Hello Frank, and welcome to Orchid;
I hope we will see a lot more of you here.
Of course, I have a political agenda, and, although it’s concerned
with globalization in general, and the political drive against
progressive tax history and organized labor in this country, it’s
focused on the jewelry industry, its marketing strategies, its
perception of the costs of doing business, and where I think that is
taking them. I will contact you privately to express these concerns
and attempt to illustrate them with facts and observations, perhaps
pointing out some useful new directions. But that is not the purpose
of this forum.
My original title for this thread was not used, and I think rightly
so; it was the moderator’s circumspect judgment to re-name it and set
its topic for the use of this forum. I hope I don’t appear to be
denigrating MJSA’s efforts on behalf of its membership, which have
been considerable, and I commend their accomplishments. I resorted to
rhetorical devices, and I will do that again. It’s the only way to
counter the other side’s rhetoric, which is based on generalizations,
assumptions, and anecdote. The other side won’t look at the facts.
Who is the other side? It’s only a part of the jewelry industry in
its present form, and MJSA, only when it still subscribes to the
ideologies that I think are driving this industry over the cliff.
I agree with you that the jewelry industry is resistant to change. I
think we disagree on the nature of that reluctance. If the industry
has been, like the Titanic, unable to see the iceberg in time to turn
the ship, I don’t want to see us looking back on MJSA’s efforts as
straightening the deck chairs.
You quote Santayana. Yes, if we don’t learn from history, we shall
be forced to repeat it. But Santayana doesn’t tell us how to
determine which history is going to give us the useful lesson, and
which is going to provide an example that is irrelevant.
Here are two examples:
Buggy-whip makers, who didn’t foresee the success of the automobile
and failed to switch to a different product, went away. The
automobile manufacturers in this country failed to see that the new
Japanese imports, which were higher in quality and got better gas
mileage, would take away their market share as they continued to
produce gas guzzling clunkers with kludgy emissions controls.
American jewelry manufacturer’s most pressing problem isn’t that they
don’t have the right product for their market. And it’s not because
they have been unable to reduce costs of production, especially by
lowering labor costs. They are trying to lower prices in response to
their retailer’s need for a cheaper product. It’s pure market
principal at work. But the retailers have identified the wrong
market! The cheaper labor has allowed the jewelry manufacturers to
supply a market that doesn’t have much discretionary income, that
never spent much on jewelry, and the retailers tried to compete with
the marketers of scale that have perfected large volume, low margin
sales, while they’ve ignored the better market demographic, which now
they can’t afford to serve. And that demographic is shrinking right
along with the middle class.
Consider this: the costume jewelry manufacturers already had a
cheap, low margin product that depended on volume. They got to the
bottom faster. I understand there aren’t very many of them left in
this country. And who needs costume jewelry when the semi-real thing,
10K and lab grown, near-diamonds, is so cheap? Apparently, the
Chinese market for costume jewelry didn’t open up soon enough to save
these manufactureres, or maybe the Chinese, since they make all our
costume jewelry now, supply their own markets adequately. Do we know
if they are adding tariffs to our product? Or maybe that’s a moot
point.
Let’s pick a more appropriate example, and this refutes your
insistence that, in the long run, the rising tide of free trade will
raise all boats. Take the example of the Makiladoras. After a decade
and a half of NAFTA’s elimination of trade restrictions between
Mexico and the U.S., wages for manufacturing in Mexico have dropped
by 20%. Wages for those jobs in this country have stagnated, relative
to inflation and are beginning to be cut, benefits slashed. Seems
like boats on both sides are swamped. But the U.S. has reaped greater
profits, disproportionate to Mexico’s gain in the game. Still, the
motor companies flounder under “legacy costs” and want the taxpayers
to pick up the tab for their guaranteed benefit plans. CEO’s plans
continue. Where did the money go? To the shareholders and CEO’s, at
the expense of the company, who still continues to produce SUV’s,
the buggy-whips of the future auto industry. China will sell cars in
this country with a 2% tariff, while GM will pay 20% tariffs to sell
their cars to China. So do not confuse an increase in a country’s
gross national product with an increase in their standard of living.
You won’t see markets open up to American products in India and China
unless we can force them to allow labor to organize as a condition of
lifting trade restrictions. The great consumer market in this country
is a direct result of the growth of the middle class, which, in turn,
is a direct result of the efforts of organized labor. Even Henry
Ford, that consummate capitalist, when confronted with what he paid
his workers, explained that somebody had to be able to afford to buy
his cars.
That brings up the second issue. Is free trade really free? Only
somewhat, and only for some. It is a compromise, the result of a
tug-of-war between exporters and multinational corporations in the
advanced countries (which have the upper hand), on the one hand, and
import-competing interests (typically, but not solely labor) on the
other.
The free trade ideology, as it appeals to policy makers, has been
carefully packaged, in oversimplified form, to serve certain special
interests. It results in a general aversion to government regulation,
progressive taxation, and organized labor. Words imbued with emotion
like “Protectionist” are used to sell it. In reality, there is a vast
array of trade and industrialization policy in effect. But in
general, the free trade policy hasn’t worked. Its most powerful
proponent, the IMF, is now ready to acknowledge that.
““the IMF itself has grudgingly conceded that, contrary to rosy
predictions of its theoretical models, a systematic examination of
the empirical evidence leads to the “sobering” conclusion that “there
is no proof in the data that financial globalization has benefited
growth” in developing countries (IMF, Prasad, Rogoff, Wei, and Kose,
2003, pp. 5-6).””
I refer you to:
http://homepage.newschool.edu/~AShaikh/globalizationmyths.pdf
to read for yourself what it was that it took the IMF so long to
realize.
So, I’m not quite ready to commend MJSA for it’s seeking a zero to
zero tariff balance. We may be giving up one of the few bargaining
chips we have.
Finally, I’d like to reiterate my position on the inheritance tax.
That is its name in the U.S. tax code. The term “death tax” was
coined by a conservative pollster named Frank Luntz, in an effort to
turn public opinion against it. Supporters of the tax have countered
with the term “Paris Hilton tax”. But here is what it actually is.
The inheritance tax has been in effect since 1919. Why then, is it
only recently that we have heard how damaging it is? Why, before Bill
Frist (who’s family’s vast wealth will definitely be affected) put
it’s repeal on his agenda, didn’t we hear about how it was
devastating American business? 18 families, within the 2% of the
American public who will be affected by it, have spent billions on
their 10 campaign to remove it. We’ve been hearing about how it
prevents the family farm from continuing when the children inherit
it, yet not a single family farm that failed for that reason has been
found! So find me, if you can, a single family jewelry manufacturer
who is now defunct as a result of this tax. The tax is just this: if
a family member inherits assets in excess of $10 million, the amoun t
over $10 million can be taxed at up to 55%. It applies to any
individual family member who fits those criteria. If several family
members are inheriting the estate, only those that get over $10
million will be taxed, and only on the amount in excess of $10
million. That means, it won’t affect publicly traded companies in the
same way. It might affect the wealth of some shareholders with
majority stock that meet the criterion. And they can sell their
stock, pay the tax, and the business can go on. How many of the 3,400
businesses that you refer to have assets like that concentrated in
the possession of a single owner, and that would go to so few heirs
that the tax burden would be too great to continue that business?
Once again, I hope MJSA will continue it’s work on behalf of it’s
members, but reconsider some of it’s positions in light of a broader
view of the facts.
David L. Huffman