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The Rich Don’t Need The Rest of America
| August 13, 2010 | Posted by Roshawn Watson under Uncategorized |
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| Frustrated American Worker |
By: Roshawn Watson
Fortunes of many American companies and investors use to be closely tied to American workers and consumers. However, this is no longer the case. Many of the financial elite have become increasingly less financially dependent on America. This decreased dependence has widened the schism between the have and have-nots and pushed some of the non-wealthy to the brink of obsolescence.
Who Moved My Cheese?
In the runaway bestseller Who Moved My Cheese, Spencer Johnson, M.D argues that change is inevitable. Cheese is a metaphor for anything that we want in life. For instance, cheese could be jobs or money. Spencer advocates that even if we do “obtain some cheese,” it is imperative to prepare for change rather than get caught by surprise when it occurs.
There has clearly been a shift, and Americans are struggling to navigate the dramatic changes. With the economy in its current state, the job market has been quite challenging. Companies and investors are increasingly looking for ways to increase bottom lines. Workers are sometimes the casualties. As we know all too well, all it takes is the stroke of an administrator’s pen to eliminate thousands of jobs nationally while simultaneously improving profits. Sometimes such layoffs are coupled with establishing offshore facilities that costs much less. Many of the American wealthy have decentralized their fortunes in this manner, making them increasingly disconnected to the fates of Americans. Consider that the economic viability of the wealthy is more tied to their assets rather than income from a job. Thus, it is conceivable that if those assets are not based in the U.S., then there is decreased financial incentive to improve the U.S. economy.
Does money flows towards where it is treated best?
In Will the Economy Collapse in 2011?, we discussed how money flows to where it is treated most kindly. For instance, nationally we have the most growth and prosperity in states with no income taxes. Often the wealthy determine the composition, magnitude, and of the location of their income based on economic incentives. The globalization of the workforce is probably one of the best known examples. One product of having a global labor force is that Americans sometimes competing against better skilled foreign workers available for cheaper prices. Similarly, Wall Street investors can make tremendous wealth through investments that are unconnected to the American economy. Thus, an American workforce is NOT required for American investors and corporations to prosper.
Additionally, since economists believe Americans are too frugal now, many American businesses have systematically embraced other markets. Perhaps you would be surprised to know just how much of Aflac’s insurance business is done in Japan (about 75%). Recently, its second quarter profits were up 85% compared to last year, mostly attributable to a strong yen (they actually loss money in the US). The point is even with the world’s largest economy, U.S. dollars may not be good enough incentive to keep American businesses catering predominantly to the U.S. market. Note, by putting those dollars to work in places like India and emerging markets, there is much more immediate and substantial growth potential.
As the largest consumer market globally, the U.S. will surely not be abandoned. However, the economic landscape is constantly changing. Those of us unable to “find the cheese” are being left behind financially, which is very frightening. Simultaneously, the rich have returned to boom levels and many have deliberately insulated themselves from our temperamental markets and may no longer have financial motivation to assist the American economy.
This quote summarizes the situation perfectly, “(a) member of the elite can make money from factories in China that sell to consumers in India, while relying entirely or almost entirely on immigrant servants at one of several homes around the country.”
With the financial decoupling of the rich from the rest of the country, many American works are just replaceable.
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Will the Economy Collapse In 2011?
Is the US system becoming a government of the elite, for the elite, and by the elite? The poor believe that increasing government power makes life better for them, but in the long run, excessive government power makes everyone poorer, except for those that can grip enough of the reins of power to swing things in their direction.
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I have to say that I have worried that, as your post brings out, that we are creating a large permanent underclass in this country. It puzzles me that business doesn't seem to see that it is in their interests not to let this happen. After all if people get good jobs they make good consumers.
As you point out, American businesses are licking their chops looking at the Chinese, Indian and other emerging economies markets.
Great summarizing quote at the end.
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Well said my friend. In the case of government, bigger is not better. It is easy to think that someone will look out for your best interests. However, there are many interests to look out for as a politician. Some will undoubtedly be contrary your own.
Yeah, it's humbling to know that not even our dollars go as far as they use to. With global markets, laborers and consumers can be found all over the world.
Shawn, Interesting title. Taking the conversation a bit further, the US economy is really at a precipice now, with the tremendous globalization, slowing US growth, and developing nations gaining ground against the US. The future looks quite uncertain economically.
I definitely get your point. It is unclear what will happen to the U.S. economically, especially for the poor and middle class. In the long-term, I do think many of our companies will do just fine. However, the unemployment and underemployment are particularly concerning, for I do not want there to be an underclass society here. I am not oppose to slower growth, provided that it is real sustainable growth. Kind Regards,
Shawn