Where’s the Land of Opportunity These Days?
By Doug Hornig, Casey Research
Recent decades have witnessed an amazing shrinkage of the American manufacturing sector, from #1 in the world to virtual non-existence. Companies, taking advantage of cheaper labor costs abroad, have either outsourced some portion of the workforce or relocated their entire operations offshore. Remember the “great sucking sound” that Ross Perot claimed he could hear?
Well, today, if you listen, there’s a different, almost opposite sound in the air. Instead of American jobs going to lower-paid foreign workers, foreign workers are leaving America for better jobs. It’s happening, increasingly, among professionals who expatriated to the U.S. in search of the good life and have begun seeing better prospects back in their countries of origin.
In a worldwide survey by HSBC Bank International, conducted among 3,100 expats in the first quarter of 2009, more than 1 in 5 (22%) working and living in the U.S. said they were considering pulling up stakes and returning home. That’s 50% higher than the overall average of expats everywhere.
This may seem strange to residents of the traditional land of opportunity. We’re much more accustomed to foreign graduates of American colleges doing whatever it takes to get that green card. But it’s in keeping with numbers noted by other observers.
And it’s all about the career prospects.
Those studying the trend say that foreign professionals are becoming frustrated with their lack of advancement in the U.S., citing widespread salary and promotion freezes, not to mention layoffs. As our unemployment rate has ballooned to an “official” 10% and everyone is downsizing, people with advanced degrees have not been spared. Competition for the best jobs is more intense than ever, and switching employers no longer results in an automatic step up the ladder.
In addition, employees holding H-1B skilled worker visas often get the short end of the stick from employers. No one with a hard-to-obtain H-1B is going to complain about unfair treatment – or so the thinking goes – because termination most often results in a quick plane ride back home.
But that may not be much of a sword to hold over someone’s head as home begins to look more and more attractive. People who came here from India and China, even as recently as a decade ago, are well aware of the explosion in opportunity that’s transpired way back east. As a consequence of all this, Harvard researcher Vivek Wadhwa predicts, more than 100,000 expats will repatriate to India in the next five years. He cites reports from human-resource directors in India and China, showing a recent tenfold increase in the number of résumés from the U.S.
And why shouldn’t they be thinking of packing it in? Among the 26 countries included in the HSBC study, America ranked a dismal 17th overall, based on four criteria: annual income, disposable income, ability to save, and ownership of luxury items.
Heading the list of negatives here is that wages have not kept pace with the domestic cost of living (a discrepancy American citizens also are painfully aware of). Just 39% of expats report being able to save more money since moving to the U.S.
That’s despite concerted cost-cutting, too. When asked if the credit crunch had changed their attitude toward spending, 74% of those living here answered yes. Two-thirds say they have both cut down on luxuries and been trying to save on day-to-day costs.
Okay, but what if the shoe is on the other foot? What if you’re a displaced professional worker, should you consider looking for a job out of country? Maybe. Though it will certainly be more difficult for an American to land a position abroad than for a repatriated citizen, it isn’t impossible.
The HSBC study wasn’t just about the U.S. Expatriates were working in all 26 countries surveyed, and many, of whatever nationality, are doing much better than those here.
Consider this: The highest proportion of expats earning more than the equivalent of US$250,000 per year (30%) is to be found in Russia. Of all places. Hard to imagine but true. Russia is followed in this category by some locales you might expect to see on the list, Hong Kong (27%), Japan (26%), and Switzerland (25%). But tied for fourth is another surprise, India.
Highest percentages of those who say they’re saving more than they could at home were working in Saudi Arabia (90%), Russia (97%), and Qatar (98%).
Given those salary and savings-rate data, it’s no surprise that the number one overall ranking for expats went to Russia. All the rest of the top eleven were located in the Middle and Far East. In order: Qatar, Saudi Arabia, Hong Kong, the UAE, Singapore, Japan, Bahrain, India, Malaysia, and China.
Where do you not want to go? Mostly, just avoid the EU. The bottom five: Belgium, Germany, Australia, Spain, and France.
Look at the top ten and bottom five again. This topsy-turvy world is not the one we’re used to, not the one most Americans still think it is. Opportunity is where you find it, and world citizens willing to cross borders for work are, with good reason, setting sail for nations other than the U.S.
If you, like an increasing number of Americans, feel that these days life, liberty, and the pursuit of happiness may be easier to come by outside of the U.S., the American Expatriation Guide – written from personal experience – is a must-read. Completely FREE of charge, this 29-page in-depth manual for expats tells you everything you need to know when considering to move abroad. Click here to download it now.
Toxic Assets.
As with under-utilised export production capacity there’s now an enormous pointless over-capacity in the financial sector. It’s ‘profitable’ only via money printing and systemically useless and discrediting rate arbitrage.
You couldn’t sell these bad banks and loans even in boom times as there are far too many of both (and nowhere near enough stupid affluent people left). Most of the Financial Sector and its plague of bad loans will have to be zeroed-out and banks rubbed-out of existence. Selling them from a toxic-dump national bank is not going to work, though it’s being tried anyway.
It’s obvious Europe is going to double-dip, and obvious (to me at least) the US will do the same. US retailers are already reporting lower sales and lower sales-tax revenue as credit continues its relentless decline. That is not growth – sorry.
As you wrote earlier in the year Ed, it all depends on if there’s growing consumption to meet rising production.
There isn’t. The CMIGI index showed it first, and the formal data releases are now mirroring.
On top of this there’s been a 22% decline in aggregate metal prices during the past 5 weeks, so inputs to production are definitely not increasing, the orders are not there.
Over capacity and perpetually declining credit collided with rising industrial commodities and energy. So now we will watch it gradually turning bad for 6 months, then crash heavily, while still pedal to the metal.
Peripheral EU countries are already falling into true depression. And there are no rich donor states only extremely indebted pretend rich states, as the actions of the ECB, B of E and Fed make clear.
PIIGS Rescue Recap:
Prior to March 25th Merkel declared not one German euro would go to Greece. Then suddenly a notional few billion euros for a total of e30 billion EMF plan, plus $15 billion from IMF that Merkel finally signed on Sunday April 11th, but was still resisting right up to the 28th of April, when Standard & Poors downgraded Greece to Junk (followed by downgrades of Portugal and Spain, and questions over Hungary). That quickly lead to an expanded e110 billion 3-year Greek rescue plan announced on Sunday May 2nd, where Germany would contribute e8.4 billion. And when that was clearly nowhere near enough to stop a PIIGS BBQ, the EZ-wide plan was cobbled together over a weekend, and on May 9th Germany was now required to commit to an estimated e120 billion. So Germany went from not 1 euro to e120 billion in about 5-weeks! Then to top it off, around the 12th of May a further rescue package was foreshadowed by an IMF official if the latest e729 billion package is deemed “insufficient”. Then on May 20th 2010 the German people find the actual expected commitment is about e150 billion!
So what will it be next week?
180? 200 billion?
All this to avoid banks taking unavoidable haircuts, or permanently closing their door.
Would it really be so bad if they did?
Worse than a protracted depression that’s coming anyway?
When broke banks finally stopped crashing in 1934, what did the US economy immediately begin to do (until ~1938)?
Do you think there was maybe a nexus between the elimination of bad loans and the recovery that immediately began?
Or are we just going to keep awarding the credit to spending, and ignore the juxtaposition of massive and very aggressive debt destruction in 1934?
Do you think the recovery from 1935 would have occurred, if those banks and their bad loans had not gone away?
But were instead propped up by higher taxation, for higher interest payments, for more public debt?
Ed, perhaps you (and your contributors) would do a series on this critical phase of the mid-1930s recovery?
The deficit/surplus and inflation/deflation debates have been productive at CW, but I think the recovery from Depression is what really needs to be gotten at. Especially; is the elimination of debt necessary for people, towns and countries to flourish?
It seems to me this incisive and level-headed blog with a confronting title like “Credit Writedowns” is the very place for that to be answered with regard to the whole effect of bad debts within failed financial institutions obstructing real economic recovery.
I clearly remember several US banking analysts during Sept, Oct, Nov and Dec 2008, saying to camera on PBS NewsHour and NBR and other mainstream US outlets that a true recovery could not and would not take place until the ‘toxic assets’ (remember those?) in bad banks were taken out of the system.
What happened though? The opposite!
Bush, then Obama actually protected these and pretended their effect had gone away.
No, it did not.
That’s why there will be a global double dip.
There it is.
Don’t forget it.
It’s hard to admit you need an amputation.
Suck it up, and eliminate the toxic assets and the US will recover – fast.
As soon as you do, presto! Stimulus settings and massive spending will re-gain traction and propel you back into sustained growth much faster, and longer.
You have spending, but it’s completely wasted. The toxic assets were not destroyed, so the spending does nothing much.
Ed, I’m sure you know this is why the US is furiously pedal to the metal but the stimulus doesn’t catch.
Does anyone reading CW actually disagree with that generalisation?
If so, why?
If not, then the spending will continue to be wasted until the bad loans are quashed, and rubbed-out.
Ok?
Which brings us to the kicker…
This in fact implies a deflationary spiral in which more and more bad loans accumulate, leading to accelerated failures of bad banks – actually necessary to bringing about sustained recovery and systemic reform.
Like I said, it’s an amputation, a desperate act to get a recovery, instead of the ‘alternative’.
1934 must have seemed like the end of the world, for the US and many European countries, but it wasn’t and there’s no reason why the US and Europe can not recover from this even larger credit binge.
Destroying the bad loans as fast as possible seems to be key to re-growth and to spending actually working, as advertised.
So massive spending alone will not produce sustained recovery. That’s where the US is now.
Debt destruction and failed bank elimination, actually smashing bad banks without relent, until there are only banks with genuinely recoverable balance sheets is the missing ingredient to a spending and stimulus recipe for recovery.
Somehow the vital need for massive debt destruction has been totally put aside and ignored.
But people only want the spending part.
Sorry, as you are about to see, it doesn’t work that way.
If I could cut your personal debt load to 30% of present, Ed, would you not flourish?
Would your city, state and country not flourish?
Is this not better than spending and tax increases even as revenue falls?
One way or another this is going to happen, the debt will go, either orderly or disorderly.
One way destroys the US and Europe, and the other results in rapid and complete recovery. Have a close look at a bank failure rate graph during the 1930s, then have a close look at GDP rise from 1933 and into 1934 when the massive destruction of bad banks and their loans was in full swing and yet to peak in 1934, with 4,000 slaughtered banks.
GDP had begun its sustained rise even as that slaughter of bad banks was still exponentially increasing towards a horrendous financial blood-bath!
Coincidence?
No, I don’t think so. People had more money, as the loans were not getting paid any more, so GDP began to rise from 1933. You are seeing an early boost to retail in the US today from the same effect. The banks will fall like flies as this continues.
This is how a sustained recovery can start and spending can start to take hold (and not necessarily public spending either – remember, there wasn’t actually that much of it, in the 1930s, compared to now).
Neither spending (in isolation of debt destruction) nor printing and digit games are going to get us there sustainably.
The bad debts are why the world economy will double-dip.
Don’t forget it, because it seems most people have lost sight of that simple fact amid the technical discussions.
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And contrary to expectations (social) it’s when people generally stop paying their debts, and the banks are slaughtered in great blood-baths that recovery can get rolling, then accelerate as spending increases and debt burden reduces.
I doubt banking industry mouth pieces will be too keen on this, but its not as if they can avoid it. No matter the favoured personal idealism this is a process that will occur. Extend and pretend ends when the poor just stop paying via necessity, and this has begun, and will get much more pronounced in 2011.
Well-managed liquid low-debt banks will survive this – just. Then they will slowly expand as businesses grow, having an excellent reputation for conservative management. Just like the 1950s era. We could froth endlessly about OTC derivatives but the peddlers of these ‘products’ will get totally smashed and eliminated.
And then they will go away and the regulation reset will keep them away.
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I would emphasise a Bill Mitchell style national “Job Guarantee” for all willing workers will definitely be necessary because unemployment will become an enormous problem that will weigh on aggregate private spending, as the banks go under. People must have an income if the economy is to rapidly start growing, as the banks and businesses fail en-masse. Banks fail because their customers failed – especially businesses. And this program is where federal spending must go until the private sector can create jobs in big numbers. (i.e. rather than Washington subsidising unrecoverable toxic assets from mere credit-money inventions, called loans, by totally defunct banks).
Huge public investment in small business start-up loans and tax support for these would be a really good idea at that point, to get private employment restabilised in competition with a Job Guarantee program.
“In addition, employees holding H-1B skilled worker visas often get the short end of the stick from employers. No one with a hard-to-obtain H-1B is going to complain about unfair treatment – or so the thinking goes – because termination most often results in a quick plane ride back home.”
This is not true. Employees holding H-1B visas can switch jobs on the same visa. It is true that you need an employer to sponsor the visa in the first place, but once obtained, the employee is not beholden to the same job for the duration of the visa.