Thursday, August 12, 2010

"How to Make an American Job"...

Andy Grove, the legendary electrical engineer, CEO and business philosopher of Intel Corporation, has a thought provoking article on creating American jobs posted on Bloomberg July 1st.  Grove, one of the true visionaries and heroes of Silicon Valley, is renowned among techies, industrialists, and his employees for his articulate and straight-forward talk about discipline, organization, business creativity and reality.  His discussion of "strategic inflection points" in "Only the Paranoid Survive" (1999) has inspired the top economic leaders throughout Silicon Valley and the World for over ten years now.

Grove gave the business world and silicon valley professionals a paradigm to understand economic crisis and change as a constant. Now he has some interesting thoughts on increasing employment that are not so oriented to the individual adaptation. Grove argues that startups and innovation are not the correct solutions to unemployment.  He is unnerved by the amount of Chinese investment capitol in Silicon Valley. He argues that the shift of production to China has functionally emasculated the American economy. Here are some of his thoughts:

"The underlying problem isn’t simply lower Asian costs. It’s our own misplaced faith in the power of startups to create U.S. jobs."

"You could say, as many do, that shipping jobs overseas is no big deal because the high-value work -- and much of the profits -- remain in the U.S. That may well be so. But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work -- and masses of unemployed?"

"Long term, we need a job-centric economic theory -- and job-centric political leadership -- to guide our plans and actions."

Grove argues that fundamental market efficiencies of Silicon Valley are leading to national economic destruction. He argues for a strong nationalist, protectionist and (essentially) socialist industrial policy that will protect American economy and industry.  Grove, a refugee of central economic planning of the Soviet Bloc, makes the surprisingly powerful argument that without greater centralized economic control and planning now, an economic revolution driven by unemployment will collapse our capitalist economy:

"The first task is to rebuild our industrial commons. We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars -- fight to win.) Keep that money separate. 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. Such a system would be a daily reminder that while pursuing our company goals, all of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability -- and stability -- we may have taken for granted. 

I fled Hungary as a young man in 1956 to come to the U.S. Growing up in the Soviet bloc, I witnessed first-hand the perils of both government overreach and a stratified population. Most Americans probably aren’t aware that there was a time in this country when tanks and cavalry were massed on Pennsylvania Avenue to chase away the unemployed. It was 1932; thousands of jobless veterans were demonstrating outside the White House. Soldiers with fixed bayonets and live ammunition moved in on them, and herded them away from the White House. In America! Unemployment is corrosive. If what I’m suggesting sounds protectionist, so be it."

This is powerful use of economic logic from the mouth of America's most renowned businessman/logician. It espouses an economic path in opposition to  thinly disguised libertarian/capitalist logic that calls for less government control, taxes, etc. Grove details how we have sold out the American worker by outsourcing manufacturing and implementing as policy the type of advice scholars like  Alan H. Meltzer routinely offer:  less government spending and interference with "market forces". To use Grove's analogy, we have been "oiling our own guillotines" in the name of "economic efficiency". Grove calls for more protectionism of manufacturing and American employment.

American capitalism has stopped functioning to our benefit. The only real solutions are greater centralized economic planning, nationalization, and the redistribution of wealth.

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