Nothing illustrated the two tracks of America better than the rapturous coverage given “merger Monday.” The deals will be good for those who make most of their income from investments. They gave the stock markets a temporary boost. They will do nothing for the 25 million Americans who are seeking full-time work. Quite the contrary. Mergers “make the numbers work” by cutting jobs.
The big dog, Google’s purchase of Motorola Mobility Holdings for $12.5 billion is a case in point. It’s all oooh and ahhh for the investment bankers and the Computer Elite. But it also marks the slow death of what was once one of America’s greatest technology companies. When I was growing up, Phoenix was a Motorola town, where thousands were employed in good-paying jobs. Nearly all are gone now. Not a few of the 17,000 Motorola patents coveted by Google originated in Phoenix, where Motorola opened a research and development operation in the 1950s that did pioneering work in transistors and semiconductors. Motorola was also a cell-phone pioneer. Virtually all of Motorola’s products were made in America through the 1980s.
None of the stories about this deal mentioned jobs. Google had 24,400 employees in 2010, including some in Seattle. That’s about half Motorola’s peak employment in Phoenix alone. Motorola Mobility, based in suburban Chicago, had 19,000. Particularly vulnerable will be 3,000 headquarters jobs. Needless to say, its cell phones are made overseas. According to Financial Times, speculation has Google selling off the handset business, probably to an Asian firm, and keeping the patents.
Now, make no mistake: Times and technology change, companies such as Motorola age and make lethal mistakes, and in theory the creative destruction of the market sweep away the uncompetitive and gives rise to the new (Google). But something has gone haywire, because most Americans are just getting the destruction part of Schumpeter’s famous dictum. It’s getting worse, not better, and millions are being left behind. At the end of the day, this creeping destruction of the middle class, exemplified by what’s happened to the old Motorola, will make it impossible for American “consumers” to keep Wall Street going.
In the meantime, hoo-ray! Oh, what…stocks are down this morning?
Note to readers: I’ll be blogging less often during August.
Today’s Econ Haiku:
Warren Buffet says
The super-rich should pay up
Fair play? Oh, so quaint