Tuesday, May 21, 2013

Unrequited Love: American Workers + Big Business

Government officials and the media love to trumpet small businesses. Big Biz is evil and corrupt. Small Biz is the engine of growth and local. Big Biz is ruled by management far away + seems to lay off more employees than they hires. They create 70% of all news jobs. They are the backbone of the economy. Maybe the next Apple is in your garage. Martin Wolk puts is wonderfully that "there is something magical, almost mythical, about small business in America". It is selling the dream to the masses as well as finding the contemporary version of the individual homesteader or pioneer. It's not as risky as being an Oklahoma Sooner but in our comfortable modern existence, we pretend it is. Americans are also completely aware of the dark side of Big Biz but love it. We want their products. We need their tax revenue. We desperately need to see them join in with hiring, but Big Biz gives us the stiff arm and says, "just keep buying".

It is the terrible that big business isn't hiring. Their benefits are better. They usually pay more. Medical insurance premiums are lower due to size, spreading the risk and fixed expenses over more employees than small firms. Their vacation and sick time allowances are usually codified and richer than smaller firms. Workers might whine about the drone effect in cubicle farms, but they love them. Outsiders want to work for them, and communities lure them to situs in their city because of the effects of having big employers present. Big Biz has a major advantage and different approach than small firms. A legacy to the union era in America, they invest more in machinery and capital since machines don't strike, get sick, slack and are far easier to rely on and plan for long term production. Global wage arbitrage is an additional horrible concept to screw over workers, and feels more like cheating than the progress of robotic development. Big Biz has to invest in research and spend money to replace humans with machines, but outsourcing is just moving the work to a lower cost, easier to pollute area. Big Biz can do both of these things far easier than smaller firms because they have entire R&D departments. They also can rent seek with the government with far greater success.

That is why the relationship is economic unrequited love. Americans love the products and really want to work for those big firms, but they aren't hiring. Americans may love Apple as a cool, visionary company, but Apple does not care about Americans beyond "keep buying our shit". Founded in 1964, NIKE made their shoes in the US with factories in multiple states, but within 25 years not a single shoe was made by the same people it would market the shoes to as cool. The cash hoards that large corporations amass stay parked in foreign locations or are reinvested into overseas operations. Sorry, Joe Sixpack we need to 'right size' the factory, but keep buying our shit. The switch from worker to consumer occurs, and the show goes on. The creep from effecting low skilled blue collar work to higher skilled blue collar work has continued despite overwhelming quality and supply chain data showing the problems with this method. Big Biz gotta hit EPS. Gotta please Wall St. This will not change as long as our system allows them to keep enough politicians in their pockets. Just keep buying.


vultureofcritique said...

Great Britain was arrogant. Eventually it got its nose bloodied several times. The "Great War" tore a chunk out of its demographics. Then Eisenhower refused to assist it in its 1956 aggression in the Suez region. Slowly, like an aged boxer who begins to realize that he simply cannot punch as hard as he used to, Britain began to realize that its empire was no longer the planet's colossal hyperpower.

Likewise, the USA will probably suffer not one, but several "bloody nose" moments. The people far from Washington DC will be the first to realize that not all is as it once was. That is when you might be able to see some significant economic changes.

Slowly, the facts will be recognized within the Beltway.

Phoenix said...

In the long run it will hurt them. As they destroy domestic wages through offshoring, automation and immigration, people will have less money to throw away on consumption. Especially as the rentier economy munches up their take home pay. Credit is already in bubbles and the party will have to end someday. Retail spending is already on the decline despite all of that life support.

I suspect the trend of big business domination will only continue, as oppressive mandates and regulation will force small businesses to tank under overhead costs. I think that's one of the reasons Amazon is coming around to state taxes, which might temporarily hurt growth but will destroy the competition.

PRCD said...

The beltway won't understand anything until the G20 gets off the dollar as the reserve world currency. Once we can no longer export debt, the wheels will come off in earnest. More than likely, our military will shrink, which is not a bad thing. At the same time though, government employment will stay the same. That is until the private sector starts going hungry as is happening in Greece.

Son of Brock Landers said...

All good comments. I see the US as suffering a series of non-military setbacks, of which we've seen the beginning already. The Chinese bilateral trade agreements, failure of climate change international agreements and even just the rejection of a giant coalition for Iraq are signs.