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January 30, 2007

Global to Local: "It Ain't You, Babe"
Posted by Heather Hurlburt

Sometimes my progressive intellectual friends wonder why "the heartland" doesn't get it about the wonders of globalization.  Sometimes you even hear them doubt the intellects of folks who live out here, or down there, or wherever it is. 

Well, this January has been one hell of a month for globalization here in linked-in, tuned-in, high-tech and higher-ed Southeastern Michigan.  My neighbors, the ones without college degrees and the ones with PhDs, understand perfectly well that events far away have direct and unpredictable impact on our quiet lives here.  And aside from some of the great immigrants now playing baseball in Detroit, it's not really doing much for us.  Globalization giveth, and this month it's been taking away with a vengeance.

The quick summary:  "globalization" has pushed the ill-managed Big Three to the wall, along with many smaller firms that supply them with parts and services.  Now it's taking PhD. research and white-collar banking jobs, too.  And somehow, the remedies from Washington involve taxing our health insurance.

Jamal Simmons of DC and Detroit calls Michigan a "canary in the coalmine" for the country, and I think he is right.  It's no good being complacent about how all Michigan's woes were brought on by SUVs and auto company mismanagement, etc.  If we can't figure out how to even out some of globalization's ups and downs, and offer citizens a hopeful outlook on the job market here, where Henry Ford's assembly line practically invented the industrial middle class, we may need to kiss the post-industrial middle class good-bye.  And that means a lot more trouble for folks who want to see the US engaged in trade and economic openness, whether for profit motives or to help open our markets to countries and producers who are much worse off, I know well, than what we face here in the land of the wolverine.

Gory details below. 

Awhile back, global pharmaceutical giant Pfizer bought up various other pharmaceutical companies with facilities in Michigan.  They invested lots of money in state-of-the-art research facilities, brought in hundreds of highly qualified folks to work here, and contributed generously to local good causes.  Everyone knew the company had been mismanaged and cuts were coming.  But they wouldn't close state-of-the-art facilities and lay off the brilliant scientists who find the golden compounds, right?

Wrong.  As of last Monday, kiss 2100 jobs and Ann Arbor's biggest taxpayer goodbye.  (And impact estimates include another community job lost for every Pfizer job...)

Just in case you were tempted to think this wasn't about the global economy, Pfizer's CEO actually sent the governor of Michigan a letter saying that the closings were not the fault of Michigan's business climate, tax policies, etc.  Sorta like when your significant other dumps you and says, "it's not you, baby, it's the global economy?"

The same day, it was announced that US giant Citibank was purchasing ABN AMRO, the Dutch bank that bought out our local Standard Federal Bank a few years back.  Hurray for the US corporation?  Or worry for the 1,000 white-collar jobs here in town, at a facility it's hard to believe Citibank, with its operations all across the US, will need...

Lots of people, including our local GM, Ford and DaimlerChrysler executives, like to frame healthcare costs as a global competitiveness issue.  Get them away from the National Chamber of Commerce and they will quietly say that universal healthcare would sure help their bottom lines (employee healthcare costs add something like $1500 to the price of every GM car).  So last week, President Bush proposed to do something about healthcare.  But guess who pays?  People who already have what used to be defined as good health insurance... autoworkers, teachers and other folks who bargain collectively for their benefits.

And then there's global warming.  Ford is creating jobs to build a high-tech hybrid compact car... in England, where anti-global warming strategies reward companies for that kind of investment.  No such luck here. 

Now you are surely comforting yourself that Michigan is an extreme case, hampered by its extreme symbiosis with the auto industry and its memories of just how good life was in the good old days.  But the Pfizer and bank examples suggest that this just ain't so. 

This is what globalized vulnerability looks like  (DC residents, imagine what housing prices would look like if there were a prolonged hi-tech bust... or if AOL finally went away...).  And those of us who think that globalized opportunity is a phrase with real meaning need to spend some time considering how we use the rewards we reap to make sure other Americans come along for the ride.

Sorry Tom Friedman, but who needs mountains... when you've got sinkholes?


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The US government is actively promoting the export of jobs. Here's the US ambassador to Poland, Victor Ashe, crowing about his success:
". . . we’ve increased our share of investment and that the United States is now the second largest investor in Poland. The list of new investments is growing so quickly--Gillette, Avon, Johnson Controls, Pratt and Whitney, 3M, Firestone, and so on . . . These add up to hundreds of millions in dollars in investments, thousands of new jobs, and billions of dollars worth of future business activity. American investors are taking advantage of Poland’s skilled labor and European Union market access. Claiming 17% of Poland’s foreign direct investment, U.S. enterprise is a potent force in a range of product and service sectors."

Concerned about the automotive industry? Here's our good anbassador again: "U.S. companies have confirmed Poland’s status as Central Europe’s automotive capital and have invested billions of dollars in this sector. These include GM with its $1 billion investment in Gliwice, Delphi, Goodyear, Eaton, Federal Mogul, Fiat-GM Powertrain, Lear, TRW, Visteon, Gates and Wabco."

Environmental technologies? "We are striving to bring American leaders in the environmental technologies sector to Poland. A number of industry leaders are present in Poland, including Atkins, Fluor, Parsons Brinkerhoff, C.D.M, Foster Wheeler, Caterpillar, U.S. Filter and others."

How abouty Aerospace? "American companies such as Pratt & Whitney United Technologies, Lockheed Martin, and General Electric Aircraft Engines are investing in Poland’s aviation industry – a sector employing 16,000 skilled workers. There are discussions with Sikorsky and Boeing that we hope will add them to the list."

--Ambassador Victor Ashe, September 13, 2005

Hi -

Well, well, well.

Welcome to reality.

The American dream of the 1950s is over. No longer can a strong back and decent hand-eye coordination compete on world markets: that can be done just as well by someone in Romania, let alone Poland.

That US unions have kept their heads diggen deeply into the sand isn't surprising: after all, they created the status quo that means that GM carries the cost of health care that it does.

And believing that "universal health care" would actually change anyone's bottom line is ignorant at best: health care costs can be shared, but given the demographics, they won't be falling. You can chose between having your healthcare rationed and cheap, or free and expensive. No one wants to tell Grandma that she's not getting that hip replacement she needs and will spend the rest of her life in a wheelchair (this happens in Germany, where I live, to those whom a panel of doctors and insurance people decide what expenses aren't justifiable, based on how expensive the costs compared with life expectancy), and so you're going to get expensive health care.

And if you are really interested in reducing health care costs, then tort reform is a necessity in order to reduce liability insurance costs.

And you're wrong: it **is** you. It's your structural costs, i.e. those costs that you don't want to give up, because they are important to you, just like the Germans accept really high unemployment because they don't want to abandon their apprenticeship system, even though it's broken.

Want to compete? Then don't do it the way your grandfather did.

There are also examples out there of older, established nations re-inventing themselves. Austria, for instance, is the world leader in diesel technology, after funding 20 professorships at its technical universities for 20 years, resulting in a horde of diesel engineers. They made building up of clusters, for instance in Graz, very attractive, so that Austria now has a flourishing automobile industry.

But it does take vision and a willingness to destroy the old in order to create the new: this is painful in any case for those who don't want the new, who want the American dream of their grandparents with the myth of the nobility of labor and the myth of the cooperative relationship between unions and management.

That's the reality of economic change. Buggy makers went out of business as the automobile came along; perhaps the next step is the outmoded idea of coming into a large office with others to work. Being able to adjust to this will be the key to success: it won't be easy for anyone - everyone, from management to workers will have to change - but what else are you going to do?

Put your head into the ground and pretend it's not happening? We're not competing with Europe any more, we're competing with India and China today, with Vietnam and Malaysia tomorrow, and probably with the Congo and Mozambique thereafter.

Close the borders, create a Fichte'ian closed economy? Then you have impoverishment, since you abandon consumer benefit - and that consumer benefit is the alpha and omega of the system - for the benefit of a few workers. Sacrifice the well-being of the many for the well-being of the few: isn't that what the left say is the real problem?

This is great -- I didn't have to do anything and we have two comments that represent the two poles of thought on this issue rather nicely. Trouble is, guys, the debate between these two points of view has gotten rather sterile. You both describe the international market the way it is, and I agree with the second commenter that we can't change it by fiat. What we can change is how we organize our own society to take best advantage of it -- and do what social safety nets are supposed to do, smooth out the worst of the bumps. Make health care and pensions portable, look at ideas like New America's proposal for universal catastrophic insurance that would cushion families through industry-wide transitions, make sure that everybody who wants to use education to surf on top of the economy actually can. Those are all choices that don't hamper the supposedly perfect functioning of global markets that Don points to but do make lives much better. Of course, it also means we have to relax our orthodoxy a little bit about allowing other nations to do the same.

With all due respect, if the eventual alternative is loss of faith in our institutions, or even 1848 with nuclear, chemical and biological weapons, this seems a small price to pay.

My intent was not to describe an international market but to illustrate that the US government has more concern for corporate profits than it has for its citizens. What to do about it? Education and domestically-encouraged private enterprise, at which Americans excel, in the manner that Opie describes in the Austrian example. Not a hostile government, and not more insurance.

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The best prospect for getting the Europeans/others involved at this stage remains the same as it was before the war: working through the UN. (Setting aside of course, for purposes of this discussion, the self-imposed political restraints that make this administration extremely unlikely to work in this vein.) Specifically, other-than-US troops on the Buy Flomax Online ground, whether through NATO, in non-combat roles, or whatever, is not happening without a Security Council mandate. Secondly, greater international participation in contracting for redevelopment is essential to de-Americanize the crisis, but this also is unlikely to happen without some international oversight and coordination of the reconstruction effort, at the very least as a perceived Buy Glucophage Online objective venue for discussion and planning, and the UN is the only institution with the experience and capactity to run such a program. In addition to the carrot of contract prospects, the international community is likely to respond favorably to moves toward greater accountability by the US. It is very unlikely and probably even undesirable that this accountability will come in the form of some US commitment to international supervision of "security" practices: detention, interrogation, and military actions generally. However, the administration of reconstruction monies is an area that is in desperate need of transparency and tough effective oversight, and subjecting reconstruction financing and contract awards to a system of inspections and accountability in which other nations can participate has great value as a signal to the rest of the world that the US is willing to play by the rules and to cooperate with other nations. Again, the institution best suited to take on the task of providing some international accountability in contracting is the UN.
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