After WWII the UA had a privileged position as it was the only country to come out of the war without its infrastructure destroyed. As the rest of the world was rebuilt it became better able to compete. Anyone wanting to return to the 1960s is living in. . . the 1960s. It ain’t gonna happen no matter what you do and protectionist measures would do more harm than good.
OK. Let’s take that further. Should companies be penalized for openning factories in other countries?
There are lots of reasons for a company to do this, one of which is to be closer to their customers. For instance, I worked for a large company that got 1/3 of its revenue from Europe. We openned factories over there because we needed to better service our European customers. THat resulted in jobs being “exported”. You are advocating punishing a company for taking this necessary action.
To reiterate msmith’s point, the economy is cyclical. This has been observed for centuries. Public policy works to lessen the effects of troughs, but they cannot erase troughs. Public policy might have more effect at lessen the effect of troughs if it also worked to lessen booms, but politicians benefit from booms, and they are far more short-sighted than corporate executives.
FTR, my market-based savings plans have been as ravaged as everyone else’s. However, if the companies they are invested in are to recover, they need to cut costs and increase revenues. I do not want to be damaged because I’m subsidizing someone’s outsized salary when the work can be done much cheaper elsewhere.
For the past few centuries, people have immigrated into the US seeking opportunity in the form of jobs and quality of life. My national ego is not so big as to think that the situation must always be a one-way ride and can’t change. Populations can either choose to live and die in one place, or to migrate to the best opportunities, nationally or internationally. Guess which one’s long term prospects are better?
My opinion, which you will probably not like:
America and Americans (and the rest of the G7) are rich, currently at the top of the planet. They have most of the wealth, they live well while the rest of the planet (including Chineses, Indians and the rest…) lives mostly in unbelievable poor conditions, some without even enough to feed themselves. You are in fact in a minuscule minority by the simple fact that you are able to use a computer.
Free trade is the door to distributing that wealth that Americans were so lucky to get their hands-on first. If you look at it from a global point-of-view, it is quite positive that these jobs are finally available and that these countries can industrialize and become first class country. Once they develop their own middle class with a quality of life comparable to America, then Africa will be next and maybe they won’t need to beg America for food after that… Countering that will only lead to further global unrest (such as what where seeing in the under-developped Middle-East) and will have quite an negative effect on the US (9/11 for example).
I would suggest that America look forward instead of backward: is agriculture and manufacturing really the way to stay on top of things? Or information technology, culture, arts, sciences? If you keep subsidizing condemned industries, you are wasting precious resources that could be invested elsewhere. I don’t think those should be seen as loss jobs: they are part of the evolution of the job market and the creation of a global society.
Of course, if we look again at a global POV, we need to develop stringent environmental laws and labors laws applied globally so that industrialisation doesn’t equal abuse by greedy capitalists (as was the case during America’s industrialization)…
Ther is just no feasible way to do this without causing a major disaster. How are you going to stop American companies from investing abroad? Are you going to establish control of all funds transfers? It is impossible and it would cause panic in the financial markets. And even so you could not totally prevent it. Do you really want to discourage American investment abroad? Nothing would favor other investors more.
Do you want to have high import duties? Who do you think pay those duties if not Americans? You’re shooting yourself in the foot. Then of course you’d have serious problems when the rest of the world retaliates and does the same and the USA is unable to export. The GATT has recently authorized the EU to put stiff tariffs on American products in retaliation for American subsidies.
And this is just talking about tangible goods. how about services? How are you going to stop an American company from contracting for services abroad? Suppose they need someone to write a computer program, do a translation, a study of the world market for widgets. . . how are you going to stop American companies from contracting them abroad?
The whole thing is just unworkable and would be a disaster. Show me anybody who knows anything about economics who defends this type of measure.
If it is necessary for servicing foreign business then it isn’t really the scenario that I’m describing.
What I’m talking about is displacing American workers and hiring much cheaper foreign workers to do the same exact job for the same purpose. Many tech companies are laying off phone support people in the US and hiring companies in India to take their place. How is this good for the US economy? It might make sense for the individual companies and their investors but what about the displaced workers? Nobody really gives a shit about them it seems until they become a member of that group.
>> What I’m talking about is displacing American workers and hiring much cheaper foreign workers to do the same exact job for the same purpose
You are missing the point that it is utterly impossible for the government to control that. Suppose I am thinking of setting up a widget business. Should I be forced to make my own widgets in America? Why? Why can’t I just set up an importing and marketing business? And how are you going to control whether I have an interest in the foreign widget manufacturing company? I can’t invest in a foreign manufacturing company? That would be a disaster for American business. How about if I set up a joint venture with a foreign manufacturer?
Most companies will set a foreign subsidiary. it is a different company wholly or partly owned. How can the USA tell a foreign company what it should or should not do? How can it tell a domestic company where it should invest? there is just no practical way to do this.
You see, there is just no way to control this without make the State the owner and manager of all business. Do you really want that? there is no way to just say “you can’t create jobs abroad if you can create them here”.
How long will america be rich, how long will there be jobs for every american, how long will our dollar be highly valued, how long will we have a positive balance of trade, when all of our factories close and we produce nothing? when all of our high skilled/high tech jobs are outsourced and done by foreigners?
No one is advocating preventing american companies from doing business overseas. What is wrong with taxing global companies who leave america and build factories and hire foreign labor? No taxes will be levied on american companies who do business in the United States, who hire, manufacture, and do business in this country. A company that has factories here and in foreign lands, is only to be taxed on its foreign operations.
The tax revenue should be isolated and dispersed entirely to those who have been displaced by foreign competition.
If you want justification for this foreign tax, then it is in lieu of bypassing the costs that american companies have to pay, that foreign companies do not pay(epa and enviromental costs, health regulations and costs, other taxes and regulations, social security costs, unemployment costs, etc).
No, it is not. There is very little that is impossible. There are regulations in place now which protect various business sectors, certainly more can be created.
If you think that this process is OK, what do you see as the impact on our economy? What industry is waiting in the wings to create jobs for the people that are being displaced? How will the economy recover from it’s current poor state if hundreds of thousands of jobs are leaving the country never to return?
So, what you are saying Grim714 is that American companies should subsidize American workers, correct? That even though moving to another country and having workers who DO THE SAME WORK, but are paid less, American companies should not do this, but should subsidize American workers…because they are Americans. Is this a correct statement of your position? If this is correct, please tell me how you feel those companies will be able to compete in the future? I see either a company that refuses to do this going under due to having to charge higher prices with less profit, or having a foreign company take over its market share and it going under anyway. How does this help the economy? How does it help those American workers in the end? How does this help America?
Even if you COULD force American companies to only build their factories here, to only contract here, to only hire Americans (all of which you CAN’T do), it would be a disaster if you did.
I’m a network engineer btw, so I’m familiar with the ‘problem’. Its sad to say, but its our own damn fault that things are the way they are. We allowed the uphoria over the tech revolution to get out of hand, and we inflated our salaries to ungodly levels (like that $80,000/year programmer you mentioned in your cite). This stuff wasn’t magic. We didn’t have a lock on it. Just like with car manufacturing from Japan and Europe in the late 60’s and 70’s, if someone can do it cheaper and better, THEY will win back some of the market share. And trust me…In India, China, and many other countries, their tech people CAN do it cheaper and better. They are much more dedicated atm, much more hungry for the work, and they work for lower salaries then our prima donas…and they are getting the jobs. Eventually things will balance out, but I don’t begrudge them their capture of the market share in tech jobs…they worked for it, they earned it.
In the long run, it HELPS us to have competition. It makes us have to WORK again. Our auto manufacturers certainly got their shit together after they were faced with stiff competition from Japan/Europe and now you have a very wide variety of choices and prices to buy cars. While our companies moved some of their manufactuing to other countries, Japan and Europe moved some of THEIR manufacturing to America because it made sense economically (there are all kinds of reasons I won’t go into).
If America wants to stay on top as the tech leader, my suggestion wouldn’t be tarriffs (very bad idea), or some fantasy of FORCING American companies to create jobs in the US…it would be to improve education accross the board (how do you think those Indians/Chineese/etc got where they were…wasn’t a gift), and focus on R&D. While foreign countries are focused on the market NOW, we COULD be pushing the envelop to stay ahead, letting them take over markets and jobs and expanding their own base, while maintaining our advantage. Everyone wins. Of course, the American worker may actually have to WORK at staying ahead in that case…
But thats just my opinion…I could be wrong.
-XT
Do you even know what you’re talking about? When was the last time the US had a postive balance of trade? Look it up. It might surprise you.
The US is the richest country in the world. It is next to impossible for a rich country to have a positive balance of trade. When was the last time Bill Gates had a positive balance of trade with his gardener?
Grim714, I live everyday as if I might become a member of ‘that’ group. I work on remaining relevant and useful, I watch trends, I gain skills that I hope will keep me employed tomorrow and five years from now.
To spin the Times article differently, over 6,000,000 jobs, or 92% of the industry will remain despite lowered cost of labor overseas. Here is another benefit - greater foreign disposable income will result in greater spending and savings overseas - savings in US companies (MSFT, GE, T-Bills, etc. because of their perceived strength) and spending on US products (McDonalds, Starbucks, Amazon, etc.). So by outsourcing jobs, companies are attacking on side both sides of the revenue equation - cutting costs and increasing revenue.
And now to beat my head against a brick wall…Susanann, you like to trot out how NIKE sneakers haven’t dropped in price, even though labor is cheaper. That’s a very nice, simplistic but mistaken assessment. It ignores the fact that NIKE works very hard to brand itself, such as spending $90 million on an unproven high school basketball player, so that it can maintain prices on supposed quality and image. The NIKE consumer pays for image, and NIKE pays to retain that image. They can cut production costs, increase marketing costs by the same amount, and charge more based on perceived value. Now its NIKE’s job to determine which price point the market will bear, and to charge that price. There are plenty of off-brand sneakers, sometimes built in the same factory, that cost much less than the NIKEs. NIKE is not selling on price alone. (Also note that NIKE bears the cost of research and development of new sneaker technologies that off-brands do not, and must factor this into price)
Lack of (regulated costs) which goosed the US economy 100-125 years ago. Of course, now that we benefited from this, lets take it away from everyone else.
Grim, if I knew what industry was waiting in the wings, I’d invest in it now. I only wish I could know that.
John Mace, I’d be willing to say it has been at least two decades, if not 3-4, that we haven’t had a positive balance of trade. What a surprise - we’re a consumer economy.
xtisme, I concur wholeheartedly, and wish to add that the workforce needs to innovate as much as the market. Someone has got to get inside of children’s heads at an early age and let them know that unskilled and semiskilled labor is a dead-end.
Yes. My point exactly. I’m sure someone will come up with the stat soon, but I’d guess it hasn’t been since the 1970s that we had a positive BoT, and probably not since the 40s or 50s when we had a sustained, positive BoT.
That is a simplistic statement if I ever saw one.
you don’t get it. You can subsidize a specific sector, say farmers, at the expense of taxes paid by the general population and this only shifts jobs around. the more sectors you subsidize the greater the burden on the other sectors. And subsidizing everybody at the expense of everybody is meaningless except that it is the best way to make the economy unproductive. Subsidies require bureaucracies. And then you get the case where you are subsidizing activities which are not needed. people are growing crops not because they are needed but because they are subsidized. This is rampant in the farming sectors in the USA and the EU. You really want moe of that in other industries? Europe has been moving away from that because it was a disaster. Communist countries even more. there is nothing like the free market to best allocate resources and economic activities.
[quote]
If you think that this process is OK…[/quote i don’t think it is ok to subsidize industries as it is at the cost of much lowered efficiency.
Nobody owes you a job. You can find something to do which is useful to others and which others will pay money for. Look at the want ads. there are plenty of jobs out there at free market wages. Why do you want to extort money from others so you can be paid more than you are worth to them?
Yes, American companies should utilize (subsidize has an ugly connotation) American labor as much as possible. I doubt that this growing trend of offshoring labor is actually a necessity. It seems to me that all of this lean-mean-corporate-machine only serves to line the pockets of the few while reducing the standard of living for the vast majority of Americans. People will only stand so much abuse, and if current trends continue unabated, I see big trouble ahead.
Who is Dell competing with exactly? I only see other American companies for the most part. If all of these companies refrained from using foreign labor then the playing field would remain level. In 2001, Dell laid off 1700 American workers. Now, in 2003, Dell has a call center in India that employs 3000. How is it good for the US economy to have millions flowing into India? Wouldn’t it have been preferable to rehire the displaced Americans?
If US companies start offshoring all the work which does not require a physical presence – then where are Americans, that have been perfectly capable of doing these jobs, going to work? Nobody has answered this question and if you support the offshoring of labor I think you should have one.
sigh
You have a skewed perspective on how business actually WORKS, Grim714. Let me lay you out a scenerio here, by way of hopefully illustrating what I’m trying to get across to you.
Say the US companies actually do what you are suggesting. Lets take Dell for example. Lets say they cut back on their profits (wouldn’t want to line to pockets of the rich with money…that would be evil, especially when poor Americans are out of work) and only use high priced American labor. Ok, fair enough. Now, unless you are just a bigotted idiot (which I assume you aren’t), you realize that that ‘offshore’ labor is out there…and that its competent, and cheaper than American labor in certain categories, while being on par as far as quality goes…correct?
Ok, so now Dell has cut back its profits (some of which goes into R&D, new products analysis, marketting, etc…you DID know that right?) and probably raised its prices or at least put a cap on lowering them (you DID know that Dell, for example, had been lowering its prices to remain competetive, right?).
Now, along comes a foreign company that wants to get into the computer field or expand their market share (like NEC), and lo and behold, there is a ready labor force that is willing to work, wants to work, and is now out of work because American companies won’t touch them. Starting to get the picture? I’m not trying to be harsh here, but you aren’t getting this stuff.
Ok, lets take it a step further. Dell, who has decided to use exclusively American labor, with its associated higher costs, has had to cut back on R&D, new product development, and marketting as its profits shrink. The new foriegn company using that ‘offshore’ labor, has captured market share, and has dumped ITS profits (after lining its evil rich’s pockets of course) into marketting, R&D and new product development, while slashing the price and undercutting Dell further. Doesn’t this sound like what the Japaneese did to us in the auto industry in the 60’s and 70’s? Do you get it? You’ve now saved the American workes at Dell 3000 jobs (those that the Indians were doing)…at the cost of 10’s of thousands of jobs (currently done by Americans) eventually when Dell is forced to cut (or folds completely) back due to dwindling market share. So, in the long run, what have you accomplished?
What you don’t get, is that the way things are is actually GOOD for America and American business in the long run. Its GOOD to have that work overseas…it opens up new markets for our goods. But I’ll leave it to others who are better at this stuff to get into that aspect, as this post is too long as it is.
-XT
You talked me into it. U.S. Trade in Goods and Services - Balance of Payments (BOP) basis
The last year we were positive was 1975. We were also positive from 1960 - 1970 and in 1973. The last time there was a significant decline was from 1990-1991.
Just to throw out a few more factoids: NAFTA was ratified in November 1993 (if I read congressional docs correctly). However, the late 1990s (1998-1999, maybe 2000) saw the lowest rates of US unemployment ever. How come that never gets blamed on NAFTA?
on previewGrim714, I’m going to repeat that you just don’t get it. Dell only competes with American companies because they beat the foreign competition into the ground. However, if we force Dell to raise prices, foreign competitors (already operating outside the US) will be given a chance to beat Dell back. Result: lost jobs. But hey, we’ll just slap a tariff on competing products. Of course, countries will respond in kind, and exports will drop. Result: lost jobs.
And subsidize has an ugly connotation because it is an ugly way of improperly propping up non-competitive business. The only real time subsidizing has a positive effect is in ensuring national security (don’t think we want to outsource rifle production to Kalishnikov). What you propose are subsidies.
Current unemployment (February 2003) is only 5.8%. Allowing generously for those who’ve given up, it is still not 7%. For that 7%, things are not good. But we’ve lived and eventually thrived as a country through worse.
Americans capable of working at jobs being outsourced need to change their expectations and their skills. They need to look at the thousands of jobs on monster or hot jobs, find the markets with good prospects, and go to the jobs. The jobs should not come to them.
Who said subsidy? It wasn’t me.
Let’s take a look at the auto industry. There are trade barriers against foreign manufacturers. To get around these barriers, foreign auto makers had to open plants in the US and now they employ Americans and everyone seems to be happy. Why can’t this (or something similar) work for other industries?
xtisme, next time wait until after I post 