Wednesday, December 7, 2016

Honest-to-Goodness Fascism and more Carrier talk

So. First of all, consider reading this article about the brutal extra-judicial killings occurring in Rodrigo Duterte's Philippines currently.

There's been a lot of talk about pending fascism in the United States recently.  Well, in the Philippines, they've got fascism.  The state authorizing police (and also low-level bounty hunters) to kill drug users willy-nilly.  If you're of the opinion that drug users should be gunned down in the streets, then you'll approve of what Duterte is doing.

Duterte claims that Donald Trump has voiced his support for the killings, saying (allegedly), "[they] are doing it as a sovereign nation, the right way".  Perhaps this is a spurious claim on Duterte's part, but neither Donald Trump nor any voice of his administration has denied this claim.

2,000 or so people have died in this manner since Duterte took office on June 30, 2016.  Duterte has pledged that 20,000 to 30,000 more people will die this way, that every drug user in the Philippines will be slaughtered.

A comparison of the United States, where drug laws tend to be somewhat severe, with the Netherlands, another majority-white first world country where drug use is legal and regulated, reveals that the negative externalities imposed by drug use in a society where drugs are legal and regulated are fewer than elsewhere.  It would suggest, perhaps, that Duterte's fascist approach to a societal drug use problem is not the only possible approach.  It should suggest to our President-elect that the iron boot may be a less effective tool than the hand up, and that men like Duterte should not be given a thumbs up.

Duterte has referred to President Obama as the "son of a whore," so verbally at least, he has some commonalities with the President-elect.  If you want to learn more about Duterte and his general M.O., read this article.


I wanted to circle back around to the Carrier deal, which has been a political success for Donald Trump.  I previously gave my congrats to the President-elect for saving these jobs - 1,100 of them.  Well, it turns out that's not the real number being saved, and it also turns out there's a lot more to mull over in this deal, not of all of it good.  Could it be that Donald Trump - a more typical politician, perhaps, than he is ordinarily depicted to be by both Right and Left - has painted a rosier picture than grim reality to score political points? Who would have thunk it!  Let's take a look at the nitty gritty.

United Tech (which owns Carrier) CEO Greg Hayes gave a refreshing candid interview concerning the deal which Business Insider has done a top-notch job of summing up.  There's also good coverage of the deal in the Washington Post and I'll be quoting both articles below.

First of all, the Trump administration will not be saving 1,100 jobs.  Emphases added mine:

[President of the United Steelworkers 1999 Chuck Jones] wondered why the president-elect appeared to be inflating the victory. Trump and Pence, he said, could take credit for rescuing 800 of the Carrier jobs, including non-union positions.

Of the nearly 1,700 workers at the Indianapolis plant, however, 350 in research and development were never scheduled to leave, Jones said. Another 80 jobs, which Trump seemed to include in his figure, were non-union clerical and supervisory positions. (A Carrier spokesperson confirmed that 800 factory jobs once earmarked for Mexico are staying.) And now the president-elect was applauding the company and giving it millions of dollars in tax breaks, even as hundreds of Indianapolis workers prepared to be laid off.

That's $7 million in tax breaks over 10 years.  Given that around 800 jobs that were going to be relocated to Mexico will be staying (not 1,100), that amounts to approx. $875 per recused worker per year.  That's a pretty good price, really, and it should pay for itself in the form of payroll taxes paid by each worker. However:

The result of keeping the plant in Indiana open is a $16 million investment to drive down the cost of production, so as to reduce the cost gap with operating in Mexico.

What does that mean? Automation. What does that mean? Fewer jobs, Hayes acknowledged.

From the transcript (emphasis added):

GREG HAYES: Right. Well, and again, if you think about what we talked about last week, we're going to make a $16 million investment in that factory in Indianapolis to automate to drive the cost down so that we can continue to be competitive. Now is it as cheap as moving to Mexico with lower cost of labor? No. But we will make that plant competitive just because we'll make the capital investments there.


GREG HAYES: But what that ultimately means is there will be fewer jobs.

The general theme here is something we've been writing about a lot at Business Insider. Yes, low-skilled jobs are being lost to other countries, but they're also being lost to technology.

Additionally, engineering jobs - which will be kept in America - were not in much danger of moving to Mexico in the first place.  It is assembly line jobs that are at risk of moving to Mexico:

So Mexico has cheaper labor with a much more dedicated workforce, and these are the kinds of low-skilled jobs most people don't find that attractive. Elsewhere in the interview, he made clear that United Technologies intended to keep engineering jobs in the US and that these higher-skilled jobs were not at risk of being moved overseas.

It appears the CEO Hayes also knows what side his bread is buttered on, and that if he plays ball and helps Trump save face regarding some of these jobs being sent to Mexico, he can expect good times ahead:

GREG HAYES: So, there was a cost as we thought about keeping the Indiana plant open. At the same time, and I'll tell you this because you and I, we know each other, but I was born at night but not last night. I also know that about 10% of our revenue comes from the US government. And I know that a better regulatory environment, a lower tax rate can eventually help UTC of the long run.

It will be interesting to track the development of the Carrier deal and to see if the number of jobs being saved continues to be revised downwards.  The deal has come in for criticism as "crony capitalism" from a variety of figures, including, in a stunner, Sarah Palin. In the meantime, Donald Trump, understanding he has a political winner on his hands, is now verbally lashing Boeing.  

I wonder what kind of deal Boeing will get!

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