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Insourcing to America
Townhall.com ^ | December 14, 2012 | Suzanne Fields

Posted on 12/14/2012 6:05:27 AM PST by Kaslin

The prospect of hanging, as Samuel Johnson observed, "concentrates the mind wonderfully." We're counting on that kind of concentration to keep us from falling off the infamous fiscal cliff, which doesn't sound like fun. But while the Republicans and Democrats argue about whom to blame if they let the worst happen, we might look outside the box to find something beyond partisan gloom and economic doom.

We've given up our role as the manufacturing colossus, which blinds us to the reality that the times, they are a-changing -- again.

"For decades," writes James Fallows in The Atlantic magazine, "every trend in manufacturing favored the developing world and worked against the United States. But new tools that greatly speed up development from idea to finished product encourage startup companies to locate here, not in Asia."

He found his epiphany when he visited a factory in China that makes computers, smartphones and games for brands like Apple, Dell and Nintendo, enabling the American brands to exploit cheap labor in China to keep prices low in America.

We've known for a long time that conditions are grim and often intolerable in Asian sweatshops, but we've turned a blind eye. We got the goods at the right price, and everyone was happy. Or so we wanted to think. We rationalized that the workers who made these wondrous machines were happy to have a job, and if some factories put landing nets under dormitory windows to catch workers making suicide jumps, well, we won't think about that.

We've ignored or overlooked how Chinese worker attitudes are changing, as well, making their compliance with economic necessity more complicated, as invention and innovation here raised our ability to compete.

Even in Communist China it was inevitable that workers would want better lives for themselves. Many are the second generation off the farm, and have no desire to till the land of their fathers. Many never did.

Instead, they see their future in an urban world and want a piece of the prosperity pie they helped bake.

One of the more telling details concerns Chinese women. Women, with diligence, smaller hands and more careful attention to detail, are usually better at high-precision work. They learn new techniques more quickly than men. Many have climbed to high positions at the factory. As a result, they're leaving for better jobs and easier conditions.

Asian workers haven't yet found their Charles Dickens or Upton Sinclair to tell their story of miserable, soul-killing conditions and to shape their yearnings and aspirations into a moving narrative. Even if that never happens, they're likely to demand more money, and that will diminish one of the major advantages they have held over the West.

Wages in China are already about five times higher than as recently as in 2000, "and they are expected to keep rising 18 percent a year," writes investigative reporter Charles Fishman, who in The Atlantic predicts an "insourcing boom" for the United States. As U.S. labor union priorities change, from seeking higher wages to keeping jobs, America becomes more competitive. He cites the two-tier wage scale at General Electric's Appliance Park in Louisville, Ky.

Appliance Park was once known as "Strike City," where it was impossible to keep workers on the job and labor costs down. But workers have agreed to lower wages for new workers in return for adding and protecting jobs, and production has grown at Appliance Park. The low cost of natural gas needed for operating a factory, which is a quarter of what it is Asia, against the high cost of fueling cargo ships to Asia, is a large incentive to increase production here.

Over the past several decades, while manufacturing was moving from the rich countries to the poor countries, cost-efficient technology was swiftly developing in America. Ideas became reality. Innovation in three-dimensional printing, for example, accelerates the process of designing a product here and making more of it here, as well.

Manufacturing in the United States will probably never be what it was before "the mighty boiler" that was the Midwestern manufacturing heartland disappeared into the "Rust Belt." But Americans have always had the gift of getting smarter. America has been a mighty magnet for talent and ambition from the rest of the world. We must keep the talent we train, and encourage our designers and engineers to make products in America, which we can easily do with the miracles of technology.

Apple surely knew what it was doing when it decided to manufacture some of its Macs here. If that's not exactly a startup, at least it's a start. Let's hope it starts a trend.


TOPICS: Business/Economy; Culture/Society; Editorial
KEYWORDS: insourcing; manufacturing; outsourcing; trade

1 posted on 12/14/2012 6:05:38 AM PST by Kaslin
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To: Kaslin

Bump!


2 posted on 12/14/2012 6:08:01 AM PST by Cringing Negativism Network
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To: Kaslin

“We’ve given up our role as the manufacturing colossus, which blinds us to the reality that the times, they are a-changing — again.

“For decades,” writes James Fallows in The Atlantic magazine, “every trend in manufacturing favored the developing world and worked against the United States. But new tools that greatly speed up development from idea to finished product encourage startup companies to locate here, not in Asia.”

She starts with an incorrect premise. The USA’s manufacturing decline was greatly overplayed because the decine was in unionized employment. Manufacturing output as measured by gross value has remained steady. However the level of employment has decreased dramatically.

Our challenges are not the Chinese or any third world sweatshop they are from self inflicted wounds based on our policices in trade, energy, enviromental, legal, labor, monetary, and etc..


3 posted on 12/14/2012 6:39:24 AM PST by FreedomNotSafety
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To: FreedomNotSafety
Our challenges are not the Chinese or any third world sweatshop they are from self inflicted wounds based on our policices in trade, energy, enviromental, legal, labor, monetary, and etc..

Offshoring our manufacturing base was a form of long term economic suicide. So you advocate economic euthanasia for the US economy. What a hero.

4 posted on 12/14/2012 6:44:17 AM PST by central_va ( I won't be reconstructed and I do not give a damn.)
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To: Kaslin
cost-efficient technology was swiftly developing in America

Countries are brings their brain trusts here and hiring thousands of American scientists and engineers, many of the start up tech companies in the US are started by people from over seas.

5 posted on 12/14/2012 6:53:54 AM PST by svcw (Why is one cell on another planet considered life, and in the womb it is not.)
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To: central_va

Read what I said. Go look at some facts. Try this one article: http://www.shopfloor.org/2011/03/u-s-manufacturing-remains-worlds-largest/18756

Our manufacturing base is the best in the world. To the extent we have problems they are self inflicted. How did you get that I was advocating anything?


6 posted on 12/14/2012 7:06:49 AM PST by FreedomNotSafety
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To: central_va

It is a common fallacy among the general public that manufacturing, the actual physical production of stuff, is the key to economic prosperity, and if that process were to find its way on the other side of some border, then the local economy can’t prosper. But this is hogwash.

www.johnkay.com/2012/11/14/fetish-for-making-things-ignores-real-work


7 posted on 12/14/2012 7:13:08 AM PST by LifeComesFirst (http://rw-rebirth.blogspot.com/)
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To: LifeComesFirst

I disagree (strongly) with your claim.

Manufacturing is the basis for real wealth.

That we have sent ours away, does not bode well for the future of America.

Time to bring back US manufacturing.

Now.


8 posted on 12/14/2012 7:20:06 AM PST by Cringing Negativism Network
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To: Cringing Negativism Network

AMEN!

Benjamin Franklin argued that HIGH WAGES and CHEAP LAND were keys t US success

Not every American is Bill Gates or Howard Hughes


9 posted on 12/14/2012 7:30:21 AM PST by usmc19651990. (Adelson Traitor, chik fil a,amnesty,obama,RINO, Keynesian Kenyan)
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To: central_va

Applying a 30% tariff today would raise $600 billion annually and do much less harm to the economy than an increase in marginal rates. A 30% tariff on imported goods would encourage investment in US production. Combine it with a 15% federal tax rate on profits from goods manufactured in the USA and you would see investment in US factories plus the middle class jobs that come with them.

To those who say high tariffs hurt the economy, I say look at the investment in, and expansion of, the US economy from 1865 to 1900 when tariffs were high. Also look at the economic expansion and job growth of the 1950’s and 1960’s. Compare with the declining standard of living and job losses since 1990, when we started removing tariffs. The past decade in particular has been a disaster for job creation.

High federal spending to jump start demand did not work in 2008 because most consumer goods were produced overseas. Putting money in consumers hands by reducing the payroll tax, extending unemployment benefits or extending the Bush tax cuts didn’t work. To the degree the money was spent (some was saved) on consumer goods, the spending helped offshore factories, not US factories. In past recessions when the government put money in the hands of consumers they spent it on consumer products which were made in US factories. The increased sales resulted in higher production and in turn hiring by the factories. Today, deficit spending to put money in consumers hands does not work because the higher demand results in higher employment in other countries.

Raise tariffs, invest in domestic factories. More middle class jobs at home. I’d rather see low skill Americans being paid to assemble toys and toasters in a US factory than be paying high taxes so those low skill workers can sit at home and live off government benefits. If I pay $1.00 less to buy a Chinese assembled toaster than I would an American toaster but I pay an extra $2.00 in taxes to support someone who could be working to assemble the toaster but thanks to low tariffs is sitting at home depending on government handouts, I am worse off economically. The free traders, who gladly sent offshore the low skill, labor intense factory jobs, always fail to look at the total cost to society of having a large population of unemployed low skill workers who rely on government welfare to survive. There are significant costs to society and the economy when a nation sends low skill labor intense jobs offshore. Look at the experience of the last 20 years in the USA.


10 posted on 12/14/2012 7:37:15 AM PST by Soul of the South
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To: Cringing Negativism Network

“Manufacturing is the basis for real wealth”

Don’t forget Energy and Food production.

Over the last 40 years we outsourced our Energy production despite being the energy richest country in the world.

I’m hopeful that the new fracking technology is going to make the US the largest energy producer in the world in a few years. This is a battle we need to win.


11 posted on 12/14/2012 7:39:45 AM PST by desertfreedom765
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To: Soul of the South

We, that is Americans, don’t want a high tariff. We like to buy inexpensive products.

We embrace the present and look forward to a prosperous future. We do not want to go backward. We want to innovate and maintain our prosperity.


12 posted on 12/14/2012 7:42:24 AM PST by bert ((K.E. N.P. N.C. +12 .....The fairest Deduction to be reduced is the Standard Deduction)
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To: bert

Speak for yourself.

I would welcome an import tariff, if we could balance our budget and bring back US jobs.

Taken as a package, I would strongly support tariffs. But only if we do it seriously. And do it in a way which keeps jobs out of unions.

The poster you responded to, has a good approach.

This poster supports the idea.


13 posted on 12/14/2012 7:47:07 AM PST by Cringing Negativism Network
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To: FreedomNotSafety

the largest problem we have is not union labor, or trade polices..

It is government regulation and interference...


14 posted on 12/14/2012 8:21:50 AM PST by joe fonebone (The clueless... they walk among us, and they vote...)
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To: Cringing Negativism Network

here we go...

one, two, three, four...

gonna start a trade war...

how well did that work out during the 1930s????


15 posted on 12/14/2012 8:24:30 AM PST by joe fonebone (The clueless... they walk among us, and they vote...)
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To: joe fonebone

“the largest problem we have is not union labor, or trade polices..

It is government regulation and interference...”

Agreed. Government is the source of those problems.


16 posted on 12/14/2012 9:15:32 AM PST by FreedomNotSafety
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To: LifeComesFirst; Cringing Negativism Network
It is a common fallacy among the general public that manufacturing, the actual physical production of stuff, is the key to economic prosperity, and if that process were to find its way on the other side of some border, then the local economy can’t prosper. But this is hogwash.

www.johnkay.com/2012/11/14/fetish-for-making-things-ignores-real-work


That article ignores the fact that anti-competitive situations allow for exhorbitant price markups. This is what big business always does: it looks for dirt cheap labor because it is looking for an easy way around the economics it sees locally. This is what slavery in the U.S. was about, cheap labor. Also, the waves of immigration that were allowed in the 1800's: cheap labor.

In all such cases, you have people who own, or nowadays don't own, just manage, large enterprises who think in very narrow economic terms, despite the fact that they are the steward of said large enterprises. Now to be clear, I am most emphatically not talking about "social responsibility" garbage; management's only true responsibility is to the shareholder. What I am talking about is taking a step back and actually thinking on a longer time horizon. Also, thinking not only the the direct, here-and-now, quarter-to-quarter scope, but realizing that a large enterprise in a given state or town is like an elephant that lives in the backyard: it has to be careful about what it does in order to avoid destroying the economy that it relies on. The most direct effect, of course, is causing the local economy around the business headquarters and operations inside the nation and state it is chartered in to tank. Case in point, Detroit Michigan. Big business had it's way there - it was the core of the economy. By being morally and intellectually lazy, looking for the easy way out, big business abandoned Michigan and now it's a mess. If we look farther out, and America itself is living in an economic wasteland nightmare, how is that good for big business shareholders of American companies ? Answer, of course it's no good.

Economists (frequently pinheads) think too macro once they get beyond about their second economics class. They forget about the basics.

Every time someone is working on something that needn't be done (twiddling thumbs, writing an email, having a pointless meeting, writing a regulation, complying with a regulation, thinking about how to avoid legal problems arising from a regulation, etc., ad nauseum), they are a) being paid (costing everyone) but not adding to the pile of goods and services available to purchase.

The more there is available to purchase, the more downward price pressure, which represents a better standard of living.

Economics can be clearly understood by a little simple drastic extrapolation. What if there were only 10 people working and producing in a society of 1,000 and 990 people in that society just lounged around and waited for the 10 people to make the food and serve them, make everyone's clothes, grow the food, build the houses, etc. How high would that standard of living be ?

Take the same population of 1,000 and switch it: 10 who are unable to work because they're sick or old, and 990 that are highly motivated and working a) diligently and b) wisely. They'd have all the necessities taken care of easily, and would go on to making various forms of education, entertainment, culture, scientific exploration, etc., that could be efficiently produced and therefore affordable and constantly deliver increased capability and happiness to the 1,000 people.

Economists and politicians today all-to-often list ethereal goods and services that are spoken of as being most worthwhile. In fact, if one digs into the reality of things, one finds they are not.

Take higher education for example. While in an advanced economy this is an area that would be worthwhile yet intangible for many who could afford to it but would not absolutely need it, due to the fact that our higher education system is simply a propaganda machine, sadly it does far more harm than good for us today.

Another source of confusion: high-tech jobs and jobs requiring advanced education, technology, innovation, etc. Sadly, the bell-curve's biggest early promoters, the educated elites, fail to acknowledge, either knowingly or unknowingly, that these jobs are simply confined to a small percentage of society. This is in part because of people's capabilities and interests, and in part because these jobs produce so much societal benefit relative to "worky-work" jobs that there simply is no need for a large percentage of the workforce to be employed in them. Simply put, there is no need for 10 million engineers to design cell phones, and most of the population could not do the job.
17 posted on 12/14/2012 9:18:18 AM PST by PieterCasparzen (We have to fix things ourselves)
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To: joe fonebone; FreedomNotSafety; Cringing Negativism Network; bert; desertfreedom765; ...

IMHO, tariff is a simple and straigtforward tactic.

But what we see happening in government and big business, given the way politics, business and foreign policy are currently working, presents a phenomenon that is much too large for ordinary tariffs to fix underlying root causes of our malaise.

Big business, most especially publicly-traded companies and foreign companies, care absolutely nothing about what they do to the American citizen, i.e., the taxpayer and the consumer. Elected officials likewise do not care. Why ? Because they are elected based on their election marketing campaigns, which can be designed to use discontent to their advantage, and can use outright lies and propaganda as long as they stay within the letter of the law, which is rather easy to do. Ergo, we keep “electing the same people over and over”. More precisly, the same “type” of people.

Big business cares only about the next quarter and will set up very long-term plans to produce better results today and defer problems, costs and taxes. Case in point, profits earned in foreign subsidiaries. Such subsidiaries would have had to have reported profits every year, except for a rule that allowed them to state that they did not foresee bringing capital back the the U.S. They decided to set up foreign subsidiaries - they were not forced to. They should pay tax on all corporate profits - businesses confined to the U.S. (small ?) have to report all profits of subsidiaries according to ownership rules, etc.

Putting big enough tariffs on big business may cause them to stop importing, but it may cause them to do other things that would hurt and may indeed not cause them to do other things that are desired, like hiring more Americans.

Large companies have far too much influence on Congress and State legislatures, far more than small business, to the point of government and big business being in an unholy alliance.

Part of what is driving globalization - is globalists. The intelligentsia that populates the echo chamber of councils, boards, think tanks, university faculties, etc., the “experts”, form a conventional wisdom that is difficult to resist - and very notably interprets morality strictly according to the winds of political correctness.

Management of businesses that are small enough to have deep connections in their surrounding society that participate in segments of the economy that are truly competitive tend to think much more like the typical person. They understand that their fortunes ultimately are tied to the fortunes of the general economy in the areas in which they operate.

Also, IMHO, it’s important to note that tariffs will naturally come to be relied upon by the businesses they benefit, as they will have an alternative to pursuing efficiency in order to increase their profits: they can pursue their Congressmen to increase tariffs a bit.

IMHO, the smart businessman does not seek trade wars or on the other hand, to use foreign trade to generate the bulk of his profits. Instead, he seeks win-win situations, and very importantly, he knows he needs to have self-restraint and think broadly and deeply. It’s fine to import and export, but it’s essential to not get carried away with something to the detriment of long-term fundamentals of his business. He knows that investing where there is no law and order is unwise. He also knows that getting in bed with the government is a double-edged sword that can come back to bite him when political winds change. IMHO, it’s much wiser for the businessman to promote good character and morality in politicians than ease of manipulation.

We also can’t forget all the bad effects of having the globalists-leftists all throughout our government, pursuing their own agendas in regulation and laws, spending decades out ahead of tax collection, throwing away national sovereignty, promoting immorality, destroying our education system, promoting collectivism, promoting disregard for the rule of law, etc., ad infinitum.

These and a large list of other problems are making it extremely and even increasingly difficult to do business here, which simple tariffs do not address at all.

In contrast, developing Asian economies are also run by elites and are facing tremendous, ever-increasing problems. IMHO, dramatic tariff increases may soon fade from the conversation.


18 posted on 12/14/2012 10:14:23 AM PST by PieterCasparzen (We have to fix things ourselves)
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To: PieterCasparzen

You need to get out more. If you did, you would know that there many many very small American companies manufacturing great products and selling them abroad like hotcakes.

Exports drive the american economy. To try to impose tariffs to save jobs or make jobs return is not only not possible but terribly regressive. The past was.

There is a presumption in your post that corporations, especially large corporations are heartless meanies concerned only with profits. That is mostly not true but the part about profits is correct. The purpose of a business in a free, non socialist, nonindustrial policied free country is to make a profit.

I recently spoke with a young man from Brazil. He was visiting us on his month long government mandated 30 day vacation. He is a pilot and has tons of frequent flyer miles. He was here to buy stuff. Stuff that in Brazil costs many many times more than here because of the tariffs. People unfortunate enough to notbe able to trvel abroad do with out or py through the nose. That is what the tarrif folks advocate....... doing without or having extremely limited choice of often inferior goods.


19 posted on 12/14/2012 10:37:19 AM PST by bert ((K.E. N.P. N.C. +12 .....The fairest Deduction to be reduced is the Standard Deduction)
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To: bert

Yeahhh...

what you said!!!


20 posted on 12/14/2012 10:58:51 AM PST by joe fonebone (The clueless... they walk among us, and they vote...)
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To: PieterCasparzen

You didn’t actually read the article, did you?

And for the record, government killed Detroit, not lack of manufacturing. Government forced parasitic unions on the automakers, and government created the moral hazard that fostered bad business decisions.

But please, read the article. And read more about what economics teaches before you trash it. Start with Sowell’s “Basic Economics.”


21 posted on 12/14/2012 11:48:52 AM PST by LifeComesFirst (http://rw-rebirth.blogspot.com/)
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To: bert
there many many very small American companies manufacturing great products and selling them abroad like hotcakes.

I agree, and I agree that it is a good thing. Actually, however, in 2009, companies of 500 or more employees exported about 67% of the total dollar volume of exports according to census export data. Both small and large companies do contribute to exports - which are important because American imports significantly more than it exports.

Exports drive the american economy.

In 2011, the GDP was $15.075 trillion, exports were $1.497 trillion, about 10%, so somewhere around 90% of GDP is domestic. America is not an export-driven economy; it's role globally is much more that of the most desired consumer market for other nations, since it's sheer size and per capita income levels make it the best market to sell in. Contrast it with the German economy to understand an economy that is quite dependent on exports.

There is a presumption in your post that corporations, especially large corporations are heartless meanies concerned only with profits. That is mostly not true but the part about profits is correct. The purpose of a business in a free, non socialist, nonindustrial policied free country is to make a profit.

I never implied "heartless" or anything emotional. If you carefully review, you'll see that I was pointing out that they are oftten unwise for the long term good of their own business. Just look at GM for an example of this. For all their outsourcing, caving in to union demands and political correctness, they still are running into the ground. Numerous very rich men who ran businesses back in the day, such as Milton S. Hersey, realized the mutually-beneficial relationship between his business endeavors and the local town, state and nation. IMHO, if I owned a $10 billion in sales American business, I would certainly be interested in employing Americans - to work as efficiently as possible - so that my business would be running in a nation of citizens that had money in their pockets to spend. That's simply a long-term strategy for my business being able to keep that Sales figure going in the right direction year after year.

Any way you look at it, 20+ million unemployed in America is bad for business. The more people earn from productive work, the more they can spend - without being a burden on anyone else. The will have earned their money. If they are handed the money without producing anything, however, everyone pays for that in the form of higher prices, or higher prices and higher taxes.

My intent in my post was to point out that simply throwing tariffs on our imports is not the fix for our economic problems.

I recently spoke with a young man from Brazil. He was visiting us on his month long government mandated 30 day vacation. He is a pilot and has tons of frequent flyer miles. He was here to buy stuff. Stuff that in Brazil costs many many times more than here because of the tariffs. People unfortunate enough to notbe able to trvel abroad do with out or py through the nose. That is what the tarrif folks advocate....... doing without or having extremely limited choice of often inferior goods.

Just to review from my post:

"a phenomenon that is much too large for ordinary tariffs to fix underlying root causes of our malaise"

"Putting big enough tariffs on big business may cause them to stop importing, but it may cause them to do other things that would hurt and may indeed not cause them to do other things that are desired, like hiring more Americans."

"Also, IMHO, it’s important to note that tariffs will naturally come to be relied upon by the businesses they benefit, as they will have an alternative to pursuing efficiency in order to increase their profits: they can pursue their Congressmen to increase tariffs a bit."

"These and a large list of other problems are making it extremely and even increasingly difficult to do business here, which simple tariffs do not address at all."

"In contrast, developing Asian economies are also run by elites and are facing tremendous, ever-increasing problems. IMHO, dramatic tariff increases may soon fade from the conversation." (meaning, may become obviously not necessary)

So while I don't know the current tariffs and can't offer an opinion as to specific changes, I'm just expressing that I don't think that raising tariffs on the Chinese is a magic fix-it. I hope this clears up my meaning.
22 posted on 12/14/2012 12:47:08 PM PST by PieterCasparzen (We have to fix things ourselves)
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To: LifeComesFirst
You didn’t actually read the article, did you?

I did.

And for the record, government killed Detroit, not lack of manufacturing. Government forced parasitic unions on the automakers, and government created the moral hazard that fostered bad business decisions.

If you or I or anyone else owned all of GM, lock, stock and barrel, we may well (I know I would have) either shut it down or picked it up and moved it. Long before the government forced unions on them. Many owners of large businesses did this back in the day - the unions hated them and called them union busters. When a person owns a business that represents a large part of their net worth and something that will be passed on to their grandchildren, they see the handwriting on the wall much more clearly when they come under pressure to do things that will eventually ruin the business.

Once companies go public, however, they are owned by many small retail investors, and the management of the company are simply highly-paid employees, who will happily give in to many things, and go skipping into their retirement, regardless of whether they have sown the seeds of the destruction of the company. There is simply no comparison in the quality of management's stewardship of shareholder value between public and private companies.

In a downward cycle that spanned decades, government and unions pressured, and automakers gave in.

But please, read the article. And read more about what economics teaches before you trash it. Start with Sowell’s “Basic Economics.”

The article had this paragraph:

"When you look at the value chain of manufactured goods we consume today, you quickly appreciate how small a proportion of the value of output is represented by the processes of manufacturing and assembly. Most of what you pay reflects the style of the suit, the design of the iPhone, the precision of the assembly of the aircraft engine, the painstaking pharmaceutical research, the quality assurance that tells you products really are what they claim to be."

This fellow should know better. The "style of the suit" implies that one would be $5,000 for a cheap junk suit bought off the rack and made in China, and $5,000 for a suit that looked the same but was a bespoke, bench-made suit made in New Jersey. They look the same, it's just the "style" ? No, you get what you pay for. It's just that most people don't know what they're getting (in most consumer markets), they don't "do the math". We're not all paying for the "style", some of us are paying for quality, others are getting ripped off.

The "design" of the iPhone. No, it's the fact that Apple has a loyal customer base they built up by offering high-priced, high-quality goods. They were a large business already before the iPhone, not a mom-and-pop shop. They then made use of their reputation, capital and savvy when the made a proprietary (to keep cheap alternatives out) phone and used skillful marketing to make it into a popular expensive item that sold like hotcakes. There was no need for Apple to try to have 60% margins on the phone, they could have had it made in American at the same price point, but with much lower margins. Or had it made in China and sold it for 1/3 less than they did. If they did, they would have been even farther ahead of their competitors, making it even more difficult for them to get into the game. Apple opted to try to make as much as they could as quickly as they could. But this profit margin and savvy, and capital, combined with the technical ability to execute are very out of the ordinary, and practically non-existent in most segments of the economy. So for the iPhone, most of what we pay for is simply based on Apple's strategy and their ability to execute it, which is an anomalie that will eventually succumb to price pressure from competition.

"The precision of the assembly of the aircraft engine" - huh ? This dude clearly has no clue or is intentionally misleading. "The precision of the assembly" is meaningless. Dude, I grew up in a machine shop, you get what you pay for, it's not cheap manual labor. Chips have to be removed, in very precise way. Very small things can cause puzzling and costly problems. The best employees are far more cost effective than the worst, and the worst can put you out of business quickly. Perhaps he's talking about more advanced equipment and tooling ? That only makes it more possible to pay workers more because the worker produces more and better in the same unit of time.

The painstaking pharma research ? Barf. You pay a high price because there are enormous regulatory barriers to entry and pharma makes all it can any way it can. I worked for a pharmaceutical contract sales company. Sorry to burst this "economist's" bubble. Ever so slowly competition will eventually happen, but they have Congress in their back pocket to hold it off as long as they can.

The quality assurance ? So the actual manufacture is not what you pay for, it's the QA. No, he's an economic cracksmoker, the QA is typically a small part of retail price.

It's real easy, you don't need to be much of an economist to figure out. Labor in any developing country is cheap. The legal and regulatory system simply requires a few payoffs and it leaves you completely alone. Companies can then make huge easy markups, and allow the capital markets establishment to project the story that they have invented some new paradigm or that they "can't afford" to do things in America. This is exactly why we hear so many pro-big business folks forever ranting that we need more "skilled" immigrants.

Meanwhile, most small businesses must try to - and usually prefer to - survive right here in America, most without the help of their Congressman and his legislative staff.
23 posted on 12/14/2012 3:23:03 PM PST by PieterCasparzen (We have to fix things ourselves)
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To: Soul of the South

I agree with every word of your post.


24 posted on 12/14/2012 8:20:51 PM PST by central_va ( I won't be reconstructed and I do not give a damn.)
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To: PieterCasparzen

Having served as a “C” level officer at one publicly held corporation and as a corporate VP at another I agree with much of what you say about big business having a short term orientation. This I attribute to Wall Street’s short term focus (stocks being traded by computers in nanoseconds is speculation, not investment) as well as the executive compensation system having a huge stock option component which encourages short term actions to drive stock price and not long term success of the organization. Short term investments with immediate payouts are therefore preferred to long term investments that pay out over decades.

To a large degree this short term orientation helped drive the outsourcing boom of the 1990’s and 2000’s. It was much easier for CEO’s to shut down factories and outsource production to brand new Asian factories than make the capital investment in up to date equipment to make US factories competitive.

One option is to use anti-trust legislation to break up large companies. The bank mergers after repeal of Glass Seagall in the late 1990’s contributed to the creation of “to big to fail” megabanks which had to be bailed out by the government. Had the government used antitrust law to prevent these mergers, the 2008 financial crisis might not have been as severe and the problem banks could have been allowed to fail.

Likewise one has to consider if mega corporations such as GE and Wal-Mart have too much power. Breaking up the “trusts” in the early 1900’s led to a vibrant economy until the 1929 when excessive financial speculation caused a financial meltdown and economic depression. It may be time to break up the giant corporations to create more domestic competition, less collusion between big business and government, and more innovation.

Perhaps higher tariffs combined with strong antitrust action is the optimal policy. Breaking up the big corporations will create more competition. It is competition which drives efficiency.


25 posted on 12/14/2012 9:00:23 PM PST by Soul of the South
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To: joe fonebone

The situation was completely reversed back then.

America made everything.

Now we import everything.


26 posted on 12/15/2012 7:45:06 AM PST by Cringing Negativism Network
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To: PieterCasparzen

Thoughtful post.

Thank you.


27 posted on 12/15/2012 7:47:28 AM PST by Cringing Negativism Network
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To: central_va

Until the banking/housing debacle We were operating beyond full employment. To fill the gaps, hordes of Mexicans poured in to fill the vacuum.

That fact belies your arguments. While manufacturing of some products moved elsewhere to be competitive, other jobs were created.


28 posted on 12/15/2012 8:04:08 AM PST by bert ((K.E. N.P. N.C. +12 .....The fairest Deduction to be reduced is the Standard Deduction)
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To: PieterCasparzen

PAT BUCHANAN made this argument in his book THE GREAT BETRAYAL


29 posted on 12/16/2012 12:44:12 PM PST by usmc19651990. (Adelson Traitor, chik fil a,amnesty,obama,RINO, Keynesian Kenyan)
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To: Cringing Negativism Network

My grandson’s business had need for thousands of trash cans—they found they could get them made here in the states less than what they would have cost in China.


30 posted on 12/16/2012 12:57:00 PM PST by Conservativegreatgrandma
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