Tag Archives: Going Galt

How Democrat policies cause corporations to outsource jobs overseas

David Farr is the CEO of Emerson Electric, a $1.7-billion-dollar company heavily involved in manufacturing. What does he think about the job that the Democrats are doing in Washington?

In this Bloomberg article, he explains:

Emerson Electric Co. Chief Executive Officer David Farr said the U.S. government is hurting manufacturers with regulation and taxes and his company will continue to focus on growth overseas.

“Washington is doing everything in their manpower, capability, to destroy U.S. manufacturing,” Farr said today in Chicago at a Baird Industrial Outlook conference. “Cap and trade, medical reform, labor rules.”

Emerson, the maker of electrical equipment and InSinkErator garbage disposals with $20.9 billion in sales for the year ended September, will keep expanding in emerging markets, which represented 32 percent of revenue in 2009. About 36 percent of manufacturing is now in “best-cost countries” up from 21 percent in 2003, according to slides accompanying his speech.

Companies will create jobs in India and China, “places where people want the products and where the governments welcome you to actually do something,” Farr said.

The unemployment rate in the U.S. jumped to 10.2 percent in October, the highest level since 1983. Emerson, which Farr said employs about 125,000 people worldwide, has eliminated more than 20,000 jobs since the end of 2008 to lower expenses.

“What do you think I am going to do?” Farr asked. “I’m not going to hire anybody in the United States. I’m moving. They are doing everything possible to destroy jobs.”

[…]Mature markets such as the U.S., Western Europe and Japan continue to decline in importance and the company will keep investing in emerging markets, Farr said during the presentation.

“We as a company today are putting our best people, our best technology and our best investment in these marketplaces to grow,” he said. “My job is to grow that top line, grow my earnings, grow my cash flow and grow my returns to the shareholders. My job is not to shrink and roll over for the U.S. government.”

[…]In renewable and alternative-energy markets, Emerson had 2009 sales of $50 million and plans to increase that to more than $800 million in five years.

“But you are not going to see Emerson going out there with fancy commercials or sitting at the right hand of some president, talking about this,” Farr said. “We do it.”

When it comes to manufacturing jobs, the only person whose opinion counts is the CEO of the manufacturing company, because he makes the hiring decisions.

Why Obamanomics will not improve the economy

I noticed the Bloomberg article because it was linked to this American Thinker article, which was linked at Marshall Art’s blog.

The American Thinker article analyzes why Obamanomics will not improve the economy.

Excerpt:

The reason that Obamanomics will not and cannot work is because an economy cannot be managed from the top. Economics is a bottom-up process that depends upon individual incentives. Critical incentives have been diminished or destroyed by recent economic policies. Fear, uncertainty, threats, tax increases, penalties, and violations of the rule of law are but some of the conditions anathema to entrepreneurs, small business, and large business. Businesses will not hire, invest, or expand in a climate of disincentives. No commands from on high can force economic activity. That was a lesson that should have been learned from Eastern Europe and the former USSR.

If these disincentives are left in place, our economy will continue to shrink and our standard of living will continue to diminish. Capital has no nationality, and it will start to flee our shores. Talent will follow. We will not recover from this economic downturn until businesses and individuals have a more favorable incentive structure.

You can’t argue with the 10.2% unemployment rate, and it’s only going to get worse. Everything that Obama has done has been bad for business, and has contributed to raising unemployment. Democrats, (and the people who voted Democrat), know less about economics than my keyboard.

How redistribution of wealth kills the entrepreneurial spirit

There is a perception, especially on the left, but also on the “big government” right, that the federal government should be responsible for redressing every inequality that occurs in society. This is true whether the person brings misfortune on themselves or whether it is accidental. The problem with this wealth redistribution is revealed when you think about the incentives this introduces to the producers and the victims.

  1. Government does not transfer wisdom, skill or responsibility from producers to victims
  2. Government transfers money from producers to victims
  3. Being productive involves risk and hard work on the part of producers
  4. Receiving money involves ingratitude and rationalization on the part of victims
  5. If the government confiscates a large enough portion of the earnings of the producers, they stop producing
  6. Every dollar taken from producers is a dollar less they have for engaging in their productive plans, (e.g. –  running a business or raising a family in a responsible way)
  7. The more money is that transferred to victims, the more the frequency of bad behavior increases – because being a victim is easier
  8. If you subsidize being a victim, you get more of it
  9. If you tax production, you get less of it

“Going Galt” is named after the character John Galt in Ayn Rand’s novel Atlas Shrugs. Galt is an industrialist who withdraws from the economy when faced by punitive tax rates and burdensome regulations. Going Galt refers to slowing down or ceasing production, because the risks and effort involved in producing are not worth the portion of the earnings that producers keep after taxes are redistributed to the victims.

The idea was first brought up afresh by Dr. Helen Reynolds in October 2008 on her blog Ask Dr. Helen. A more recent discussion of the phenomenon is here at the Washington Independent web site.

Excerpt:

“Just this weekend,” said Rep. John Campbell (R-Calif.) on Wednesday in an interview with TWI, “I had a guy come up to me in my district and tell me that he was losing his interest in the business he’d run for years because the president wanted to punish him for his success. I think people are reading ‘Atlas Shrugged’ again because they’re trying to understand what happens to people of accomplishment, and people of talent and energy, when a government turns against them. That’s what appears to be happening right now.”

The plot of Rand’s novel is simple, despite its length — 1,088 pages in the current paperback edition. The United States is governed by bureaucrats, “looters” and “moochers,” who penalize and demonize creative people. The country is in decline because creative people are disappearing — they have followed the innovative John Galt to a mountain enclave, “Galt’s Gulch,” where they watch society crumble. Creativity has gone on strike (the working title of the novel was “The Strike”), and the engine of capitalism cannot run without it.

For Campbell, this is a powerful and relevant story. The congressman calls “Atlas Shrugged” an “instruction manual,” and inscribes the copies that he gives to interns. Rep. Paul Ryan (R-Wis.), the ranking member of the House Budget Committee, also gives copies of the novel as gifts and refers to it to make the case against President Obama’s policies. “It’s an audacious scheme,” said Ryan in his speech to the Conservative Political Action Conference last week. “Set off a series of regulatory blunders and congressional meddling, blame the free market for the financial crisis that follows — then use this excuse to impose a more intrusive state. Sounds like something right out of an Ayn Rand novel.”

Michelle Malkin is posting a lot of messages on her blog from people who are suggesting other ways to Go Galt.

Excerpt from one of the producer’s letters:

It is now fashionable and politically expedient to extend blame for the current financial crisis on greedy businesses and predatory lenders. The reality is that individuals and poorly managed businesses were responsible for the bulk of the problems. Government also played a role – and it was both parties – that encouraged and supported unsound business practices. Now the Government “must” step in to “save” these poor people from losing their homes, and “save” these “too big to fail” financial institutions. What about those of us, and those businesses, that chose to act responsibly? Who chose to live within their means? Who chose sound financial decisions over high risk behavior?

Enough is Enough. Let them all fail. It is not too late. I don’t care about the homeowner that borrowed more than they could afford and now find themselves potentially without a home and bankrupt. I don’t care about the businesses that overlooked sound financial decisions in the name of short term profits. We all make choices in life and it is time to let those that made the bad choices live with their decisions and finally reward those that chose to act responsibly. It has come down to this – either we let those that made the bad decisions fail, or we end up sacrificing our nation, our national identity and our very way of life.

Related posts.

Two ways to conduct a Tea Party revolution against socialism

GatewayPundit is reporting that the economic news is getting even worse.

Along with raising taxes on businesses, raising taxes on the “rich,” and allowing the Bush tax cuts to expire…
President Obama will also announce the implementation of an expensive cap and trade energy policy this week to battle pretend global warming.

He cites Human Events’ report that we will lose between between $444 billion and $1.308 trillion of GDP output, and unemployment would increase 2.7% (= 4 million jobs lost), mostly in the manufacturing sector.

Well, we’re doomed. Or are we? I’ve found a couple of clever ideas for dealing Obama’s plans to plunge the United States into socialism.

The first idea is from Biola University professor Doug Geivett, who is a first-class evangelical Christian scholar. I met Doug at a philosophy conference on Providence and Open Theism at Wheaton College, IL in 2000. I remember asking him whether investments were a form of gambling. He explained that investing was not gambling, because investments fund the creation of new products and services that grow the economy.

Doug starts by noting Rick Santelli’s rant against Obama’s socialist policies which involve wealth redistribution from those who produce to those who consume. (Note: there is now a new rant up, with supply-sider Larry Kudlow).

In his post, Geivett enumerates the points made by Santelli:

First, fiscally responsible Americans don’t want to pay the bill for borrowers who can’t keep up with their mortgages.

Second, fiscally responsible Americans shouldn’t have to pay the bill for borrowers who can’t make their payments.

Third, this plan doesn’t rob the rich to give to the poor. It takes from every tax-paying American and turns it over as free cash to people who can afford to rent but can’t afford to buy.

Fourth, there are ways to get the federal government to pay attention, ways the government is totally unprepared for.

Santelli suggests that responsible, productive Americans may want to consider a revolution – a kind of Chicago Tea Party. Right now, the banks are being more careful about who they give credit to. This is not a problem for responsible people with good credit history. The government is giving out bailouts to banks in order to ease credit for irresponsible consumers – the same ones that got us into this mess in the first place.

Geivett describes what he thinks this Chicago Tea Party might look like:

For example, what do you think would happen if 30% of all Americans with an income of $50,000 or more organized to do the following two things:

  1. Convert all of their assets held in the stock market and at banks and credit unions into cold, hard cash (or gold bars holed up in their bank’s safe deposit boxes)?
  2. Refused to pay income tax for 18 months (or indefinitely)?

This would remove the money that banks use for consumer loans. If no one can get credit, then no one can default, and there is no need for bailouts to these delinquents. By refusing to pay income taxes for a period of time, the government would have no funds available for bailing out their favorite special interest groups. People might finally have to stop spending and start working and saving again.

Geivett goes on to describe how this plan should incorporate reduced consumer spending, which I agree with. Somehow, America has gone terribly wrong. We use to be a nation of workers and savers. But the progress of left-wing socialism, with all the redistributing of wealth from producers to free-riders, has caused us to drift into an irresponsible, immature, hedonistic culture.

Geivett’s plan made me think of a post I read before on “Going Galt”. What if all the people who produced wealth just stopped producing?

Do you ever wonder after dealing with all that is going on with the economy and the upcoming election if it’s getting to be time to “go John Galt”? For those of you who have never read Ayn Rand’s Atlas Shrugged, the basic theme is that John Galt and his allies take actions that include withdrawing their talents, “stopping the motor of the world,” and leading the “strikers” (those who refuse to be exploited) against the “looters” (the exploiters, backed by the government).

Obama talks about taking from those who are productive and redistributing to those who are not — or who are not as successful. If success and productivity is to be punished, why bother? Perhaps it is time for those of us who make the money and pay the taxes to take it easy, live on less, and let the looters of the world find their own way.

The National Taxpayers Union explains who pays the taxes that Democrats are redistributing to their freeloading constituents. The top 50% pays 97% of all income taxes collected! The lazy half the country is freeloading off of the productive half.

The second idea that I found for responding to Obama’s socialist bailouts is to move to Canada. Captain Capitalism had this post in which he compares the two economies and concludes that Canada has a better future than the United States. Canada has a smaller deficit, a smaller debt, and is not facing a meltdown from entitlement programs like Medicare and Social Security, like we are.

Investor’s Business Daily reports that:

By 2041, Social Security will be essentially broke, having exhausted its trust fund, those dollars amassed through decades of surplus payroll tax revenues that Congress will have already squandered on general budget expenditures. Medicare’s future is just as bleak. It is already spending more than it is receiving in payroll taxes.

The prime minister of Canada right now is economist Stephen Harper, a strong fiscal conservative in the mold of F.A. Hayek.

UPDATE 1: Michelle Malkin has even more ideas on what to do here.