About Me

In writing the "About Me" portion of this blog I thought about the purpose of the blog - namely, preventing the growth of Socialism & stopping the Death Of Democracy in the American Republic & returning her to the "liberty to abundance" stage of our history. One word descriptions of people's philosophies or purposes are quite often inadequate. I feel that I am "liberal" meaning that I am broad minded, independent, generous, hospitable, & magnanimous. Under these terms "liberal" is a perfectly good word that has been corrupted over the years to mean the person is a left-winger or as Mark Levin more accurately wrote in his book "Liberty & Tyranny" a "statist" - someone looking for government or state control of society. I am certainly not that & have dedicated the blog to fighting this. I believe that I find what I am when I consider whether or not I am a "conservative" & specifically when I ask what is it that I am trying to conserve? It is the libertarian principles that America was founded upon & originally followed. That is the Return To Excellence that this blog is named for & is all about.

Thursday, February 18, 2016

Carrier & UTEC Relocations To Mexico Expose Middle-Income Trap In America

"China is ripping us off like nobody has ever seen.  Vietnam's a new one, Mexico's a disaster.  Mexico's the new China.  They are taking so many businesses." - Presidential candidate Donald Trump speaking to a large crowd in suburban Charleston, SC on Monday.
"The challenge we face & everyone is facing is a skilled labor shortage.  It's probably getting worse every year." - Doug Macpherson, General Manager @ the Baltimore office of Construction Labor Contractors a staffing agency.
Last week two subsidiaries of United Technology announced they were shutting down operations in Indiana & moving 2,100 jobs to Monterrey Mexico.  Engineering, marketing, & some administration jobs will remain in Indiana.
Carrier – subsidiary #1, a manufacturer of heating, ventilating, air conditioning, & refrigeration systems (the company founder, Willis Carrier, invented the modern air conditioner), eliminated 1,400 jobs & will complete the move over three years starting in 2017.
United Technologies Electronic Controls (UTEC) – subsidiary #2, a designer & manufacturer of microprocessor-based controls, thermostats, & zoning systems for heating, ventilation, air conditioning & refrigeration systems eliminated 700 jobs & will complete the move over two years starting in 2017.
The relocations are being made following the continued migration to Mexico of the companies' suppliers & competitors.  The minimum wage in Monterrey is 70.10 Mexican pesos per day (less than $4.00 per day @ current exchange rates) placing it below most of its peers in Latin America & last among the 34-country Organization for Economic Cooperation & Development (OECD).  The total compensation for union workers in Indianapolis is comprised of an average wage $23 per hour plus employer contributed fringe benefits of health & welfare benefits, supplemental dental & vision benefits, disability benefits, death benefits, pensions, & annuities. 
Indiana Governor Mike Pence, upon learning about the relocations, said in a written statement that "federal regulations continue to stymie our national economy" & Washington (meaning BO's deliberate plan) is @ least partially to blame for the moves.
In summary the Carrier & UTEC moves are just the latest example of BO's purposeful plan to make Americans miserable & dependent on government for their existence.
I researched the above after hearing about it from Tucker Carlson – an excellent reporter.  But in this case Carlson emphasized the "downside of globalization" saying that low prices of imports are the tradeoff we make in losing jobs to cheap-labor countries as if this is a fait accompli.  By this logic we are all just counting down to the end of the prosperity of our society as more & more companies relocate jobs & their operations to cheap-labor countries or engage in tax inversions to the point where Americans aren't producing any wealth @ all & ultimately can't afford to buy a stick of chewing gum.
Carlson should have "checked his premise" based on the best book he ever read in that he discounted the power of America's free enterprise system unshackled from BO's purposeful onslaughts designed to produce the very result Carlson was describing – how undiscerning on the part of a usual clear thinker to promote the very mindset we should all be working against. 
Now it is true that the 2,100 people described above who are losing their jobs in Indiana are caught in what Professor Peter Coclanis calls the "middle-income trap" - meaning a situation where economies stagnate after reaching a certain middle level, usually because their manufacturing & labor costs no longer allow them to compete with lower-cost producers, but their work forces aren't skilled enough to compete higher-up the value chain.  To paraphrase – "I'm pretty expensive & not very skilled." 
The emphasis that I make is that even Americans skilled to make air conditioners & controls find themselves not being able to compete with Mexicans who make pennies on the dollar compared to them while making the same products.  This is part of the global economy.
But what is missing is the other part of the global economy or more specifically the free enterprise economy that America was founded upon & followed until the 1930s when FDR began the socialization of America that BO, Hillary, & Sanders are poised & ready to complete.
To see how value producing jobs are created think of the world economy as a ladder with the U.S. currently on the top rung & developing nations with low tech labor intensive jobs like Bangladesh or Mexico on the bottom rungs. The other countries are in between. All countries try to climb to the next rung. This works well if the topmost countries create new industries & products, thus adding another rung to the ladder like when we replaced horse drawn carriages that used buggy whips with cars. Older industries can move overseas while new jobs are generated @ home. It is when innovation stalls @ the highest rung that the portion of Americans near the bottom of the income distribution must compete with workers in developing countries. This is what we are facing today as far too many Americans are so poorly educated that they have skills so limited that no employer can use them which is exactly the plan BO is implementing in making people ever more dependent on government. Source of the ladder metaphor – Professor Robert Carbaugh of Central Washington University.
In summary, Americans should not be doing jobs that are classified as "third world jobs".
But America no longer has a free enterprise economy that will produce ever higher rungs on the ladder – we have a mixed economy that is somewhere between a totally free market economy (pure capitalism) & a government directed economy (socialism).  The current mindset in America is favoring more socialism because BO has intentionally produced a business climate that few entrepreneurs want to enter.
The first step in correcting this problem – if people are smart enough to want to - is for everyone suffering in this middle-income trap to admit their skills are limited to the point that fewer & fewer employers have need for them.  Accordingly they need better education & training – this will take looking yourself in the mirror & admitting the predicament you are in without casting blame on someone else.  You have to confess (to yourself) that you have not adapted to the fact that your old job can now be done by someone in a third world country who makes pennies a day or by a machine in a sophisticated computer controlled factory.  This is exactly the condition that Carrier & UTEC employees find themselves in.   Since you always have to make a living – there is no such thing as retirement from receiving bills – you will have to learn new skills & retrain.  Part of the cost of freedom is that everyone has to bear the cost of investment in themselves - both time & money – so they can make a living to support themselves.  For example, a toll collector could have seen his problems coming if he just looked @ the number of E-ZPass lanes (or other similar electronic toll collection system) & admitted his toll-collecting job prospects were not bright.  Carrier & UTEC employees could have connected some dots when they saw their competitors & suppliers moving to Mexico as mentioned above. 
The government has brainwashed far too many people to think they don't have to take care of themselves.  In 2011 I posted the stats that some 50.5 million Americans were on Medicaid, 46.5 million are on Medicare, 52 million on Social Security, 5 million on SSI, 7.5 million on unemployment insurance, & 44.6 million on food stamps & other nutrition programs.  Some 24 million get the earned-income tax credit, a cash supplement.  In 2010 such payments to individuals were 66% of the federal budget, up from 28% in 1966 – see graph below that shows 71.3% of the total federal budget is dedicated to payments to individuals.  This is a lot of momentum toward government dependence & it has only gotten worse since these statistics were compiled & ObamaCare will further swell the Medicaid, unemployment (& SSI by extension), & EITC numbers.
click on graph to enlarge
This post presents the way forward to break the government dependence spell that has been cast on America the past 80 years.  The solution is grounded in limited government, personal responsibility, & the free enterprise capitalistic system – the only cure for socialism that I know of.
The next step is for liberty loving leaders (or leader) to explain how capitalism is the only alternative to turn the socialist mindset & middle-income trap around by countering the destructive path far too many of our citizens are experiencing – our society either lurches further toward socialism & destructed lives & livelihoods or returns to the excellence of high achievement that is earned through capitalism by freeing entrepreneurs from BO's burdensome government regulations that have hamstrung our economy. 
This revitalized start begins with everyone facing the fact that something different happened in November 2008 & it was confirmed in 2012 – & that something is evil & a deliberate deception to overrun our country.  What happened to the people @ Carrier & UTEC is an example showing how this deception leads to people becoming dependent on the government.  The last seven years has not been about the usual sort of things the two parties argue over & take turns winning elections over.  These years have been about robbing liberty from people by increasing dependency on government & promoting destructive class warfare & envy & there is no end in sight to this nightmare & no foreseeable practical solution other than for those of us who still unabashedly believe in America to teach & live the libertarian principles that our country was founded upon.  Start with the thought of freedom & explain that all prosperity comes from unleashing the free human intellect.  If we lose with that message all is lost anyway @ least until John Galt comes forth.
Click on the reference post below for specific solutions to problems regarding Medicare, Social Security, federal spending, & the FairTax.


  1. Excellent analysis. 1 more point: not allowing entrepreneurs to increase ladder on top is part of BO strategy to level the global playing field. The weaker US economy is, the less economic and military power the U.S. has over world. I bet BO is very pleased with results of his policies as he contemplates becoming the next UN Sec General!

  2. Hi Doug and Carol, we have talked about this many times, about little labor people. This starts when the kids are young. I feel that we have too many office people behind desks. We need to educate more to be out there doing labor jobs. We need plumbers, auto mechanics, etc. I find that so many young ones today have the attitude that they should be given everything and not work for it. What happen to hard work? We have a lazy society. Not all but many. I see it all the time no matter where I go. I agree with Trump. Too much has been given away by this president and the people don't have any say any more. And if we do no one is listening. We need our great USA back again. The veterans are treated like crap. These guys have fought so hard to keep us free. I don't want to live in a communist country. I like my freedom and I like that I can say what I feel. I know it's being taken away slowly. Not politically correct. I am sick of this crap too. If people don't like it here then they can get the hell out. In God We Trust. Eye

  3. If I read your email correctly, people have to update their skills. Fine, I agree with that. But once your skills are upgraded, what will prevent your company from moving you and your family to a foreign country, where on your salary you can live like a "king", as wages in those countries are much lower than in U.S.? You still have firms moving out of U.S. for various reasons, less govt.taxes, etc. How do you counter this?

    1. For one thing, lower the taxes paid by corporations, which aren't actually paid by a corporation but are passed on to the consumer in the price paid for the corporation's products. The US has the highest corporate tax rate in the developed world, just think what would happen if that rate was lower. And by the way, it burns me up that virtually all of our elected representatives talk about lowering the corporate tax rate - but nothing happens. Why? They really don't want to change the rate and put their vote on the line. I do believe what RTE reports regarding the ladder and the US' position at the top if we as a nation can continue to invest in new products and technology. Otherwise we will not be at the top and the jobs will not be created. It is a sad story for our nation to lose what made this country the best and most free in the world - personal responsibility, the rule of law, and free market capitalism.

    2. Firms moving out of US
      Yes this occurs for gamut of reasons with main ones including high US corporate taxes, a hostile anti business government, and less technical skill set of US employees. There are multiple ways to comprehensively address this. One significant way is tax reform. Congress should pass the Fair Tax. It eliminates all federal personal income and payroll taxes and corporate income taxes, replacing that with a revenue neutral consumption tax. Such tax reform will motivate firms to move back to the US, increase US entrepreneurial development and hence new jobs, and motivate employees and prospective employees to develop their skills, work with more energy and smarter, to keep more of what they earn. Net result: more firms in US, with more skilled and motivated work force, and stronger GDP growth.

    3. Doug - I just added to this live, necessary debate:

      Re: company moving you to a foreign country, where on your salary you can live like a "king"

      If your company moves to another country and has decided to keep you (you may be in the minority, unless you are in senior mgt), you may very well be able to secure another comparable or better position with another domestic company. Maintaining and especially enhancing job market skills are critical factors in increasing your options.

      If you go along and move to a foreign country with your company, hope that it is a country more like the US rather than a country more "socialist" or more freedom restricting country. If you wind up in the Middle East, unless you are with a royal family, you will not live like a king. If you wind up in a country with very low wages that benefit your company, I doubt that you will easily adjust to lack of consumer goods, adequate health care, education, and even protection from terrorism.

      The US is still the greatest country to live in, but our electorate must wisely not again choose a far Left President and anti capitalist congressmen and senators. We still have an opportunity to correct our economic policies to once again make the US a nation that companies and entrepreneurs will flock to..

    4. Thanks to the Historian for such a thought provoking question & the three responses received so far. Of course there is theoretically nothing stopping the companies from moving as the Historian suggests. There are some people who would enjoy such an experience but others may not, preferring to live in the U.S. near their friends, family, & cultural events that are here. If the ladder metaphor is working as Professor Carbaugh describes it in a free enterprise system there will be a surplus of good jobs created & the lesser jobs would be the ones moving overseas to third world countries. What happened when the automobile came on the scene & the production of horse drawn carriages that used buggy whips moved to other countries as the American work force improved their skills & standards of living?

      The main thing we know is that every product will sooner or later be made the most efficient way possible & that includes whatever country it is made in.

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