Part 2: Unemployment crisis in America — Why?
The previous post discussed the severe unemployment situation. How could this happen here in America, bastion of wealth, land of opportunity; a nation blessed with natural resources? Not everyone is suffering. Corporate profits are way up  and the wealthy continue to grow wealthier. This post examines some of the mega-factors that contribute to this paradox.
Outsourcing of jobs and production. As Robert Reich, former Labor Secretary in the Clinton Administration, says, “[L]ook at GE, the bellwether of American corporations — 60 percent of its business is now coming from outside the U.S. And that’s where 54 percent of its employees are. Almost half the sales of the S&P 500 are now overseas. The Commerce Department reports that in the past decade American multinationals have eliminated almost 3 million jobs in the U.S. while adding more than 2 million abroad.”  In short, the corporations are going to low-wage countries. Hard to see how cutting corporate taxes will stop this process – unless the cuts are tied to domestic job creation.
Failure to invest – corporations: Despite rising profits, U.S. corporations are now withholding $ 2 trillions in capital from the economy. “Companies like Microsoft are raising billions of dollars by issuing bonds at ultra-low interest rates, but few of them are actually spending the money on new factories, equipment or jobs. Instead, they are stockpiling the cash until the economy improves. The development presents something of a chicken-and-egg situation: Corporations keep saving, waiting for the economy to perk up — but the economy is unlikely to perk up if corporations keep saving.”  My cynical side asks if the mega-corps are simply waiting for the GOP to take the White House in 2012.
Failure to invest in infrastructure: The U.S. infrastructure from roads and bridges to water and sewerage systems are in a wretched state. As Senator John Kerry put it, “while Europe and Japan have bullet trains that run at 250 miles an error, here we are struggling to keep Amtrak.”  Restoration and modernization of America’s infrastructure has multiple benefits including millions of jobs that can’t be shipped abroad and that will spur local economic development, increased competiveness of the U.S. economy, improved health, safety and sustainability of communities, the restoration of confidence in America. Also, it would create an outlet for union and public pension funds invested in countries like China and India where the products we import are manufactured.
Increased productivity, increased profits, fewer jobs. Walk into most supermarkets and look at the present ratio of electronic checkout counters to the traditional ones operated by people. Similarly, many corporations are investing in equipment that increases productivity and profitability but reduces the size of the work force. No medical care or union negotiations with robots.
According to Peter Goodman of the NY Times, “Automation has helped manufacturing cut 5.6 million jobs since 2000 — the sort of jobs that once provided lower-skilled workers with middle-class paychecks…The declining influence of unions has made it easier for employers to shift work to part-time and temporary employees.” Global economist Allen Sinai (Decision Economics) quoted in Goodman’s article is blunt, “American business is about maximizing shareholder value. You basically don’t want workers. You hire less, and you try to find capital equipment to replace them.”
Feedback loops and vicious cycles: Looking at the laundry list doesn’t explain the whole fiasco. Consider also interconnected feedback loops and downward spirals. Say a large manufacturing company decides to move production overseas and lays off thousands of workers. Local sales decline and a number of retail outlets go belly up or layoff more people resulting in higher unemployment and fewer sales and so forth. Tax revenues decline and state and local governments facing mounting budget deficits layoff hundreds more. And so forth. Conversely, economic development which creates local jobs creates feedback mechanisms that boost local economies and more jobs.
 Robert Powell, NY Times, “Profits are Booming. Why Aren’t Jobs?,” January 8, 2011, http://www.nytimes.com/2011/01/09/weekinreview/09powell.html
 Robert Reich, radio opinion on Marketplace, Wednesday, May 4, 2011,http://marketplace.publicradio.org/display/web/2011/05/04/pm-corporate-profits-dont-translate/
Graham Bowley, NY Times, “Debt for Cheap Corporations Fails to Spur Economy,” October 3, 2010,http://www.nytimes.com/2010/10/04/business/04borrow.html
 U.S. Senator John Kerry, Colloquium, A Bank to Rebuild America? June 8, 2011. Kerry is co-sponsor of a bipartisan bill that would initiate a national infrastructure bank that would issue long-term loans for infrastructure projects. You can see a video of his stirring speech at: http://www.newamerica.net/events/2011/a_bank_to_rebuild_america
 Peter Goodman, NY Times, “The New Poor: Despite Signs of Recovery, Chronic Joblessness Rises,” February 20, 2010, http://www.nytimes.com/2010/02/21/business/economy/21unemployed.html