Serious Question about Manufacturing

[DK666]

Will manufacturing survive in the US ?

Will manufacturing as we know it be reborn into something different ?

Discussion. Please.

[bahrbearian]

1. With declining dollar, greater productivity, of course....

but is it a situation that we want? Beating Mexico and China for job's, sound's incredile but may be happening.

[Another Bill C.]

2. Not soon.

Wherever in the world, people are willing to work for practically nothing, that's where manufacturing will go.

The golden age of manufacturing in this country where even entry-level workers could make a living wage and thrive as a one-income family is gone. Most of you don't know what you're missing.

[kcwayne]

3. No it won't

The major exodus of manufacturing from the US is driven in the public mind by lower labor costs.

That is certainly a major part of it. But the other costs that US Corporations are moving away from are environmental, liability, and taxation.

In the US, you can go to jail or pay heavy fines for dumping toxic chemicals into the soil, air, or water. You don't face the same fines or regulation in Mexico, China, or India.

Rather than pay a multi-million dollar lawsuit for injury caused to a worker from a poorly maintained piece of machinery, the corporation simply bribes the local authorities, and the rights of workers are bypassed, if there were any to begin with.

Look at the poverty and poor quality of infrastructure in all of the cheap labor countries. There is no tax base to build a modern society in these locations. The corporations have moved in and paid off governments to insure that taxes are not levied against the corporations, and they assume no responsibility for developing the occupied nations.

Given these cost advantages, no corporation will change its strategy of relocating operations in the US with its higher operating costs as long as they have access to the US markets.

If we shut them off from access, where will they sell SUV's, refrigerators, TV's, or building materials? Certainly the slave working in a Chinese factory at $100 per month will not be able to afford $30,000 automobiles. The only leverage the US, Japan, and Europe have against the corporations is to lock them out from the markets as long as they violate US and European laws regarding wages, environmental impact, and liability assumption. The countries that are selling free access for payola will never raise the standard of living in their empires and cause a market adjusting balance of costs that will stop the motivation for the outflow of US and European operations.

We are in the "Perfect Storm" of capitalism. Massive greed, utter immorality, and political corruption have paved the way for the destruction of the higher standards of living achieved in the last 100 years. In 5000 years of recorded history, the average person has been living in serfdom to kings and tyrants of one sort or the other. The brief fling with the creation of a middle class has lasted a mere second in historical terms.

[DK666]

4. Well written

Are you saying the middle class is all but history ?

[htuttle]

6. That's about the size of it

Unless we want to go unionize India, China and most of South East Asia so that our cost-of-living-driven wages here become competitive again.

There's no way to live on $0.50/day in the US, so overseas wages need to rise substantially before manufacturing (and a lot of other businesses) has a reason to come back to the US.

[DK666]

7. Hmmmm.

I have been asked to speak about manufacturing and "off shoring" I wanted to make sure I was not alone on my opinions. I am getting incredible pressure to sway my speech toward the "Lucy in the sky with diamonds" approach rather then the river STYX. Unfortunatly as a professional I cannot do that not only that my research indicates a convergance of manufacturing technologies that will change the way products are brought to market. We have a hard road ahead of us and we must take a leadership role.

[kcwayne]

8. Yes, if we stay on the current course, it is history.

If the benefits of globalization that were promised by free traders were to be realized, then a global middle class could arise. That can only happen if corporations suddenly become benevolent. I am not holding my breath.

I don't see the middle class surviving without massive labor revolt in Asia and South America, but then you still have Africa to contend with. By the time they (the corporations) get to Africa the US and Europe will look alot like Mexico.

[htuttle]

10. An ironic thing is...

...if there WAS a massive labor revolt for higher wages in Asia and South America, you can bet that our CIA would pull out all the stops to put it down and reverse it. Bad for Bidniz, ya know.

[ma4t]

11. Bingo!!

Kcwayne has clearly identified an aspect of the problem that many overlook. The exodus of manufacturing is driven not by wages but by costs. In fact, there are many areas where higher wages are coupled with lower unit costs due to a higher level of productivity by the higher wage worker.

The fact is that many of the factors that confront manufacturers contribute to costs although they do not necessarily put a dime in the pocket of a worker. Laws requiring advance notice of layoffs, pollution controls, OSHA regulations: all these things add to the cost of a manufacturing operation.

Don't get me wrong - I'm not advocating junking environmental or safety regulations; however, I do recognize that "there is no free lunch".

All regulations impose a cost and sometimes the cost reaches the point where a business decides that it makes business sense to go elsewhere. I guess what I'm advocating is for everyone to understand that all of life is a set of trade-offs and to exercise some common sense reguarding regulations. I've seen plenty of stupid regulations that add relatively nothing to workplace safety but cost plenty. I'm sure others have as well.

Is there no way to find a way to safeguard workers and the environment without publishing a set of rules thicker than the NY phone book? Surely that is within our ability.

[AG78]

12. Well said

That last paragraph was perfectly written. Should be a fun future for everyone.

[terryg11]

5. most likely won't

unless some new market appears that has a product in demand that someone is WILLING to make here in the US. What manufacturing tht does stay here will continue to use less people and more automation as technology and productivity gain. Something else will have to fill that void for US workers to make a living, only problem is has anyone heard wht that might be?

Neither Bush or for that matter any of the dem candidates will say much about it but they probably already know that the future holds fewer manufacturing jobs. It scares them because they apparently don't know what the solution is.

[Jose Diablo]

27. Renewable energy n/t

[TahitiNut]

9. Can any nation survive economically ...

... if the labor of its citizens isn't valued both domestically and internationally? Our balance of payments indicates that we value the labor of others more than others value the labor of Americans. Both our tax structure and our labor compensation structure indicates that we value American labor less than accumulated wealth.

If we don't value our own labor, who will? :shrug:

[kcwayne]

14. China doesn't value the labor, health, or welfare of its citizens

and they are the ones holding the lion's share of the our imbalance of payments. So yes, a nation can survive, and its directors prosper magnificently by devaluing labor.

When there is a shortage of labor required to create wealth, labor can marginally benefit from the ensuing economic exchange. Labor has never benefited at the same rate as capital in this exchange. Remember, even in our democracy and incredible standard of living as compared to the world, over 95% of the assets in this country are owned by 3% of its population.

[TahitiNut]

24. China, huh? Well ...

Despite China being a communist nation, their Gini Index (a measure of income equality) is remarkably close to that of the United States', with China at 40.3 and the United States at 40.8 (World Bank, 2001). Their breakdown of percentage share of income or consumption is also remarkably close to that of the United States: China's lowest 10% of the population has 2.4 % of the income or consumption, while the same category for the United States is 1.8%. For the highest 10 % in China, the figure is 30.4% and for the Unites States it is 30.5% (World Bank, 2001). It seems that while China is, for the most part, a communist nation, the income disparity displayed by the Gini Index is a sign of the influence that capitalism has had.

While it may be argued that China is an emerging core nation, it does have aspects of being a semi-peripheral nation. As a core nation, China has a fairly diversified economy, it is modern and industrialized, it has strong internal political structures and a stable government, and it is relatively affluent. However, class conflict in China exists. And there is a large peasant population that remains quite distinct from modern sectors of the economy. Also, China's limited political freedom and individual liberty are elements of a peripheral nation.
China: Country Report


(An even better understanding can be obtained here.)

[kcwayne]

26. Your article supports what I am saying

China having a Gini Index remarkably close to the United States' is confirmation that there is wide income disparity in China, just like the US. Most of the article goes on to describe why there is a huge income disparity in China.

While there is reference to per capita income gains over the last 25 years, these gains are coming off an appalling low base, and still the standard of living for the average Chinese citizen is far below that of western countries.

There is an endless supply of $100 a month labor available in China. Those jobs typically come with shared housing and schooling for a single child, and are highly coveted. We had the same sort of conditions in the US in the late 1800's. We called them factory towns, and the abysmal working conditions and perpetual poverty gave rise to the union movement. China by law has unions (except for the exclusion they gave to Walmart), but the unions represent the company to the worker, which is irrelevant to workers.

Other SE Asian countries are struggling with their competitive position with China. So they are trying to out-Chinese the Chinese. Factories in Viet Nam charge $80 per month to try and attract western business that is otherwise going to China.

Until the workers in Asia can afford to buy the products (other than food and clothing) that are produced in their country, their labor has no value. Their poverty is being perpetuated by capitalists that at this point see no advantage to changing the distribution of wealth. If history repeats itself, it will take force and conflict to change this.

[rhino47]

13. Reznor Heating went to mexico in 95

They make wall heaters.There were so many problems with the heaters
made in mexico they were losing money.They came back to pa in 1998

[kcwayne]

15. In 1979 I was working for GE while we put up plants in Mexico

Jack Welch became CEO of GE that year and went on a tour of the plants that had been set up. At that time there were quality and communications problems that meant we were not achieving the projected return on investment.

With one sweep of the hand Jack said "You don't know what you are doing down here, close these operations". We did.

5 years later, they were all back. Jack just retired from GE a year ago so I guess he changed his mind, and changed it big time.

Operational problems get solved. The human differential in the process is overcome by process and systems. There are so very few things that you can say "This person, with this training, and this culture is critical to the process". Concert pianists and basketball players are exceptions. Everyone else is subject to being replaced by a more desparate worker.

[David Zephyr]

16. The Horses Are Already Out Of The Barns.

I own a small manufacturing firm in the technology sector with my biggest customer base in Silicon Valley.

Belive me, the horses are long gone out of the barn.

Factory jobs lost to Mexico pale in comparison to those lost forever to China.

[DK666]

17. I agree.

Once gone they dont come back. So we innovate. Its a cycle.

[kcwayne]

18. New products don't change the calculus

What can you innovate that will change the reality of an economic system? New products in the pipeline don't make a difference, because those new products will be developed and produced in the lowest cost environment.

The innovation has to center around those services that cannot be efficiently delivered from 3000 miles away. That leaves you with retail, health care, some education, and maybe some other things that don't spring to the top of my mind. This begs the question if you can build an economy where the only thing we do is sell and deliver each other things that are produced elsewhere?

The Dutch did this successfully in the 1600's and 1700's. They were the bankers and middlemen of choice in global trade. The great Tulip crash was an side effect of alot of capital with no place to deploy it.

Of course the Dutch did this with thousands of people, not millions. Maybe there is some sort of service that we could innovate that would have the economy of scale to support 300 million people. Someone smarter than me needs to suggest something because I keep staring at a blank screen when I try to articulate something.

[DK666]

19. Thats

Where mass customization comes in. We are already seeing it in auto manufacturing they drop the cars at a "Depot" and the extras are added at the point of entry and Shazam you get your very own "custom" car. The model has been refined. New manufacruring methods need to be examined and that takes skill. I beleive we have an edge.

[BillZBubb]

21. Any edge we have would be short-lived

I have read your comments in this thread and I am much more pessimistic that you. By a mile.

You seem to accept the Schumpeterian model of "Creative destruction". It's based on inductive reasoning--ie, whenever a capitalist society suffers severe setbacks in some area, the magic or the market leads to new areas of growth. Historically, this seems to be the case.

But, as David Hume showed centuries ago, induction is highly flawed. Consider the lowly chicken. Every day of his life at sunrise the farmer's wife has come out with some grain to feed him. He gets used to the pattern. He reasons that today will be no different. Unfortunately, today the farmers wife has her axe.

We have no intrinsic advantage in creativity, intelligence, or human energy. Our slight advantage in education is withering away. With today's communications, shipping, and English language pervasion, we have no significant advantage in location. Since capital knows no borders, we have no advantage in investment capital.

We have numerous "disadvantages": We want our workers to make a decent wage and have a good standard of living. We enforce worker safety rules. We have unemployment insurance and social security. We allow a certain amount of worker organization. We tax our businesses. We try to protect our environment (when the Democrats have any say).

Trying to project the rise of a multi-trillion dollar replacement for the U.S. manufacturing base is pie-in-the-sky wishful thinking. Once it's gone, wave bye-bye. We have no lasting advantages and we have many economic (but not social) disadvantages.

There is a solution, but it requires a critical and creative re-evalution of "free" trade. The Democrats are the ones who have to lead on this.

[DK666]

22. I agree with you...

I totally agree with your solution. However as was pointed out earlier whats gone is gone. It will not come back. "Free" trade depends on what side of the corporate border you are on. But we cannot just roll over either.


Onward and Upward.

[apsuman]

23. geez...

you say

"We have no intrinsic advantage in creativity, intelligence, or human energy. Our slight advantage in education is withering away. With today's communications, shipping, and English language pervasion, we have no significant advantage in location. Since capital knows no borders, we have no advantage in investment capital. "

... and I disagree.

We do have an advantage in creativity, intelligence, and human energy. When the American economy has been growing it has been because of small businesses which requires exactly those three things. Germany is industrial, educated, and (relativly) free but they can't get their economy to grow. Japan is industrial, educated, and (relatively) free and they can't get their economy to grow.

Although capital knows no borders it's owners do appreciate rule of law and rights of private property. Jobs might go to Singapore, but the capital does not. The single biggest hurdle to development in third world countries is the enformcement of contracts by the government.

Manufacturing jobs peaked in this country in 1979. Automation and the rising cost of labor keep manufacturing jobs away.

[BillZBubb]

25. You may disagree, but you are wrong

Americans aren't more intelligent than others, Americans aren't intrinsically more creative. We're all human beings, we have no extra-human advantage. We aren't the master race.

As to small business, the success of U.S. small business has little to do with any advantages other than a large available market and a large middle class capable of supplying start up funding and customers. It's not because we are more clever or creative. That's just jingoist baloney.

And as to the rising cost of labor, that's a whole different set of issues. It's more the falling cost of exporting jobs. Free trade is a race to the bottom in wages, environmental protection, worker's rights, and living standards. Since the 1970's our country has let this abomination continue without a whimper.

[Ripley]

20. I keep hearing that Americans are great at concepts.

We're the innovators, we don't need to be the workers...let the poor Chinese toil on an assembly line. What I don't understand about this argument is that there will never be a majority of Americans conceptualizing and entrepenering. Especially now that the education system is so poor. Where will the worker bees go? Service jobs. Low wage, few-benefit jobs. That means the middle class will disappear.