I see many disturbing trneds going on in the USA…mostly related to de-industrialization. Recently, a local factory (making furnaces )closed down-the assembly lines have been shipped to China, where the furnaces will be made with Chinese labor, costing perhaps one tenth the price as here. Who wants to move it? WALMART! they have trumpeted the fact that they will “create” 100-odd jobs…paying (in most cases) minimum wage, part-time, and no health insurance. So, we have (it seems) traded 100 high-paying jobs for 100 third-world type jobs. Consider the drop in purchasing power…the jobs lost paid between 12.00- 25.00 $/hour…and the new jobs pay 7-8&/hour.
In addition to this, each of the factory jobs supported allied jobs at suppliers, in purchasing, trucking, shipping, and other services as well-perhaops another 100 jobs dissappear as well.
Meanwhile, Walmart keeps telling us what a great place it is to work in! I remember the story about a town in California-Walmart annouced they would set up shop, and the town fell over themselves to attract them-they wound up giving Walmart tax concessions, paid for road improvements, sewers, etc. Then, they found out that each job that walmart brought was costing them money! WaLMART EVEN FORCED THE HEALTHCARE COSTS ON TO THE LOCAL COMMUNITY, BECAUSE THEY FIRED EMPLOYESS JUST BEFORE THEY WOULD BE ELIGIBLE FOR HEALTH INSURANCE! Doesn’t anybody in government care about what’s going on? Sometimes I wonder!
I am an MBA. When it comes to offshoring, I say: show me the NUMBERS! How much are you really going to save by moving production to China?
Also: How will quality be affected? How will your image be affected? How much is the “Made in USA” label itself worth on that product?
You hear a lot of bitching about offshoring, but rarely does the media give you a breakdown of a particular case/decision. Without concrete data, my sympathies cannot lean either way.
Soon in this thread you will have Sam Stone or whoever reassuring you with bromides to the effect that it’s all for the good: Those people who lost their jobs will go on to even more productive work, the American and World economies will grow, and both Chinese and USAians will feel joy.
Again, I’d like to see the numbers. No, not data for the past few decades. Not reassurances that past successes will continue. I want to see the hard proof that things will be OK HEREAFTER.
Some offshorings are definitely junk jobs that we should not regret losing. Some are not. Some are opportunities for the companies that decide so. Some are probably mistakes. Some of them we can prevent. Some we can’t. Etc.
Numbers, please. No bromides allowed!
In a nutshell:
Walmart trims fat. Walmart cuts prices.
American Consumers attracted to low prices. American Consumer spends money at Walmart.
Walmart makes profits. Walmart’s American Workers keep their jobs. Walmart’s Shareholders happy.
Because of lower prices, American Consumer has more disposable income. American Consumer (and Walmart’s happy shareholders) can buy more good-ies and services-ies from Other Businesses.
Other Businesses happy. Other Businesses employ more American Workers to meet demand. American Economy is happy.
At same time, Chinese Wa-mart employs Chinese Workers to supply Walmart with Stuff. Chinese Workers have jobs. Chinese Economy is happy.
Chinese Economy is growing. Chinese Workers have disposable income. Chinese Workers consume American good-ies and service-ies. Walmart and Other Businesses happy. Walmart and Other Businesses employ American Workers. American Workers happy.
Just another day in the free market Circle of Life, Grasshopper.
I’m not going to give numbers, but I’m not going to say everything’s wonderful either.
What’s going on does suck for some people. Increased and/or freer trade means that the relatively abundant factor gains and those industries that are relatively intensive in that factor prosper. The relatively scarce factor and those industries intensive in it lose. In the US, that’s the old industrial manufacturing industries and the workers that supply them. Lower skill occupations in less traded margin industries like retailing will still get screwed because of the reduced competition for workers of that type. That doesn’t mean there won’t be jobs in that skill category, just that over time it will become a less and less well-paying job.
What the US has a comparative advantage in is highly human capital intensive industries. These industries will gain and will pay for the imports of furnaces and such. And factor suppliers for those industries and the related ones will gain. The recent “tech wreck” bubble merely obscures the underlying gains to knowledge intensive occupations.
The story about the “gains from trade” that economists talk about (I’m one BTW) are more properly called potential gains from trade. You can hand-wave and invoke dynamic gains to pretend that everyone’s a winner, but at least in the medium term, changing patterns of world trade will create a lot of losers in the US.
That doesn’t mean that trade restrictions are a good way to go: the key point about the gains from trade is that the winners win by more than the losers lose (in jargon, the outcome is potentially Pareto superior). In other words, you should be able to ease the transition to different (and better-paid) work for the losers and compensate them to some degree and still have something left over.
In the longer term the net job losses are going to be zero. Some occupations are going to be bad ones with lower wages and fewer takers, some good ones with better pay and conditions and lots of newly-minted graduates. Anything that you think of as a minimum wage job is going to be crap and getting worse - poor, declining pay and uncertain ongoing employment prospects.
It’s a mistake to simply look at a smal sector of your local economy and extrapolate doom and gloom for the reat of the nation. Just because some factories are shutting down locally does not mean that the nation’s economy is on the road to ruin.
Here are some interesting assertions I recently read in Reason magazine:
http://www.reason.com/0407/fe.bl.truths.shtml
And
As well as
HA! The rich are already taxed too high, remember? They made that money fair and square! No one was forced to have a manufacturing job! etc etc :barf:
I have no problem, generally, with free trade, but I think that the people who stand to benefit so much from it need to realize that they’re crippling the workforce for their own selfish gain. But of course, any form of redistrubution based on offshoring will look like “protectionism” i.e. penalizing companies that do it through a tax code, even if we were to try an optimize the solution as you indicate.
How would you suppose we handle this?
These were the bromides I was talking about, people. Numbers!
Reason is Libertarian propaganda. Please label it as such. Thanks.
So, basically you’re asking that we prove the future?? :dubious:
Sure, just as soon as I finish that time machine.
Yes, it is a libertarian magazine. So what? You can’t simply negate what is being said in that article by labeling it “libertarian.”
I’m by no means a libertarian, but I thought the quotes from that article were fine (and, in the bonus round, broadly agreed with my post).
I’ll return to this, it’s bedtime here. Generally, not with trade interventions. 
Considering that, for this model to work, Wal-Mart buys cheap goods from China to put in its stores, what incentive is there for the Chinese Workers to buy American “good-ies and service-ies”? They might as well buy direct from their own factories instead, n’est pas?
You always give answers worth waiting for, hawthorne. Sleep away.
None whatsoever, except if the goods or services cannot be produced locally with adequate quality and for less $$.
I think you have a credible case for getting ALL of your tuition back. Clearly a fraud has been committed…
Has anybody considered the national security angle?
In the Second World War, America’s staggering industrial capacity gave it a tremendous advantage in the war. I understand that immediately after Germany declared war on the US, Albert Speer, Hitler’s right hand man when it came to managing the economy, took one look at projected figures for America’s war production and decided then and there that Germany would lose the war.
Do we even have that kind of industrial capacity today? In the unlikely event that a conflict on the scale of WWII broke out, could we muster the kind of massive wartime output that we managed 65 years ago? How much of our razzle dazzle weaponry depends on electronic components manufactured overseas? Could our shipyards turn out 2000 Liberty ships a year?
Something to think about the next time you hear about a factory being closed and moved to China …
Yes. (more below)
… well, we just bought billions of bullets from Israel, what does that tell ya?
(now for the “more below”)
Our military might (in theory) no longer relies on mass producing large quantities of munitions. We aren’t geared for a long-term conflict anymore; we are much more geared to fight several short wars where our sheer operational firepower and technological advantages overwhelm the enemy.
Further, our military industrial capacity is almost entirely self-contained (minus some munitions and a few odd vehicle contracts I mentioned above) in that we build the vast majority of our own vehicles, missiles, etc from raw material to composite GPS-guided computer-controlled death. No one outside of Russia has that kind of capability, and the Russians can’t afford it themselves.
The question is, then, are the above scenarios going to benefit us if we do happen to get into a long, dragged out war? The answer to that is, “wake me up when someone threatens me with it.”
Isn’t there a saying about a town where “everyone is taking in everyone else’s laundry”? In other words, you can’t have JUST a service economy without someone producing something (unless you’re completely dependent on providing services to foreigners)?
It’s an article of faith that in the VERY long term (centuries??) an unfettered global free market will be to the benefit of everyone, as water finds it’s own level and inequalites even out… But as hawthorne pointed out, in the medium term (decades??) there will probably be a lot of pain. And I can see at some point people in the US questioning why we’re working so hard to make the Third World wealthier seemingly at our expense. There ARE good reasons- but tell that to someone who was downsized and now makes half the wage he used to.
Here’s my problem with the numbers. I believe the currently employed count is around 150 million in this country. That means that almost 1/3 of them falls into this category of “Managerial and specialized professional”. I work in a highly technical company, with an extremely vertical org chart, and even we don’t have that sort of percentage of folks I would categorize in this way. They also do not show how much these new jobs in this category pay, thus making it harder to reverse-engineer what type of jobs they really are.
I couldn’t find it on the census chart anywhere, but I’d love to see a breakdown of what they decide to place into this category. Perhaps “burger-flipper” is a specialized profession these days, and perhaps “head cashier” is a management function. Also, choosing to compare today to 1983 seems a bit odd, unless you were trying to skew things. In case no one remembers, 1982 and 1983 were the years of highest unemployment for a long time, likely requiring you to go back to the Great Depresssion to find higher rates. It was widely called the “Great Recession” and there were plenty of folks who were afraid the Great Depression was about to repeat itself.
I’m actually for global free trade, but I want it done much more painlessly than is currently happening. We don’t open up dams all at once, letting the water flood everything in sight, and that’s the route we seem to be taking here. That’s likely an argument for a different thread, so I’ll stop here.
One thing I have wondering about is:
It is generally accepted that the wealthy under this administration had incomes grow by 186 percent, whereas the middle class and the poor increased by about 3 percent. Huge disparity, of course, with the income gains fo the middle class and the poor barely keeping up with the cost of living.
At the same time, we are seeing the trend toward outsourcing and the growing trend of McJobs replacing real jobs that can support a family.
Here’s what I think is happening: in a stagnant economy, the wealthy have been keeping the party going for themselves by cannibalizing the wealth the middle class has built up since the postwar economic boom of the 50s. They have by no means destroyed the middle class, but they may eventually do so if the middle class and the poor don’t get off the barrel and pull their pants up from around their ankles.
I think the mechanism by which this is being accomplished is by lowering costs for goods and services through automation, outsourcing and productivity gains. This generally means layoffs and firings, leaving people unemployed, or more typically, radically underemployed.
The people who own the corporations or get considerable income from shares in them do very well for the time being, because the displaced workers naturally try to maintain income by having more family members work and/or by working two jobs where possible. Or they drop major plans like home ownership or sending thier kids to college. But they can still afford to buy the consumer goods and services that keep the wealthy happy. And growing Third World markets mean that this trend may hurt Americans even if the underemployed American workers eventually lose their ability to buy most discretionary goods and services.
Americans need to wake up. This “free market” bullshit is gonna turn us all into mindless cogs in the machine, with no free time and not enough income to enjoy it, if we let it continue. There is no such thing as a “free market” an economy is just a social engine we build. As long as we pay attention to how it works, we can build it any way we like. We don’t HAVE to let the wealthy have all the money. That’s just bought-and-paid-for bullshit.