Here is a series of mutual rants by a free market friend (me) and a fiscal and political conservative concerned about our country’s outsourcing and loss of manufacturing.
My thoughts haven't changed in the last 10 years when I started to recognize what we were doing to ourselves in the name of progress and profits.
You give away or allow your manufacturing jobs and technology to be imported by another nation for instant corporate profits and you, as well as our country, will inevitably pay the price later on as they out compete you due to their low labor costs. Soon we will be unable to manufacture anything in this country if we don't equalize the scales with taraiffs to take away the foreign advantage. This will allow us to again have a large and vibrant manufacturing sector. I sound like the union bosses but I agree. We are forming a nation of burger flippers, health care specialists and other service providers and if we don't turn it around soon it will become very painful for our future generations either through wars or a low standard of living.
Bottom line, even though you think China is the future, is we need to keep our intellectual property and reestablish our manufacturing through the dismemberment of the free trade agenda or else. The old economic models of guns or butter never considered "or services" as an alternative as you have to produce something of value to sell as a nation or you will sink.
Those are my thoughts, another Conserative rant.
Dear (name not posted)
Tariffs. The problem with that solution is that it may work but only inside the U.S. Tarrifs can't make any U.S. manufactured product more competitive for export as long as we pay $60,000 a year to workers to insert and tighten screws. And what will be China's response ? Buy less U.S. Treasuries and force Congress and Senate to abandon our debt financed society ? Maybe we should leave Afghanistan and the Philippines save a few billion now ? Or how about ending Social Security, Welfare and Medicare ?
And try to convince Americans that the patio furniture they bought last year for $250 at Costco or Walmart would be much better Made in America and costing $1500.
Many American's would not tolerate the quality of life for even the growing middle class in China.
Japan did the same thing as China is now doing... they began with cheap labor, then moved up the value chain with imported and homegrown technology. Remember the 1980's when they bought Rockefellor Center? As Japanese incomes rose, Japan now can't afford to manufacture low technology products in Japan and have been opening factories in China for years. However, Japan didn't have the local consumer market that China has - and will have for many decades to come.
Why is it that Japan and Germany can open factories in the U.S. with U.S. labor for the U.S. consumer market and GM and Chrysler have had such a hard time surviving? Maybe it's the $60,000 worker at GM and Chrysler?
When we talk with Chinese businessmen, their markets are so big and growing so fast that the U.S. market for their goods is just not that interesting anymore. Global companies (not just U.S.) will continue to buy cheap labor wherever it can be found and import to Americans who want things cheaper.
Here are a few areas I think we need more focus:
> Educating our children and requiring adults to get continuing education (tax incentives, reduced Social Security, reduced Welfare, etc.)
> Put a cap (not a Tariff) on imports by any company. If there is enough U.S. market demand for something , the rest will need to be manufactured here. Prices will shoot up and there will be a loud cry as Americans can't afford that new patio furniture they want - and we will get used to fixing things and making do with less in the new world. Yes, there will be riots and people getting killed on opening day of store sales as people push and shove to buy that "thing" we all want. Look at Greece's response to fiscal belt-tightening.
> Realize that we can't be an island and put more focus in doing in China what Toyota, Honda and VW do here. Did you know that the Buick division in China has been profitable since the day they opened? At least for a while, the power trains are Made in America and shipped to China. And our profits in China could come back to America in jobs, profit income and corporate taxes if structured properly. I think we need to get into China, export our people and management and take advantage of the opportunity ahead. Then find things we can do uniquely - if anything - here at home to serve those markets.
> Did you see the 60 Minutes special about how our entire defense system and banking system has been breached over and over again by internet hackers? (see details at http://www.cbsnews.com/stories/2009/11/06/60minutes/main5555565.shtml)
We may find a way to protect our Intellectual Property, but I doubt it. Therefore, we need more of it and won't get it as long as we're flipping burgers instead of getting educated. Many great inventions and new products are the result of businesses (and defense contractors spending big government money) being in the local market or latest war - not from university labs.
Interestingly, China has "big government" while many of us still want "small government" in the U.S. The China economic stimulus plan was 1/2 Trillion Dollars (U.S. equivalent) of government money and banks were ordered to start lending - which they've done. China banks made $65 Billion in loans in the first 6 months of 2010, but more importantly, that is up 72% for the first half of this year compared to 2009. I wonder if that matters. Or is it because China is willing to have 650,000 people die every year of respiratory diseases and don't yet have Medicare, Social Security, Welfare or a Clean Air Act?
A vicious cycle, but hopefully not a zero sum game.
If I had a reasonable set of arguments or ideas that I thought would really work, I'd become a writer or politician to be heard. But I wonder - why can't we find high school and college students to dig holes, cut grass and pick strawberries for $10 an hour? Something's gone amuck with our sense of value and entitlement, and we will all pay the price for that as well. But in one of the richest countries in the world, it's sad we still can't take care of our poor, indigent, aging and uneducated masses.
Sorry you missed my online “liberal rant”, but I've attached a few of the charts from it that I find interesting. Hopefully, this file isn't too big and doesn't end up in your Spam file (now that I understand you use Rush Limbaugh's Guide to Internet Security Settings).
Let me know if you can't open them (they require a PDF reader which you can download free from Adobe.com). Some are a bit harder to read since they aren't projected to a big screen.
I'll be glad when I finally get you educated and you find a job. Attached are some my thoughts as I can't type fast enough to provide all of them. I reviewed your charts and photos and see a underdeveloped country moving to catch up with the developed cultures in Europe and the US. Other than size I see no real difference with the countries in the same position. I just am not as interested in you at seeing them develop at the expense of most of the citizens of the US.
Convert an isolationist from what country the USA or China? By the way I am not an isolationist I just believe in developing, building and selling your products to keep your citizens productively employed not giving away your developments for short term personal gains while keeping another country's people employed for personal enrichment from their cheap labor. Doesn't that make sense to you?
Dear (name not posted)
Actually, it does make sense to me. China is doing the same - for example, they have not allowed FedEx or UPS to enter the domestic China market (UPS is big in the shipping docks though) to allow China native industries to develop and evolve in that area. But none of that will bring the $60,000 manufacturing jobs back to the line worker when the world is full of people who will do that job for less - not just in China.
I just don't believe Tariffs work, but import restrictions and other policies may as they seem more "tolerable" as they are level (that is, ALL countries are treated the same, not just a few).Tariffs create isolationism (a word?) because it's strictly for internal markets and to shut out (raise the price of ) foreign products. It still doesn't address the base example of the $1500 patio furniture. But in a democracy, it's really hard to get anything DONE...that I believe is one reason India (democratic) is having trouble with their economic rebirth while China (communist) is moving ahead.
The U.S. cannot be a world competitor on the basis of cost of labor. I'll bet we could put all the lost Oregon workers back to work at $300 per month !
This is broader than just manufacturing jobs but that is a part of it ...our steel and textile industries just could not continue to compete on a world basis and that was their demise. That's' one of the points of the charts I sent you. America grew rapidly, creating the world's greatest consumer market...for awhile. Then when you compare the magnitude and timing of China's growth and growing middle class (ours was in the 1960's) it becomes clear that they are on the same trajectory as the U.S. WAS.
America is not growing enough - and not at the price of those steel and textile goods - to sustain those industries on a worldwide basis. Any that have survived are like job shops or paper mills - specialty niches of (typically) short run items with short turn around times that don't make sense to export.
Now, if the price of oil went to $200 per barrel we'd have a game on our hands as the international supply chain would create higher prices and allow U.S. manufacturing to become competitive again. Maybe we will get lucky and they will go up ??
I don't think any of us are prepared to a) stop buying any product made in China (nearly impossible and just try and convince your friends and neighbors) or b) suggest our children work for $300 per month. So if we can't hold to our beliefs and vote with our feet, we expect corporations - profit animals by nature - to do it for us? When was the last time EITHER of us "overpaid" for something because it was Made in America ?
Technology and know how can only be protected so long, but the Intel discussion is interesting (see article below) of keeping R&D close to manufacturing. However, as noted, IP does escape whether we want it to or not.
See these links. One discusses how China's growth MAY bring jobs to the U.S. The other, that Oregon' s exports (as an example) SHRANK in 2009 EXCEPT for our exports to China which GREW. As one points out, however, Oregon has lost 60,000 jobs in the last decade (some just from sales of Oregon companies to owners in other states) and they probably won't come back in that form. But look at the list of exports and strategies (e.g., Intel).
I believe we need corporate, state and national strategies to increase exports and (as noted before), do what VW, Honda and Toyota have done in America. By the way, how much "technology risk" did they take in doing that?
The U.S. sees China's population growth and growing middle class as a burgeoning market, while the Chinese see it as a burden ! How do you feed, cloth and give healthcare to that many and how do you continue to placate the growing "wants" of the MClass ? Interestingly different points of view.
We went through the same issues during our post WWII population growth and found it was good for most of us.
We went through the same issues during our post WWII population growth and found it was good for most of us.
Also, we all know Democracy is not efficient (just look at the effectiveness of our Congress and Senate), we just don't like the alternatives.
Socialism is a whole different discussion.
Thanks again for taking the time and giving this discussion some time. I do appreciate it.
Remember to include the other components of a product other than labor in your analysis of pricing that can be just as significant. Raw materials, production technology /methods, quality, marketing, shipping efficiency and the intangibles such as pride and inventiveness. You seem to ignore these which can effect pricing as much as labor and effect demand much more. We are our own worst enemies as we seek the most return at any long term cost.
Interesting when you address Oregon's unemployment problems. First to put them back to work you need to end the Government handouts. Again I believe all the government handouts retard people from working at something rather than go hungry and look at the impact of local and national forest products policy that decimated the use of our most available natural resource in favor of protectionism rather than conservation which was already in force in the industry. Look at the morons who continue to force the power industry to tilt at windmills while abandoning nuclear, coal and natural gas and continuing to beat up on the water power supply. As long as the State continues listen to such unsustainable idealists and elect similar leaders, like our current Governor and the retread running again, manufacturing (jobs) will continue to suffer. So what is left? The service industry and more government employees. This is where an electorate full of freeloaders is bound to fail while a hungry China or others will take over. I hope and believe these trends are reversible when such governments run out of handouts (like California) and are forced back into a productive mode to survive. You can only live so long on savings then you must go back to work or sink.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: Jonathan Cooley has traveled extensively in China on both business and pleasure and continues to work on cross-border technology transfer between the two countries. See his blog and website at AdvantagePartnersUSA.com