Like a junkie or a crack head, American industry has become addicted to third world labor. The driving force in the economic equation has become finding the lowest cost labor source. Like stealing the family TV, or money from mother's purse, they think only of the buzz or the high, the dividend or quarterly profit.
The image is put before our eyes that everyone is doing it, just as junkies try to rationalize their addiction. That it couldn't be helped, but of all the outsourcing on planet Earth the United States is responsible for 50%. Outsourcing has made Mexico a satellite, an import hub into the back door of the United States. Mexico's import partners are the US at 49.6%, China 10.5%, Japan 5.8%, South Korea 4.5%.
Mexican labor then assembles or manufactures these foreign imports to the tune of $305 billion then boxes it up for the trip north. Mexico exports 82.2% to the United States, so everyone is not doing it. Mexico's other neighbor to the north, Canada, receives only 2.4% of Mexico's exports. That makes Canada Mexico's second largest trading partner.
This system is sold to us by politicians of all stripes as being beneficial to one and all, but for Mexico it has been disastrous. A country with vast oil and natural gas resources exporting over two million barrels of oil per day and ten billion cubic meters of natural gas annually, Mexico has a current accounts deficit of almost $14 billion and an outstanding national debt of $181 billion. That's twice the amount of her foreign exchange and gold reserves.
Americans have been accused of living beyond their means, but the numbers imply that it might be true of Mexicans, as well. But, is that so? The average Mexican earns $14,200 per year, up only $300 since 2006 with an annual inflation rate of 6.1%. So where does the money go? The money goes to the foreign investors who take their profits home with them. Direct foreign investment in the Mexican economy is over $278.9 billion. Mexican employment is like working at McDonalds; you're never going to learn enough skills to open your own business. They'll never get rich and they'll never get ahead with employment and investment based only on low wages.
So, as we talk about the demise of America's big three automobile companies, let us remember that when they depart from us we will see their like no more. During the last ten years they have spent their profits on new factories in China and Russia, India and South Korea. They intend on being with us, just not on employing us. But just like the junkie coming down off his fix, they worry about how they can find that next fix. Who will they sell cars to when American affluence is diminished?
American Axle was GM's largest supplier of axle components and after an 87-day strike they successfully reduced wages from $27.00 per hour to $14.00 per hour. American Axle employees can no longer afford to buy new GM products. American Axle rewarded its CEO with an eight million-dollar bonus and then teeters itself toward bankruptcy. You see, the unemployed can't buy cars nor can the underpaid or underemployed, so GM can't pay the debts it owes to suppliers like American Axle. American Axle now finds itself on the begging end of the stick.
If GM bankrupts, it threatens more than one million jobs directly and $40 billion in supplier contracts. The demise of Pontiac follows Oldsmobile into the grave as GM withers from self-inflicted wounds. The cancer is spreading and all GM divisions are scrambling. Saturn is considering being spun off as a stand-alone entity that will import cars rebadged from another country as Saturns, with perhaps one domestically produced model.
The Saturn scenario is for a white knight from China or India or Italy to buy them and use the Saturn name to crack into the American market. They will make money by selling someone else's product, then watch those profits return to the investing country. This may rescue a few jobs, but we lose the strength of self-determination and innovation, working in the factories we once owned.
The root cause of it all, the banking crisis, the mortgage crisis, unemployment, falling wages, illegal immigration, and yes, even the health care crisis is globalism. PT Barnum said a sucker was born every minute; globalism proves that maxim. Ross Perot claimed NAFTA would create a giant sucking sound of jobs leaving this country. Anyone still want to argue the point with him? Perot also said, "Anybody can cut prices, but it takes brains to produce a better article." GM hasn't spent their money on either, the new Camaro weighs almost two tons and the top model costs over $35,000. The original concept of pony cars was a sporty, low-cost, affordable car.
The demise of the auto industry is like watching a member of the family die. You realize that things will never be the same again. Our country will be weaker, our neighbors poorer, our prospects dimmer. Service economies are dependent on the wealth of others; their employees, as the name implies, are servants of the wealthy.
A sad requiem for a nation that invented the airplane, the telephone, mass production, the steam boat, the record player, the microwave oven, the movie projector, the fax machine, the VCR and the computer. As well as the communications satellite, the lunar module and the space shuttle, and then traded it all for a cheap high of easy profits for stockholders and corporate executives. And with no regard for what that cheap high has done to the American landscape.
Yet still those in power cannot resist the addictive urge as GM plans to remove another twenty-one thousand American employees. What do you think, will that solve the problem? Those twenty-one thousand will become twenty-one thousand fewer taxpayers, losing cars and homes and becoming dependent on the thin, over-stretched social safety net. They will divorce and their families will dissolve. So what will be the fate of the children of these families?
If you believe that money is the root of all evil, come see what the lack of money brings. We can't all be rich, but none need be poor.
"A weak currency is the sign of a weak economy, and a weak economy leads to a weak nation." (Ross Perot)
"The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little."
(Franklin D. Roosevelt)
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