Skip to comments.Insourcing to America
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.
“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..
Offshoring our manufacturing base was a form of long term economic suicide. So you advocate economic euthanasia for the US economy. What a hero.
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.
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?
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.
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.
Benjamin Franklin argued that HIGH WAGES and CHEAP LAND were keys t US success
Not every American is Bill Gates or Howard Hughes
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.
“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.
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.
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.
the largest problem we have is not union labor, or trade polices..
It is government regulation and interference...
here we go...
one, two, three, four...
gonna start a trade war...
how well did that work out during the 1930s????
“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.
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.
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.
what you said!!!
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.”
I agree with every word of your post.
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.
The situation was completely reversed back then.
America made everything.
Now we import everything.
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.
PAT BUCHANAN made this argument in his book THE GREAT BETRAYAL
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.