We Speak on CSPAN’s Washington Journal About Big Corporations and the Economy

Some readers already found the CSPAN segment via comments in Links yesterday, so I hope you bear with me posting it for the benefit of other readers.

Although I’ve done a fair bit of call in on radio, this was my first time on TV. I think readers will find the mix of questions interesting.

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  1. ejackson

    Good interview.

    One observation, however, is that you came across as wildly left-wing. I have no clue what your political beliefs are (and it is irrelevant to me), but depending on what image you want to build for yourself, it may or may not be something you want to keep note of.

    1. Deus-DJ

      There is nothing that can be done about that nor should be done about that. If anyone wants to label her without listening to her commentary seriously then they have the power to do so…what she thinks about how some plebeian thinks of her should be of no concern at all.

    2. Yves Smith Post author

      My views happen to be middle of the road as of the Reagan era. Reagan himself panicked when unemployment hit 8% (which would be an even lower threshold now given changes in how it is measured) and began some closet Keynesian measures, pushing against our trade partners, and ultimately got support of the then G5 to engage in coordinated currency intervention (the Plaza Accord) to lower the value of the dollar to improve our trade deficit.

      In other words, when fealty to “free market” concepts produced large scale job losses, Reagan retreated, big time.

      The country has moved massively to the right since then. If correcting right wing falsehoods and overstatements makes me look leftie, so be it. We are in the midst of a plutocratic land grab by Mussolini style corportratists (aka socialism for the rich). If you aren’t upset about it, you are either not paying attention, deluded, or part of the problem.

      1. George

        Yves,I thoroughly enjoyed your CSPAN appearance and appreciate your sounding the alarm. Susan Eisenhower said that President Eisenhower’s original warning about the military-industrial complex referred to a military-industrial-congressional complex. He had a good relationship with Congress, and he dropped the reference to it to preserve the relationship. I think that the problem is actually much larger now and could be characterized as Large Corporate-Government complex.

      2. Anonymous Jones

        Nice response, Yves. When I was in college during the onset of the political correctness movement going mainstream, I was thought of as being stridently right wing (especially having sympathy for many of Reagan’s views and policies). Now I’m accused of being a leftist even though I despise the arrogance and stupidity of the far left. It is a little frustrating. But look, read Ayn Rand. She *hated* pragmatism. We live in a country that has increasingly rejected pragmatism for principles, and thus, somehow pragmatists (who do *not* necessarily reject principles, just principles that are obviously and empirically anti-pragmatic) are now leftists. Strange times.

        “If you aren’t upset about it, you are either not paying attention, deluded, or part of the problem.” Without a doubt…

    3. Ray Phenicie

      I would like to see a moratorium on what is perceived as left, right, centrist and so in in comments on discussion about the economy, money finance and politics.

      Why not talk instead about what needs to be done? What is the best way to keep most Americans employed at good paying jobs? What will give us all a healthy productive world to live in? A world that is populated by snowy owls and forests and where productive cities, farms, coexist with meadows, ponds, fields and (since I love this little animals output) honeybees.

      Yves comment about the example of American Apparel is to the point I am making; a company that does the right things will be successful and we don’t need to really know how the owners or managers voted in the last election to look at somebody doing something that is good and something that serves the true spirit of capitalist enterprise in the larger sense-capitalism will not just look at bottom lines on quarterly reports.

      As FDR is supposed to have been quoted as saying:
      “Capitalism is a wonderful economic system, too bad its not been tried anywhere in the world yet.”

    4. Glen

      Wow, “wildly left wing”!

      How times have changed.

      You do realize that Obama’s politics match up pretty closely with Ike? (Except Ike is probably a little more leftist.)

  2. tawal

    Yves, I enjoyed your discussions.

    However I wish someone would have asked you about this: I believe that our federal government is responsible for providing its citizens with a safe and healthy environment. In 2005, yes it’s already 5 years ago, the Civil Engineering trade group stated that we needed to spend 1.5 trillion dollars over 5 years in order to make our infrastructure safe. The fact that our country’s capital was without electricity for I don’t know how many consecutive hours last week says that we have alot of WORK that needs to be done. Every summer the beaches in some of this country’s most wealthy zip codes are closed because of high bacteria count from dilipidated sewer systems. This is domestic work that our domestic corporations can undertake, providing jobs. I wish someone would have asked you about what impact of US government spending on such projects would have done to improve the velocity of money presently.

    Further, every person who wants a job helping with the clean up of the oil spill in the gulf, should have one right now. There is no reason for unemployment in this country; we have alot of necessary work to do.

    1. Deus-DJ

      When the question being asked in today’s society is “Can we afford it?” rather than “Is it necessary?”, you will understand why it is nothing gets done.

      1. BigBadBank

        BP are paying for the Gulf clear-up so it’s a free local stimulus with no addition to the deficit.

  3. Sundog

    Cheers for mentioning the furniture industry example again.

    BTW prolly had a lot to do with how the tech stuff was arranged as well as your increasing savvy but to my eyes (mind, no TV in this house) you came across very well — not an econ robot, not a political creature adrift from data.

    1. Yves Smith Post author

      You are right re tech. My furniture industry contacts maintain a LOT of furniture manufacture could have stayed here had the industry implemented more flexible manufacturing methods, so factories could do smaller runs and compete using just in time techniques. Low end furniture might not have been able to support the investment, but high end and a fair bit of middle could have.

  4. anvILL

    As a Japanese working at a manufacturer/exporter in Japan, I would have to say that furniture manufacturers having trouble increasing profit by outsourcing are just plainly unskilled.


    Nitori is one of the hottest stocks in Japan today.
    They have reduced costs by outsourcing, and most important of all, by creating a manufacturing system that is very suitable for creating quality products overseas.

    Many problems such as logistics can be solved by manufacturing with intelligence.
    And the other merits of producing overseas is lower cost for purchasing materials and parts, if they are available locally they can go down drastically.

    1. poopyjim

      This may have a lot to do with lacking natural resources to manufacture furniture in Japan. In America, we do not lack the natural resources with which to build furniture.

    2. Yves Smith Post author

      Agreed with poopyjim. You can’t compare Japan furniture maker economics with US. A great deal of furniture has wood as a significant component. Pretty much all the needed wood components, which are heavy, come from North American. Hence, having furniture manufactured in China or SE Asia (the big destinations) means two way trans-Pacific shipment, which introduces a lot of shipping and inventory financing cost, plus reduces flexibility to a huge degree (very hard to respond to changes in demand quickly).

      Japan is physically proximate to China and SE Asia, and faces one was trans Pacific wood shipment regardless (and may use more plastics or other materials as a result). Completely non-comparable competitive settings.

      1. anvILL

        Poopyjim, Yves, thank you for your comments.

        >wood components, which are heavy, come from North American
        Sorry, I did not know this.
        Since US is also an major importer of hard/soft wood,I thought the reasonable approach would be manufacturing the furniture in where the wood is grown, such as Africa or South America with cheaper labor rather than the thoughtless outsourcing to Asia.
        So I agree that manufacturing in Asia is not efficient.

        On the other hand, I do not think logistics costs and materials are not a real excuse to give up searching for a better place to manufacture.

        Outsourcing solutions may be suprising.
        Kobebussan(3038)is going to start to grow wasabiin the deserts of Egypt for Japan.
        First, it seems like a total agricutural/logistics nonsense.
        But they claim its actually cost efficient.


  5. purple

    Re: Sitting On Cash

    “No can sell unless someone else purchases. But no one directly needs to purchase because he has just sold …These two processes lack internal independence because they compliment each other. Hence, if the assertion of their external independence proceeds to certain critical point, their unity violently makes itself by producing a crisis”. Marx, Capital I

  6. paul

    Yves, You mentioned industries that have outsourced work abroad even though the economic case was weak or non existent e.g. the furniture industry. Can you point me to any studies that have dealt with this topic paul

  7. mm

    Yves this is extremely interesting to me. Do you, or does anyone else here know, how I can download the audio for my mp3 player?

      1. mm

        Thankyou ray. I see that they have it for sale on dvd. So I’m guessing I’ll either have to pony up or ask my kids.;]

  8. jumping

    You nailed it! Most satisfying interview I have seen in awhile.

    It would be good if you could get on with Charlie Rose for an interview and help set the record straight! Charlie by the way has really been focused on this american competitive topic lately with guests like Wilber Ross and David Rubenstein (I believe).


  9. MinnItMan

    It is interesting that with the exception of the union (anti-union) questions, there was pretty consistent sentiment regardless of whether the caller was on the R, D or I line. And I agree that President Obama is governing from the center-right, IMO more than GHWB certainly, and perhaps more than RWR himself as you noted.

    Back in the day, when I grew up in a heavily unionized industrial city, while unions weren’t loved and weren’t held up as a model of optimum labor efficiency, they weren’t terribly scorned either. The problems associated with the steel industry, for example were pretty closely tied to the oil embargo, ancient manufactering plants (both environmental nightmares and obsolete), increasing alternative materials in auto design (much less steel, much more plastic), inferior auto design (Pintos, Vegas, etc.). That is to say, these weren’t union-created problems, although old-line unions were in an expremely poor position to respond to the “value-added revolution.” Democrats essentially sat this one out until most of the damage was done when President Clinton attempted to start addressing it, and the second President Bush continued that path, having delicious access to all sorts of levers and buttons to goose the FIRE economy, in particular, but the health care economy as well.

    President Obama faces some pretty harsh headwinds where “profitability,” IMO, is largely a function of getting paid to eat [underpiced] risk, or slashing production costs, both of which require mighty suppression of potential and/or probable negative externalities (bailouts, sweatshops, environmental abuse, etc.)

    The CSPAN callers seems to share a glumness that may be linked to what I see is the increasing suspicion that profits are what you call income after sticking someone else with the hidden costs.

    Left, center, right, Democrat, Independent, Republican, what I see are “not answers” and perhaps “clearly worse answers.”

  10. NB

    Great show! I thought is was heavily focused on outsourcing, of course, which is par for the course on that show…

    I’m based in the DC area and tried to call in or write an email with a couple of questions:

    1) Where do you think the housing market is going? Is there another leg down? Do you think that the fed or Treasury are going to intervene again?

    2) You talk about the large cash surplus, but the other day you linked to a post showing non-financial corporate debt being higher now than in a generation. Is it possible that the companies are sitting on cash to rollover short-term debt?

    One small criticism: Why do you refer to yourself as “we”, as in “We speak on CSPAN”…are you representing yourself and the NC blog particpants, or guest posts?

  11. InsideTrader

    Great work Yves. I was sitting on hold and they didn’t get to me where I was going to open up the topic of how the US can get out of this liquidity trap (implying there are no monetary policy steps that can be taken outside of extreme solutions like negative interest rates and such).

    I don’t think there’s enough urgency paid to this issue and people need to be talking about the stimulus package and we need to get some details worked out on amounts and exactly where it can go. Shiller, Krugman, Stiglitz, they are all calling for it, why aren’t we bringing this conversation into the mainstream?

    Anyway it’s great to see you bringing the show on the road and hope we can catch more interviews!

    Take care!

    1. jumping

      Here is an idea realted to yours trader. I would like to see a long term U.S. investment package. The stimulous for unemployed and firefighters is nice, but is kind of like a sugar high.

      Long term goals(investments in US) for energy, homeland security(while bringing troups home to pay for it), non-toxic and green technologies. These goals/investments could be subsidized with say 25% matching governments funds. Business could see these incentive carrotts, and create economic activity since they don’t seem to have any direction at the moment.

  12. arby

    Excellent. Suggest that you bring graphs or charts to each appearance. People need to see the dynamic at work with regard to inequality, etc.

  13. petridish


    Your appearance on C-SPAN was nothing short of impressive as was your response to ejackson above. It is amazing how many Americans cannot resist the reflexive knee-jerk of reducing every issue to right and left.

    I plan on trying to be the first caller next time and asking you to define the difference between FACT and POLITICAL OPINION. Hopefully ejackson and his ilk will be listening.

  14. Psychoanalystus

    I really enjoyed this interview. Yet, I was amazed by the high number of anti-union callers, which to me only says that the divide-and-conquer approach of the corporate media to brainwashing the middle class in this country has been a stunning success.


  15. dsawy

    Wish you could have been on for longer, Yves.

    A couple of issues:

    1. The next time you’re explaining to people the Chinese currency “subsidy” gained from their currency peg, make sure people know that it is a deliberate policy on the part of the PRC to keep their goods cheap in the US. An honest currency policy on their part would result in Chinese-made goods taking a substantial price increase as the yuan appreciated vs. the $US.

    2. It would be useful if you also pointed out how far too many corporations in the US have gone from seeking profits from “making stuff” to “making profits financing their customers’ ability to buy their stuff.” eg, GE, Cat, GM (pre-2008), and the finance arms of these companies. Far too much of the US economy is now wrapped up in passing little bits of debt paper around for our own good.

    3. re, corporations sitting on huge piles of cash, and then subsequence stock buy-backs. I think that the stock buy-back is one of the least effective ways to return cash to shareholders. Do you have any data or studies that address the efficacy of how a company can return excess cash to the shareholder in the most beneficial manner?

    1. Deus-DJ

      Stock buybacks are bad in the sense that they don’t return money into the economy, not that they are an ineffective way to increase shareholder wealth.

  16. dsawy

    Oh, one more issue to bring up when discussing outsourcing production to China: IP theft.

    If you’re a high-tech company and you outsource production to China… you’d better have written terms into the contract specifying the damages for intellectual property theft – and you’d better make the damages very high.

  17. Vilhelmo

    Replacing US workers with lower paid foreign workers is in no way more effecient. Foreign worker essentially subsidize corporate profits with their lower wages. In fact actual manufacturing processes can be much more ineffient along with the energy involved in shipping because the foriegn workers absorb the cost and they pay that price in blood. It allows corporations to destroy the rights and benefits that people have fought and died for over the last three centuries.

  18. Vilhelmo

    In regards to China’s supposed currency manipulation. The same arguement can be made in reverse. That the US OVER values it’s currency thereby pricing it’s products out of the world market. Whether China’s currency goes up or the US’s goes down, it has the same effect relative to eachother.

    1. Yves Smith Post author

      I suggest you do more research on this topic. China pegs the value of its currency versus the dollar, and has bought over $2 trillion of dollars (buying dollars means they sell their currency, which suppresses its value). As a result, it now has the biggest foreign exchange surplus ANY country has EVER accumulated relative to the size of its economy, bigger than the US pre the Depression or Japan pre its bubble implosion.

      China is unambiguously manipulating its currency. There’s no two ways about it.

      1. john c. halasz

        Yves, with all due respect, I’d suggest you think again and a bit further. There is both an inherent ppp difference between 1st and 3rd world currencies, due to wage/productivity differentials, and due to the fact that 3rd world currencies don’t play a part in global financial investment flows. Hence the temptation is open and rife for MNCs to exploit that differential, based both on their exclusive access to 1st world technological capabilities and their exclusive access to 1st world markets, to accumulate large rents by various forms of “arbitrage”, rather than engage in actual productive and productivity-enhancing real investment. The Chinese,- (which is really a greater E. Asian co-prosperity sphere),- currency intervention is just a mirroring of differentials that already exist and which would be exploited anyway by MNCs, to their relative developmental advantage. But it’s really the “strong dollar policy”, together with other concessions/manipulations, built in to “free trade” regimes, that are at the deliberative root of the downsizing of us “poverty pimps”. Don’t blame the victims or the accessories. Shine the midnight special on the capos and the chief perps.

        1. Yves Smith Post author

          Huh? What do you think the Asian crisis was about? It was the result of hot money, meaning foreign capital, flowing into Thailand and Indonesia (and a lesser degree, S. Korea) to such a degree that when it pulled out, it dealt a devastating blow. And the IMF mandated reforms required that the countries that accepted aid open their capital markets even further. The response across the board in Asia was to peg currencies low so they’d all accumulate FX reserve war chests so as never to be in the position of having to go to the IMF again.

          China, which was hit only secondarily by the Asian crisis (it hadn’t opened up its economy much) has kept capital controls in place and simply has repegged its currency higher only under duress (the normal state of affairs is for currencies of emerging economies to appreciate as development progresses.

          1. john c. halasz

            Umm… and when did the E. Asian financial crisis occur? Oh, during the Clinton/Rubin phase of the “strong dollar policy”, eh? And so how did China and the other (quasi-subordinate due to size) economies react? By accumulating $ for-ex reserve, by jimmeny! (And those IMF mandated “reforms” weren’t Clinton/Rubin authorized “reforms”?) The “normal state of affairs” for currencies of “emerging” economies hasn’t actually applied according to theory for quite some time now, if ever. At least since the demise of Bretton Woods and the adoption of a “floating” for-ex/trade regime. And at just who’s behest did such a transformation occur?

            Look, I’m not defending the Red China regime, but I’m against the “blame the Chinese” approach, without understanding how the whole situation came about and who its actual prime beneficiaries were and are. Not Chinese, nor American workers, to be sure.

  19. Deus-DJ

    Mr. halasz,

    I just wanted to inform you that you are an idiot.

    China is applying something called a “peg”. Of course “theory” cannot be followed if one actively manipulates their currency.

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