Japan Airlines is a participant in the new open skies agreement.
Japan Airlines and All Nippon Airways made a pitch for improvement in their operations, with JAL President Haruka Nishimatsu saying in a statement, ‘‘We will aim for providing better services for customers through managing air routes efficiently and establishing a strong network.’‘
Japan’s biggest airline, currently restructuring itself under government supervision, has been in negotiations with Delta Air Lines and American Airlines separately for a possible capital and operation tie-up.
In the wake of the open skies accord, JAL appears to now be accelerating its efforts to choose a partner.
In a similar move, JAL’s rival ANA President Shinichiro Ito also released a comment, pledging, ‘‘We will take strategies that will improve the convenience of the users of our services such as increasing flights to American cities and selecting a U.S. partner as early as possible.’‘
Delta released a welcoming statement, saying the accord will provide ‘‘benefits for consumers, airline employees and investors,’’ and expressed hope that it will enable Delta and JAL ‘‘to engage in deeper and more effective cooperation, producing greater benefits for the carriers and their customers.’‘
American Airlines’ Senior Vice President Will Ris also praised the newly struck deal, saying in a statement, ‘‘This open skies agreement will effectively reset the playing field and enable new working relationships.’‘ – read more at JapanToday.com…
China to the US economy - lifeboat or tugboat? (photo: Randal Rayborn)
A number of recent headline stories out of China about joint ventures and acquisitions involving American companies didn’t seem to get much attention in the US media, yet these stories indicate that the current economic recovery will remain jobless for some time. Is China a lifeboat for US firms, or the tugboat pulling the entire wounded US economy back to shore?
The biggest news came out of the automotive industry, where Beijing Automotive announced its intention to acquire all or part of Saab from General Motors which also announced a joint venture with Shanghai Automotive to sell small cars to India. Ford Motor Company also made headlines in China, as Geely Holding Corp. discussed details of its 100% purchase of Volvo from Ford.
As the Big Three automakers try to shed unprofitable divisions and consolidate operations, look for more acquisitions and joint ventures with China. “Saab is attractive for its brand and its technology”, Beijing Auto president Wang Dazong said of the proposed acquisition, adding that a lack of “technology depth” is one of Beijing Auto’s weaknesses. Chinese firms recognize how much technological improvement they can achieve through acquisition, and they have the cash to go shopping now that the marketplace offers them bargain prices.
Healthier US firms have not been idle in the Chinese marketplace, either. IBM signed a range of cooperation agreements with China’s ENN Group, including a joint venture for new energy development. Pharmaceutical giant Pfizer announced plans to set up a new research and development center in Wuhan, Hubei province, in central China with a goal of acquiring less expensive talent to support Pfizer’s global R&D projects. Fast food company Burger King announced that it was opening six more outlets in Beijing. (At the same time, news reports indicate that fast food outlets in many American cities have implemented hiring freezes – an unprecedented situation.)
Observers can be forgiven for wondering if US Government stimulus dollars are simply going straight to Asia to be put to work. Throughout the crisis, American firms seem to have retained their enthusiasm for investments in Asia – particularly China – but inside the United States private sector investment and job growth have ground to a halt. In some ways the jobless recovery was an entirely predictable result of the information technology boom at the beginning of the decade. Many of the new systems and processes implemented during that boom made middle management positions redundant some years ago, it just took a sharp recession to kick off the actual downsizing. Those middle management jobs will not be coming back. Large- and medium-sized companies have learned to run leaner, and in an economic environment filled with political risk they recognize that aside from a small core of highly intelligent and creative “idea people”, employees are now liabilities.
The US Government has picked its favorites, and the Administration’s policies give us insight into what the next couple of years of “recovery” are going to look like: Big Business goes to the government, Medium-sized Business goes to Asia, and Small Business goes under. Those few small businesses wise and determined enough to swim to the China lifeboat have the best chance of surviving the apparent deflationary depression the American economy is headed into.
The average American pays little attention to news from Asia. American culture is insular, sparing little attention to developments in other countries. The nation’s focus is on the wars in the Middle East and the expansion of domestic welfare programs – an expansion demanded by handout-seeking voters who may now be starting to understand the downside of getting what they wanted.
The US media traditionally spends little attention on economic news from the rest of the world, and even President Obama’s current trip to Asia has not generated much coverage of the back story behind his visit – the fact that the US and Chinese economies are now inextricably intertwined. Neither nation can make grand economic decisions independently. America may have to a certain degree surrendered its economic sovereignty to the Chinese government, but China finds itself equally constrained – if their largest debtor decides to default, Chinese economic expansion could be in very big trouble.
Asia’s rise got America’s attention back in the 1970’s and 1980’s, when anti-Japanese sentiment was rampant in Detroit and the Rust Belt and fears of Japan rising to achieve economically what they had failed to accomplish on the battlefields of the Pacific a generation earlier seemed justified. Until the overheated Japanese economy collapsed in 1989, beginning a twenty year period of economic stagnation that has left the Nikkei to this day well off its all-time highs.
Americans quickly forgot about the Japanese “threat”, though occasional grumblings have been heard in conservative quarters throughout the last decade about the military threat from ascendant Chinese Communism. In truth, these complaints seem like nothing more than a political movement in search of an enemy – and they have today faded from the headlines as the extraordinarily divisive President Obama attracts all of his opponents’ energy, and the authoritarian Chinese government has proven to be a stronger exponent of capitalist principles than the typical Wall Street investment bank.
Asia may not register in the public’s mind, but American companies have certainly noticed the healthier business climate and are continuing to move work to China. Even the so-called “green” jobs talked up by the Obama Administration aren’t for Americans – they, too, are headed East:
Evergreen shifts work to China
Bailed out GM to Spend Millions Overseas (Europe, China, South Korea)
Asia’s rise is one of the reasons the American worker is faced with a rapidly decaying job market. Heading overseas to work is not a realistic option, since the majority of the laid-off do not possess skill sets that travel well. Barring the rise of new domestic industries (which seems unlikely under the current Administration), the United States may be forced to undertake a huge expansion of its already vast welfare state – just to keep unemployed voters quiescent. Middle America will certainly start to notice Asia’s rise at that point – for they will question why Asians are able to achieve a standard of living that once was commonplace in the United States.
Chinese Defense Minister Cao Gangchuan (L, Front) holds a welcoming ceremony for visiting U.S. Secretary of Defense Robert Gates (R, Front) in Beijing, capital of China, Nov. 5, 2007. (Xinhua/Li Tao) (whj/wcy)
The rise of China is hardly a secret, but because it is a complex economic that is constantly evolving, it gets less attention than hot-button issues. Absent a real crisis between the two, the relationship is more about the flow of capital and the nature of global business than it is about heated battles inside the Beltway or on Main Street. And while the rise of China and America’s increased dependency on Chinese loans to fund its deficits certainly generates anxiety, it’s mostly amorphous barring some specific issue to focus it.
How that relationship came to be is the subject of my new book, Superfusion: How China and America Became One Economy and Why the World’s Prosperity Depends On It. While this economic fusion has taken more than two decades to evolve, with the crisis of the past year, it has become both a tighter embrace and one more fraught with tension. It’s to the credit of both governments – for now – that those tensions have not boiled over.
For their part, the Chinese are concerned about the viability of the American economic system and about the long-term value of their more than $1 trillion of investments in American bonds. They are also dependent on the market even a recession-mired America offers, with exports to the United States still near $300 billion a year. Americans are worried about the effect of lower-cost Chinese labor on U.S. jobs, even though most of the lost jobs were lost long ago and have as much to do with the corrosive effects of technology on labor as they do with cheap production in China. Meanwhile, China offers turbo-charged growth for American companies, as the Chinese government turns to companies like Caterpillar and GE to help with the industrial build-out and as Chinese consumers buy more goods – even a bankrupt GM sold 1.6 million cars in China this year, more than in the United States.
For now, the relationship between the two economies is symbiotic, and is providing a degree of stability to both societies. In the absence of Chinese money, the Obama administration could not be spending its way out of recession, and without American companies operating in China and without Americans purchasing Chinese goods, China wouldn’t have the money to lend and spend. But no country likes to see its sovereignty eroded and its ability to be master of its own fate undermined – and that is precisely what the economic relationship between the China and the United States does to their respective governments. National sentiment in both countries is also strongly suspicious, and that is likely to intensify. read more at RiverTwice Research…
Hong Kong - a beacon of hope to the American worker? (photo: Randal Rayborn)
A Change of Age
The pundits told us the great transition from the Industrial Age to Information Age would be easy. Nothing like the wrenching social dislocations of the 1800’s, when people left behind the grinding poverty of rural agrarian life to earn better wages laboring in urban factories. This time, the transition would require nothing more difficult than a bit of retraining. Add a few computer skills to your resume, those pundits assured us, and all the golden rewards of the new Age would rain down upon you.
During the dot-com era, that rosy forecast seemed to be coming true. Multi-millionaires were born every day in the Great Internet Land Rush, and for a time it seemed the Information Age had already arrived, after a quick and painless transition. Even the sudden collapse of the dot-com bubble didn’t dampen many spirits – yes, a few of the kids had gotten too eager, but the economic changes the boom had wrought were permanent – and the industrial economy the United States was rapidly losing to Asia and Latin America simply didn’t matter any more. The era of the service economy had dawned, and if Americans could no longer compete for industrial work against a global labor force…well, it just didn’t matter. Take a few computer classes, and Joe Steelworker could get right back into the game.
But a new trend was taking hold, one that the American media and government to this day refuse to recognize, much less accommodate – the greatest casualty of the transition to the Information Age is the job.
The death of the “job”
Many people still hold jobs in the United States. According to the Bureau of Labor Statistics, almost eight million civilian jobs have been lost since peak employment of 146.6 million was reached in November of 2007. But in an era of excessive government regulation and mandatory health insurance coverage, creating a traditional job is no longer the most efficient way to buy talent. International labor arbitrage gets a lot of media blame, but it is not the real reason American jobs are disappearing.
1980’s corporate America employed layer upon layer of “redundicrats” – middle managers and lower-level executives who contributed very little to corporate bottom lines, but did quite a lot to build up the egos of the more senior-level executives whose empires they made up. Companies began to recognize the excessive costs incurred by this redundancy toward the end of the decade, and many administrative employees and extra layers of management began to disappear, replaced by new technologies like word processing software. It was an era of morale-boosting fads like “team-building” and hanging inspirational posters on cafeteria walls, but the real theme was already clear – even in the midst of an unparalleled economic expansion, the goal was to do more with far fewer people. Employees were no longer seen as assets who could add value, but as costs to be controlled.
American firms continued to invest heavily in automation throughout the 1990’s. Mass layoffs weren’t necessary (indeed, they posed serious publicity risks), but fewer and fewer replacements were brought in to address normal rates of attrition. A brief spike in hiring in advance of the Y2K crisis did not change the overall mission of HR departments, which was to minimize the growth of headcount. Business process automation often improved the quality of working life for those still employed, but left many older employees struggling to gain minimal competency in the new technologies.
The dot-com boom starkly pointed out the real challenge of the Information Age – how to help older workers keep up with the tide of young brainpower that was remaking the workplace. The back-breaking farm work of the Agrarian Age transitioned to the somewhat easier drudgery of the Industrial Age – but the demands of the Information Age now presented a much steeper hill for the average worker to climb.
Transition to a knowledge economy difficult for many
Evidence suggests that at best 20% of US workers have the brainpower, education, and cultural fluency necessary to do meaningful work in a global information economy. That is a brutal and politically unacceptable statistic. All the weekend Microsoft Excel courses in the world can’t turn a laid-off bus driver into the Java/J2EE-fluent Enterprise Systems Architect US companies desperately want to find.
Western companies have eagerly embraced foreign outsourcing in an attempt to both find the talent they need and to control the cost of retaining it. But outsourcing has proven to be a mixed blessing. Language barriers and reputation risk make the actual price of hiring H1B’s much higher than their enticingly low salary and benefit costs. And there are still very few H1B’s allowed by quota in the United States compared to the much larger number of brainpower-intensive positions that go unfilled. Unfilled for a simple reason – adding an unproven outsider to an overdue technology project invariably delays it further. If companies can find perfection on the open market, they’ll create a job for it – otherwise, hiring managers usually decide to just have Bob and Bill and Jo work some more overtime. There is not enough time built into extremely tight project schedules to train even a capable candidate in a given company’s way of doing business. Bob and Bill and Jo aren’t happy, either – the overtime demanded of them is invariably unpaid.
So where does this general aversion to traditional hiring and training practices leave the remaining 80% of workers, many of whom are intelligent and experienced in roles that no longer exist, but struggle to perform relatively simple Information Age tasks like logging into a corporate network and reading their e-mail? There simply aren’t many jobs left where their talents – developed for an era that has passed – can be used to advantage. Or, more precisely, their core competencies have been permanently taken off the job market and replaced with automated processes, outsourced tasks, or temporary positions. And government regulation has created an age bias – mandatory offering of health insurance means the cost of employing these workers trumps the value their experience offers. If they possess a particular skill that is still in demand, they can try their hand as independent contractors or start their own businesses – many have done so out of necessity. But other workers have started to slide back out of the middle class lifestyles they once considered an entitlement. They may well never again find the kind of “permanent” employment they once enjoyed. For it is likely America will never again reach that November, 2007 peak job level. The Information Age offers entrepreneurship, temporary projects, and odd jobs – more freedom, but far less old-fashioned job security.
The middle class lifestyle – expectations and reality
Television has delivered a very clear vision of American upper middle class life,both internally and to the entire world. Television thus sets an expectation – Americans watch Hollywood shows and commercial advertising and believe they should be able to achieve the lifestyle depicted therein. For nearly three decades after WWII, this was not an unreasonable expectation. The United States emerged from the war in an economic position unparalleled in history. The manufacturing economy was so strong that assembly line workers in Detroit were able to buy three-bedroom suburban homes and drive new cars. Americans quickly assumed this was the “new normal”.
By the 1960’s the middle class lifestyle had become America’s birthright, a reward, many thought, for its steadfast defense of freedom during the war. But the real reason for US ascendancy was that its industry had survived the war intact. Wartime necessity taught Americans to make things, and they set to converting those defense production lines to peaceful purposes with a vengeance. Americans built things and sold things to a world desperate to rebuild and modernize, and became the richest nation on Earth while doing so.
The suburban lifestyle popularized in the post-war years was a direct side effect of that period of economic ascendancy.
But the manufacturing boom eventually ran out of steam, and by the late 1990’s, the era of financial engineering was underway. A different dynamic had taken hold – if Americans could no longer afford the lifestyle they saw on TV by creating and selling superior products, they could just borrow the lifestyle they wanted from the bank. Why work hard and wait many years for your experience to be rewarded when you could have the bigger house and nicer car right now…just like those people on TV? This belief and Alan Greenspan’s interest rate manipulations created a giant real-estate bubble which has yet to fully collapse. Foreclosures are driving hundreds of thousands of Americans away from the “American Dream” of home ownership and back into rented apartments. The even larger commercial real estate bubble has not yet begun to deflate.
One thing is clear – the American middle class will not return to poverty quietly. Their sense of entitlement is too great, and vast subsidies will be demanded at the ballot box, adding trillions more to a debt load already beyond any in human experience.
An exodus?
Young, bright workers have an option. It has been said that a smart young person in 1807 went to London, a smart young person in 1907 went to New York, and a smart young person in 2007 went to Shanghai. The economic “Wild West” of Asia bears a resemblance to America in the early part of the last century, offering the young and bright endless opportunities to build empires of their own. Opportunities they will struggle to find in the mature economies of the United States and Europe, which drown the small business owner in red tape for the benefit of rent-seekers in government.
America’s President Obama has made no secret of his hostility toward small business – he views business owners with the jaundiced eye of a fraud victim and finds virtue only in public service and community activism. But he seems to have little problem accommodating the wishes of the large multi-nationals whose campaign contributions have bought considerable control over his Administration and the US Government as a whole, so perhaps he does not consider those entities to be businesses at all. It is unlikely any real economic recovery can occur in the United State as long as government treats small business as its enemy.
Faced with such a hostile environment, why wouldn’t America’s best and brightest start to look for opportunities in places like Shanghai, Hong Kong or Singapore? While none of these cities is noted for encouraging free political speech, they certainly understand the critical importance of enabling the freest economies possible, and they welcome brainpower from foreign lands. Most Asian nations now demonstrate a keen understanding of the new rules of the Information Age, while the governments of the United States and Europe seem determined to try to fight off the future. A reverse of the “brain drain” America exploited so skillfully over the last century may be about to begin, as Asia’s young talent returns home from university education in the US and their American classmates start to follow them. It seems likely that the next Microsoft or Hewlett-Packard is even now being created in a garage…in Shenzhen.
