First Posted: 3/27/2015
We were the largest creditor nation in the world. As the 1980s progressed our trade deficits continued to increase and today we are the largest debtor nation in the world. In the early 1980s Sam Walton, a businessman, said “We cannot continue to be a solvent nation as long as we pursue this current accelerating direction.” He was referring to the trade deficit. Those trade deficits he referred to were miniscule in the 1980s compared to the ones today. He was correct. We are now $17 trillion in debt with interest eating up part of our budget. While we may not blame all this on the trade deficit, it surely has played a role on where we are now.
When we see manufacturing plants close we may only consider the effect it has on those workers at that facility. That is the farthest thing from the truth. It affects our community, state and the nation. It affects all of us directly or indirectly.
Let us look at the effects when a facility closes and moves overseas. We lose the wages and benefits that employees bring to the community. Then there are the tax revenues that are lost. State and local taxes along with social security, property taxes, and unemployment and workers compensation funds lost. There is the loss in sales to local and state suppliers to include utilities, natural gas services and healthcare benefits.
A good example was a statement made by a former Allen County Auditor, Herb McElwain in 1974.”We must remind ourselves that 30 industries paid almost half the real state and property taxes in Allen County.” Later we saw industries on that list close and move out of our area, some moving out of the country. Airfoil Textron closed and Shawnee schools lost $171,000 in tax revenue. When Sundstrand closed Shawnee schools lost well over $200,000 in school tax revenues annually. The list of plant closures that were on that list includes Sheller Globe, Clark Equipment, Warner Swasey, and Artex to list a few.
Just consider that over 90 percent of all the clothes, toys and shoes we buy in this country are made overseas. That doesn’t take in to consideration all the small appliances, electronics, tools and building materials imported into this country. Call on a credit card problem and find you may be talking to someone overseas. Can you imagine the tax revenues these once generated?
It is not just the jobs or the tax base that we lose; it is also the transfer of wealth. In 1982 the top two largest banks in the top 10 in the world were American with two Japanese banks one placing eighth and the other tenth. Our largest trade deficits in the eighties were with Japan. By 1986 the top five banks in the top 10 banks were Japanese with Japan totaling seven in the top 10. The United States placed one coming in at sixth place. Today three of the top 10 banks in the world with one listed at the top are Chinese. Five years ago they didn’t have one.
Let’s not stop there. There are other effects some trade has on our country. Walter Reuther, a labor leader once said “If you don’t raise the standard of living of you competitors, then they will drag yours down.” A closer look at some of our trading partner’s wages reveals a great gap from ours. Wages in Bangladesh is at $68 a month. The minimum wage in India is set at $2.18 a day. In Nepal the minimum wage is at 45 cents a day.
Child labor is something we addressed long ago. At one time our children were found in mining operations and cotton mills. Yet, in many countries we trade with still allow child labor. You can find children at ages five to seventeen working in conditions we would not tolerate or allow our children to work in.
Then there are safety issues that should be addressed. Bangladesh recently had several facility accidents that involved 1100 deaths. In 2006 China mining operations recorded 5,000 fatalities not to include the number of injuries in that occupation. In 2011 China recorded 79,552 workplace fatalities. That’s an average of 218 a day.
You may ask how all this affects us. Let’s say you, the reader, own a manufacturing plant that makes baseball hats. You pay your workers $12 an hour plus benefits. You have stockholders and are paying them $2 dividends per share. Your plant is in the USA. I own a plant in the USA and pay identical wages and benefits to my employees. I return $2 dividends per share to my stockholders. We both sell our hats for $10.
I move my operation overseas to Bangladesh where wages are $68.00 a month. I don’t have to worry about the safety and environmental issues. Nor am I strapped with any benefit costs. I produce my hat at a fraction of the cost you have. Children as young as seven work in my factory. I come back and sell my hat at a cost of $9. That’s one dollar cheaper than yours. I may even sell it at the same price as yours. The difference is I will now pay my stockholders $4 dividends a share. That is double your returns per share. Your stockholders will be telling you the need to match that or they will be taking their money out of your company and investing in mind. The end result of this process is you going to your employees asking them for wage cuts and benefit cuts so you can match the $4 per share dividend I am giving. The pressure may become so great you will have to move your operation overseas to satisfy your stockholders.
If you look at our economy today wages and benefits are stagnant. The stock market is at its highest levels. There are more part time and temporary jobs replacing permanent ones. In June of 2012 the Department of Labor reported that the nation has 2.7 million temp workers, the highest on record. Ohio temporary staffing services employed 105,412 in 2012 compared to 73,757 in 2009.
Is it like a sinking ship? As the ship goes down the first levels get wet. As it continues to sink it will swallow up all levels until everyone gets wet. Are we that sinking ship? Can we stop the water from coming in?
