Monday, May 17, 2010


The US cuts, not grows manufacturing capacity

by Larry Geller

But then we told you that would happen. Why manufacture cars (for example) in the USA when they can be made in Mexico or China and just sold here for more profit? No pesky unions, in fact, no pesky workers, are needed. From Ezra Klein’s Wonkbook daily email:

On Friday, the Federal Reserve reported that the U.S. cut manufacturing capacity, or the amount of goods that can be made in the nation's factories when they are operating at full tilt, by 0.1% in April, compared with the month before, putting it a total of 1.7% below the peak it hit in late 2008. By comparison, the U.S. cut capacity by a total of only 0.6% in the aftermath of the last recession, which was the only other time the U.S. has shed capacity.

The followon to this could be that as unemployment continues to bite and US citizens can no longer afford cars, US companies will simply sell them to Chinese consumers instead, and throw us all under the bus, so to speak.

So where will jobs come from? They won’t necessarily come back soon. From another part of Klein’s newsletter:

Large businesses can't hire enough to drive the recovery, writes Meredith Whitney: Small businesses created 64% of new jobs over the past 15 years, but they have cut five million jobs since the onset of this credit crisis. Large businesses, by comparison, have shed three million jobs in the past two years. Small businesses continue to struggle to gain access to credit and cannot hire in this environment. Thus, the full weight of job creation falls upon large businesses. It would take large businesses rehiring 100% of the three million workers laid off over the past two years to make a substantial change in jobless numbers.

“Large businesses” almost certainly don’t want those workers back if they can figure out how to do without them. That’s nothing new, but they find themselves for the first time with a lean workforce.

bird_manager_cracking_whip Those still employed are being pushed to the limits, working themselves hard, just to keep their jobs. That’s an ideal situation for employers, who would be out of character if they acted on generous impulses and just hired more people. In fact, it would probably be against shareholder interest if they did any such thing.

It’s Naomi Klein’s “Shock Doctrine” at work, and no encouragement for those awaiting a recovery.

…Klein launches a highly polemical, and persuasive, assault on free-market fundamentalism. She rips into the big-business agenda to show how economic opportunists need and promote misery and disaster…  [LA Times]



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