Tuesday, January 4, 2011

Globalization and Human Resource Management

I am teaching an online human resource management class this month.  One of our first day's discussion boards was about globalization and human resource management.  I sent the class the following e-mail to cap off the class discussion on globalization and human resource management:

>The class is more balanced with respect to globalization than my classes last semester.  Globalization gets bad press but I am for it, although not in the way it is done.  The theory of comparative advantage that David Ricardo first expressed in the early 19th century shows why trade works.  Each country has relative strengths and weaknesses. If each country does what it is relatively good at (not necessarily better at than other countries, just what it is relatively productive at compared to its other opportunities) then the world will produce more and the greater productivity can be exchanged globally, making each country better off.  Tariffs and other trade restrictions thus prevent possible gains from trade.

The worst examples of tariffs were during the 1840s in Britain and Ireland and in the 1930s in Russia. In both instances there were mass starvation, first of the Irish during the Potato Famine and second of the Ukrainian kulaks under Stalin's socialism.  These two instances of trade restrictions amounted to mass murders, the first of  one million deaths and the second of I believe about 10 million deaths. Thus is the promise of tariffs, trade restrictions, economic autarky (whereby everything is manufactured at home) and government intervention.

While such extremes are unlikely here, at least in the near future, there are other repercussions to trade restrictions.  For instance, trade restrictions preceded the Second World War.  The Smoot-Hawley Tariffs, the most extreme in American history, were passed in 1930 at the outset of the Great Depression. It is difficult to prove that World War II and the Great Depression were entirely caused by the Smoot Hawley tariffs. But it is astonishing the labor movement now advocates similar kinds of tariffs.

The Great Depression was far worse than any that preceded it and there was much less government intervention in the economy until within 20 years of the Great Depression.  Hence, the Smoot Hawley tariffs and the increased regulations of the 1890-1920 Progressive era and the New Deal along with the establishment of the Federal Reserve Bank in 1913 all may be part of the reason for the Great Depression of the 1930s.

Astonishingly, Americans under George W. Bush and Barack H. Obama have opted for policies that are similar to the policies that were adopted preceding the Great Depression: expansion of the money supply, more regulation, higher tariffs. Have fun, guys. My career is drawing to a close. You are the ones who will be hurt by economic insanity.

One of the chief policies that the Federal Reserve Bank and the US government have emphasized is ever increasing foreign indebtedness.  Numerous foreign countries have been holding large shares of treasury bonds. This has the effect of propping up the dollar.

The natural response to excessive outsourcing ought to be a weakening dollar.  As firms move overseas demand for dollars declines. When the dollar declines demand for foreign goods also declines and firms move back.  But the US government and the Federal Reserve Bank have orchestrated a pattern where foreign countries hold our debt, keeping import prices low.  Thus, the two-party system, specifically including the Democrats under Obama and the Republicans under Bush, have pushed for policies that ensure that jobs leave the country.

Of course, given the huge indebtedness now to foreign countries, if those countries were to unilaterally sell off the US debt there would be a currency collapse here. The dollar would be worth pennies, much like the Papiermark in Weimar Germany in the early 1920s.

The effect of the twin policies of monetary expansion by the Federal Reserve Bank coupled with subsidization of the dollar by foreign central banks and governments has been a weakening of the manufacturing sector here and the comparable strengthening of the competitiveness in European and emerging market countries, for instance, the BRIC countries, Brazil, Russia, India and China. At the same time, consumers here are better off than they ought to be as merchandise is at low prices.  However, the inflation due to the Fed's monetary expansion can be seen in the rising property taxes and cost of services such as construction, government, health care and education.

Thus, it is inaccurate to view globalization and its implications as separate from monetary and Federal Reserve Bank policy. These issues are linked as well to human resource management.

Many students note that culture clash, complexity and the need to increase skill levels are coupled with slow job growth, outsourcing and increasing competition.  All of these factors coincide with monetary policies.

There will be no easy way out for the US.  The dollar will become weaker and consumers will be worse off before manufacturing will return here.

There were several interesting responses to this discussion board, one of which was R's:

"Some employees who have lost their jobs have either relocated, changed their career, returned to school, negotiated with their former employer for a part-time position, pay-cut, or have accepted a lower level job. In turn, this has often led to a decline in living standards.

"2. Many employees who had maintained their jobs, felt insecure and were under constant pressure at work. This led to chaos, over-achievement, competition to outperform colleagues and an obvious decrease in desire to help co-workers leading to decreases in efficiency and lower product quality. This marked a  withdrawal in loyalty toward the employer and the employer’s goals. The low morale and insecurity would also heighten the employee's interest in social insurances (health, social security, education…) as the fear of job loss intensified.

"3. On the other hand, the import of these goods manufactured offshore has created end-line positions at retail stores...This yields a boost to the nation’s economy and the acceptance of diversity and multiculturalism. It can also foster positive feelings towards others cultures and harvest communication and cross-cultur(al) exchange of ideas on an international, national and intra-company level. (Of course the reverse exists due to globalization as well, with Dunkin Donuts, Starbucks, Walmart, McDonald's etc…  opening worldwide.)"

All of these behavioral and economic outcomes are linked not only to globalization but also monetary policy.

The error virtually everyone who discusses this makes is to blame globalization for phenomena that would not occur without the Federal Reserve and other central banks' monetary policies that have pegged other world currencies to the dollar.  The dollar has been propped up, encouraging exodus of manufacturing jobs.  If the propping stops, consumer prices of imports will rise and job losses (and foreign trade deficits) will come to a halt.

Monday, January 3, 2011

These Guys Want to Run Health Care?

CNN reports that garbage pick up in the public sector-and-Wall Street dominated Big Apple has scarcely resumed.  Even legacy media like CNN can't help but observe that:

"This weekend, a city with some of the most tight garbage disposal regulations in the country, looked like a dumpster, with piles of garbage on streets and sidewalks."

Whatever the cause, a publicly run New York Santiation Department (NYSD) once again demonstrates that the public sector cannot do the job.  Pinni Bohm points out that  The Daily News's Juan Gonzalez blames Deputy Mayor Stephen Goldsmith, who is a privatization advocate.  But the NYSD is not privatized, so the Daily News once more illustrates the old proverb: take reason and sanity away from a blogger and you get the legacy media.  In order to blame privatization for the problems, first the NYSD would have had to have been privatized.  Gonzalez lacks the reason and sanity necessary to put the blame where it belongs:  on the incompetently run public sector which has sucked New York dry for 15 decades (yes, Juan, government bloat and incompetence in New York go back that far).

New York must make up its mind.  Either  (1) continue to pay 40% wage premiums to under-worked, unproductive and incompetent  public sector unions or (2) become competitive.  Privatization is a workable method of accomplishing (2).   But blaming privatization for the incompetence of a non-privatized public sector-run SD is, to put it plainly, BS.

Worse, there have been allegations that the NYSD's middle managers deliberately  told workers to shirk their duties.  These allegations have been made in The New York Post. But The News and Gonzalez choose to chant the excessively staffed NYSD's party line that all workers must be micro-managed or they cannot do their jobs.  Maybe it is Juan Gonzalez who needs additional management.

Adam Smith on Third Parties

"It is needless to observe, I presume, that both rebels and hereticks are those unlucky persons who, when things have come to a certain degree of violence, have the misfortune to be of the weaker party.  In a nation distracted by faction, there are, no doubt, always a few, though  commonly but a very few, who preserve their judgment untainted by the general contagion.  They seldom amount to more than, here and there, a solitary individual, without any influence, excluded by his own candour, from the confidence of either party, and who, though he may be one of the wisest, is necessarily upon that very account, one of the most insignificant men in the society.  All such people are held in contempt and derision, frequently in detestation, by the furious zealots of both parties.  A true party-man hates and despises candour; and in reality there is no vice which could so effectually disqualify him for the trade of a party-man as that single virtue.  The real, revered and impartial spectator, therefore, is upon no occasion at a greater distance than amidst the violence and rage of contending parties.  To them, it may be said, that such a spectator scarce exists any where in the universe...Of all the corrupters of moral sentiments, therefore, faction and fanaticism have always been by far the greatest."

--Adam Smith, Theory of Moral Sentiments, pp. 205-6

Sunday, January 2, 2011

Slime Beneath the City's Fallen Snow

New York City Counicilman Dan Halloran is New York's only major elected official with a libertarian background.  Last week, a major snow storm afflicted the Big Apple.  Just as in 1969 during the mayoralty of the late John W. Linday, the Sanitation Department failed to perform.  There was public snit about the lack of snow removal.  My good friend Glenda McGee forwarded a December 30 New York Post article quoting Halloran as saying that managers from within the Sanitation Department had ordered a work slowdown.  If it occurred, it lead to deaths and other serious harm.  According to informants who brought the information to Halloran, the protest concerned promotions and budget cuts.  Union officials Harry Nespoli and Joseph Mannion as well as Sanitation Department spokesperson Matthew Lipani deny a slowdown occurred.  However, the Post asserts that multiple Sanitation Department sources have said that:

"angry plow drivers have only been clearing streets assigned to them even if that means they have to drive through snowed-in roads with their plows raised...One mechanic said some drivers are purposely smashing plows and salt spreaders to further stall the cleanup effort."

Mayor Bloomberg's absurd response was to blame residents for shoveling snow into streets.  But according to Halloran, "snitches" said that:

"they were told [by supervisors] to take off routes [and] not do the plowing of some of the major arteries in a timely manner. They were told to make the mayor pay for the layoffs, the reductions in rank for the supervisors, shrinking the rolls of the rank-and-file."

It is time to privatize the Department of Sanitation.  Competition has drastically improved the dismal telephone service of the former New York Telephone (I remember when one had to restrict long distance calls because of high costs, for instance). New York's sanitation workers are paid much more than comparable private sector workers.  Here in rural Olive, New York snow removal usually is complete within a day or at most two after a storm despite higher highway mileage per capita.  The little city of Kingston, NY, 25 miles from here, also has a public sanitation department that is inefficient and in need of privatization.

Mayor Bloomberg's response to the accusations of shirking and inefficiency in his Santitation Department has been cowardly.

I wrote the following letter to Mayor Bloomberg:

PO Box 130
West Shokan, NY 12494

Mayor Michael Bloomberg
City Hall
New York, NY 10007
Dear Mayor Bloomberg:

As someone who relies on New York City to earn my livelihood, I urge you to privatize the New York City Sanitation Department.  According to Councilman Dan Halloran and the New York Post, the recent John Lindsay-like problems that you have suffered result from an illegal, irresponsible and murderous work stoppage. 

The Sanitation Department is not functioning competently or morally.  Its workers are overpaid and under-productive.  The irresponsible stoppage caused people to die. You are the person ultimately responsible to investigate and ferret out the malefactors.  But much more important action is needed.  It is time to eliminate a white elephant that New Yorkers cannot afford.


Mitchell Langbert