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If I said… “Hey, dude, what happened 100 years ago today?”…. about 4 out of every 25,000 of you, would know and answer back with a question…. “Are you sure you are not talking about 100 years yesterday?” You would be officially right of course… June 28th…. But I would be “politically” right, I guess, (struggling for an adjective to describe the rightness I would be..).
To fill in the rest of the 24,996 of you…. yesterday marked the 100th anniversary of the shooting of the Archduke of Ferdnand,,,,
“Who the fvck is that?” say 24,996 people all at once…. (People in Oklahoma hear that rumble as another frack quake..)
Since reality is 100% of reality, I’ll take that on….
In 1914… there were 5 nations that mattered. One of the nations that didn’t matter back then would have been the United States; others: China, and Japan… The 5 nations that were relevant back then actually included Russia, believe it or not…. with Germany, France, Britain, and Austria-Hungary rounding out the full 5… This last nation, I always think of as a joke, and say so sometimes… (“What? Austria’s Hungry? What a joke!”) That is because I tend to ignorant of anything southeast of Germany… I’m an American, you know…
Austria Hungary was called the Dual Kingdom… Can you guess why? One was Austria, the other was Hungary. Austria ran Austria/ Hungary ran Hungary, and a couple of times a year they got together to coordinate… Those episodes resembled today’s divided Congress. Neither side would accept the provisions of the other…. and stalemate meant each could go their own way with little interference from the other… However on security matters they were conjoined… Austria had the military; a standing army of 900,000.. and Hungary bordered Russia from where any major attack would come…
To the south the ancient empire of the Ottoman Turks was decaying from its inside. Recognizing that most of the Empire’s attention had to be focused inside of Turkey proper, all 5 relevant nations begin eyeing the Balkans and Dardanelles and sizing each other up… Significantly, Russia was very nervous over the Dardanelles because the wrong person owning that property, could bottle her navy inside the Black Sea…
Austria had, in just a very few years before, annexed Bosnia, roughly the same size as it is today, by marching in and calling it their own… Serbia, had wanted the same, but was too small to do anything about it and no one came to their aid…. But people inside of Bosnia who had wanted Serbia to control it, had financial resources made available to help make that happen…
The archduke was the next in line to the Austrian emperor, who himself was getting quite old. Both the archduke and emperor were primarily pacifists who didn’t believe that war was profitable. But like any nation, within their cabinet as well as in charge of their military, they had well-spoken ministers who argued that a “shock and awe” first strike was always the best option…
Unfortunately for the world, it was one of those two pacifists who was assassinated 100 years ago today…. along with his wife… killed by what today would be considered a terrorist cell of about 5 people total… working independently… meeting in secret. etc. etc. They botched their previous attempts and by today’s standards were almost comical, until they finally got lucky on number 3…
Some people got the word 100 years yesterday… June 28th. Who these were, were mostly heads of state, many of whom were on summer vacation so telegrams had to jump all over the country, and in some places be put on skiffs and rushed out to meet the heads of states floating in the Baltic…. No one at first predicted what this assassination would preclude… Those who firmly believed in war, thought it precluded war. However most thought that was too unreasonable and assumed everyone would of course get mad first, then settle down and make certain arrangements and life would eventually go on as normal….. After all, worse crises had been settled such….
There were two small problems… One involved the signing of treaties, some secret and some not, that tied promises of reaction to any military invasions of one of the signatories… The other, was the Victorian mode of character which dictated that one dutifully filled out one’s signed obligations, regardless if they had been originally made in error… One filled out ones obligations and damned the torpedoes.
In efforts to preserve a peaceful Europe, (which had been effective for 40+ years, and probably a world record at that time)…. alliances had been made loosely between Britain, France, and Russia… With the two extremes of East and West appearing united, this left vulnerable those who could get crunched in the middle, so they formed an alliance too: Germany and Austria-Hungary….
But no one ever thought they’d be used. Ever! Europe was one chummy place. The heads of England, Germany, Russia were all related, and met for state weddings and funerals regularly. Vienna was one of the playful destinations in Europe, and socialites from all 5 nations frequented there every summer… It and Paris vied for the Art & Music capitols of Europe… Tension was not like during our Cold War at all. Europe was very open and much like international relations today, where one could travel freely, where all the big powers meet occasionally and decided how to deal with each of little tweaks and interruptions….
So 100 years ago today, people woke up to this assassination story …. Today (yesterday) is the real beginning of the count-down-clock because for the first time in European history, the populations inside the nations were to have a profound impact on the upcoming events to come… (even though the structures of the governments were very closed to all but the upper crust of society…) Public opinion primarily through the growth of large metropolitan newspapers, had become an influence that had to be “reckoned with”.
For Austria Hungary was hot! You can imagine if Joe Biden was killed. Though some here love him, and some here make fun of him, … were he assassinated, this entire nation would demand retribution…. So Serbia got blamed…. In Austria-Hungary, with one pacifist dead, and the other now solo against a cabinet calling for an invasion, the call to go to war with Serbia came quickly…
Serbia appealed to their soul mate Russia. There had always been a deep Slavic bond between the two nations… and the head of Russia, when confronted with the fact that his people would rebel against him if he ignored his brother nation’s plea, said Russia would attack Serbia’s attacker if Serbia were attacked by Austria Hungary… Military philosophy at this time dwelt solely on the benefit of a quick attack. All armies were trained to attack, not defend. Simply put, the philosophy was that if you attacked quick enough, you always won… And all nations suffered from this delusion, though reality had showed it certainly hadn’t worked in all the proxy wars (Boer, Sudan, Balkans)…. As Austria began to mobilize her troops towards Belgrade, Serbia’s capital, Russia began mobilization to send it’s troops to the Austria-Hungarian border….
Austria Hungary had the second largest standing army in Europe (Russia had the largest due to its gigantic size relative to European nations) but even still, Austria-Hungary could not both defend its border, and attack/occupy Serbia simultaneously… Therefore they appealed to Kaiser Wilhelm to promise an attack on Russia if Russia attacked The Dual Kingdom… Previous handshakes had sealed the deal long before, and the Kaiser promised he would….
Now this caused a dilemma within Germany’s army. Their plan had long called for first attacking France … France was the more dangerous of the two, so it made great sense to defeat France first and then attack Russia, instead of attacking Russia and have a fit France barge in through the back door… No one had ever considered the option that perhaps a minor limited war with Russia could happen first without French involvement. But plans were plans and the detail in them was so meticulous that there was really no option to opt-out and siphon off troops to the Russian Border…. (all the trains would be tied up and busy carrying soldiers to the West) until after France and fallen and signed their surrender… The surprise Russian build-up now meant it was more imperitive than ever that France surrender before Russia could mobilize to march into Prussia proper….
France was insistent that it would not make the first move. They tried to dissuade Russia to stand down, but Russia’s people felt a personal insult (and a rational fear of internal overthrow) if Serbia fell, so that didn’t happen. The French who were the villains of the last European War( the Franco-Prussian War that ended in 1870… a quick war, which France had lost, and been paying repatriation upon for a long time), were very squeamish about being considered the aggressor again, and so they mobilized defensive forces and fortified their common border with Germany, just in case.
Britain’s Prime Ministe firmly believed in making alliances but also keeping them secret so both his allies and enemies would be left guessing… He was so good at it, that the Kaiser was convinced upon invasion, that Britain would definitely not interfere and that Paris would fall quickly as had long been planned (across twenty years)….
The accidental player in this scenario, turned out to be the tiny little neutral nation of Belgium…… With no real army and a reputation for being a peaceful take-what-comes population, its future role had been dismissed by Germany, France and Britain… Germany simply assumed that it being a neutral nation, it would take the gentlemanly course and let the German’s pass through unopposed to attack France where it lacked defenses. Britain and France had assumed due to its neutrality, Belgium would be off limits for any German advance….
As troop deployments began to show the German’s hand, four nations raced to shore up that area…. Belgium said it would not allow German passage and began to mobilize its defense…. (This infuriated the Kaiser who apoplectically raged how dare that tiny nation not fall in line with Germany’s plans; who did they think they were?)… which shows how reality and clear thinking often had little voice in governments at that time…. Assumptions made by whomever was annointed head of state, tended to always carry the heavier weight.
With everything ready and the impetus on the Axis (Germany/Austria) to strike quickly and the Entente (Britain, France, Russia) to wait and only fight defensively, all pieces were in place for what everyone thought, would be a short little war… Most analysts assumed everyone lacked resources or the will to fight in order for it to carry over 2 months… “By Christmas all the troops would be home” each nation’s people were promised….
What impressed me most upon looking back from a 100 years’ perspective and I guess it is true with any war, was how life went on normally for 99.999% of the world’s population while this crises brewed… Future weddings were planned, meetings between future adversaries were scheduled, treaties and statements of purpose continued to be signed between the future enemies… At any point, if anyone powerful enough had said, “STOP! let’s talk about it”, (as is done so often today it now seems like an extra step), this war would have been prevented… If Russia had not mobilized, this would have remained a local conflict, taking place only on Serbian hillside whose outcome have been very quickly settled. Or if Britain had been forthright, stating that it would come to France’s aid and attack German interests, then the cost of war would have risen to where the Kaiser would have backed down from attacking France first and would have made a deal with Russia… If Germany had not been locked so deep into its own plans, so that once the order was given to mobilize it started everything which precipitated the next step automatically like a line of dominoes. …. if any of these occurred prior to the First World War , history would be far different today; The First World War would not have happened…..
The suddenness is simply mind boggling. How could Europe go from congeniality and peace and prosperity and hope, to an all-out brawl. Like a bar fight that erupts instantly leaving lifelong scars?
It would be like today… if we opened our paper and read the news that one of Putin’s emissaries was assassinated in Sevastopol, Crimea…. And… by this upcoming Saturday (July 5th), Russia had asked China if it will help fight and China agrees. .. and exactly two and a half weeks later on July 23, Putin’s Russia surprises the world with an ultimatum to Ukraine designed to be so harsh that the Ukraines cannot possibly accept it. The world holds its breath, and the 5 day deadline passes, and Russia declares war on the Ukraine…. July 28th, exactly on month from today!
NATO mobilizes, beginning with their declaration… . All NATO units are then put on full reserve and active units are then moved into Turkey, Uzbekistan, Poland, and Finland, positioned along their borders with Russia….
On the last day of this month, July, China calls upon the NATO to stop its mobilization…. NATO says no; it is mobilizing solely against Russia and for only the protection of the Ukraine people…. Then on August 1st, China declares war on NATO, including the US….
The very next day, August 2nd, China bloodlessly rushes in to occupy North Korea … China then demands of South Korea to let them use its seaports to facilitate their landing craft invasion against Japan. They promise that after hostilities are over, all Korea will be free and promise it can under them become one nation again…
The very next day, on August 3rd, China declares that the state of war now exists between it and Japan, Taiwan, North Vietnam, and the Philippines, and moves their navy into blockade those ports… All those nations plea for help from the US and the US promises it….. South Korea to the Chinese surprise, announces despite overwhelming odds, it will NOT grant permission for China to enter peacefully, NOR allow Chinese military hardware into its country…. A brief testing skirmish occurs on the 53 parallel between US and Chinese troops becoming the first engagement of the war…. On this same day unknown to almost everyone, China and most Latin America nations sign a secret treaty…. relating strictly with the US and stating that if China is attacked, Latin America will side with China in order to protect their massive investments there….
The very next day, August 4th. China swiftly invades South Korea and quickly over runs Seoul and commandeers all the ports on the peninsula. China’s massive merchant marine of commercial cargo ships out of nowhere suddenly gather outside all of Korea’s ports. The US protests. calling for China to leave Korea. China flatly says it won’t. The US declares war on China…. The Chinese merchant marine begins loading up the 2 million troops and lands them on the remote undefended section of north-western Japan… Within 7 days, 2 million Chinese are moving towards Tokyo….
The very next day, August 5th… Latin America surprises all and closes shuts down all commerce with the US, closing it’s borders… All US firms have their property confiscated to be nationalized and the Panama Canal is closed to all but Latin American and Chinese traffic…
The very next day, August 6th… Putin’s Russia declares war on the US and NATO….. and for what it is worth, the Ukraine declares war on China….
The very next day, August 7th… The first US troops from Okinawa, land in Japan and rush north to engage the advancing Chinese… Battles ensue and the Chinese throughout the next week, till the 13th, win all of them…
The very next day: August 8th… NATO and the US finally declare war on Russia…
For the next week, all eyes focus on China’s advance to Tokyo. Then one week later, August 15th… Ukraine counter attacks a Russian outpost on its border, and regains control of the entire border area… The Russians run back across the border. It will be the first allied victory of the war…
Two days later… August 17th… The US and NATO forces invade Russia proper upward from Uzbeckistan, and upwards from Turkey through Sochi, and eastward into Belarus from Poland, and towards Leningrad from Finland….
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4 years later, 2018, the armistice will be signed, leaving 37 million souls dead…. 93 million wounded for life…. and 34 million people simply missing… never heard from again…. And the borders between most of the big players will primarily remain just as they are… ( Hopefully all parties refrained from nuclear weapons….. or citizen causalities would be uncountable.) Unsettled emotional antagonisms will continue to fester, and won’t be settled until after the next great war beginning in 2039…..
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This is how life changing that event was 100 years ago…. Literally it came out of nowhere….. Just take a moment to consider the breathtaking speed with how fast this occurred and stretch your imagination wide enough to take in us being in a full fledged real world war equivalent to WWI in less than one month and 5 days from today, as you read this and the News Journal and fret over Greg Lavelle… ….. Maybe this could happen today, maybe not. You and I need to make sure the “not” wins out…. were such a crises to occur.
The lessons of yesteryear are so lost on us today, as I’m afraid they are on every new generation. I only share interest because of a personal bond with a relative, who was called to France in 1918. So unlike most today, this history to me is something very real. Upon my passing, there will then be no one to remind us of how stupidity can sometimes take over an ruin a world of good… But for the rest of you, 100 years ago today you would be just reading about this life-changing first step in the paper…. (yawn) another assassination in Crimea… possibly thinking “awwww… how sad”… but never dreaming it would within four years time, cause you to lose your entire family in the same amount of time that briefly passes between two World Cups….
Life should never be taken for granted. Lesson. Always be vigilant against war. Always.
To really understand Christmas, you need to be in the Third World, hot climate, where Christianity doesn’t exist. Life is just a normal day. Their religion’s calling out prayer, markets bustling as always, and you are working too…. Somewhere during that day, if you are an American, it hits you. Wow, its the 25th.. This is Christmas.
And so it was. No one knew who Jesus was. The Bible says that in his own way, God announced it. But if you were living in Bethlehem roughly 2000 years ago, it would be like what you see here before you today. Life as normal. Just like every other day…
And that is the beauty of Christmas. In your town, today, the child of the second coming could be born. You would never know. And that offers a clue to how God works… He works things in his own way….
And somehow, it works out…. Against all odds of the dice being thrown in multiple odds, it always lands the right way when it is needed…
After all your calls home, you report for duty in the hospital where you work, and from a room a newborn cries out. The question hits you. What if in two thousand years, everyone shall know his name? At first you scoff, he’s just another mid-eastern baby. But then, so was Jesus…..
It happened just like this… THAT is the mystery of Christmas…
Right click to open full image… Pictograph Courtesy of Viral..
So, can someone tell me again, why we shouldn’t tax the rich, and instead, balance the budget on the backs of everyone else?…….
I seem to be missing that little detail where that all makes sense……
Almost all Americans will agree… There is one thing America does best…. Nothing….
Well, actually in this case, that might be a good thing…. For in Congress’s naturally tendency to play it both ways all the time, whenever they enacted legislation, the also set in stone a date for it to expire…. So if Congress does nothing, the automatic policies go into effect and we have a $7.1 trillion deficit busting package signed, sealed, delivered right to Americans… almost as efficiently as an order off Ebay….
Hats off to Cassandra for pulling out this nugget….. Here is the source, and here is the savings….
● $3.3 trillion from letting temporary income and estate tax cuts enacted in 2001, 2003, 2009, and 2010 expire on scheduled at the end of 2012 (presuming Congress also lets relief from the Alternative Minimum Tax expire, as noted below);
● $0.8 trillion from allowing other temporary tax cuts (the “extenders” that Congress has regularly extended on a “temporary” basis) expire on scheduled;
● $0.3 trillion from letting cuts in Medicare physician reimbursements scheduled under current law (required under the Medicare Sustainable Growth Rate formula enacted in 1997, but which have been postponed since 2003) take effect;
● $0.7 trillion from letting the temporary increase in the exemption amount under the Alternative Minimum Tax expire, thereby returning the exemption to the level in effect in 2001;
● $1.2 trillion from letting the sequestration of spending required if the Joint Committee does not produce $1.2 trillion in deficit reduction take effect; and
● $0.9 trillion in lower interest payments on the debt as a result of the deficit reduction achieved from not extending these current policies.
How does a zero balanced deficit in ten years sound?
If Congress does absolutely nothing, something they’re good at, we’ll have it….
Republican David had this to say on Delaware Liberal the other day…..
Democrats cannot offer new programs because of the deficit. They can’t raise taxes because of the economy. They will demoralize their base. The business community will choose the real Republicans over the fake ones and they will hurt in the financial category. Their social agenda will write off huge portions of the country and they will lose VA, NC, MO, OH, and FL and put at risk WI, MI, and the upper midwest. Even PA is in play.
It is hard to win when on one side you abandon your base and the other side you do not draw people from the otherside. We win not because of the brillance of our side but because Democrats have boxed themselves in. You cannot say those Republicans are dangerous and adopt their premise. If I seem smug, it is because for the first time, I think the odds of a total sweep have shifted in our favor.
And now, a retro line back to 150 years ago……….
“Before I draw nearer to that stone to which you point,” said Scrooge, “answer me one question. Are these the shadows of the things that Will be, or are they shadows of things that May be, only?”
Still the Ghost pointed downward to the grave by which it stood.
“Men’s courses will foreshadow certain ends, to which, if persevered in, they must lead,” said Scrooge. “But if the courses be departed from, the ends will change. Say it is thus with what you show me!”
And in an epiphany in which he understands the changes that the visits of the three spirits have wrought in him, Scrooge exclaims:
“I am not the man I was. I will not be the man I must have been but for this intercourse. Why show me this, if I am past all hope!……Oh, tell me I may sponge away the writing on this stone!”
America’s hope lies in you…… Still watching from the sidelines? …….
“If the course be departed from, the ends will change.”
He said build something; I said with what?— kavips
Some of you remember the “giant sucking sound”?
Ross Perot, Reform Party candidate for the US President in 1992, coined the term during one debate (4:45) to represent how dropping protective tariffs for NAFTA… would suck our manufacturing jobs to undeveloped nations south of our border…
Today we see evidence that it was true. Although China, India, and Southeast Asia are contenders for stealing our manufacturing base as well.
There is no real industrial manufacturing base left in the United States, which is one of the reasons that bailing out our car manufacturers has become a national emergency. At the exact moment when we need a manufacturing base to prime the pump of our economy, it is missing. Gone. It is not there.
The Free Trade agreements do well for our nation’s consumers; they bode ill for those working at high wages. I remember buying the cheapest shovel I could find for $25 dollars back in ’92. Last summer the same brand was still on the shelf for $25 dollars, but the one I bought cost me $4. I figured I could buy 6 replacements before breaking even…. My choice gave me $21 dollars to spend on other items…. Free Trade works for American consumers…
But for someone costing more than $1 a day, for someone with pension costs, health insurance costs, and vacation costs, free trade is something to fear. For the sucking sound of job loss continues up until the point occurs where the cost of doing business here, drops down to meet the climbing rate of the cost of doing business elsewhere……. At $18 dollars an hour here, and $1 dollar an hour there, when both settle out around $9 the flow of jobs is abated.
But you can’t force a company to not make money. If it gets so bad that they can’t stay in business, they have every reason to shut their doors…. Even if WE were able to close off the imports of all products made more cheaply elsewhere than domestically…… we would be paying much more than necessary for those products we bought. Most of us would choose to go without that unnecessary expense, before paying what we considered exorbitantly high prices.
Furthermore, closing down imports would turn us into a trade island. Other nation’s $4 shovels would continue to be snapped up on the world market, while we sat on a huge inventory of $25 dollar ones…. As soon as our nation’s market was saturated, its one shovel plant would have to close, (provided no bailout was forthcoming to keep it solvent and afloat….) They could not sell any more of what they had….
I mentioned in a previous chapter that it was lower labor costs which were responsible for propelling Germany, Japan, and South Korea out of their economic paralysis following the ends of wars. Writing on the wall says that for us to survive… we probably will have to do the same.
Just having health care removed from corporate responsibility, could significantly impact how this is done. If the burden of providing huge sums for medical insurance was suddenly lifted off of business’ shoulders, its cost of doing business in the US would drop significantly without touching the amount paid out in wages.
So what would it take to get manufacturing jobs to come back to the United States of America.
Bottom line….the entire process from raw materials to final delivery, needs to be cheaper here ….. than somewhere else…
That cheapness doesn’t mean we are forced to sacrifice wages… After all, wages are the fuel that drives our economy. After all, wages are what buys those goods and services which America makes. After all large scale cutting-back on wages, cuts back on the money supply that buys what we produce…. Cutting wages is the final resort: our very last line of defense. It is in other areas where we need to look if we wish to get our nation to bypass this economic bump in the road…
One different and novel method would be to shorten the accounting rule on how one claims depreciation. One of the reasons that trading in mortgage securities was so profitable and lucrative was because the full cost of buying those securities was immediately deducted from the purchased amount creating an expense that matched the asset. However upon buying a piece of equipment under depreciation, a large amount of capital is required up front… and is not costed out except in little pieces over a very long time.
Building a business is capital intensive. Buying securities … was not. Considering the global shortage of capital right now, changing the rules for even a short time, could be considered to be sort of a tax break. If banks were lending (those loans guaranteed by the Federal Reserve), and…. purchases made this year could be written off totally… meaning no taxes would be paid on that amount…. this would be the goldmine year for a business to expand, buy, update, renovate, modernize, and become more efficient. And if each one of every businesses started ordering materials, …..well, you see what that would do to our economy…….
Since a business will be carrying a lot of expenditures this year, the chances are that their tax payment will be minimal. That does not do well for our nation’s Treasury… we sorely need that money… but, if one waits long enough… upon the following year, all those new pieces of equipment will have been completely depreciated, so that when the rules return to normal, the profit below the depreciation line is higher than it would have been had we left everything alone! And the Fed’s taxable portion of that amount, would be higher in its dollar amount, even though its marginal rate did not change. The same boost in more taxable dollars, would occur each year up until that time when the equipment would have finished its cycle of depreciation. Basically for the Federal treasury, it is the same principle as having a business skip a monthly mortgage payment, by agreeing to pay a token amount more each month after that grace period to achieve balance.
Another concept is to change our definition of what constitutes manufacturing… The old days are gone, thanks to technology. If one looks at our assembly lines today, one does not see a myriad of men running around at breakneck speed to keep up with the assembly line… Instead one sees (in the words of Robert Reich) “a lot of numerically- controlled machine tools and robots, and a few technicians sitting behind computer consoles. The old-style assembly line factory worker is going the way of the bank teller, telephone operator, and service-station attendant.”
“But there’s a different way to think about manufacturing, and here we’re doing much better. Take a close look at any manufactured item — a pen, a cup, a car, a dress — and see who’s actually earning what portion of its purchase price. Much of it goes to Americans, even if the factory that made it is located in Asia. More and more of any item’s value is going to researchers and designers, engineers, entrepreneurs, marketers, advertisers, distributors, bankers, lawyers, wholesalers, retailers. None of them is considered a manufacturing worker, but they are the future of manufacturing. ” a different way to think about manufacturing, and here we’re doing much better.”
“The loss of blue-collar manufacturing jobs is a huge problem for America. That’s because many young people with only high school degrees no longer have access to middle-class wages. But that problem, which has been growing for years, won’t be solved by an Assistant Secretary for Manufacturing or any get- tough trade policy. To solve it we need good schools, ready access to technical skills and community colleges, and companies that continuously retrain and upgrade their workforce.” Robert Reich 2003.
Robots are here to stay. What is needed to maintain them, is an educated workforce that can design them, program them, maintain them, market them, and sell them…. Education puts higher costing jobs back on the family’s table. If America is to compete, then we need to be the ones making the most technologically advanced pieces of machinery that are bought by technicians from other countries… We don’t want our workers competing for $1 an hour jobs, yet we need those products which are cheaply made so we don’t have to spend prodigious amounts of our income on simple necessities. We waste a lot of time in today’s schools. Currently Delaware schools lose 1 month every year talking up Black History month. We need to start asking hard questions on how that helps America compete against someone from India or China? It doesn’t? One example of where our priorities are wrong, and we know it, but we do it anyway.
If one asks Americans whether we need more manufacturing, the choice is overwhelming…. In one unscientific poll, 99.13% said they would be willing to pay more for a product if it was made in America. The unscientific nature of that poll is suggested by the lack of determination of just “how much” those Americans would be willing to pay over the cost of a foreign import…. As in that true story about Lowe’s $25 dollar shovel… are they willing to pay 600% more? If you remember … this one shopper wasn’t… He figured the could get six shovels for the price of one, and bet that his shovel would hold up well against those odds. (He was right too, by the way).
Another traditional way to protect local manufacturing jobs, would be to forcefully devalue our currency. If we artificially keep our currency at a lower rate per exchange with other nations as does China, our products, even if costing the same to produce, will be cheaper to buy… Again this would be a short term solution, since as our economy began to grow due to an increase of factory orders, our currency would gain value and then rise.
The downside is that it would make traveling through Europe expensive, but that would be a small price to pay for not having the Great Depression at our doorstep. A more significant negative would be that the global economy would prefer to peg their prices upon the Euro, and the once almighty America dollar, would fall quickly out of favor…
Speaking of traveling, the high fuel prices paid last summer point to another element as to why manufacturers would want to return to America. Keep in mind that many manufacturing jobs went offshore for cheaper labor. The downside of doing so is that one must pay to transport the product back here to market. With the influx of $4.33 dollars for a gallon of gas, the cost of getting foreign products into stores, climbed rather significantly. At some point it will be cheaper to again build in America and pay the American rate, instead of building cheaply offshore and then giving back the savings to those responsible for transporting ones product back to our shores to sell…. If a fuel tax is levied as has been discussed, it could turn America into a land of new manufacturing opportunities. The less miles traveled… the lower the cost that would be incurred.
In the same vein, the imposition of Carbon taxes would bring manufacturing back to America. If America imposes Carbon taxes and China does not, then all those Chinese products being imported are subject to carbon tax tariffs making them too expensive and unmarketable on these shores. Carbon taxes especially when coupled with high energy costs, make manufacturing closer to home, the cheaper alternative.
Cheap energy can really bring American manufacturing back onto these shores. That energy would be wind at 2.3 cents per kilowatt/hour, being made with free fuel turning the rotors of 7MW generators perched on tall towers dotted across America. Pushing forward with subsidies to initiate the building large wind farms, would be advantageous in not only putting workers to work on building the towers as well as installing the rotors, but also in lowering our energy costs so that any company moving here would still do better than it’s competitor languishing oversees.
Some say our brand new baby boom may bring jobs back to America. In 2007 America broke its record for the most births per year. That last record had held from 1957. With a workforce growing by 4,300,000 persons per year, and China’s one baby policy still in effect, our labor pool may appear more attractive 18 years into the future. This may not sound as far fetched as one would initially think. Most business decisions are sketched out over a fifteen year time frame… which means in most better run companies today, some employee has already started the research that will ultimately become the foundation of the plan… The idea is to get companies to reinvest here… not elsewhere. Grand trends that happen in our future can be a valid part of convincing someone to open an American manufacturing plant….
Likewise tougher and better American regulation can return manufacturing back to America. That may not make sense to anyone who has not done business in third world environments, where capriciousness blows with the wind. One of the classic blunders invested in the third world is the huge oil investment made in the Niger delta, now rendered cost prohibitive by the actions of local guerrillas. Another occurred last winter, when toy manufactures suffered significant losses because toys contained lead. And it was last year when animal enthusiasts bought everything American so that their pets would not keel over dead? In an arena where paying off a string of corrupt politicians is considered just a cost of doing business, the uncertainty of knowing just how long those politicians will last, has firms thinking again about the stability of doing business on American shores… RegalWare. Inc has brought back all of its plastic manufacturing back to Kewaskum, Wisconsin. As their CEO Jeffery Reigle states:
About three years ago, the company, with the guidance of consultants TBM, started evaluating its operations to become more efficient. A particular concern was how long it was taking to deliver cookware to customers. The overseas manufacturers emerged as a key bottleneck. Since the company brought production home earlier this year, delivery times to one major customer, Reigle says, have gone from 30 to 60 days to as little as 24 to 48 hours.
Even if Regal Ware’s prices are 8% to 10% higher than buying direct from China, the its cash flow from Regal Ware products has increased 10% because the seller can turn over inventory more quickly.
Other pressures that motivate a manufacturer (or outsourced work) to move their manufacturing back from overseas: 1) bad experience with foreign vendors, partners, suppliers, local government, employees, 2) updated product portfolios and the pursuit of short lead-time or customization, 3) good utilization of automation, 4) overheated competition and lack of patient protection from improving foreign competitors, and 5) finding the made-in-USA label sells really well overseas. Not to mention liability issues where shoddy work, or tainted raw materials can upon being discovered, totally disrupt normal business flow.
The overall rising costs in China, from wages to taxes and to utilities, are definitely in the spotlight. American businesses may have realized through the years, from observing work transfer first to Mexico and then to Asia, that no country will be low-cost forever. Low cost is not everything. Consistency and trust in the quality also considerations a consumer factors in when making a purchasing decision. Tightening our quality standards, our environmental regulations, and stressing our attention to detail, will have the effect of increasing the value of the label “Made in America” That label is already the one preferred by wealthy Chinese who like us, have care and concerns for their children as well… Knowing how their countrymen sometimes operate, they prefer American.
So far missing in this analysis is all mention of imposing tariffs on imports for any reason. Pat Buchanan has been making the argument to stem free trade for years.
To date one of the more interesting aspects, is his distinction between how foreign trade works with VAT taxes and against corporate taxes… VAT (Value Added Tax) are used by almost every civilized state other than us. American’s have held off because of the huge populist sentiment that permeates their politics. (VAT’s being a consumer tax, are regressive). The VAT works on this principal: at each step of a manufacturing process, just the value added … is taxed. In America, when one buys a bag of flour on sale at $2 dollars a pound, and assuming a 6% sales tax, one pays 12 cents additional in sales tax. In Europe, Japan, and other industrialized nations, each step is taxed and the consumer pays the final price posted, Over there the fuel, seed, and fertilizer used in the growing of the wheat is taxed. When harvested, the silo operator taxes the farmer, who in turn has the taxes paid on his raw materials, deducted from the amount he is called to pay. The regional distributor taxes the silo operator, who in turn deducts the amount of tax he paid to receive each farmers wheat. The mill operator tacks on his charge which is paid for by the regional distributor, and when selling the product to a distributor, he credits the amount he paid… and so it goes right up to the last person to sell you the bag of flour.. Each entity buys the product with the tax attached, attaches their tax and gets credit for the tax they paid when they purchased their raw material. That way, each entity is taxed only on the value they added to the product.
Since just my telling of it appears so complicated, one can get an idea of how keeping track of every step in the process, must run tax agencies bonkers. Instead of trimming the IRS, we would be growing it by leaps and bounds. Which is why in frugal America… VAT’s have not yet been moved out of any committee….
The bright side is that this amount replaces corporate income taxes: zero corporate income tax. The downer is that we would be paying $2.12 for our flour …. before a state even had a chance to tack on their 6% sales tax. Together, we would be paying a 12.36% tax on all products. Your $150 grocery bill would cost $168.54. Whereas that seems like a lot to Delaware citizens who are used to no sales tax, to those in other states already immune to a 6% sales tax, the difference would be only an additional $9.54 dollars.. The average American would be paying roughly per month, four times that amount on groceries or $38.16 for the privilege of doing away with corporate income taxes…
But… and here is the argument when applied to free trade….
Foreign cars arriving here, have their portion of the VAT’s deducted by their home corporations. We, without a VAT, must pay the full amount of the VAT expected in foreign countries, when we drop our cars off there. Roughly a 15% charge is added to the purchase price of any American car in a VAT country, while they receive a 15% credit for selling cars in ours… It is hard for American cars to compete as imports.
Perhaps we could recognize this constraint being placed on what is now, … the taxpayer’s car company, and use this opportunity to initiate a VAT solely on the car manufacturing sector of our economy to see whether or not its principal holds up under actual international trade. The worst case scenario is that American cars may cost us 15% more, and the best case is that US manufacturing plants go into full production due to the overseas high demand of affordable “American quality” vehicles….
Finally, we come to the heavy hitter part of the intellectual argument. If we are talking about changing import taxes, what about tariffs?
Tariffs limit free trade. How? Tariffs make imports more expensive, thereby making domestically produced products cheaper by comparison. Tariffs become a means of keeping prices higher for all Americans thereby enabling American companies to remain solvent as well as increase their profit margins. Tariffs once imposed, cause retaliatory tariffs against us which shut out our imports from entering new markets, causing plant shutdowns and layoffs.
Protectionist tariffs are often blamed for the increase in the severity of the Great Depression which occurred after the passage of the Smoot Hawley Act of 1930. Intended to protect America businesses and force up prices by limiting cheaper foreign competition, those companies protected went under, because no one bought any of their higher priced goods. Imports plunged 66% from US$4.4 billion (1929) to US$1.5 billion (1933), and exports fell 61% from US$5.4 billion to US$2.1 billion, both drops far more than the 50% fall in the GDP.
It did little to protect America jobs. Unemployment was at 7.8% in 1930 when the Smoot-Hawley tariff was passed, but it jumped to 16.3% in 1931, 24.9% in 1932, and 25.1% in 1933.
Today, one cannot help but to invoke the image of Ronald Reagan when discussing “Free Trade”. Above anyone, he is the person responsible for bringing that term into modern consciousness. However, even the harbinger of free trade was quick to slap tariff duties on “motorcycles over 7 liters” to protect Harley Davidson from going under.
The Cato Foundation was quick to criticize this action. In a policy piece titled “Taking America For A Ride” they were quick to point out the economic hardship facing America. Concluding that:
They went on to predict that 20,000 less motorcycles would be sold the first two years, with an increase of 8,000 to 10,000 Harley’s being sold over the same period…
But they were wrong. Initially the goal was to jump the current tariff of 4.4 percent to 49.4 percent and keep it there for a year; lower the rate to 39.4 percent in the second year, to 24.4 percent in the third year, to 19.4 percent in the fourth year, and to 14.4 percent in the fifth year. After the fifth year the tariff is to return to 4.4 percent. During the amendment process lines were added that allowed numbers of BMW’s, Italian, and English manufacturers to slip through unaffected. The Japanese were given the same amount as were the other foreign bikes in without tariffs, but… due to the size of their market share, a large percentage of their imports were affected.
Bottom line: Harley Davidson is still around today. They would not have been had this tariff not been imposed. Harley Davidson took this time to retool, refinance, and modernize their brand, becoming a better company for it. Able to make better motorcycles, their market share increased to make them enough profit allowing them to call for the removal of the tariff a year earlier than planned.
Furthermore, solely because of the tariff, two Japanese companies, Honda and Kawasaki increased production at their American plants since they were not affected by the tariffs, in turn providing additional work for American workers.
So why was one tariff a success and the other an abysmal failure? The difference is scale. The Harley Davidson tariff was limited to Japanese manufacturers who used their protected high prices at home to subsidize dumping into the America market, which ultimately drove down motorcycle prices so low that Harley Davidson was unable to keep up. The tariff was limited to five years, and designed with a specific purpose: equalize the playing field. It was not done to protect American workers (they were few in number); it was not done to keep a lazy and insolvent company afloat forever; it was done to allow the free market to work. Now, every time a “hog” pulls alongside of you, you can thank Ronald Reagan.
Protectionism ( the imposition of trade barriers) has its purpose. With today’s economy one should expect to see and hear labor unions clamoring for more and more “protection”. It’s a plea that is hard to resist. After all, we could all be in the same boat some day, and certainly would appreciate someone bailing out our leaky vessel…. How can one “not” protect American workers?
The answer to that question is this: that we, the rank and file Americans, have to realize that protectionism is a form of war. As we recently found out, when a nation goes to war, it had better be sure beforehand that it will end up on the winning side. For once a war is started, the costs are always higher then expected. And if the enemy has a method (not in your calculations) of outmaneuvering you,… you never get the chance to say… “oh…never mind… let’s call this off and pretend like it never happened…” For once you hurt someone… they will do their darnedest to hurt you back.
The Smoot Hawley Act hurt a lot of people indiscriminately. The Harley Davidson tariff did so with precision. It’s the difference between accomplishing the same goal with either an all out war, or with a deniable, dark-ops special operation. One must take into account, and not be surprised, by the retaliatory measures which be taken against us.
As an aside, it is worth noting that an interesting observation came from the removal of the Smoot Hawley Tariff as WWII came into closure. The world emphatically sought assurances that no Smoot Hawley Act would ever be passed again. This bitter hate led to the Bretton Woods Agreement, in 1944, a great lessening of global tariffs starting in December 1945, and the General Agreement on Tariffs and Trade, in the 1950s. However it is interesting to note that special provisions were made for national security. Due to globalization in the 20’s and 30’s, Britain and France had ceded their watch making to Germany and Switzerland. Later they discovered that the lack of a watch industry was a great handicap in building defense equipment during the war. Both nations determined never to be without a watch industry again and placed embargoes on watch imports after WW II. (Lewis E. Lloyd, Tariffs: The Case For Protection, 1955, p. 137-139). The US is in somewhat the same danger today.
When dealing with protectionism, it is important to first sift through all the facts to see who is benefiting from whom. When George Bush protected the American Steel Industry in 2003, business went to China costing our nation 200,000 American manufacturing jobs…. Yet when one goes shopping for jeans, and sees articles from the Philippines, Malaysia, and made in America all at the same price, it puts a hole in the argument that free trade lowers prices for all Americans. Obviously instead, it increases profits for those who move their business to cheap labor areas off shore, then selling it back to us at the rate we are used to paying… Again that is why one must be leery of free trade pronouncements being made by large multinational corporations. They may benefit someone else, and not America.
Protectionism helps the American worker as Ross Perot adequately explained. The downside is that protectionism hurts the American consumer as Al Gore showed Ross Perot in their 1993 debate over NAFTA on the Larry King show. Al presented Ross with a large picture of Smoot and Hawley shaking hands in a congratulatory ceremony. As with anything tainted with protectionism, we need to weigh the benefits against the risks. Sometimes the risk may be acceptable. But it is unconscionable for us to look at protectionism in a vacuum…. as one affecting just American workers. The proper yardstick to measure protectionism’s effectiveness would be to measure its impact upon the total amount of money circulating throughout our system. Will protectionism grow the amount of money… or diminish it. Each case by case analysis needs to take that single measurement into consideration, otherwise we will be making a great mistake, sort of like Smoot and Hawley did during Hoover’s administration.
Bottom line of this entire post:
Raising tariffs, like war, is a very unpredictable method of furthering a nation’s wealth. Therefore other methods to increase our manufacturing base should be tried first.
Recognizing the severe nature of our economic situation, any policy change if enacted should be given expiration dates. A handout is helpful; continuous welfare is not.
To return American manufacturing jobs back to Americans, the entire process of acquiring raw materials to delivering the finished product, needs to be cheaper here in America, than it would be with foreign workers halfway around the globe. The best avenue for providing that benefit while getting the biggest bang for the buck, is to temporarily change our depreciation laws so that capital purchases can be written off entirely over one year. As opposed to the much talked about stimulus package amounting to no more than a national welfare check; this little change would have a lasting economic effect with less long term cost than a corporate tax cut. The second short term policy would be to use a budget reducing gasoline tax, to artificially raise fuel rates, making it expensive for foreign manufactures to ship here. Doing so would reward those businesses that built near their markets.
Both stimulate our economy without directly affecting retaliatory measures by our trading partners. Those two, one politically acceptable and one not, should be our first choice of action.
Longer term solutions involve 1) educating most of our youth to be technically savvy, 2) moving forward with a Carbon Tax benefiting technologically advanced societies over cheap working developing nations, and 3) developing cheap energy sources (2.3 cents per kilowatt/hour) for American manufacturing, would all keep American jobs in America…
What we do not want to do… is believe that we are an island and impose trade restrictions that isolate and collapse us further, instead of growing our way out of our current crises. We do want to lower all other costs so manufactures will want to set up shop here, on these shores, despite our higher wage levels……
So I’m listening to WDEL and the case of food giveaway and thinking wow that’s nice; $11.50 for a case of food that will last a weekend. How nice would that be for a family out of work?
But then I think: “Gee, I’m in bad straits, and it’s getting worse.. and my own family is the one who I need to take care of…”
Then someone named Charlene comes on and tells about when she was a single mother and had no money, how much a donation of a bookbag had meant to her… She had no other way of getting one, and someone told her that if she went down to the Breakfast Mission she could pick one up. She railed on how humbled she felt that someone would think of donating a bookbag for someone who they didn’t know to use …..”What wonderful people” she exclaimed….
$11.50.
And then I remembered the night before Thanksgiving, picking up some odd items needed for once a year recipes, ( the bulk buying had already been done), and spending $56 dollars on one flimsy bag of stuff that I really didn’t need… 5 cases of food for 5 families… I then thought of the crappy candle I bought for a fund raiser that was done because someone had bought from my fundraiser too…$24 dollars… 2 cases of food for 2 families…
I really can’t by presents for people who don’t need them when there is stuff like this that is far more important…. Perhaps I could give a card that said I donated a case of food in your name with the money I would have spent on you for the Holidays…but…that sounds tacky and kind of grossly self serving…
I think it is better not to say anything at all, just don’t give them anything this year…And I do have a family that is my first priority… But in discussing this with others, the consensus seems to be that settling for low budget presents that are liked, and spending half of the holiday money where it is really important, such as a case of food, might be how we balance it out this year…
I was impressed that giving was up this year over last…
because the economy sure the hell isn’t…..
kavips 