Changed Reality: How Tea Party Mentality Exported American Jobs

The claim that Tea Party mentality exported American jobs does appear to be counter-intuitive. However, if you care to keep on reading then you will see the proof behind this claim.

To recap:

In the first post of this series we looked at what happened with American “corporations” during the 20 odd years leading to 1970.

In the second post of this series we looked at what happened in the field of corporate finance during the same period.

I could go on with the historical perspective but I think I have established the bare minimum and we can now afford to come to a conclusion.

To recap: Corporate strategy evolved to hammer the principle of cost-cutting at any cost. One significant measure of cost-cutting was to increase sales volume. The easiest way to increase sales volume was to acquire existing companies. During the same period, financial mathematicians gave theoretical reasons for companies to stop paying dividends and take on more debt. This, in turn, fueled the junk bonds market. Another financial development during the same period was the (false) sense of risk management.

Hopefully you can see here the roots of the 2002 stock market crash. This crash was due to leveraged buyouts (read junk bonds). Even the stock market crash of 2007 can also be attributed to the above developments. It might appear that the 2007 crash was due to the bursting of housing bubble. However, let us not forget that the housing bubble happened because of over-confidence of financial mathematicians in the field of risk-management which in turn enabled sub-prime lending.

Stock market crash is not the topic of this post. So let us leave this aspect aside. What is important to note is the push to decrease costs and increase volume at any cost. As an example, look at the development of the World Trade Organization (WTO); you can see the logic behind promoting such an organization — the WTO was a logical way to increase the sales volume by enabling corporations to sell around the world.

Another interesting aspect of ‘cost decrease push’ is outsourcing. If goods and even services (like software) can be produced cheaply outside USA then it has to be good, right? What can be wrong about American consumers paying less? Well! Hind sight is 20/20 and we all know the answer to this question. American consumers need to pay more to keep American jobs at home otherwise everyone ends up working in ‘Mc-jobs’.

A typical tea-party-minimum-government-intervention-nutcase would still argue about free will:

If people do not want to outsource jobs then they can buy American goods. If enough people want to buy American then outsourcing will automatically stop.

Sounds logical, right? Wrong! The fact remains that at an individual level we are all looking for that advantage. I am not going to be a happy camper if my neighbor purchases merchandise at price lower than what I paid for those same goods. This is in stark contrast with the fact that most of us will have no problem in voting for a legislation that restricts outsourcing and favors purchase of locally produced goods.

So to summarize my argument: Tea-party-limited-government-free-market mentality fueled unbridled capitalism which, in turn, exported American values, technology and jobs.

Is it not ironic that government intervention is actually needed to preserve American values?

[Note: Unfortunately I am not very familiar with European history...but I can bet that Europeans became socialists while following a similar route.]