Saturday, May 30, 2009

The Freemarket Solution

Talifaitasi W. Satele

Whenever the ASG attends those DOI sponsored business conferences, I always wonder what the attendees think of our officials’ statements about how welcoming our great territory is to investors.

With just a little research, they could find out for themselves that if they don’t pay enough in wages or benefits (like unemployment or health insurance), they’ll be attacked for corporate greed and mismanagement.

If they happen to be the only game in town, they’ll be attacked for establishing a monopoly. And if they stick around long enough, they are bound to become some politician’s target for a new “revenue” measure.

Instead of rolling out a welcome mat, the ASG puts out a blatant warning sign to potential businesses with all its policies and rhetoric, and it reads: Run like hell! And like the old saying goes, actions speak louder than all the flattering words our officials could ever say at any business conference.

Why not reform our tax system to level the playing field and tie taxes to the services one receives? That way there is a sense of fairness and the idea that one doesn’t pay something for nothing.

Why not resolve to not dictate to businesses what they should pay in wages or benefits, and leave the matter between employers and employees (with collective bargaining if need be)?

Why not put up for sale assets that should clearly be in private hands (ASPA, ASTCA, KVZK-TV, DBAS and LBJ) and get the government out of the business of competing with the private sector?

And there are plenty of other unresolved matters that we need work on. We need relief from Cabotage laws to free up the airline market. We definitely need relief from the federal minimum wage law. We don’t just need the increases stopped; we need to have the law rolled back!

The free market solution simply asks for relief from government intervention. Mind you that while it is a simple request, it won’t be easy for our politicians to discard their policies unless they believe that the private sector (meaning the people) can succeed as well as achieve the ends (higher wages or benefits) for which their policies were founded.

Above all, the free market solution asks that the people believe in themselves and their fellow citizens. That belief alone should be the engine upon which we rebuild our economy.

Monday, May 11, 2009

It's All A Guess

Talifaitasi W. Satele

Businesses need to defend their decisions and not cede public opinion to the politicians or even to pundits, like myself. But seeing that Chicken of the Sea (COS) doesn’t want to justify how its bottom line is better off in Georgia than it is in American Samoa, then I guess someone has to speculate on their behalf.

I’m guessing that paying 200 workers $7.25/hr in Georgia is better than employing 2,172 of our people at $4.76/hr in American Samoa. That actually amounts to $8888.72 of instant savings in labor costs per hour, and that will especially be true if COS can employ less workers to do the same amount and quality of work in Georgia as it does now in the territory.

I’m guessing COS will be able to employ fewer workers to do the same job by investing in more capital (newer technology, methods and machines). It’s textbook economics that as labor costs go up, businesses have the incentive to substitute labor with machines. But as any accountant can tell you, the danger in doing that is that you increase your fixed costs relative to your variable costs. When things go south, you can’t fire machines; you still have to pay for them day in and day out.

I’m also guessing that the relocation to Lyons has a lot to do with its proximity to Atlanta , which is the transportation hub of the South East. Three interstate highways converge in Atlanta , and even Mexican drug cartels have relocated there to take advantage of the infrastructure. So instead of producing in American Samoa and shipping product via sea transportation, they’ll make it and transport it right there in its main marketplace.

I’m guessing there are whole bunch of other reasons that makes COS move more profitable than staying, but I’m not privy to any inside information. Is the minimum wage the sole reason they’re leaving? No. But it sure as hell didn’t help any.

The canneries may not have paid our people what many think are “fair” wages, but do they even get credit for all the indirect benefits they provided our great territory? Interest rates for auto loans are now going up; do the canneries get credit for unintentionally helping to keep them low while they were here?

How about the economies of scale they’ve helped with in transportation costs and electricity or all the supporting businesses that make money from them? Seems to me that the choice is either “fair” wages or nothing, which is not much of a choice at all.

I don’t care whose theory of economics this whole fiasco fits in. The fact is that we have 2000+ workers soon to be out of work, and we’ll trade $22-23 million of paid work for a $20 million welfare check from Uncle Sam (and that’s a Big IF). Our leaders must do something and do something quick.

But Faleomavaega’s rhetoric so far is not helping any. Any potential businesses or investors looking at American Samoa are probably reading his press statements and saying to themselves, “This is how I’m going to be attacked if I open up shop. Best not open up at all.”

How the government plans to attract businesses other than providing for a free market is anyone’s guess at this point.