By Larry Romanoff, January 23, 2021
Americans boast incessantly about their competitiveness and the miracles of their predatory capitalist system, but on examination these claims appear to be mostly thoughtless jingoism that transmutes historical accidents into religion. If we examine the record, US companies have seldom been notably competitive. There is more than abundant evidence that their efforts are mostly directed to ensure an asymmetric playing field that permitted them to avoid confronting real competition. And, in very large part, major US corporations have succeeded not because of any competitive advantage but by pressure and threats emanating from the State Department and military.
Xerox was once almost the only manufacturer of photocopiers in the world. Kodak was once almost the world’s only maker of cameras and photo film; where are Xerox and Kodak today? More recently, Motorola was the leading manufacturer of mobile phones; where is Motorola today? US-based RCA Victor was one of the largest producers of TV sets in the world. Where can you buy an RCA TV set today? Where are the great Pan Am World Airways and Continental Airlines? Where are E.F. Hutton, General Foods, RCA, DEC, Compaq? Where are American Motors, Bethlehem Steel, Polaroid cameras, and so many more? Gone, because they couldn’t deal with effective competition.
Boeing Aircraft would be gone today if not for the extensive subsidies it receives from the US government. It’s true that Airbus receives subsidies too, but Boeing is supported by billions in US military research grants against which it can apply much of its current expenses. Not so many years ago, IBM was the only manufacturer of office and home computers. Where can you buy an IBM computer today? GE was once the largest manufacturer of electric home appliances, lights and lighting fixtures. Where is GE today? Transformed into a financial company, beaten out of all consumer markets because it couldn’t compete. IBM defenders will tell you that the company willingly abandoned the PC market to focus on mainframe computers and information services, but no company abandons a profitable market. The truth is that IBM faced manufacturers who could produce PCs for a quarter of the cost, and were forced out of the business. GE defenders would make a similar claim, but GE couldn’t compete in the vast consumer markets and was driven out too.
The three major US auto manufacturers are in the same position. Chrysler has been bankrupt three times already, and survives today only because of Fiat having taken it over. The great General Motors went bankrupt, and was saved only by $60 billion of cash injections from the US and Canadian governments – money which will never be recovered. And in spite of that, GM would have anyway disappeared from the earth if not for its sales in China – which are now three times GM’s sales in its own country; even Americans are refusing to purchase GM’s tired and dying brands. Only Ford has been able to keep its head above water, and then only just. We could produce a list of hundreds of US companies who thought they were great until they faced some real “competition”, and then rapidly disappeared. It’s true there are business failures in every country, but other countries don’t boast about their God-given omnipotence and their world-beating competitive supremacy.
Descriptions of American ingenuity and competitiveness were never accurate or valid, but
mere jingoism fabricated by Bernays’ adherents to further promote the self-serving mythology of virtuous American capitalism. The truth is that the large US companies thrived on only brute force, heavily supported by their own government to limit competition both domestically and abroad. The US government and military have always existed primarily to browbeat other nations and economies into submission, to help US corporations obtain unfair trade deals, exclusive access to resources and markets, effectively colonising and subjugating much of the world. American business has seldom been able to compete when placed on an equal footing with other competitors because the US business model works only on a “take it by force” basis. Kodak, Xerox, and so many
other American icons disappeared when the playing field did indeed become level.
We need only look at the US domestic market to see the truth of this. When Japanese and German automobiles were finally permitted into the US market on equal terms, the American auto firms mostly entered a long slide to bankruptcy – because they couldn’t compete. Almost every computer and electronic device sold in the US today is a foreign brand because Americans couldn’t compete when the playing field was level. Motorola’s crappy phones were a great success until Nokia and others entered the US market. Harley-Davidson exists only because of a 50% import tax on competing motorcycles; Ford Motors would also be in bankruptcy if not for the heavy protectionist tax on light trucks. The American mobile phone companies and ISPs would disappear into the bankruptcy courts within a year if foreign firms were permitted into the market. Cisco Systems, the grand American Internet infrastructure champion, would within three months be reduced to assembling Playstations for Sony if Huawei were given free access to the US market. The story is the same for countless American firms that were once dominant in their home market but quickly disappeared when protectionist trade tariffs and duties were eliminated and foreign products could enter the US on fair or equal terms. The dominant US firms surviving today are able to do so due mostly to rampant protectionism and oligopolies created by the US government to ensure their survival.
At one time, US banks, radio and TV companies, print publishers and others were heavily restricted from mergers and takeovers on the sound basis that society needed to be protected from the predatory nature of concentrated ownership. But for the past 50 years the elites who control the large US corporations have exerted enormous influence on the government to remove domestic restrictions on monopolies, and eventually their political influence succeeded to the point where today the entire nation has only a few media firms, auto manufacturers, pharmaceutical firms, oil companies, telecommunications firms and major banks. In each case, companies were bought, merged, swallowed or bankrupted until only a few very large survivors remained.
American banking corporations were once permitted to operate only within a single state,
in part to sensibly ensure that local deposits were converted to local development loans rather than being siphoned off to develop other richer regions. But the powerful East-Coast bankers, heavily supported by the FED, convinced the government that all those small regional banks needed “competition” to make them “more efficient” and to bring them into the big leagues of the modern financial world. And of course once approval was received, most of the local banks were purchased, enticed into a merger, bankrupted or forced out of business, and now a small number of banks controls most of the US economy. And, as we would expect, the new mega-banks did indeed siphon off local deposits to richer centers, thereby vastly increasing the nation’s income disparity and relieving the government of its control of regional development. All the claims about the need for, and benefits of, competition were false. The purpose of these mergers and purchases was never to foster competition but to eliminate it. Today, a few major US banks control the bulk of the nation’s business, and instead of competing with each other in some meaningful way they generally conspire together to plunder their customers. Where there is real competition consumers have choices, but what are the choices with the banks? You can leave one bank that offers poor service while cheating you to go to another bank that will offer poor service while cheating you.
The US mobile phone system, an oligopoly, is the most expensive and dysfunctional in the world. An Internet-enabled smart phone that can be managed well in China for less than 100 yuan a month ($15.00) will cost $200 per month in the US. SIM cards cannot be removed, to prevent customers from changing suppliers; unlocking the phone to enable its use with another phone company or in another location, will lead to a $500,000 fine and a ten-year prison sentence, thereby protecting the oligopoly from competition. Like all American systems, communication was designed by and for the benefit of private enterprise, meant to hold consumers captive and milk them for every dollar they have. It was never considered as infrastructure nor designed with any thought of what was best for either the consumers or the nation. By contrast, China’s mobile phone system is the best in the world. It is the least expensive and the most convenient, seamless and comprehensive because it was designed as social infrastructure for the benefit of the nation rather than as a cash cow for a few members of the elite.
This pattern prevailed in banking, transportation, telecommunications, the media, the petroleum industry and others, to create a situation where these giant firms could totally dominate an industry to control not only prices and production levels, but also the rates of both future investment and technological innovation in these industry sectors. Those innovations escaping this capitalist net were soon either driven out of business or were purchased and killed. These are precisely the same arguments American companies and the US government utilise today in China to pressure China’s government to open industry sectors to US multi-nationals, claiming the benefits of competition and the need for efficiency as necessary credentials to enter the modern world. These claims are equally as much a lie in China as they were in the US.
In fashion similar to their mythical inventiveness and entrepreneurship, nostalgic and misinformed Americans today pine for “the returning of pride once again to what was once the global standard of creativity, quality and style in manufactured products – the mark on all our goods saying ‘Made in the USA'”. But this is just one more foolish American myth. The US was never a world standard of anything except weapons and maybe pornography, and even then they stole most of that from Germany and Japan. Mostly, American products, like their automobiles, have always been crappy. It is true there have been some products of acceptable quality emerging from the US, but these have always been much in
the minority and the few examples used as evidence of this claim are virtually the only examples. The Americans have never been able to produce machines or tools that could match those of Germany, or shoes and clothing as fine as those of Italy, or wines and food products as good as those of Europe.
We are constantly reminded that the Americans, being so creative and innovative, spend huge amounts of money on R&D, but these claims are short on detail and therefore disguise the objectives of corporate R&D in America. Companies in most countries invest in research to produce products of higher quality and greater reliability or durability, but US firms typically have interest only in finding ways to produce more cheaply so as to enhance profitability. Large American firms focus at least 60% of their entire R&D budgets on ways to lower costs, with product quality inevitably being the loser. American investment in R&D is merely a kind of race to the bottom, with every firm competing to discover new ways to substitute substandard materials and produce a more cheaply-made product that can be sold at the same price. Many components are internal where the materials quality is not obvious to consumers, but for those which are external and subject to consumer evaluation we see superficial America at its best. Manufacturers conduct consumer tests of their R&D ‘innovations’ to determine if the public are able to detect the cheap substitutions, the goal being to degrade product quality and cost as much as possible in a way that will not be apparent to the consumer. Lawrence Mishel, President of the Economic Policy Institute, wrote that “the US is a country interested only in finding the shortest route to the cheapest product”.
Despite all the mythical propaganda, the Americans have never placed much value on a skilled work force, and the quality of American goods has reflected this for 200 years. Neither American people nor their corporations have ever valued product quality, the people having for generations been programmed to value superficiality and appearance over substance, eventually resulting in the almost universally low quality throwaway society we see today. One of the main results of this low-class attitude is the American use of technology. Companies in Germany, Japan, China, and much of Europe, will take advantage of new technologies to produce better and higher-quality products but the Americans almost invariably use it to lower their cost of production and raise their profits. Product quality is always the loser. Even today, a German Volkswagen that requires repairs after a year is an anomaly; an American Buick that doesn’t, is a miracle.
Mr. Romanoff’s writing
has been translated into 28 languages and his articles posted on more than 150 foreign-language news and politics websites in more than 30 countries, as well as more than 100 English-language platforms. Larry Romanoff is a retired management consultant and businessman. He has held senior executive positions in international consulting firms, and owned an international import-export business. He has been a visiting professor at Shanghai’s Fudan University, presenting case studies in international affairs to senior EMBA classes. Mr. Romanoff lives in Shanghai and is currently writing a series of ten books generally related to China and the West. He is one of the contributing authors to Cynthia
McKinney’s new anthology ‘When China Sneezes‘. His full archive can be seen at https://www.moonofshanghai.com/ and https://www.bluemoonofshanghai.com/ He can be contacted at: email@example.com.