It May Not Pay to “Join ’em if You Can’t Lick ’em”

According to the Atlantic Monthly magazine’s February 1923 issue, a U.S. senator named James E. Watson was fond of the saying, “If you can’t lick ‘em, jine ‘em.” President Obama must have heard it from someone else; he wasn’t born until nearly half a century later. But he certainly seems to be adopting that strategy.

He seems to have been converted to President Calvin Coolidge’s view that “the business of America is business.”

But America, and the world, was much simpler back in the 1920s. Globalism had yet to be invented, for example.

By his own admission, Obama was “shellacked” in the November elections. Shellacked by free-spending Big Business abetted by the most sophisticated psychological tools available.

So the president has decided to play nice with his shellackers.

He is even sounding like Ronald Reagan these days, extolling the virtues of tax cuts for the rich as a way of creating jobs.

And they may – but not in America. Not in today’s world.

Robert Reich analyzes the flawed tax cutting strategy in his blog today. Here’s an excerpt:

The White House caved in on the Bush tax cuts for the wealthy, and is telling CEOs it will be on their side from now on. As the president recently told a group of CEOs, the choice “… is not between Democrats and Republicans. It’s between America and our competitors around the world. We can win the competition.”

There’s only one problem. America’s big businesses are less and less American. They’re going abroad for sales and employees. That’s one reason they’ve showed record-breaking profits in 2010 while creating almost no American jobs.

Consider one of most popular Christmas products of all time – Apple’s iPhone. Researchers from the Asian Development Bank Institute have dissected an iPhone, whose wholesale price is around $179.00, to determine where the money actually goes.

Some shows up in Apple’s profits, which are soaring.

About $61 of the $179 price goes to Japanese workers who make key iPhone components, $30 to German workers who supply other pieces, and $23 to South Korean workers who provide still others. Around $6 goes to the Chinese workers who assemble it. Most of the rest goes to workers elsewhere around the globe who make other bits.

Only about $11 of that iPhone goes to American workers, mostly researchers and designers.

Even old-tech American companies made big money abroad in 2010 – and created scads of jobs there. General Motors, for example, is now turning a nice profit and American investors are bullish about its future.

That doesn’t mean GM will be creating lots more blue-collar jobs in America, though. 2010 was a banner year for GM’s foreign sales – already two-thirds of its total sales, and rising. In October, GM became the first automaker to sell more than 2 million cars a year in China. The company is now making more cars in China than in the United States. And GM has just signed a deal with its Chinese partner to try to crack India’s potentially huge auto market.

Meanwhile, back home in the US, GM has slashed its labor costs. New hires are brought in at roughly half the wages and benefits of former GM employees, under a two-tier wage structure accepted by the United Auto Workers. Almost all GM’s US suppliers have also cut their payrolls.

It’s much the same even for America’s biggest retailers. 2010 wasn’t an especially good year for Wal-Mart in the United States. Its third-quarter sales fell as US shoppers continued to hold back.

But Wal-Mart International is contributing mightily to its bottom line. Its UK business, Asda, will be adding 7,500 new jobs next year. Wal-Mart is also doing well in Japan and Brazil, and hiring like mad in both countries.

So when President Obama tells American CEOs our biggest challenge comes from abroad, you’ve got to wonder. The leaders of American business are already abroad, and doing quite nicely.

So by joining Big Business, the president might win a few more friends in high places, but he won’t be doing much for the American economy. The CEOs are doing very well for themselves and their shareholders, which is their job. But they have no loyalty to America or any other country.

They’ll take whatever tax cuts they can get and when the time comes, they’ll put their money on whatever candidates appear most favorable to their bottom line.

I doubt that – even if they want to – President Obama and the Democrats will be able to outdo the Republicans when it comes to currying favor with those “American” CEOs.