We Need More “Made in the USA” — Hear That, Apple? Congress?


What is the future of work? Which party will prevail in not only lowering our unhealthy unemployment rate but ensuring that job growth will continue based on genuine prosperity and not the “bubble economics” such as the housing and Internet bubble enabled by Bill Clinton? Let’s call it “Bubba economics.”

As I said in a previous post, the major driver of our economic doldrums is the rise of China and India during the past decade. What’s more, while economists can claim that the issue is China’s undervalued currency, it’s the slave wages that make outsourcing to China appealing. Let’s face it, American businesses didn’t relocate to southern states because they have a different currency but because they are “right to work” states.

President Obama’s announcement on Monday that the administration would take action against China for illegal subsidies of auto parts sheds a light on the enormous role China is playing in our economic doldrums.

But I’d contend that it’s cheap labor, not subsidies, that’s the problem. The reason why the last decade was the first since the Great Depression in which there was no net job creation in the U.S. is that the 500 million people in advanced economy labor pools, whose average daily wage is $135, can’t compete with the 1.1 billion people who make $12 a day in developing economies such as China, and the 1.3 billion people in rural economies where the daily wage is only $1 to $2 a day.

We didn’t used to outsource, at least not to this degree. In 1955 GM was the largest company, with more than 475,000 employees and only around 75,000 employed by overseas contractors. Today Apple is the biggest company, employing fewer than 50,000 employees here and more than 700,000 abroad.

The standard Republican response to economic doldrums — claiming that tax cuts will incentivize companies to “re-shore” jobs–is absurd. As even the conservative Wall Street Journal admitted, most major U.S. companies pay zero taxes.

While Huffington Post’s “What is Working” campaign has provided vital input on how we’ve got to train more Americans for highly skilled jobs — especially at community colleges — unfortunately the fastest growing jobs don’t require a college degree.

As economist Jeff Faux of the Economic Policy Institute has observed, “the Bureau of Labor Statistics projects that by 2014 the number of occupations filled by people with college degrees will rise by merely one percentage point — from 28 percent to 29 percent.”

What’s more, the BLS says that of the ten occupational groups that will add the most jobs between 2010 and 2020, five don’t even require a high-school diploma.

Those who think we can jump-start the economy by encouraging high tech start-ups need a reality check, given that too many of these start-ups wind up outsourcing much of their work. Wonder why California, our most entrepreneurial state, has one of the highest unemployment rates in the country — 11.5 percent as of March of this year compared to the U.S. rate of 8.3 percent?

In fact, four of the five Congressional districts in the U.S. with the highest proportional decline in jobs are in the tech-heavy San Francisco Bay area — oh, and the fifth is Austin, which is also a high tech area.

Says Intel founder Andy Grove, only about 166,000 people in the U.S. work in the computer manufacturing industry, a lower figure than when the first PC was assembled in 1975. “Meanwhile, a very effective computer manufacturing industry has emerged in Asia, employing about 1.5 million workers,” says Grove. Unlike Apple, GE and HP, “[Intel is] making three-quarters of those chips in the United States, even though three quarters of its microprocessor chips are sold elsewhere. Intel employs 44,000 people in the U.S., more than half its overall workforce of 84,000,” according to Robert D. Hof of Stanford Business Magazine online.

Grove knows first hand the price you pay if you don’t make the stuff you invented:

When Intel’s business consisted of making memory chips, we hesitated to add manufacturing capacity, not being all that sure about the market demand in years to come. Our Japanese competitors didn’t hesitate: They built the plants. Asian countries seem to understand that job creation must be the Number One objective of state economic policy.

Grove’s approach to re-source and re-shore jobs to the U.S.A?

Levy an extra tax on the product of offshored labor. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. If the result is a trade war, treat it like other wars — fight to win. If what I’m saying sounds protectionist so be it.

Grove offers Germany, which produces more high-end goods than China — from autos to renewable energy — as a role model. For one thing, management and labor have a more cooperative relationship, emphasizing on-the-job training and avoiding layoffs by substituting wage freezes or temporary shorter work weeks.

As I pointed out in a previous post, a little-discussed feature of the European Union is that it’s a partnership between large employers and their workers, not just between countries. Works councils, which are mandatory at most companies, not only enable workers to have veto power over job losses but give them the right to meet with management to discuss mergers and the introduction of new technologies, says Steven Hill in Europe’s Promise.

What’s more, some of the most effective economies are unionized AND European. Four of the 10 best economies are the Netherlands, Sweden, Finland and Switzerland. The European Trade Union Confederation consists of 81 unions with 60 million members compared to the AFL-CIO, which represents only 10 million workers., according to Europe’s Promise.

European countries also broker trade deals with other countries. As United Steelworkers President Leo Gerard put it, “If you look at the Scandinavian countries, if you look at Germany they’ve got strategies that include having a balanced trade agenda with China. If the Germans can have a balanced trade agenda why can’t we?”

It will take time and effort to change our labor and trade policies but Americans deserve to know what companies are outsourcing/offshoring their labor so they can choose to boycott them, as I’m doing with Apple products. Unfortunately, the GOP-dominated Congress very likely doesn’t want to offend major U.S. outsourcers, given that these companies are a major source of their campaign contributions — the Chamber of Commerce is the top spender, shelling out more than $885 million since 1998, according to CRP.

Earlier this year the House Republican majority voted down the Peters Outsourcing Accountability Amendment introduced by Rep. Gary Peters of Michigan, which would have required publicly held companies to reveal how many of their employees work overseas. I would urge you to contact your Congressperson (or Peters directly if you’re a New York resident) and urge him/her to ask Peters to re-introduce the bill. It’s a first step in keeping the vital subject of bringing jobs back home on the front burner, not to mention throwing the bums out who would dare impede an effort to bring them back.


U.S. Mill Re-Opens To Meet China’s Rising Demand For Diapers


Southern U.S. Loblolly Pine Picture:Beth J. Harpaz/AP











A Virginia paper mill that shut down a few years back is reopening to meet rising demand from China and India.

The mill is “gearing up to begin producing fluff pulp—the soft, white absorbent used in diapers, tampons, and some medical bandages,” this morning’s WSJ reports.

Fluff pulp is apparently made from the fibers of a type of pine tree that grows well in the Southern U.S., so it makes sense to make it in U.S. factories and ship it to Asia.

U.S. workers selling stuff to the rising middle class in China and India is, of course, good news. And it’s the sort of thing we’re likely to hear more of, for several reasons.

* China’s leaders want to shift the economy away from an over-reliance on construction projects and toward more middle-class consumption.

* Millions of Chinese people are moving into the middle class.

* Made-in-America is a mark of quality in China.

* China’s currency has been getting stronger relative to the dollar, which makes U.S. products are cheaper for Chinese consumers.

One exporter we visited in Shanghai last year said she saw a big future in selling U.S. imports in China.

“We would love to buy products from the U.S.,” she said. “We have seen what is happening in China, so we believe the market needs to turn.”


Fake Chinese parts in US-made arms leave India at risk

New York: India, a big buyer of American arms, is understandably concerned by a key US senate committee report that finds vast numbers of counterfeit Chinese electronic parts are being used in US military equipment. Where does it leave India if suspect parts have crept into US-built aircrafts and missiles it has bought or put on its shopping list? The failure of a single electronic component could put an Indian airman or soldier at risk.

Over a 14-month investigation, the Senate committee’s investigative staff amassed a database with 1,800 cases of counterfeiting involving about 1 million parts. It found that 70 percent of the suspect parts were traced to fly-by-night, unscrupulous Chinese companies who supplied electronics and other computer chips to large US defence manufacturers.

Picture courtesy Boeing
India will acquire ten C-17 Globemaster-III aircrafts from Boeing for $4.1 billion, which will be delivered in 2013.

Defence Minister AK Antony told the Rajya Sabha in a written reply on Wednesday that India was verifying if “faulty spare parts made in China” were used in defence equipment being sold by the US to India.

“There have been media reports in this regard, which are being verified,” Antony said this week.

According to Bloomberg, the US Air Force had in January this year suspended a company called Hong Dark Electronic Trade Co., in Shenzhen (in southern China), from supplying parts to US contractors after it supplied about 84,000 fake components to a middleman, who then sold the suspect electronic parts to Boeing, Lockheed Martin, Raytheon, L-3 Communications, among others.

Bloomberg quoted Air Force Deputy General Counsel Steven Shaw’s memo saying; œMany of the 84,000 electronic parts from Hong Dark have been installed on aircraft such the C-17 transport and helicopters such as the AH-64 Apache and CH-46.”

Given Shaw’s memo, India should double-check what it is paying for when it receives new aircraft. The first of the 10 Boeing C-17 Globemaster III aircraft ordered last year will be delivered to the Indian Air Force in June next year. India is forking over $4.1 billion (Rs 22,960 crore) to buy the US Air Force’s workhorse used extensively in Iraq and Afghanistan, making it the largest defence contract to have been signed by the two governments.

Antony listed some of the other US military equipment India had bought in the last five years. Last year, India purchased an amphibious transport vessel, the USS Trenton (re-christened INS Jalashwa), for nearly $50 million with six-UH-3H helicopters to operate alongside, costing another $49 million.

It also bought Harpoon anti-submarine missiles under a package worth $200 million, and long-range acoustic devices, modern hull penetrating periscopes, side scan sonar, C-130J transport aircraft, sensor-fused weapons, P-8I long range maritime reconnaissance aircraft and quick reaction team boats from the US.

One reason India is beefing up its arsenal is China, which has been expanding its military and modernising its equipment at a tear. This has triggered a simultaneous build-up of advanced weaponry in the Asia-Pacific region on a scale and at a speed not seen since the Cold War arms race between America and the Soviet Union.

India has purchased some $12.7 billion in arms, 80 percent of them from Russia, during 2007-2011, according to the Stockholm International Peace Research Institute (SIPRI). India and the US want to eventually move beyond a seller-buyer relationship to substantial co-production and eventually, high-technology joint research and development of weapons.


Original Post: http://www.firstpost.com/world/fake-chinese-parts-in-made-in-usa-arms-leave-india-at-risk-414524.html

Seven Reasons Outsourced U.S. Bank IT Jobs Are Heading Back Onshore

Some bank IT jobs that have been outsourced for the past 10 years or so are coming back stateside, at least according to one expert. “A number of banks have told me they’re pulling back work from offshore, particularly from India but not only India,” says Harley Lippman, founder and chief executive of Genesis10, an IT consulting and staffing firm based in New York. “India is still the epicenter of IT work for major banks, although some work has gone to China, Eastern Brazil and other locations.”

Lippman doesn’t have numbers to back this observation. “I’m gathering that as we speak,” he says. “A lot of people are interested in that.”

Lippman’s own company has benefited from this trend, although he declined to name any bank clients. His firm is hiring in Troy, Michigan; Atlanta (where it just opened a new facility); Grand Rapids, Mich.; and Kansas City, Mo. “That’s all driven by bank client demand,” Lippman says.

Some banks are bringing the work back in house, but the majority are finding an onshore outsourcing provider, Lippman says. “In all banks there’s head-count pressure; there continues to be cost pressure, there’s pressure on execution and delivery for all the major banks,” he says. Outsourcing offers variable costs and the flexibility to ramp up and down as the volume of work fluctuates.

Offshoring made sense 10 years ago, when a New York City programmer might have cost $100 an hour, versus $15 an hour for a worker with similar skills in India, Lippman says. “Today it’s very different, the world is more flat,” he says. “Jeffrey Immelt,” the General Electric chief executive, “said there’s no more cheap labor; I found that quite significant.” Inflation is over 20% in India.

Why are banks turning from offshoring to onshoring? Lippman offers several reasons:

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Engineer gets 32 years for military secrets sale

FILE - In this undated passport photo provided by the Gowadia family, Noshir Gowadia, accused of selling military secrets to China, is shown. Prosecut

AP – FILE - In this undated passport photo provided by the Gowadia family, Noshir Gowadia, accused of selling

HONOLULU – A former B-2 stealth bomber engineer was sentenced to 32 years in prison Monday for selling military secrets to China in the latest of several high-profile cases of Chinese espionage in the U.S.

Chief U.S. District Judge Susan Oki Mollway said Noshir Gowadia, 66, would likely be in his late 80s by the time he is released if he gets credit for good behavior in prison.

“He broke his oath of loyalty to this country,” Mollway said. “He was found guilty of marketing valuable technology to foreign countries for personal gain.”

Gowadia was convicted in August on 14 counts, including communicating national defense information to aid a foreign nation and violating the arms export control act.

Prosecutors said Gowadia helped China design a stealth cruise missile to get money to pay the $15,000-a-month mortgage on his luxurious multimillion dollar home overlooking the ocean on Maui. They say he pocketed at least $110,000 by selling military secrets.

The defense argued Gowadia only provided unclassified information to China and was innocent.

His son, Ashton Gowadia, told reporters the jury wasn’t able to see documents that would absolve his father of the crimes because they were deemed classified. He said his father’s defense team would present these during an appeal.

“My father would never, ever do anything to intentionally to hurt this country,” Ashton Gowadia said. “We hope the convictions will be overturned and he’ll be able to go home.”

Assistant U.S. Attorney Ken Sorenson, the lead prosecutor, had asked Mollway to sentence Gowadia to life in prison. But he said 32 years was a stiff and appropriate sentence given Gowadia’s age.

“We’re confident the message is sent that when you compromise U.S. national security, when you disclose national defense secrets, when you profit by U.S. national defense information, that you will be punished, you will be pursued, you will be convicted,” Sorenson told reporters.

A federal jury in Honolulu found Gowadia helped China design a cruise missile exhaust nozzle that would give off less heat, allowing the missile to evade infrared radar detection and U.S. heat-seeking missiles.

The jury, after hearing 39 days of evidence over nearly four months, also found Gowadia guilty of attempting to sell classified stealth technology to the Swiss government and businesses in Israel and Germany.

The case follows other high-profile convictions of people accused of providing secrets to China.

Last March, Chinese-born engineer Dongfan “Greg” Chung was sentenced to more than 15 years in prison after he was convicted of six counts of economic espionage and other federal charges.

A defense contractor engineer, Chi Mak, was sentenced in 2008 to 24 years in prison after being convicted of conspiracy to export U.S. defense technology to China.

Gowadia’s sentencing came just weeks after China conducted a flight test of its new J-20 stealth fighter during a visit to Beijing by U.S. Defense Secretary Robert Gates.

The Jan. 11 flight was held at an airfield in Chengdu, where prosecutors said Gowadia delivered an oral presentation on classified stealth technology in 2003.

Chengdu is a center for Chinese fighter aircraft and cruise missile research and development.

The judge sentenced Gowadia to 32 years for each of two counts of communicating national defense information to aid a foreign nation.

She also gave him 20 years for each of four counts of violating the arms export control act, and 10 years for each of five lesser counts including money laundering. He received five years for one count of conspiracy and three years for two counts of filing a false tax return.

But Mollway ordered the sentences to run together.

Gowadia has already spent more than five years at Honolulu’s federal detention center after he was ordered held without bail following his 2005 arrest.

The engineer helped design the propulsion system for the B-2 bomber when he worked at Northrop Corp., now known as Northrop Grumman Corp., between 1968 and 1986.

Born in India, Gowadia moved to the U.S. for postgraduate work in the 1960s and became a U.S. citizen about a decade later. He moved to Maui in 1999.

(This version CORRECTS to reflect Gowadia is not Chinese.)

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