Sunday, November 11, 2007

corporate myopia, the labor edition (light)

Myopia (from Greek: μυωπία myopia "near-sightedness"[1]), also called near- or short-sightedness, is a refractive defect of the eye in which collimated light produces image focus in front of the retina when accommodation is relaxed.

Those with myopia see nearby objects clearly but distant objects appear blurred. With myopia, the eyeball is too long, or the cornea is too steep, so images are focused in the vitreous inside the eye rather than on the retina at the back of the eye. The opposite defect of myopia is hyperopia or "farsightedness" or "long-sightedness" — this is where the cornea is too flat or the eye is too short.

Wikipedia, November 12, 2007

Why myopia? Easy enough to answer. Myopia is the inability to focus on anything further than a given distance from the eye. Corporate myopia is the inability to focus planning on goals further than a year or so away. What happens when business planning is focused on short term goals (like quarter profits or expansion, for its own sake)?

Look at the dollar.

I won't, in this post, go into what I think will happen with the dollar and what I think the smart thing to do for the poor and middle class is, especially if the tanking of the US dollar continues.

The strength of the US dollar is, well, kinda important. Take the average worker, who, by statistics, makes $739 per week, including non-cash settlements and properties. This is based on unemployment benefits, and, as an aside, I've worked full time the majority of my adult life and never made that much. Since the great proportion of the goods available to buy are imports, subject to lesser cost, not to mention the questions of safety that have recently arisen in terms of inspections preformed on imported goods and the department that does the import inspections. The greater cost is reserved for locally made goods, in the attempt to encourage trade. The reduction of tariffs, is not, in and of itself, a problem. Given, of course, that
the tariffs are not so far reduced that buying local goods is prohibitively expensive and that an economy becomes dependent on imports for basic commodities-- like food-- and exporting for the salvation of their economy. If you click on the word 'imports' above, it takes you to an article tracing the volume of imports to exports in the US economy. The import category is 61.5 billion dollars more than the export.

Basic math will tell you that if you are spending more than you are earning, you go into debt, which, for reference, is not a good bargaining stance. Moreover, if the plan is to 'globalize' economies, the macro-focus there has already created problems; the WTO has been repeatedly criticized by its less developed member nations and labor and environmental organizations for ignoring small trade, the health of developing nations, the well-being of workers and the balance of the environment.

For that average US worker, this means that the goods she can purchase are suspect, and as the dollar tanks, less available. Since imports now comprise everything from cars (and oil is a whole 'nother article) to clothes and food, the real life consequences are that food, especially in variety, is less available, and that which is available is more expensive, reflecting the graded costs which have been removed, a la the severe reduction in tariffs, from imports and reflected onto local goods. And clothing is far more expensive, unless you are comfortable buying imports.

As an aside, the clothing I have bought from WalMart, uniformly made in China once I began looking at the labels, develops a rip in normal usage about a third of the time within a week or two. But then, if goods are not being inspected, I have no guarantee that I will be paying $20 for a pair of pants that will last longer than a week, hence my shift to buying from thrift stores. If it's going to tear almost immediately, I'd prefer it to have been about five dollars or less.

Money's gotta come from somewhere; usually a reduction on tax or tariff in one place is directly correlated with a raise in cost in another (usually related) field. (The article clearly traces the reduction in jobs, but I'm interested in the sustainability of the jobs we still got.) In this case, in terms of labor. The cost of tariff reduction is not in program reduction (do not get me started on the war) but rather in increased cost of living, reflected on the species of goods that are not preferable to be consumed. Our hypothetical worker makes $35,472 gross, and at the single rate, is taxed at $4,220 plus 25 percent of everything over $30,650, which adds up to $5,425.50, or six and a half percent. She's left with 30,046.50, then, if she lived in my state, she'd owe another 6.8 percent on the gross, which is 2,412.10, leaving her with 27,634.40, or roughly $2,303 a month. Not bad until you start looking at rent (again, another hot issue), any medical debt, groceries, gas and any credit card debt. Let's say she has a small, two bedroom house, which around here can vary from $800 to $2100 a month, depending on the neighborhood and amenities. The average is roughly $1200, so now she has $1,103 a month. If she's fairly conservative in her grocery shopping and entertainment budget, she might spend about 300 dollars there. Might. So now she's at $900. If she owns a car (Albuquerque is a spread out city with sporadically running public transit, where it has public transit at all), that'll knock another at least $100 off in insurance, more if she has total coverage. Now she's at $800. How about insurance? Another $300 per person, and, thank god for her, she's single. So we're at $500. Add a full tank of gas a week, at a fifteen gallon tank and about $3 per gallon, and we have $180 on gas. So we're at $320. And then there's the utilities, which are about to go up, thanks to the price of gas. My utility bill, if I can afford to run the heater, is about $180 in the winter. She's down to $140. And let's hope to god she has no credit card debt or car payment (which is highly unlikely. The average house with a credit card in the US owes at least several thousand, and that's the conservative estimate.) Remember, this is a single worker, no dependents. Moreover, this does not take the history of inflation into account. And that some of the benefits taken into tabulation are not in the form of cash, and moreover that averages are comprised of the magical middle between the very wealthy and people like me, at roughly $10,000 a year with two dependents while I finish my Master's.

I broke all this down with the average worker for a reason; corporations are staffed, in the vast majority, with workers who earn an income around or lower than the average, which, at those numbers, is $18.48/hour. (Ha, not in this state. Our mean hourly is $16.34; the median is much less.) These are the bulk of consumers and the captive audience of US business. It is to the benefit of business to have a class of consumers who can afford the wares they hawk and are healthy enough to attend work. Short term business planning on profits generated from this captive audience has very obviously not taken these two simple maxims into account.

This means that profit cannot be the only model, the only goal which business can aspire to. The reduction of business analysis to that which either grows the company without paying attention to the ability of the resources to be tapped without depleting them (both of the planet and in terms of people; I'm looking at you, supply-side economics) or only to improve profits from the last quarter (expanding to what, exactly?) creates a business model that is, frankly, designed to fail spectacularly. It is impossible to create a model with infinite supply and demand, and the assertion, (again, looking at you, supply-side) that the demand will be somehow regulated by the supply alone and vice versa (you too, demand-side economics) is absurd. It takes neither greed nor myopia into account, which means that the current 'hot' business model relies on everybody being careful with their resources and means of production but does not achieve it and has not insured it. The market is not being regulated by 'natural forces.' The dollar is being broken not as a 'natural rhythm' in the stock market, it's being broken by a combination of spiraling debt and speculation. (As an aside, the thing about buying houses on the cheap to 'flip' them is that it relies on the housing bubble to be a temporary state of affairs. You'd best hope for a quick rebound, because for most small buyers, purchasing and trying to maintain or improve multiple properties is beyond their budgets, especially as their wages continue to be worth less.)

The average worker, who entered into a loan to buy a property and live the American Dream (an acronym that should be BS, not AD), has been squeezed out of their wage and their property, or is working so much that their health plans are about to get hit for claims. Health cannot compensate for inflation.

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