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Why Amazon Can't Manufacture a Kindle In the US
theodp writes "Ever wonder why all those job listings for Amazon subsidiary Lab126 — the internal group behind the Kindle and, by all accounts, an upcoming Android tablet — have travel requirements? Over at Forbes, Steve Denning explains why Amazon can't make a Kindle in the U.S., and why that really does matter. 'The idea that there is a lot of outsourcing going on is hardly news', writes Denning. 'The idea that it is irreversible and destructive of the economy's ability to grow is less well known. Even so, it's not exactly new news: the HBR article that I cite is two years old. What is really new news is that (1) these fairly obvious truths haven't yet dawned on economists at the Federal Reserve Bank of San Francisco, CEOs, accountants, politicians, among others and (2) the way to manage in a radically different way to deal with these issues is now more fully articulated than it has been before.' Denning concludes his trilogy-of-management-terror by noting that the decline is also occurring in software."
Cos they are cheap
Sure, places like Taiwan are better at manufacturing electronic components than the US is. The US is better at building airplanes than Taiwan is. So, we trade -- the US builds airplanes while Taiwan manufactures electronic components. As a result, we get less expensive electronics and less expensive airplanes. That's a good thing which makes everybody better off.
Thank you for being a friend
Traveled down the road and back again
Your heart is true, you're a pal and a cosmonaut.
That's confidant, not cosmonaut.
Not that I can see any connection with this story, either way.
The Tao of math: The numbers you can count are not the real numbers.
...it dawned upon them a very long time ago. But at the end of the day they'll get a bigger paycheck if they outsource something to lower the costs. Let's be honest, there's always someone somewhere on this planet who does it cheaper...and now guess what Capitalism is about.
Someone needs to tell the author that Dell are still in business and still making lots of money. Maybe those economists aren't so crazy after all.
Much more destructive than the recent outsourcing to China and India has been the much bigger outsourcing to a place called Technologyville.
Outsourcing to Technologoville has been going on for close to 300 years now and has destroyed countless jobs, not to other poor people, but to machines. Clearly, CEOs, accountants and other must see the job-destroying evilness that is technology and stop all "outsourcing" to Technologyville immediately.
Value addition, cheaper goods accessible to more people and an increase in living standards are no reasons to continue this brain dead policy.
In the USA, people don't want to do things that are hard. They want the quick buck without having to understand the underlying technology. How many USA people really understands the physics behind flat panel displays or rechargeable batteries? Almost none.
Academics are much more valued in Asia, so that's where people actually UNDERSTAND what's needed to make the core components of a Kindle or whatever. USAians with business degrees and even with software degrees don't understand the things they would need to understand. So it's only natural that the expertise and production moves over there.
In 1960s it was the opposite: US culture valued science and math, and the USA led the world in those fields. Since then, USA rests on its past while Asia adopted the science/math mindset, and it is kicking USA ass. USA is a has-been nation now and is being drained of all the value it built for itself as wealth and expertise leaves the country.
You can't change this unless you fix the US *culture* that values ignorance and the superficial and the appearance of things over the depth of things.
All of the above, except maybe the economist, are concerned with their bottom line OR whose lining their pocket. They wont bring their business back to the US without big incentives. At the moment, other countries provide greener pastures
I like the comonaut version better. It aligns better with the Marxist message that was an inherent part of the show.
Wearing pants should always be optional.
Over seas they still have the company store where part of the works pay go to having to pay to live at the factory and also where they don't need to spend on safety.
China factory's are like the factory's of the past in the USA.
As for software india code is a big mess.
All the expertise cited in the article IS here. It is just relegated to small specialty shops that cater to small runs.
When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
Dell told its 905 workers there that the factory will be closed by January in a cost-cutting move that will send more of the company's manufacturing overseas.... Analysts said they expect Dell will transfer much of the work now done in North Carolina to lower-cost contract manufacturers in Asia, who already make PCs for Dell's rivals.
Here is a suggestion you could make to your local politician:
Companies selling products in the US or Europe must be obliged by law to ensure that some minimal labor standards are maintained in the whole production chain, including all subcontractors suppliers. If minimum industrial safety and labor protection requirements are violated the management of the company selling to the end-consumer must be held accountable for it and should definitely face prison terms in serious cases.
Such laws would in the long term help people in countries like India, China, and certain regions of Africa (cocoa plantations, mining, ...), where workers are sometimes held and de facto treated like slaves. In case of cocoa plantations, for instance, there is a market of child slaves in certain region in the world. One child costs around $200. That's why chocolate is pretty cheap all around the world. (I am not making this up! This is well-documented.)
Anyway, with such laws in place and being enforced, it would become more viable to produce in the US and Europe again. Of course, some products, especially clothes and chocolate, would also become much more expensive.
Software is another matter. I don't believe Indian programmers are treated significantly worse in terms of working conditions than elsewhere, and salaries are relative, of course.
I can't believe the stupidity I'm ready on here, well maybe I can this is after all SlashDot. Outsourcing = why the US no longer has jobs. Plain and simple. While you celebrate your cheap gadgets your exploiting someone in another country with practically slave labor. I've seen it first hand, I need no citation because you'll never find one since the lie needs to be perpetuated. Outsourcing has been good for a few (rich) Americans, not the working class. It's a joke when you see any politician going on and on why there is no work here and NOT one will ever mention outsourcing as a problem. GE is about to ship a whole division over to China, the CEO is the jobs czar, how ridiculous.
The Yuan is not floated like many countries currencies are. This gives China a significant competitive advantage over all countries to produce goods and services in their country. China take the long view. They know that his will weaken manufacturing in several countries and drive demand to their economy where labour laws and conditions are under their control. Incrementally they will capture those markets.
The irony in all this is that China is still a communist country using capitalism to destabilise democracy.
My ism, it's full of beliefs.
Kindles, and Nooks, and iPhones, iPods, iPads, MacBooks, and MacBook Airs, Lenovo ThinkPads, etc., etc., etc.
The summer before college (1978) I worked for an audio electronics manufacturer. I'd guess that most of the assembly line workers made little more than minimum wage.
I suspect that today, even if they wanted to, most companies here in the U.S. couldn't find enough workers willing to do that work for minimum wage, and even if they could, Foxconn, at let's say $1 an hour, is 1/10th the cost.
Now Foxconn is going to automate, presumably to further reduce their labor costs. Which then begs the question: Why can't Apple and Amazon build those same automated factories here? Then at least the 100 jobs to run the automated factory would be here, rather than in Taiwan or Shanghai.
But the answer is probably that even with automation, the cost of salary and benefits, including health care for those 100 people here would still dwarf the costs of doing in offshore.
Accountants need to get beyond the mental prison of cost accounting ...
Anyone who has spent anytime in engineering knows, there's a huge amount of pressure to reduce costs. As a matter of fact, a sure way to get a promotion, raise, and maybe a bonus (or just keep your job) is to find a way to reduce the cost of the product, it's materials, or how it's manufactured: thinner parts, use plastic, or add more automation - respectively.
That's why you find plastic where it shouldn't be - like in automobile transmissions *grumble* and why shit doesn't last as long as it used to.
It's all about reducing costs to improve the bottom line. And with billions of people on this Earth, one of the easiest costs to reduce is labor.
If in 81% of the US economy the money stays in the US, that's great, even though the rest goes overseas. Unless... there aren't enough exports within that 81% to match the 19% of cash going overseas, in which case, the amount of money in the US decreases. So. My question is, can the US just print more money until everyone is sick of selling things in the US for monopoly money and they invert their economies and no longer sell to the US? Because then there will be no outsourcing from the ensuing market crash, since it will no longer be cheaper to outsource anymore, and the process will reverse. You can see the pie chart in TFA more clearly here http://globaleconomyfinancialmarkets.blogspot.com/2011/08/when-you-buy-made-in-china-most-of-your.html.
Having read the article (all 3 parts), to sum up - "learn SCRUM project management, oh, and hey, buy my latest book on 'radical' project management!".
*Yawn*
it's troll which has been showing up in a couple of articles over the last day or so, ignore it and mod it into oblivion.
These comments are my personal opinions and do not necessarily reflect the opinions of the other voices in my head.
It's older than that. I remember seeing it a year or so ago.
The highly polished injection-molded case is made in China because the US supplier base eroded as the manufacture of toys, consumer electronics and computers migrated to China.
Considering I've worked on advanced injection molding machines IN the US this is such pure bullhockey.
The controller board is made in China because US companies long ago transferred manufacture of printed circuit boards to Asia.
Another BS line, again I've worked with an assembly line making PCB's and finished boards, right here in the midwest.
The Lithium polymer battery is made in China because battery development and manufacturing migrated to China along with the development and manufacture of consumer electronics and notebook computers.
The worlds largest lithium-ion battery facility is just being finished outside Dearborn, Michigan right now.
This whole article reads like some rant by a coastie who has no idea that we still make things here in the midwest, and if the MBA's would stop deciding to chase short term profits at the cost of long term brand erosion and control we would be happy to keep doing it. Over the next decade increased fuel costs paired with a decoupling of the Chineese Yuan from the dollar will lead many companies to pull manufacturing back to the US.
There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
News: noun 1. a report of a recent event; intelligence; information
2. the presentation of a report on recent or new events in a newspaper or other periodical or on radio or television.
News is by definition new. If it isn't new, then it's just information.
One of our competitors trademarked the term "hypothesis". From now on, we will call them "boneheaded ideas".
While he does have some interesting things to say, the article reads like a sales pitch for some business strategy called "Radical Management" -- i.e. the author is trying to sell his book. Unfortunately he never explains what "Radical Management" is or how it will change the status quo.
Because that effect has not been proven? Many, many very informed groups of leaders, business people, and scientists ( economists ) disagree with this forgone conclusion.
There seems to be a lot of that going on on slashdot lately.
Perhaps you should outsource your grammar.
Evan Davis of the BBC made an interesting series recently on manufacturing in the UK (http://www.bbc.co.uk/programmes/b0125v5h). He's been one of the few people in the UK consistently to point out that the VALUE of manufacturing to the enconomy continues to increase even as the number of JOBS continues to decrease, so it's not all doom and gloom.
People are still making stuff, it's just that the stuff they make is increasingly complicated and valuable. In that respect, it's fine if assembly and easily-replicated technology go overseas. In some respects, it doesn't actually matter if high technology manufacturing processes go overseas - if they're economically important then they'll be taken by espionage if not by way of commerce so you might as well make some money on the deal.
The real problems are that (a) you end up without any jobs at home that underskilled workers can reasonably undertake causing social cohesion to break down and (b) you lose the critical mass of both talent and investment that comes from having a nexus of inter-related manufacturing skills nearby.
Exactly the same economics as China. The difference is the workers run on electricity or fossil fuels etc.
Of course on top of that is a what, 30%, 40% handicap on the flesh and blood worker in the form of income tax etc. Just for working.
Machines perform work, should they not be taxed in terms of the amount of energy they consume as a proxy for the amount of work they do? After all, humans are taxed in that manner.
Deleted
And they now plan to start selling them at best buy now.
First, through most of the history of the People's Republic of China, their currency was pegged to the US dollar.
Second, while this practice ended in 2005 when the PRC both switched to pegging their currency to a basket of international currencies and allowing it to float within a narrow spectrum, it's not really fair to say that the RMB is a floating currency. Such a policy of managing the float of a currency is something entirely different from the way that most major western currencies completely float on international exchanges.
In all honestly, it's fair if we all get paid for what we do not what country we happen to be born in - some get the almighty dollar, others monopoly money simply because they live in a poor country.
Are you aware of the Balassa-Samuelson model? A country whose economy consists largely of goods and services that must be consumed locally, such as perishable food or beauty services, will have an undervalued currency. But as the economy becomes more efficient at producing goods for export, its currency will become stronger. So if a company outsources production to a given country due to a currency undervaluation advantage, then over time, there will be less and less of this advantage of keeping production there.
tl;dr: Experience in production of goods for export diminishes undervaluation of a country's currency.
"Rechargeable batter" - sounds delicious. "Sets of a chain reaction" - is it one or a set?
Why does this article pre-suppose that multi-national corporations have any loyalty whatsoever to any country? Perhaps Dell screwed up by ceding it's manufacturing capability to it's main contractor (Asus) and then losing control, but that has nothing to do with America vs. China. Patriotism and Capitalism are inherently at odds.
Not to mention the insidious trend of outsourcing the process of deciding when and where to use apostrophes.
Don't disappoint your bird dog. Go to the range.
The article ignores environmental issues that cost manufactures nothing but grief. I am not saying ALL environmental laws are bad, and industry has done lots of things in the past to hurt itself, but the effect is to act as a disincentive to produce things that will cost much more in the US (or western Europe) than overseas. By adding so much environmental regulation onto the back of industry, they just say "Screw it, move it to another country". Let them worry about the environmental impact. If the US and Europe want to get these jobs back, then the price of the products will have to get artificially inflated via tax or import duties to overcome these burdens.
Conservative, mod down for violating
The scary part is not that Amazon can't make a Kindle in the US. Whether they do or don't, a moderate slice of the revenue from the kindle made in China will end up in the US, as profits.
The scary part is when Chinese owned and operated companies start selling chindles in the US, designed, built in china.
All the value stays in China, with a tiny amount of revenue going to the sales and distribution network for them in the US.
When this starts to happen in a big way, over a large fraction of consumer goods, the balance of trade gets much, much sicker than it is at the moment.
Shortly after this, the USA (and indeed the west) in general has to devalue their currency in order to pay for imports, and the effective price of basic commodities rises.
The US/UK/... is at the moment living off the investments of the past.
For the past 70 years or so we've been shooting ahead in productivity compared to the rest of the world, as we have benefited from the enormous infrastructural investments of the past. From roads, to freight networks which ensure that most of the food gets from the farm to the plate.
A lot of the rest of the world is doing _massive_ construction in what were quite undeveloped regions. This sets the scene for greatly improved productivity, and the rise of a local middle class.
This then bootstraps into greatly improved wages, as the working class pay and conditions improve. Shortly meaning that in combination with revenues to the US dropping due to Chinese owned brands taking off, costs rise, due to increased wages in china driving demand for commodities from oil to grain.
Eventually, it all evens out when wages are more or less equal, and countries can specialise in random areas, and export to other countries that happen to want their stuff.
But the process to get to that point is going to be horribly painful for the US.
(US = any country in the west, China = any of the emerging economies)
Newsflash: USA has under 10% unemployment, and statistically, about 20% of humans are bad employees. These three articles are all basically saying that Asians are competitive. The same kinds of articles were circulating in the 1980s as Japan made better and better automobiles.
When the Red Sox improve, it doesn't mean the Yankees are getting worse. USA got used to under 10% unemployment (everybody with a glove making the team), but now Asia is catching up, just as Japan caught up with us in auto manufacturing. Isn't it possible that stronger competition will make us a better team even if we lose more often?
Keeping Asus from making Kindles, or Japan from making cars, or Africa from growing cotton, isn't the solution. The rest of the world doesn't have to do badly for USA to do well.
Gently reply
You also have to remember, now that China has cut exports of important Rare Earth Elements, any components that require these elements will have to be manufactured in China. It is taking a while for the markets to understand this, let alone the general public. More jobs will be going to China. (http://www.raremetalblog.com/2011/07/breaking-news-hitachi-succumbs-to-china-ree-power.html) . They have always wanted to crush Tiawan... they are about to do it without firing a shot.
The arguments that retooling is hard, just doesn't make it. Planned retooling is now designed into the manufacturing process. The U.S. helped develop the the Japanese manufacturing base by ignoring Demming. The Japanese were known for poor quality, so even with their lower labor rates. The Japanese improve their quality by following Demming and eventually overtook U.S. manufacturing and steel production. The remaining U.S. industries learned to focus on statistically analysis integrated quality control, and designed retooling became part of the process. So what drives the decision to outsource: 1) lower environmental standards, 2) lower overall employee costs, 3) tax benefits, 4) economic stability.
I think the underlying article hits the problem straight on. These economic factors are enticing from a cost accounting perspective, but not from a competitive one. Eventually, the knowledge is transferred to the low cost producers and they no longer need the costly U.S. managers to drive the business. We see that now with the rise of Haier and Chinese manufacturers who are beginning to dominate the lower end market. Eventually, they will displace the high margin businesses.
The U.S. main advantage in the past has been easy access to capital via efficient markets. With the current crisis and the idiotic standoff over debt, these markets may give rise to competing capital markets in SE Asia. The Chinese are flush with cash and it won't be long before they start to bypass the Western capital markets.
So what do we do? First, stop letting corporations drive the political agenda, because their short term focus is killing our industry. If we changed our focus to research that will enable lower cost production even with high labor rates, we can pull back manufacturing. This will have to be done at a grass roots level, because Wall Street will not invest in this kind of retooling when they can invest in companies that outsource. This means that we need to stop electing corrupt corporate lackies and uneducated religious nutcases, and change the rules so we encourage companies to invest here. Here a though, remove ALL corporate loopholes, and offer tax incentives only to those companies that in-source production and service jobs. Offer tax breaks to companies who invest in basic research programs that will innovate product and keep the technology here. This incentive can extend to University research which is most corporate funded anyway.
If you believe our problems stem from big government and the fear of socialism, then you are an idiot. Socialism is beating the f..king pants off of us right now, so that can't be the main issue. We as citizens must drive the political agenda and encourage Wall Street to invest in companies who develop our local economies. Otherwise, start learning Chinese because they are destined to be your overlords.
It isn't Unions, socialism, or big government that is killing us. It is the short term thinking of Wall Street. Once Wall Street was temporarily taken out of the picture at GM where they perpetuated a management culture that was adverse to change, the company was able to shed its high cost assets and return to profitability. In essence, it took government action to force the correct change in direction.
Please, name these companies. I have little choice when I hit the box stores other than to buy made in china crap. If I could nearly as easily purchase over the internet a product made in the US I would do so. If we are manufacturing so much in the US, where is it sold? Is it like the Georgia Chopsticks company that sells Made in the USA chopsticks to China? I used to live in a place that the major employers were paper mills, apparel factories and agriculture. Now the major employers are the state, hospitals and federal government. Yes, this place is on the coast and most of the problems with these now dead companies can be tied to crazy unions and overseas competition. But I would rather spend 10% more on a product if it meant that someone in the US would have a job (other than making chopsticks and toilet paper for the newly-created Chinese middle class).
Look on Slashdot, any time an economics article comes up, there'll be people who post, and often get moderated up, who declare that the "US doesn't make anything anymore except imaginary property." That is of course not just false, it is exceedingly false. Until this year, the US made more manufactured goods than any other nation. China now makes slightly more than the US, but the US still makes more than anyone else (by a reasonable margin).
There's no question that there is a large amount of outsourcing going on, but this make-believe that the US doesn't make anything, particularly anything high tech, is beyond stupid.
My favourite example is always processors. Intel has fabs in a few other countries but most of their fabs (7 of 10) are in the US. All their 32nm stuff is in the US and nealry all their 45nm stuff. So if you buy a modern Intel CPU, it was fabbed in the US. It was tested and packaged somewhere else most likely (though they now have a US packaging site for things sold in the US mostly) but the high tech work, the fabrication, was done in the US.
You guys are forgetting one very important fact: we have Elon Musk!
The cost cutting Messiah of SpaceX (if you can just overlook the flop of Tesla Motors).
He of savior against the yellow peril. Our salvation is nothing but assured.
Why no one in the U.S.A. can afford a kindle.
The US used to be better at manufacturing electronic components then the US. This is no longer the case.
How long do you think it will be before the US is no longer top dog in making planes? Tell me... which is the biggest passenger plane in the world? Airbus came out of nothing and is build with EXPENSIVE european workers and the US can barely compete. How do you think it will fair against Chinese build aircraft in 2 or 3 decades?
This discussion is nothing new, a few days ago I asked people to name a US consumer electronics firm. People named Motorola (been selling off its divisions since the 70's to asia) and Apple (a design company that has everything build in Asia).
There is the dream in the US that you can outsource all the drudge work and keep marketing, sales and design... and run the economy on that. 300 million people, all selling, marketing and a handful of designers...
If you can't see just how silly this concept is, well, then there is no hope for you. Vote tea party and pray the end comes swift.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
"Apparently splitting the teams geographically forced more conversations among the team about what the client really wanted. Being forced to explain to the developers in India each day what the client wanted helped everyone get clearer and so the teams as a whole tend to become more productive."
How much more productive would they be if they were all in the same building, forcing less conversations via phone in different timezones, when they could have been writing software instead. If you need confirmation on clients needs going down the hall for 5 mins wastes a whole lot less time putting together the whole team for a phone call, calling india and a 5 mins talk turns into 30.
"Slave-labor" wages are really a matter of perspective, based on your personal standard of living. The people filling these jobs, particularly in China, are from rural areas, who take them because they are a substantial increase in pay for their family from what they as farmers were making toiling over fields. As hard as the manufacturing work seems to us in America who comparatively have it pretty easy, isn't sitting in a chair putting electronics together somewhat less back-breaking work than bending over harvesting crops all day?
If you stumble through the wal-marts and targets - sorry, you won't find many American made goods if any. That's because these box stores, the Dollar Generals, the Home Depots, are all about making as much profit as absolutely possible, without regard to the communities that support them.
Most of my tools are now US made. It took a little looking at first, but it's really not that difficult. There's even a website to help: http://google.com/
Many (not quite most) of my clothes are American made. Yes I pay a little more, but then I should. Shoes shouldn't cost $19. Your savings come at the expense of slave-wage labor. Your savings are another's exploitation.
There are so many sites specifically devoted to buying US made goods. Have a look and put your money where your mouth is.
Because that effect has not been proven? Many, many very informed groups of leaders, business people, and scientists ( economists ) disagree with this forgone conclusion.
There seems to be a lot of that going on on slashdot lately.
RTFAs, and mentally graph the growth of outsourcing and the economic trajectory of the USA over the same time period.
quite possible, but I've only noticed it popping up over the last few days.
These comments are my personal opinions and do not necessarily reflect the opinions of the other voices in my head.
Americans still make good products as some have indicated already. Unfortunately in a competitive landscape, other countries also have game.
The American automotive industries were this close to fail entirely (and may yet do so). The Japanese (and now apparently the Koreans) are doing it just slightly better.
Despite many solid aspects, there are significant problems with the American system.
What this article has endorsed (i.e. government intervention) is exactly what has caused the problem. Nowhere in Part One of the article did I see any mention of actual economics, just a bunch of OMG THEIR TAKING R BUSINES. Ask yourself, what makes it cheaper to manufacture overseas? Could it be corporate taxation? Regulation? Expense of Social Security and unemployment insurance? Yadda Yadda Yadda? Anyone listening?
True Story: Bea Arthur gave me a golden shower once.
Dude 1: "I lost my job to someone named B. B. Rodriguez."
Dude 2: "Those bastards!! They're destroying the economy with their outsourcing! Jobs jobs jobs! Jobs!"
Dude 3: "I lost my job to Bender the Robot."
Dude 2: "Well, that's the price of progress, and ultimately, technology is the one and only thing that ever really lifts the economy. At least you didn't end up like Dude 1."
As copyright owner of this comment, I authorize everyone to defeat any technological measure which limits access to it.
I'm a small business in web development and am highly sensitive to costs. I work by myself in my home office. I do need tasks done - graphics, copywriting, and technical analysis. I can't do those myself and so I need to hire people to do that for me. I used to use a labor outsourcing website where jobs can be bid on and I can approve the bidders.
When using that site I submitted between 1 and 4 jobs per week. The people hired for these jobs were rarely from the U.S., and varied from Russia, China, India, the Philippines, Saudi Arabia, and Mexico. The work didn't always get done perfectly for which I blame myself. I learned how to manage a remote workforce and ensure that I put in testing criteria for the product beforehand.
I don't use those outsourcing websites anymore because I kept coming back to the same people that wanted the work. I got their contact info, and can send them a email with "Same thing, same way, new item, same price?". Much quicker than going through the website.
I do work in the U.S. (Pennsylvania) and theoretically could hire at least 3 people to work with me (I really need a fulltime graphic designer). I wouldn't consider doing it though.
First I would need to hire an Human Resources manager to handle all the government paperwork, then probably a lawyer because there are invariably workplace disputes. That is two non-productive (moneymaking) personnel just to set up a business. Then I need to worry about employees. If an employee gets "stressed" they can claim FMLA and get a free paid vacation. If an employee gets pregnant, same thing. If an employee wants to join a national labor union (yes, I've had this happen) I can't do anything to interfere and I have to be careful about handling that person.
I don't have these problems with overseas workers. They work, and they work well. I've spoken to them (yes some of them have strong accents) and they are happy and eager to do business. I've heard the stories about abuses but haven't seen anything to cite specifics. Sure there are past cases from years ago that have been corrected, but to be fair the U.S. has had its share of its own labor abuses in the past.
Now I hear that there is a political figure that wants to penalize business for doing business overseas and move the tax-rate higher. Good luck with that. I am currently a Delaware LLC, but it isn't that expensive (about $5000/yr from what I can find) to become a foreign-owned corporation (Kingstown, in St Vincent is particularly attractive). I would then change myself from listed president to the single paid employee (yes you can tax that $25000), and keep all assets and profits overseas (no, you can't tax what I haven't taken). Yes, this is legal.
America is uncompetitive. We have labor unions that has run manufacturing into bankruptcy (US Steel, textiles, GM, Boeing). Americans are too poorly trained, greedy (once they are competent they want pay raises or leave for other jobs), and arrogant (one employee wanted a room to smoke marijuana in for an hour each day because he had a legal "prescription" for it (stress-related)). Labor in the U.S. has become a nightmare for business owners and a running joke for international observers. This is even written up in current business books about U.S. labor.
It is not just me that is doing this. I'm not the only one using these job outsourcing web sites. I'm seeing signs that there are a lot of companies that are submitting dozens of jobs at a time, or complex jobs that require teams of developers and thousands of man-hours.
When the U.S. become more competitive things will improve. Pretty speeches won't do it.
... How do you expect anything to change? As someone in software, I moved into doing classified work since that cannot be exported - at least at the moment, but the cuts are looming. I wish there was a country where innovation, hard-work, and ability would allow someone to excel, but the bean-counters have destroyed the last bastion of freedom on this Earth - the US, and conveniently killed any hope of getting off this rock. And Socialism doesn't work so we are doomed to live in squalor - it's just going to take a while for people to look around and say, "Hey, things used to be a lot better before Nanny State tried to make life - better..."
The last hope that I see is the Seasteading.Project - but that will be a while, too little too late..
http://news.yahoo.com/blogs/lookout/silicon-valley-billionaire-funding-creation-artificial-libertarian-islands-140840896.html
Companies have cost-cut themselves into oblivion. They've outsourced themselves out of business. That demonstrates the folly of their business model. Look at the results. If your course of action results in your undoing, it is clearly wrong. And yet, they march like lemmings to the sea.
The worst part is by the time enough people realize what we've lost and why, it may be to late.
Wansu, th' chinese sailor
It would seem there is a simple, obvious solution to these 'unavailable' components - import them while you work on being able to build them locally. Your profit margin will take a brief hit, and then continue to rise faster with the company taking in ALL profit instead of just the profit from assembly onward.
The flex circuit connectors are made in China because the US supplier base migrated to Asia.
Just import the damned things. I'm sure shipping on a few thousand flex-connectors is less than one of the products' costs.
The electrophoretic display is made in Taiwan because the expertise developed from producting flat-panel LCDs migrated to Asia with semiconductor manufacturing.
Import them, or seek out a domestic manufacturer that can do it for you. There are certainly manufacturers in the US which can make electrophoretic displays, but their costs would be inevitably higher until they geared up for mass production.
The highly polished injection-molded case is made in China because the US supplier base eroded as the manufacture of toys, consumer electronics and computers migrated to China.
Give me a break. There's a plastic parts manufacturer down the street from me, and a few in the next town over. If you really wanted to, you could make these in the US no problem.
The wireless card is made in South Korea because that country became a center for making mobile phone components and handsets.
Well, this is probably one of the easiest ones to come by in the US. There are several circuit board manufacturers that can easily make you a WiFi card, and again once mass production kicks in the prices will come down and the quality will be streets ahead from the beginning.
The controller board is made in China because US companies long ago transferred manufacture of printed circuit boards to Asia.
Ok, that one's true. I don't think a decent semiconductor has been manufactured in the US in at least a decade.
The Lithium polymer battery is made in China because battery development and manufacturing migrated to China along with the development and manufacture of consumer electronics and notebook computers.
Waaah. Call the wahmbulance. Most battery technology, large and small, is owned and patented by the US oil companies to prevent competition from electric vehicles. If they wanted to, it would take maybe a week to begin domestic production.
It's all bitching and complaining. Just make it yourself, or realize you will have a shitty mass-produced plastic piece of Chinese shit.
If the only way you can accept an assertion is by faith, then you are conceding that it can't be taken on its own merits
Come on, they could make it here if they wanted to. BMW makes cars/SUV's in South Carolina. Boeing makes jumbo jets in Washington state. I'm sure if Amazon shopped around they could find someone the US that could make it and import the parts that could not be manufactured here.
It might be more expensive, yes. but it could be made here.
The A380 has sold for shit because there just aren't many routes where carriers have a use for a plane that big. You have to have a lot of passengers that want to go on one flight to make it a worthwhile purchase. Thus currently they have had a total of 236 orders and delivered 56 jets, and the ordering seems to have dropped to near nothing (they've had 2 this year).
Now compare that to the Boeing 747, which has a total of over 1,400 delivered, and 114 orders for their new variant, the 747-8, which is still in final testing, and another hundred orders for older variants.
Or how about the Boeing 787, their next generation mid body plane? Expensive little thing, because of all the carbon fibre, and has had more than a few delays in delivery (if it gets certified it'll start shipping fourth quarter of this year). Yet despite that they still have 827 orders for the thing.
Seems like Boeing is doing just fine when it comes to aircraft, in particular making aircraft companies actually want. Remember that having the biggest doesn't mean anything. Who cares if you can make a big jet? Biggest for its own sake isn't useful. The A380 has been a pretty big boondoggle. The R&D cost was about 11 billion euro. They are still in the red on it, and will be for quite some time, perhaps until 2020. They made a jet that cost a lot to design and there isn't a big market for.
Remember the A380 started in 1991. 2 years later, Boeing discontinued a similar project because they felt the demand wasn't there.
I remember when this place used to be news for nerds, and now all I seem to see are people posting in science research articles to whine about tax money, and then pop over to stories like this to explain why slave wages are good, and how evil unions are.
That's hot.
Maybe we have the Wild Wasteland trait activated.
The US is better at building airplanes than Taiwan is
I was just last week talking with a manager at a big US aerospace company. He said that they much prefer government business than commercial, because a commercial project will bring $20 million in profits while a government project of the same size could bring a billion.
As long as the US has a strong military sector to subsidize the aerospace industry they can compete, but how long will that last?
1. Profit - Enterprises are eager to get lower cost to increase their margins.
2. Globalization - Companies and politicians work together to break trade barriers and allow imports/exports more freely to create more revenue and profit.
3. Consumer - Always wants a better price. If you manufacture everything in U.S., I'll bet iPhone/iPad needs > 50% price up.
As a Foxconn (who manufactures for Dell/Apple/HP...) employee, what I can share is that our business model is to make the money from the least wanted portion of the supply chain. As long as we maintain our volume huge enough with least profits, we can survive for a very long long time. We never make easy money but always the toughest.
If Americans can work more than 12 hours every day, 5 or 6 days a week with no overtime pay, less than 20k/yr (most production line workers make less than 10k/yr). You can manufacture anything.
Thinking positively. After China and India become rich, at the end, maybe Africa will get rich too. The greedy of managers eventually saves children lives in Africa.
f@ck you USians.. The western world seems to have this sense of entitlement that these jobs and industries belong to them but given these 'multinationals' sell and opeate across the globe you have no extra right to those jobs than an Indian or my fellow Chinese do.. So crib all you can but we will rightfully take what's ours, it's no longer yours by default...
The last time I was at an electronics plant in China, most of the operation was automated with robotics. There was some "final assembly" work being done by real people and of course shipping and receiving was staffed with people. So, moving manufacturing to the US should not add major costs to the product. Yes, those wages will be hire, but then that difference is spread over 80 units per hour, so the incremental cost is lower.
No, it's easy to blame cheap off shore labor for the problem. In reality it is plain old on-shore greed that wants to take the $2/machine incremental labor cost but claims it will increase the selling price by $60.
Ford had the same issue with the Pinto in the 70s. It would have cost $2 per car to fix the problem. They looked at it as an increase in selling price of $100 which would make it non-competitive with the Vega. They could have fixed the cars for the cost and saved millions in lawsuits, but chose to maximize their profits. What Apple and most other electronics manufacturers are doing is no different. It's just that their products don't explode if hit from the rear.
The goal of business is to maximize profits. Unfortunately the way that is translated into our economy results in high unemployment.
We can model pegged currency by assuming the US and China both use RMB, just in different denominations: 1 dollar is worth 6.4 yuan. As growth of export manufacturing expands, demand for export manufacturing labor will increase, which pushes wages up. Wages for non-export sectors will likewise increase to try to keep workers from defecting to export manufacturing. Wouldn't this lead to inflation of RMB within China?
Besides, RMB was unpegged from US currency back in 2005.
because you clearly haven't looked
http://www.dailykos.com/story/2010/12/08/926903/-American-MadeWhere-to-find-it-(UPDATED-Dec-11,-2010)?detail=hide&via=blog_674989
Hell, I remember seeing it on NBC in the late '80s!
:q!
I make less than 50k a year. Don't preach to me about living on a budget. I know first hand.
I also learned how stupid it was to pay inflated prices for slightly less expensive and moderately more junky chinese tools. That has nothing to do with the idea of spending a little more to ensure that we continue to have some semblance of a middle class in this country.
Buy your cheap Harbor Frieght ratches, air tools, welders and see how long they last before making the inevitable trip to the chinese tool graveyard - the county landfill. Which I might add, is another reason to spend just a little more to avoid contributing to that particular problem.
They've sent so many jobs overseas, been so stingy paying their remaining workers a decent wage, and so focused only on results in the next quarter to get their bonuses, that they have forgotten the big picture. It's finally dawning on them that if they keep following these practices they won't have anybody left to manage except employees at McDonalds and Wal-Mart. It's finally their jobs that are ultimately being jeopardized as well. Welcome to the club, ya morons. Now get off your asses and start changing things for the better for everybody, instead of only yourselves.
Why should it matter whether Amazon could manufacture a Kindle in the US? Is there any rule that says that every country MUST specialize in everything (which means that the country will specialize in nothing?). New York also specializes in financial services, Houston in the energy business, the SF Bay in high-tech companies, etc. Is it a such cause of concern? Why is it that everyone is very concerned about that when it comes to countries? Specialization is good, this is what makes us all more wealthy.
If you study economic history, you'll see the same progression everywhere. First, people are virtually all employed in agriculture. Productivity in that sector is low and output barely sufficient to feed everyone. Then, an industrial sector arises and expands. Productivity keeps on rising in the agricultural sector and fewer and fewer people are needed. Doomsday prophets tell us that it's horrible, it will forever change the country, etc., but we just keep ignoring them. At one point employment in manufacturing also peaks (there is only so much stuff you can buy and we keep getting better and better at producing things economically); services become more and more important. This is happening everywhere in the world. In fact, even if you consider the earth as a whole, the share of services in world GDP also keeps on rising. And, no, this is not due to trade with other planets.
The premise of the article is also wrong. There is nothing irreversible about this trend. If the US were to unilaterally erect trade barriers, it would once again be profitable to make whatever the author thinks should be made in the US. It's not as if the Chinese and Taiwanese all have some sort of secret technology that no US person could ever replicate or approximate. Especially since in many cases it is US companies that provide the specs and designs that are made in those foreign factories. It would of course be very wasteful, but it'd be possible.
The journal article on which the column is based is also bizarre. First, it's already a bad sign when you talk about "competitiveness". See for instance Krugman's article "The Myth of competitiveness" (http://www.pkarchive.org/trade/MythCompetitiveness.html). Second, weekly wages are not a good metric. Total compensation (including benefits) is what really matters. Third, please provide figures and be precise. It just won't do to say that the US "has lost or is in the process of losing the knowledge, skilled people", etc. that it needs. This makes it an unfalsifiable statement as it is much too vague. It also seems strange to argue that the US is losing the knowledge it needs when people from all over the world come to the US to study in order to acquire this knowledge. Fourth, it almost seems to border on xenophobia at times. Why should it matter if something is designed in Tokyo or Chicago? Do American designers have a higher worth, matter more than Japanese or Korean designers?
How long do you think it will be before the US is no longer top dog in making planes?
It will be quite a while (if ever) before the US does not have world class aircraft manufacturing. There is of course no guarantee that the US will maintain dominance in this industry but it isn't going to go away quickly.
Tell me... which is the biggest passenger plane in the world? Airbus came out of nothing and is build with EXPENSIVE european workers and the US can barely compete.
Airbus has been around since 1970 and was form out of a consortium of existing aerospace manufacturers - hardly out of nothing. I'm pretty sure that the folks at Boeing would be very surprised to hear they they cannot compete with Airbus. The 747 is built with expensive US labor and Boeing is still selling plenty of those. Both companies have delivered similar numbers of planes for the past 20 years and there is no reason to believe that will change soon. The fact that the A380 is larger means very little by itself.
There is the dream in the US that you can outsource all the drudge work and keep marketing, sales and design... and run the economy on that. 300 million people, all selling, marketing and a handful of designers...
The US has a $3.7 TRILLION manufacturing sector. That is larger than the GDP of all but about 5 countries in the world. Even China does not manufacture anywhere near as much stuff as the US does. The notion that the US has exported all its manufacturing is simply not supported by the facts. There are (and always have been) some industries that are dominated by firms in other parts of the world. That does not however translate to the US outsourcing all its manufacturing expertise.
I agree with you, but it's more complicated than that:
1) retirees who do not want to devalue their dollar (prefer small government, strong dollar, and are against anything that would disturb the stock market short term)
2) corporations who manipulate the market to increase cost to entry (patents, trademarks, FUD, etc)
3) government that prefers large companies over small businesses
4) weak consumer protections, weak warranties that give incentive to produce inferior products (like washers with plastic parts that brake after few years)
5) high cost of living, low worker mobility due to healthcare rules and inability to sell property to relocate
6) wars and war machine complex (who is going to put the jack back in the box?)
With the rising cost of energy, shipping stuff and people around the world soon won't be cheap enough to make outsourcing profitable. It'll last for a while for small, high value items like electronics but it's going to change soon for bulk materials like steel. Localization and (re-)insourcing will be the new buzzwords in a decade or two.
thegodmovie.com - watch it
The problem with your idea is that it really is hard to find anything made in the USA.
No it isn't. You just aren't really looking.
My truck is a Ford, with an International engine, but the casting was moved overseas and only assembly took place here, while virtually everything electrical was made out of the country as well.
There is FAR more to a truck than just the engine. I've been in literally hundreds of automotive assembly (including Ford) and part plants (including Visteon, Dana, Delphi, Lear, Cummins, and more) in the country. The percentage of stuff in an automobile that is made in the US is really quite high. Some of the connectors for electrical stuff are made outside the US but there is more made here than you think. (Disclosure: My current company makes wire harness assemblies so I have direct first hand knowledge of that piece of the pie) I absolutely guarantee you that pretty much any truck from a US manufacturer has a very high (>50-70% usually) of parts built in the US. Most of the rest comes from Canada or Mexico.
Every part of my computer was made out of the USA.
If you own a chip made by Intel, Freescale, Cypress, IBM, Hynix, Micron, National Semiconductor, or ON Semiconductor, chances are very good it was made here in the US. The same goes for many more parts. Yes, much is made overseas but much is made in the US as well. You've taken a very superficial look at where things are made.
While we still make stuff here, it's a tiny slice of the stuff we use
The US has a $3.7 trillion manufacturing sector and only about a quarter of that is exported. By definition we use the rest of it. Your hypothesis is not supported by the facts.
You got to ask yourself which country came up with and popularize iPad and Kindle? To say we have lost the edge because we lost manufacturing is like saying a chef can't be great if they don't know how to grow / catch their own food.
Are there some benefit of daily interaction with the source(manufacturing/farmers)...yes...but that still does not prevent us from being creative in other ways. By giving up costly manufacturing in the US more money can be spend other areas of innovation. It is a trade off.
There's too much short sighted xenophobists, thinking global economy is bad for the US. In time the market will balance out (as we can see some of the outsource job are returning to the US). Just remember how well Japan did with sakoku.
Corporations in the United States benefit from a stable political system, fair court system, strong protection for IP, lenient corporate taxation, excellent communications, etc. However, federal government policy allows these same corporations that enjoy these benefits to make all of their business decisions based solely on what is in the very short-term best interests of the corporation...and that means that those decisions generally are made by using the United States as the corporate ash tray. The only beneficiaries of this are short-term investors. European government policies generally require their corporate citizens to actually be patriotic good citizens of the countries they live in. TFA points out the long-term consequences of the US policies...not only the immediate loss of jobs but much more importantly, the loss of knowledge and expertise that, once lost, can not be easily regained. As a result, we have become a country that ships raw materials and commodities overseas (grain, meat, coal, ores, logs, etc.) and then imports finished products from those same countries that we pay for with money that we borrow from them. Obviously, this cannot be sustained and the eventual result of our own government policies is our impoverishment. Even worse, at the moment we are also borrowing money to pay for very expensive wars in distant locations while other countries laugh at our foolishness.
An exception is Apple [AAPL], which “has been able to preserve a first-rate design capability in the States so far by remaining deeply involved in the selection of components, in industrial design, in software development, and in the articulation of the concept of its products and how they address users’ needs.
Huh? Apple couldn't onshore any easier than dell. Apple products are manufactured in Asia just like every other computer firm.
An exception is Apple [AAPL], Because I have Apple stock and don't want to say anything negative about the company.
FTFY, Forbes.
The US military has a fair chunk of contract work being done by US prisoners for mere pennies on the dollar. One more reason so many in the Military-Industrial complex do no want weed legalized.
What really irks me about globalisation is that many big corporations have closed down local operations - manufacturing, test, etc - in order to maximise profit, but then get upset when grey import channels are established to allow the consumer to take advantage of the cheaper manufacturing!
For example, CDWow used to buy completely legitimate CDs and DVDs from cheaper markets like Hong Kong and ship them into Europe. The official importers, controlled by the studios, complained and managed to get those channels closed down: courts-ban-cd-wows-grey-imports.
So, at the same time the jobs were lost as part of a cost-cutting measure, those newly redundant people were expected to continue to pay full price.
These companies that outsourced for cheap didn't reinvest in technologies - they just rode a wave of cheap exports. All the while, the expertise in development and manufacturing was moving offshore. They reaped enormous profits during the short term, but they didn't reinvest locally and abroad with those profits.
Successful companies opened up labs in India, Taiwan and China and actively competed for talent. The most successful companies aggregate their talent on the network and build relationships wherever the opportunities arise.
I recently worked with a big company on a new chip platform launch - the software team is in Ireland, Austin, and Israel. I work with the lab in the US, but I can quickly get bugs and questions ironed out across numerous disciplines (hardware, software, and everything in-between). It's fantastic - because they own the design and know what they're doing across the board. If they were simply rebadging imports it would likely take twice as long to hit the market.
Dell built it's first China lab in 2000, then setup a Taiwan lab in 2003. I think that they recognized the importance in integrated design teams pretty early (certainly better than HP who waited until 2005). I've gotten good support from Dell enterprise on Linux for a while now. It was pretty spotty in the beginning but now I've got no major complaints. Actually I think Dell is positioning themselves pretty well in the long term.
A gift from the down economy is that nobody expects miracle profits right now, so companies have a real choice to build up their capitol improvements and long-term outlooks should improve. Everyone knows competing for dollars is going to take a lot more work than selling PC's out of the trunk of a car.
The most successful companies of this century are going to utilize the talents where they come. They are going to reinvest those massive profits into their own product and services and support them during design, delivery and warranty. The ones that merely brand their products are going to be commoditized by their own suppliers.
I said no... but I missed and it came out yes.
As long as Wall Street dictates its ideology of shareholder value the companies will outsource, as they all look only on their pocket. Individualism at its best. To fix the problem the US has to switch from pure individualism to more collectivism. However, due to the base ideology of the US such approaches are all marked as evil named socialism or communism. Even though it is not.
Alternatively you could say: You have to switch from business studies (looking at one company) to economics (looking at the state as a whole).
So my conclusion is: The USA are not able to fix the problem.
t. In the end the penny dropped that this thing was a disaster and they sold the entire operation to an outsourcing firm.
That's good. We all know that it was a bad decision, and the market recognized that and dispatched the damaged assets. (I know, don't anthropomorphize markets, they hate that).
What's missing is a reputation system that would tag those bad decision makers as toxic.
My God, it's Full of Source!
OUTSIDE_IP=$(dig +short my.ip @outsideip.net)
The US has a $3.7 TRILLION manufacturing sector. ... The notion that the US has exported all its manufacturing is simply not supported by the facts.
This is a really good point. I think the problem is that machinery used to require human operators. Humans are expensive, and robots always do repetitive tasks better than humans anyways, so the trend has been to automate as much as possible.
The problem is that there are fewer replacement jobs for those displaced, and Wall Street just pockets their machines' "wages".
Cheap consumer shit (throw-away plastics at the Dollar Store, for example) is now made in China, but medical supplies, airplanes, automobiles (most the Japanese manufacturers have plants here, as do BMW and Mercedes), etc are made in the US. American Apparel was doing pretty well making clothes in Los Angeles, but last I heard the economy threw them some speed bumps.
I spent some time recently in an injection molding company. Never would have known they were there, if I hadn't needed some basic machining done.
The problem is that human economies are still organized under the scarcity principle, when the problem is dealing with the abundance created with modern machinery and technology.
Learn the rules so you know how to break them properly.
www.teslabox.com
Poor article. It portrays strategic risks in outsourcing as new thinking yet it was covered in depth in my business minor 10 years ago. Actually, we covered it in highschool. It also implies that companies are outsourcing out of pure greed. As ever, broad statements rarely portray complex issues accurately.
Consider what your thoughts are when a company approaches you and says that they can do what you do for 20% less. That's 20% after applying their profit margin, mind. The reaction is not "yay, more profit" but rather "oh shit". The decision is not a choice of either taking the proposal vs everything stays the same. If you don't take the proposal there is still someone out there who can do what you do for 20% less. The choice is either taking the proposal vs everything changes anyway.
The problem was an underlying one. Dell could not make the components as cheaply as the Taiwanese company could. That fact does not change if Dell continued making their own components. Best Buy would still be buying cheap components from Asustek. The only difference is Dell would be finding it even harder to compete. Outsourcing was only a bad decision only if it was actually plausable for Dell to reinvest and be competitive with Asustek. Have no doubt they considered it.
The article describes the symptom, not the cause.
Dammn what has happened to you, land of the free. You are living in chains without noticing that you really need a travel requirement to be able to leave your country? I really feel saddned by this fact...
Ever heard of Google?
http://www.imdb.com/title/tt1773722/
http://www.laborrights.org/stop-child-labor/cocoa-campaign
http://www.theglobeandmail.com/life/the-hot-button/child-labour-free-cocoa-almost-impossible-nestl-head-says/article1953439/
The last one is particularly telling... "Child labour-free cocoa ‘almost impossible,’ Nestlé head says"
Personally I believe that what we are witnessing is a global economic version of "Communicating Vessesls".
With the sudden availability of shipping of goods on a global scale and outsourcing, the natural thing happens: wealth starts pouring from the fuller rich vessel (the US) to the less full one (poorer countries). Shouting at how this is all the fault of some evil caste of managers is pointless. Humans do what humans do, and markets do what markets do.
One day the system will reach an equilibrium. China and India can't stay poor forever when so much wealth is going their way. Eventually a more educated and wealthy middle class will emerge, the country will develop and eventually transform from that empty vessel to a full one.
When that happens the opposite of what we are witnessing today will happen - when labour costs in China and India will match or almost match those in the US, US companies will not longer have an incentive to outsource and industries will re-emerge in the US. However something else will also happen then - there will be a billion new wealthy people on the other side of the world to sell products to.
The US just leaves industrial policy up the short term whims of the corporate CEOs who make up the big donor base for the politicians.
It is the height of folly to think monetary policy - Quantitative Easing, aka Printing Money - managed by the Fed, can replace a government policy to encourage jobs and consumption here.
The incentives in our society are rapidly gutting it. Welcome to the Declining Standard of Living.
Yes, that's part of it. But it comes from more than one place in culture. Is the programmer fat? Yes, that'll impact the bottom line (via private insurance), but it also has social aspects... your odds of getting hired drop as you fall out of the various social norms. Is the programmer older? Again, that'll hit the private insurance rates, but there's also a cultural issue.
When it comes to cheap, remember a corporation is bound to do what it can legally to maximize earnings. If part A or service B comes from overseas, will do the job, and costs less.... well of course they're going to choose it. In a world where cost of living varies hugely downwards from what we experience here, either we reduce our own cost of living, or erect a legal wall that prevents goods and services from leveraging that advantage, or we see our jobs and services outsourced.
We can effectively erect a legal wall if we accept that our market subsequent to that will be considerably more concentrated within our own borders. This, I think, would bring our economy much further back online, and faster, than anything else we can put on the table. Reducing our own cost of living, while technically feasible, isn't culturally feasible, at least IMHO. Protectionism isn't popular, though, and there are significant ethical questions about the impact such a trade wall has on other cultures -- in other words, perhaps we can save our economy, but a significant portion of that save will be done at the cost of reducing other people's ability to earn as we make our own markets less accessible to them.
Personally, I think the US -- as a society -- has made a very serious error by allowing private insurance companies to serve as the arbiter of most worker's healthcare. By not going with a universal model, it becomes not just practical, but advisable, for the insurance companies to lock out entire classes of workers based on non-job performance issues like age, weight, preexisting health conditions, even your credit rating and various government records -- anything that tweaks the actuarial positioning of the worker is fair game as far as they're concerned. If we simply "manned up" and declared that we were going to single-payer, everyone covered, and cut the insurance companies out of the deal, we'd save the costs (and paperwork) of the middleman, while bringing a whole bunch of workers back into the fold. This is one of the many reasons that government single-payer is better than the mish-mosh of predatory middlemen we have now. I'll not argue that the government would be more efficient (it's highly doubtful) but the effect of universal heathcare extends much further into the economy than just administrative issues.
In the end, I don't think it's fair to point the finger at companies that are trying to produce goods and services; they have to deal with the culture, economy and resources that are available to them, and they can only exist if they are economically viable. If we want them to make decisions that are more favorable to local workers, we're going to have to stop making hiring local workers such a hurdle to overcome. There are implications all over the map: just about everything associated with unions, unemployment insurance rates that spike if a company decides to discharge a worker, the lack of trade barriers at the border for goods and services produced in environments that have significantly different costs of living, the hugely complex legal and tax environment that businesses have to deal with.
You can -- and we have -- justified each of these things on its own, but taken together, our own cultural and political baggage has combined to be the concrete boots that are pulling us inexorably to the bottom of the economic river, where I think we're going to sit until we run out of air. At that point, we either take the shoes off, or we die, economically speaking.
Opportunities for those who can avoid the system's pitfalls will last the lon
I've fallen off your lawn, and I can't get up.
I don't know why India keep showing up in these discussions.
I see virtually nothing here that's made in India.
I thought Goldratt, Constraint Management and Throughput Accounting were long forgotten.
Trouble is, it seems hard to root out cost accounting mentality, as illustrated in the many comments ;) Try to implement Critical Chain Project Mgmt, and listen to the howls of all the old timers...
Well, if some still remember, ther may be hope. ;)
of course decline is also seen in software, when it's absolutely fully and completely impossible to ever write another piece of software ever again that doesn't violate dozens, maybe even hundreds of patents!!! The fact that they're mostly invalid patents has no bearing on the fact that any small to medium software business can be quickly sunk by them... It's just a ticking time bomb, soon all software writing will be forced to move offshore to survive.
Bit absurd for a clueless nit who has no grasp of the ancient principle of comparative advantage, or that of malinvestment, to be lecturing anyone on the economics of production.
Slashdot: Playing Favorites Since 1997
about "Socialism beating the f..king pants off the US" and suchlike. Makes as much sense today as it did 20 years ago.
First off, China has no kind of Socialism other than 50% share of government control over economy. For the absolute majority of the Chinese there are no social guarantees and no pension system. Unless you are born into a few enclaves of prosperity, you are on your own. There are no independent unions is China, and a very tame Socialist "people's movement" for slightly better labor conditions ended up being made an example of how well unarmed protesters can do against tanks. If this is your idea of Socialism, then what is fascism? Is fascism so great as to call the opposition "idiots"?
Second, having taught Mathematics to Americans, Russians, and Chinese students, I can attest that the former have the atrocious misfortune of the least qualified teachers who would lose to an average high school graduate in the latter countries. Having known some engineers that tried to teach math and physics in Boston and Cambridge public schools, I can say with certainty that it was Teacher's Unions and big school districts that did that, promoting seniority instead of competence.
Wall Street is the least of your problems, same as "western propaganda" was the least of USSR's.
I challenge your assertion that the Chinese et al. damn foreign workers taking your jobs are paid slave labour wages. That's because, while it is slave labour wages to you in Bald Eagle Land dollars, it is not for them in Yellow People's Republic Dollars. Currency exchange, do you know it sucka? Cost of living, do you grok? In fact, they are paid around the normal or even above average than what they would get doing traditional jobs such as farming in their own country. You live in the most wasteful, entitled, litigious society on Earth. That is why your cost living is so high, hence your uncompetitive wages. I find it ironic (Sheryl Crow and all that) that the land of the free, the fountain of free market capitalist economy ideology is crying for a communist country to stop adopting what you have preached for decades.
China has a huge labor inflation problem, which is going to make Chinese goods uncompetitive over time once you factor in lag and transportation costs.
Also, they're not going to be able to push the RMB down forever, and even if they could the US can burn them by printing dollars (which we're doing).
The bit you quoted and then insultingly disparaged refers to what was going on when the Unions were first formed.
The unintended consequences of steel and sugar tarriffs are two very clear examples of how stupid that can be.
The US steel industry has not had to innovate and cut costs for years so the result is expensive substandard steel. That led to some manufacturing moving to places with cheaper steel, leading to less local demand, leading to less economy of scale and higher prices per ton so more of a driving force for heavy steel using industries to move. While it was ultimately a stupid thing to do it can't be reversed without nearly all those workers in that industry losing their jobs because the industry is fossilised and has almost nobody that can bring it forward. If everyone's just following a standard operating procedure from twenty years ago you don't have many engineers around to make improvements.
The sugar situation would just sound like a bad joke if it wasn't one of the causes of a major obesity and liver damage problem. Protecting sugar just made the usually more expensive fructose the sweetener of choice but you need more of it and the body processes it in the liver. Cane sugar in very large amounts is bad for you, and it's the fructose half that causes most of the problems - pure fructose is twice as bad. The sugar protectionism has done more for the corn industry than it did for the diminishing sugar industry.
China in 1981 was not some manufacturing super power. It was primarily full of peasants who work for cheap wages. That was enough to have some manufacturing move to China. So, since that can lead to a massive manufacturing economy in 2011 in just 30 years, it should be obvious that the manufacturing base could just as easily flow back to the USA or to Africa in the next 30 years.
Now, beyond wages, there are other aspects to out-sourcing, and Asian out-sourcing:
1) Less headaches. Its a pain to manage 1,000 low wage assembly workers. Let someone in China do it.
2) Its very, very painful to deal with the US regulations compared to those in China (for Chinese owned firms.) In China, you can ignore regulations, bribe officials, or get exemptions if you are connected..
Its not just cheap labor. If it was , then US companies would open plants there. But instead US companies almost invariably use Chinese factories as vendors and don't open their own factories.
3) Undervalued currencies are also an issue.
Now, we can't make labor cheaper easily, and we can't make it easier to manager screwdriver monkeys, so the only things left are:
A) work on making regulations more sane. Yes, it will be more than in Asia, but we also are more stable and the rule of law is stronger.
B) Work on that currency issue. Not sure how to fix the problem, but I am sure Wall Street could be tapped for creative solutions.
What is up with the Apple fanboyism in the article?
An exception is Apple [AAPL], which “has been able to preserve a first-rate design capability in the States so far by remaining deeply involved in the selection of components, in industrial design, in software development, and in the articulation of the concept of its products and how they address users’ needs.”
Apple outsources their manufacturing to Foxcon just like everyone else. What makes them "special" wrt outsourcing, other than the author most likely wanting to pump up his AAPL stock?
I am going to reflect on the original post with a viewpoint that focuses back thirty-nine years to 1972.
That was the year Nixon went to the Peoples Republic of China (PRC) and HP introduced the electronic slide rule calculator model HP-35. I was freshly graduated from college working in the machine shop of a small packaging machinery manufacturer.
That year I was offered a three unit residential property on an 100 x 100 lot in the Mount Washington district of Los Angeles for $72,000. My Dad said "the pipes are bad" and wouldn't help me buy the property. Within a year, I had been kicked out of my cheap rent cabin on this same property. The property quickly changed hands and began rising in value.
So I date 1972 as the start of steady aggressive real estate value increase, at least in California. I was an early baby boomer and real estate prices were racing ahead of me.
Meanwhile, regarding the Nixon trip to China, this is a starting date where Chinese land values, real estate values and rate-of-pay for labor had been reset by the Communist revolution.
So here is the view I propose: Starting about 40 years ago, the cost of land, industrial buildings, residential homes and apartments has been going up in the United States. Meanwhile, the People's Republic of China, thanks to the Communist revolution, had an enormous "land and real-estate value reset" that has kept land and real estate cheap for much longer than 1972.
The huge difference in land and real estate value means it costs a lot more to live in the United States than in China.
These facts are the financial basis for why it costs a lot less to make things in the PRC than in the USA.
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In the decade around 1982, in America there was a perception of a Japanese manufacturing assault on America. What became of the Japanese business success of those years? In Japan there was an epidemic of real estate speculation. At one time Tokyo floor space sold for $1,000 per square foot. One of the effects noted has been 20 years of stagflation. The Japanese economy did not recover after several years of Keynesian spending on public works projects.
For instance, eight years ago the water pump in the Japanese engine in my Dodge Caravan was made in Japan. Another water pump for the same car bought one year ago (in 2010) was manufactured in China. Yet another well established manufacturing job moved to China.
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So what to do? I am presently reading Progress and Poverty by the American economic thinker Henry George. He did a classic economic analysis of American capitalism in 1890. Yes he was within a few decades of being a contemporary of Carl Marx. One point I note is he identifies the activity of buying and selling real estate for a profit as not a part of capitalism per se.
Amazon just flipped California the finger because of imposing high taxes.
Here are the tax rates per Country.
USA:
0-35% (federal)
0-12% (states)
China:
16.5%
Taiwan:
17%
South Korea:
13/25%
So where would you manufacture a product? Slave labor is just a bonus, if you can do it. Taxes are a sure loss proposition.
The US is screwing itself. Don't blame others for how much you suck today.
Lower taxes, and businesses will return.
Yes, I know. WTF does that have to do with anything right now? That's the point. Someone says Union X has caused a problem Y, and the response is to raise the specter of kids in coal mines? *That's* what I disparaged, and rightfully so.
The last I looked the Marshall Islands were a US territory and they have working conditions of the sort that kicked the union movement in the first place. Then there's parts of South America, Africa and Asia where you can see exactly what it's like without unions for the price of a plane ticket. With your barbaric system of paying lees than a living wage and expecting people to make up the rest by begging for tips from strangers in their workplace you probably don't even need a plane ticket.