March 24, 2014

The drumbeat goes on :  ” There are no jobs.”  ” We need to create new jobs. ”  “Government must create jobs.”  “Outsourcing by big companies is a job killer.”

Historically in the U.S.,  jobs for non-professionals were created largely by large public companies.  No longer. Non-governmental jobs have all but  disappeared, excepting small businesses.

Hand-wringing and political bloviating will not solve the problem.  No one has even defined the problem – so I must.

When and where did it start?   Very simply, it started with the repeal of the  Glass Steagall Act in 1999, under Clinton, after which banks started investing (gambling) with depositor’s money while not lending to corporations for what they considered a paltry interest rate. Lack of competent oversight of said gambling  coupled with a lack of  leadership (on both sides of the aisle) largely led to the financial crisis of 2008.

Banks began investing in public companies with whom they had a lending relationship.  They demanded representation on the boards of those same companies. Their mentality was always the same:  manage for short term gain and screw the long term (including the societal impact on the long term).  Profit today at any cost was the motto.  CEOs began to think ‘ tomorrow was some other guy’s problem’.

Banks’ pressure  on CEOs became intense. Labor and energy costs have always been the largest components of ‘Cost of Goods Sold’ and were the first to be reduced or eliminated.  Energy costs have, until very recently due to fracking, been kept high by a failure to invest in energy infrastructure .  (No new refinery has been built in the U.S. in over 30 years.) and environmental fears have restricted pipeline growth.  Flawed government policies on trade and immigration coupled with pandering to environmental activists exacerbated the unemployment numbers.

Social media companies are currently soaking up all available investment capital, again for short term gains. When trouble (bankruptcy) occurs those companies will suddenly find all their assets have two feet and have jumped ship leaving the common shareholders with squat.  No hard assets to distribute. Again, the banks got out early and whole, by generating false demand for these fledgling companies with no history or record of earnings and making huge fees by selling to unsuspecting buyers (other social media ‘players’).

Unfortunately for job hunters, it is a vicious cycle: Banks have amassed all the money and lend almost nothing for domestic capital investment;  they employ lobbyists who whipsaw and threaten Congress which in its cocoon of feckless pandering passes laws that drive jobs out of the country.

It is no accident that the three most profitable companies in the U.S. (Exxon-Mobil, Apple Computer and Chevron) have only one banker (at Chevron) serving on their boards.

It is past time to re-institute Glass-Steagall, make the banks lend to corporations in this country and stop, not merely limit, their ability to gamble with depositors’ money in foreign markets for their own self-serving greed.  Jobs will then return to this country.  Trust me.

You are welcome.