Halliburton is a new example in an age old problem facing American domestic policies towards big business. Over the years, some things have become very apparent to me, one of these being the hatred of ‘big business’ companies. This has deep roots in our national memories. From child labor and worker maltreatment of the industrial revolution to the stock market crash of the 1930’s to mass layoffs and closings of the 1970’s to scandals and corporate greed from the 1990’s to present our trust and view of big business in America has always been with skepticism.
There is one thing we need to realize though; this is a love hate relationship we have to live with. Big business made our economy what it is today, and it is what has sustained our place on the world stage. Even if we do not work for a large company, they touch our lives every day. Our 401K’s and IRA’s are invested in them, our daily necessity goods are produced by them, our entertainment industry is run by them, our entire lives are dependent on them (unless you live in the mountains and hunt for your food and exist without electricity, running water, or any manufactured goods at all). For this reason we have a vested stake in the health and well being of big business in our country.
Over the past 10 years there have been examples of businesses being abused by their leadership, corporate greed and miss-management to such a level it would be funny if it did not leave tens of thousands of people with less money or no money after the dust settled. This is the point. It is not just the investors who risk their money, but us as a nation too. Investments, jobs, futures, are all at stake and wrapped up into the health and prosperity of corporate America. The announcement of Halliburton moving its CEO and corporate headquarters to Dubai is a sign of many troubling things.
To dissect the move I consulted Houston and financial resources and found out the what and why behind the move. No, it is not about taxes or wages. Halliburton is re-aligning its future growth model and believes the Middle East holds strategic advantages to its future success and profitability. Its stock only falling less then 1% proves this as its investors are inline with the move and were expecting it (it was eluded to in its 1st quarter stock holders review and corporate meeting). The company pledges to keep its 4,000 Houston employees, and if it does or not it really does not matter. The company is still listed in Delaware making it still an American company therefore not changing its US tax liability or situation any (by being in Dubai however, it is eliminating its foreign tax liability in that country tremendously). The department that holds the billions of dollars in government and military contracts is being separated and will remain solely in the US according to company declarations to the press. This move is to strengthen the company’s long term position in the global marketplace and maintain a competitive edge. Everyone who has invested in them directly, or indirectly via mutual funds or blended portfolios will see their money grow as the company grows and profits continue.
Despite all the press coverage, all politically motivated mind you, this move is something that is typical of everyone’s expectations. They are not ‘leaving’ the US, their largest customer base according to company statements, but moving to a region where they can better respond to market demands in a real time basis. Let’s face it, this is a global economy and world now days and just as with any other business… if you do not adapt you will be out of business soon. I have worked for companies who moved their factories to cheaper labor pools, Vanity Fair textile mill in Monroeville Alabama to be specific, but I do not fault the company for doing this. Why?
Companies are in business to make money. I don’t care if it’s for the owner, partners, stock holders, etc, its all about making money. No one opens a business to break even or for principle. Part of business is basic black and white economics, produce an item and factor in production and margin costs to the item then sell it. From there the business is done from the standpoint of the company. The higher the production costs the option of how to deal with it arises, either cut into margin (no profits) or raise the price of the item to recover the increase of production costs. See, simple.
The largest cost for producing anything in business is employee costs. Wages, insurance fees, facility fees, etc all make up a large portion of an items initial cost. If the wage of employees goes up, or the insurance fees go up, or the facility fees go up they you have to go back to the two options outlined previously. Seeing companies are in the business of making money and not existing just to cover production costs then we know prices have to rise. We all know this, it is not brain surgery. Yet we all feel betrayed and hurt when a company moves to Mexico, India, China, or anywhere else with cheap labor. Here is the paradox of the situation.
For companies to remain profitable they have to maintain budget constraints. In our new global economy their competition has much lower operating costs and our trade policies try to be as fair as possible therefore requiring domestic companies to take drastic steps to remain competitive. As a company moves its manufacturing or large labor pool outside our borders we, as a nation and as employees, have to adapt. Manufacturing in America is dead! The sooner we wake up and realize and embrace this the better. We have to move on to the next economy. We have to shift from a manufacturing based economy to a managerial, financial, technological, or whatever based economy and leave the heavy labor to the hungry and eager workers of the world. Allow them to work in factories and make the money our grand fathers and fathers did so they can send their children and grandchildren to college and build nice cities and communities. Let them have their turn in the sun and let us go back to the drawing board and define our futures as a nation.
Our companies will never abandon their roots. There are advantages to being an American based company, namely trade agreements and access to our government for protection and access to world markets and economies other countries can not match. American companies will need different skill sets of its US based employees, people with a different mind set and different world view then just 20 years ago. We have to shift our jobs to meet these needs.
As our companies branch out into the world economy and engage in competition with state run and funded companies we have to be supportive and proud of them. Our goods may be made in Indonesia but the profits will be coming back to the US in tax revenue as well as salary for the American based managers, executives, and support people needed to run a global company. We should not denounce Halliburton for moving the CEO to Dubai, just take note that this company is not taking on much larger and more competitive companies in the future. Even if jobs are lost, the demand for jobs will emerge some place else in the company. We as a nation of employees have to be flexible enough to navigate these new global job markets and not expect the same treatment our fathers and grandfathers received by the same company.
The only reason this move has garnered any news traction at all is solely political. Realistically, anything and everything close to the current administration is a target. Our political landscape is polarized and crystallized in such a way it is hyper sensitive to any and every move, no matter how far from the people and players it is. The GOP is a wounded and dying beast on the plains full of scavengers and predators just waiting for the weakest moments to strike. Despite all the bad press about being unpatriotic, profiteering, selling out at the expense of the American workers, this is a business move in line with hundreds of other American companies in recent years. Maybe Coca-cola is not putting their CEO in Europe, but does 38% of their product come from their? It makes sense to have key decision makers in a region where high level decisions involving billions of dollars hangs in the balance and requires frequent meetings with suppliers. Maybe spending thousands of dollars in air travel and pollution for that travel makes more sense to democrats and critics. Maybe allowing European or Middle Eastern companies take over this region with presence thereby shutting out Halliburton and causing the company to potentially scale back its operations or go out of business, ok a long stretch but not completely out of the realm of possibilities. I don’t know if I am the only one fed up with the hostile tone of our press these days. Things have went from bad to worse over the past two years, and this story in many outlets just illustrates this. The Houston Chronicle’s article is very informative and seems to be pretty much blasé about it. CNN Money’s article is down right combative, as are many other ones across the country.