcelor-Mittal bought the troubled plants, closed some, invested the capital to update many others, and now Arcelor-Mittal is not only the largest US steel manufacturer, but also the largest globally. I am worried that American business leadership no longer is capable of competing on the world stage.
These are only a few of hundreds of examples where American business squandered opportunities that were later seized upon by foreign investors and turned significant profitable ventures. I worry that our business leadership is believing too much of our ugly negative press while the world around us takes advantage of our own opportunities. Our intensely negative media and our vitriolic politics have incapacitated us.
The rest of the world is watching and wondering if America can get its act together. We will pay a very dear long range price, domestically and internationally, if we don’t.