Saturday, September 29, 2012

The European Perspective on Labor

Our Seattle University study tour provided an opportunity to have meetings with different types of companies across Germany. We visited firms focused on development of intellectual property (SAP), companies designing machinery and "turn key" factories (Dieffenbacher), and various sized manufacturers (RAFI, Audi, BMW). Each meeting with our German counterparts provided me a greater appreciation for how businesses view labor across the Atlantic. In Europe firms treat their labor force as an investment that adds value to their companies, whereas most companies in the United States treat labor as an expense that must be aggressively reduced.

One reason European companies invest in their workers is because good talent is hard to find, so once they get it, they want to keep it. Our Red Hawk contingent visiting SAP received a very in-depth, professional briefing on the company and equally detailed briefings on the flexible working situations available to personnel at SAP. The company wanted some of us to apply to work at their American subsidaries. I was very impressed with opportunities available at SAP to tailor not only working hours, but also career development, to meet each individual worker's desires and needs. After going through all of the trouble and expense of finding and training productive personnel, multinational European companies like SAP go to great lengths to keep them.

European companies also invest in their labor force because workers who have a deep understanding of their trade and their company are more likely to understand the products they are making and are better able to respond to changes. RAFI is an electronics manufacturer that does plastic injection molding to make components to support production of its products. RAFI has the edge when it comes to worker training as compared with electronics manufacturers and plastic injection molding companies in the United States. RAFI has a series of 18 off-site, dedicated courses to train personnel on different aspects of production. In the United States, workers are generally provided nominal training that includes certifying that they have read procedures - that are sometimes not written in the worker's main language - and they are subsequently shown the "important" aspects of their jobs by coworkers. This process in America inevitably leads to expensive mistakes, and companies respond by hiring more managers to expain to customers why the product is still good to use - as opposed to investing in worker training to prevent those problems in the first place.

One should not overlook an important difference between the industrial/labor policy in Europe as opposed to that of the United States. In Germany in particular, industrial policy is designed to make it difficult to quickly fire a worker due to an economic downturn. There are fees and large severance packages that a company must pay when laying off workers. As we know, in the United States it is much cheaper to lay off a worker quickly. Morally, the European approach is commendable: a worker should not be used solely at the discretion of the company - the relationship should be mutually beneficial. Conversely, many Americans would focus on the flexibility businesses have because of their ability to quicly reduce payroll requirements. I would argue that the flexibility is short-sighted, and my visit to Germany reinforced that feeling for me. During our visit to RAFI, the management showed us a huge drop-off in their manufacturing demand after the start of the financial crisis. Instead of focusing on lay-offs, RAFI took the opportunity to provide more training to their workers, and two years later - when demand exceeded levels seen before the crisis - RAFI had a large enough work forced with up-to-date skills ready to meet production requirements. In the United States, the workers would have been fired quickly after the crisis and when demand returned, poorly qualified or "rusty" workers would have been hired. This approach certainly undermines the quality of American products and services, not to mention the well-being of American workers.

In the long run, it is more economical to choose talented people, train them properly, and ensure they have a positive work environment. The companies we visited in Germany demonstrated if a business shows a committment to its workers, the workers will be committed to the business. Some companies in America are able to do this, but these companies are more of the exception and not the rule. Over the long term, the European commitment to workers lowers costs for the company and increases the productivity of employees and the quality of the product. However, in America we do not always take a long-term view of things, especially in business. All too often the focus is on the next quarterly earnings report. Our companies have to be on guard against corporate raiders and companies like Bain Capital, who will swoop in and dismantle a company if it misses its earnings estimate. It is time for American business to take a longer-term view of the labor force and the overall measurement of business performance.

Saturday, September 8, 2012

Quantitative Easing in Frankfurt

As I arrived in Germany's financial capital Thursday on the ICE train from Berlin, the head of the European Central Bank, Mario Draghi, was also in Frankfurt announcing the ECB's quantitative easing program to bring stability to the Euro currency. As required, the ECB will buy short term (up to 3 year) bonds from member countries - on an unlimited basis - to combat the Eurozone crisis.
Essentially, the Bank will step in to buy bonds from countries like Greece, Italy and Spain to ensure that those governments can get manageable interest rates to finance the borrowing required to keep their governments solvent. Additionally, the ECB has given up its "seniority" - its claim to be paid first as a special investor.
This quantitative easing essentially ensures that countries in southern Europe will be able to avoid defaulting on their debts because the ECB will buy as many bonds as necessary to ensure the countries can pay their bills.
This was the backdrop as our delegation from Seattle University began our meetings on Friday in Frankfurt - the financial center of Europe. The city has several nicknames indicating its role in finance, among them: "Mein-hattan" and "Bank-furt". With the businessmen and sky scrapers, the city appeared to be quite similar in many ways to our own financial capital, New York.
Our visit to the Frankfurt stock exchange showed us the origins of trading activity in the city. The largest stock exchange in Germany and the 12th largest in the world, the exchange is operated by Deutsche Börse. Herr Max Ebner from Deutsche Börse provided an informative and interesting overview of the trading floor's operations, and added a real-world operating perspective to the information that we've learned in our finance classes.
Later in the day, we received a special guided tour of the German Federal Bank's Money Museum. We reviewed the origins of money, saw different types of currency used throughout the ages, and used interactive exercises to see the importance of using monetary policy to influence both interests rates and unemployment.
A timely exhibit reminded me of the need for another quantitative easing in the United States. The Federal Reserve Board is directed by law to execute a "dual mandate" to control both inflation and unemployment. This previously non-controversial mandate has been executed for decades, regardless of the political party in charge in Washington. However, the current Fed membership has been reluctant to use its power to ease unemployment in America. The Republicans in the House of Representatives recently moved to eliminate the part of the mandate to keep unemployment low. If the Republicans truly cared about reducing unemployment, they would not try to takeaway the Fed's duty to help with job creation.
The American economy has not produced enough jobs since President Obama's stimulus ushered in the recovery. Since another round of stimulus is unlikely from this Congress, the Federal Reserve should execute its duties under the law and introduce another round of quantitative easing. The European Central Bank has stood up for stability for the single European currency, and the Fed should stand up for unemployed American workers by instituting more quantitative easing.

Thursday, September 6, 2012

A Wind Farm Outside Berlin

Germany: Leading the Way

Racing across the German countryside at 200km/hr (120mph), I see how this country at the heart of Europe has been able to incorporate green energy production into its society and make its economy one of the strongest in the world.

I am riding the Euro-Rail Inter City Express (ICE) from Berlin to Frankfurt, and less than 20 minutes from the start of this journey I notice an unfamiliar shape on the horizon. As I draw closer, I recognize the outline as a wind turbine - the first in a large wind farm that stretches for miles along the train route. This wind farm must contain at least 500 of these electricity generating works of art - each capable of producing up to 3 megawatts of electricity (enough energy for 1000 homes). Beneath the windmills in the foreground sit acres and acres of photo-voltaic (electricity producing) solar panels.

The people of Germany have combined their desire for a clean environment with their engineering know-how, and they have decided to develop new sources of clean energy to help them move away from harmful fossil fuels. Like the United States, Germany has a large, talented and educated pool of labor. This has enabled the development of Germany's clean energy industry. But unlike the Washington, Berlin has already decided to remove incentives which encourage the use of fossil fuels and to add incentives that encourage the production of clean energy. The German people understand that the oil party will end some day, and the resulting hang-over will be immense. They are weening themselves from fossil fuels while they still have a choice in the matter.

Some say that government has no role in choosing winners and losers in the energy sector. They say that we should simply allow the free market to take its course. The main problem with that argument is that there is no "free market" in America's energy economy. The established companies have rigged the system to perpetuate their own existence and to undercut the development of alternatives. Plus, the oil companies lobby Congress to give them tax breaks (free money) - nothing about that has anything to do with a "free market". Congress provides at least $4 billion in economic incentives to oil companies every year. These companies are already by far the most profitable corporations that have ever exited on the face of this planet.

A second problem with the "free market" argument is that it abdicates our responsibility to pass on a better world to our children. Our challenge in developing public policy in the United States is to evaluate the long-term consequences of policy alternatives and choose a way forward that will benefit future generations - not just this year's balance sheets. America should not be locked into policies that destroy the environment and lead to increased warfare over the planet's finite oil resources. We can use our collective knowledge and ingenuity to build a better future, while leaving behind the false "free market" arguments which justify doing nothing and marching off a cliff like a pack of lemmings.

Germany is racing to the future on high-speed trains fueled by clean electricity from solar and wind power. The United States should get in this race.

Saturday, May 8, 2010

Goodbye Beijing

I have returned to Seattle - just in time for some beautiful springtime weather - but I'll never forget my time in Beijing!

My visit to China was an incredible learning experience and studying there helped me to improve my language skills considerably. I really believe that intensive and immersion teaching techniques are very effective for learning a language .

Living in Beijing also exposed me to many things and experiences that I've never encountered before. Aside from studying Mandarin, I discovered so much about the challenges and rewards of living in China's capital. I've certainly gained a better perspective on the lives of the people living in Beijing.

Now that I'm back home, I'm going to take some time to get settle in before my next adventure. I'll keep you updated!


Monday, May 3, 2010


Today, an Australian friend and I visited 北海公园 (Beihai Park) near the Forbidden City. The park is situated around the northern part of a lake in the middle of Beijing, and it's a good place to relax, stroll around or ride a boat. But the best part of the park are the 龙 (dragons) - specifically, the Nine Dragon Screen that I'm posing in front of. (They could have called it the 635 Dragon Screen - because that's the total number of dragons on it - but they went with nine because there are nine really big ones on each side.) The wall was built in 1756, but the dragons are in good shape - and they still look scary!

After inspecting the dragon screen, we hopped on a boat for a short ride across Beihai to Jade Island, where the White Dagoba is located atop a hill. (See photo.) It is another Lama temple, built for the Dalai Lama in 1651 - and rebuilt in 1741. We climbed up the hill and through some ancient caves to see the dagoba and to get a view of the surroundings. We could see the rest of the park, Jingshan Hill, the Forbidden City - and other areas of the city.

By this time we were getting hungry. I knew this because I considered eating food from a street vendor in the park. After several failed attempts to get a taxi to take us two 外国人 (foreigners) to a particular famous Peking duck place, we ended up walking along the sidewalk just outside the walls of Zhongnanhai (the Communist Party's leadership compound) and settling for some soup and noodles. (The waitress told me it was shredded pork in my noodles, but I wasn't so sure.)

From my vantage point in the noodle restaurant, I watched the people walking down the street. It's still a holiday weekend here, so there was a lot of activity. I saw one very old Chinese man walking alone past Zhongnanhai, dressed in a suit that probably fit him 30 years ago, but now he's swimming in it. He was wearing three rather large red medals, unevenly attached to the left side of his jacket. I really wanted to know what his story was. I couldn't help but think that he may have been a hero in the revolution (which is possible if he is in his 80s), and how it was kind of sad that he was all by himself on the holiday.


Sunday, May 2, 2010

雍和宫 (Yonghegong)

This is a big holiday weekend in the People's Republic: May Day. While the socialist workers of the world unite in protest in places like the Philippines and Thailand, China's citizens have gone on holiday. My school has a three-day weekend, but many Chinese workers will take up to a week off. It's a time when people travel to see their families, and many people seem to have traveled to Beijing to ride 地铁 (the subway).

Today I rode that crowded subway to see the Lama Temple at Yonghegong - the largest Lama Buddhist temple outside of Tibet. Yonghegong - which means 'harmony and peace' - was built in 1694 as a temporary palace for a prince, and it was turned into a Lama Temple in 1744. The official placard at the entrance points out that 'the temple has survived the ten turbulent years of the Cultural Revolution from 1966-1976, thanks to Premier Zhou Enlai.'

The temple complex is as impressive as it is historic. Photography is not allowed inside any of the five halls, but exterior pictures are allowed. I've attached a few photos to show what the buildings look like. Inside the halls, there were extraordinary statues of the Buddha and centuries-old Lama relics.

The Lama temple still functions as a place of worship, which made the entire 'tourist experience' a little surreal for me. Throughout the temple complex, devout Buddhists performed religious rituals, prayed and lay prostrate in front of their holy shrines. All the while, tourists stepped over them, bumped them, and let their screaming children interfere with their prayers. It was quite a strange thing to witness. (I did take the opportunity to spin a few Dharma Wheels - only when there were no worshipers in sight!)