Why the US can't just start making everything here

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Originally Posted By: chubbs1
It is sad, we need to do something about this or all of our jobs will be overseas. I don't understand why we can't make the product here. Especially with low employment. We need to Tax China's goods coming in more or, Have big penalties (tax wise) for moving manufacturing jobs out of the USA or Canada.


This was posted to another thread, and it got me all fired up. Sure, we can make a standard copper spark plug for 8 bucks, but who will buy it? This has been tried in history past, in economic parlance (Yes, I'll admit to being an Economist. Please don't shoot!) it's called " Protectionism. " Books and papers and articles and thesis papers galore have been written by the average man and Nobel Prize winning Economists alike, in almost all instances, free trade wins over protectionism.(There are times when protectionism wins, but they are not applicable to a large economy. Normally just third-world developing nations with specific industry or infrastructure needs.) The problem with goods from China is not the loss of jobs (see Creative Destruction, ignore the communist comments on the article, who came up with the theory, in this case, is not relevant to the theory's practice today). The real problem is called the "Race to the Bottom". The Race to the bottom is present in product quality as well as regulation for child labor, worker safety, environmental degradation, and the like.

If the issue is quality, the companies that move their production to China would be well-advised to implement more stringent quality assurance. It's not China's fault, and it's not the US Govt's fault. Free trade (or freer trade?) is here to stay. Best to make it known that we expect the same quality from China that we get here, otherwise, we won't be buying their product. In a world of global economic problems, protecting one economy will make theirs and others suffer. But, keeping jobs here will drive up cost on products here, and allow lower-priced competitors from overseas into the market. Similar to the Wal-Mart effect in local economies. The only way to stop this is by injecting a Barrier to Entry into the market (i.e. tariffs, local laws prohibiting Wal-Marts) but then we are back to protectionism. We institute protectionism, they do too, and we are in a downward spiral where no one can engage in trade because we are so afraid (This actually happened in the US twice, once within living memory, during the great depression. It was a disaster as you may recall although this was not the sole cause). Your costs go up, you spend more money for the same goods(VERY BAD!), you have less/no money to spend on other goods, people slow down on their purchases, credit freezes, people stop buying big ticket items, etc... Like I said, this actually happened in the great depression. And that's not theory; you can see it in the data. Scary.
shocked.gif
Should be avoided at almost all costs.

Sorry if this turned into a economics essay, but I see this argument made all the time and the reasoning just doesn't work in a real-world global economy. It only hurts.
 
There's something wrong when you can make an item and ship it 1/2 way around the world and it's cheaper than making it where you just shipped it to.

Not saying which end is wrong, but something has to change in a competitive environment.
 
Its interesting to see this argument come up and an "economist" quotes the same old lines of Schumpetarin "Creative Destruction", Protectionism, and "data" supports the conclusion.

Several things are routinely ignored in any discussion about protectionism.

First, The US government regularly puts policies in place that penalize our producers to the benefit of overseas producers at the cost of American Jobs and American Income.

Second, China and most other countries that export goods to the world have a state supported policy of exporting products. Their regulations, tax codes, and law supports exporting at the cost of everything else. By definition, this creates an unlevel playing field, to America's detriment.

Third, currency manipulation goes on all the time and right now, America is on the wrong end of it. Since Nixon floated the dollar in 1974 off the gold standard, our dollar has been used as an international store of value, but things are changing. Our current policy of pouring dollars out of the printing press is killing the value of the dollar as a store of value.

Fourth, economists and other so-called policy wonks ignore a basic fact. America is so rich because we are so productive. We are not rich because we stole any benefits from other nations. Its because on a per hourly basis when you have the huge capital base we have and add machines to workers, we outproduce anyone else on the planet when given a level playing field.

Fifth, other countries want to sell in the United States but have protectionist policies in place that virtually stop our selling anything there. This point is mostly left unsaid or vaguely hinted at. I only assert we need a level playing field in terms of regulations and protection.

Sixth, if you look at the history of exports and imports you can discern a pattern. Countries exporting to the US use everything they possibly can to kill manufacturing here, take over the market and then start raising prices. Anyone remember what happened to steel?

The question is not as simple as protectionism. It has many more dimensions than economists usually perceive.

Like many academic disciplines economists are highly intelligent in their field but lack interdisciplinary education that allows them to bring diverse information together and come to a valid conclusion. I might say this is not only true for economists, but true for most of academe in America today. We are mired in reasoning inductively and seem to totally miss what we could learn if we reasoned using a deductive method.

I can criticize economists because I are one.

Dan
 
Quote:
There's something wrong when you can make an item and ship it 1/2 way around the world and it's cheaper than making it where you just shipped it to.

Not saying which end is wrong, but something has to change in a competitive environment.


This is quite possibly the best comment I've read in response to the entire US-Sino economic relation/situation. 'Both sides' can surely agree on these sentiments.

I'll step out with you tinman, into the minority (I'm sure) and say free-trade is a good thing.
 
I don't buy it. There was a time that most everything was made in the US (like the 50's) and business payed a higher tax rate and things were still affordable. Tariffs have been used many times in American history and the economy prospered Tariffs . If free trade is suppose to be so good why is it our economic situation keeps getting worse and worse all the while more free trade is happening? And why is China and Asia resisting efforts to allow more US goods imported and being protectionist if trade is always good? As far as if the US was protectionist it'd hurt are exports, we are always running a trade deficits anyway. China has their own market plus ours and several others and we are somehow benefiting?
 
Well said Dan. So-called free trade is nothing more than cheaper labor and production costs to sell in the US market at the highest prices possible to the primary benefit of the global traders at least in the short run.
 
The US system of rules and regulations is one of if not the strictest when it comes to what a business can and cant do.We have a minimum wage,EPA rules,OSHA,over time and many other regulations that are to be followed and these are just a few.

These are good things but when the US tries to compete with China and other countries where rules are few and far between,it is almost impossible to do so.You have child labor,wages that my be $50-$100 dollars a month,no set number of hours that can be worked and you have an ideal setting for cheap labor.

This is something that the US and some other countries,to a lesser extent,are going to have to deal with.The answer isnt really known,on one hand tariffs are something that could be used but the economy is such a global market that doing so is almost like cutting you nose off to spite your face.

There is such a global market for cheap goods that if the US does impose a tariff against a country,that country will completely close its doors to any prospect of US made goods.We no longer live in a world where the US and a handful of countries control what happens economically.India and China are fast becoming the power houses of the world when it comes to economics and they are doing so with advancing technology and cheap labor.

Several years ago,the US and a few other countries made most products and could leverage their way into foreign markets,that is no longer an option in most areas of production.The vast majority of electronics and everyday products are made in those countries that have cheap labor and an almost unending supply of people that are willing to work for the low pay.The pay is low but in some of the countries that do this,the low pay they make is better than what they would get farming etc.

The US is also indebted to some of the countries that give us the low cost products and if tariffs are imposed,the debt may be called and the US in no way has that amount of money.

It is a problem,there is really no simple answer,at least not one that people want to hear.
 
You guys (your country) have been telling everyone globally to become more competetive, open your (our) markets to competition, sell your assets to the market which does it better, allow foreign ownership of your companies, float your currencies...for decades.

The rest of us have had pain, job cuts, profits going overseas, our icon brands sold to overseas firms.

And the result could always have been predicted.

Enriching the people who have made the things that you want so cheap, while taking away the manufacturing that your expanding standard of living could not manufacture goods for what you, the consumers were willing to pay for them.

I remember clearly, when our dollar was floated from a fixed $1.33US, and watched my family's purchasing power diminish, my parent's anxiety level increasing, Christmas gifts of matchbox and hotwheels cars rather that the kits that had been previously...all the way down to where our dollar could buy 45c US.

Response from on high was "get over it, your dollar was overvalued".

But it also lead to the current boom of $200,000 p.a. train drivers in the mining districts (and the hugely pricey Big Mac price that goes with same in order for Maccas to operate in such an environment).

I'm happy to go back to isolationism, happy to go forward to the market, but if you want to go back, then give us back that which you took in the process.

BTW, you could buy a Pontiac G-8 for 15% less than it cost to buy one in Oz.
 
The basic problem here is regulation, taxation and litigation. Hourly wages have little to do with it. Sadly, its ALL intentional. John--Las Vegas.
 
Originally Posted By: Torino
The basic problem here is regulation, taxation and litigation. Hourly wages have little to do with it. Sadly, its ALL intentional. John--Las Vegas.


I agree with the taxation and such but wages do have a lot to do with it.

Example,I have a company that remanufactures alternators.I have 100 employees and they make on average of $16.00 per hour,plus benefits.The alternators I make wholesale for $40.00.I have federal,state,county and city regulations and taxes that I must pay and follow,including over time pay and safety.

A company in China remanufactures alternators that are comparable.They have 50 workers and they make an average of $100 dollars a month and they dont have any benefits.The alternators made here wholesale for $20.00.The company here works as few as possible for as many hours as they want and in what may be dangerous factories.

I cant compete with the Chinese company.
 
We should just declare that all imported goods be certified that they are made to current US Labor, Environmental, and Safety standards. That would level the playing field. No more competition with slave labor and polluters.
 
Not to be political but the reasons are EPA regulations, High Taxation of successful business, Potential litigation and Cost of labor due to Unions , Health insurance Workers Comp costs.
 
IMO it simply comes down to the average cheapskate American being willing to pay for quality.
 
I'd like to know how Germany can manage to be one of the largest exporters in the world yet at the same time have strict environmental and labor laws, as well as higher taxes than the USA.

In the coming decades, I think it's inevitable that the standard of living in the western world will dramatically decrease while it improves in the 3rd world, until some kind of equilibrium is reached. As it is, I feel like we're just living off of the residual wealth of our industrial past and at some point it's going to run out. All that old FDR and Eisenhower era infrastructure is starting to crumble and our landmarks are being bought out by our foreign creditors.

I'm not that old and I've witnessed many small towns and neighborhoods transform from prosperous mill towns to meth-ed out slums in just the past 30 years. It makes me sick to go home to where I grew up and see all the boarded up buildings, burned down houses, empty factories, and junkies walking around --- it wasn't always like that. It seems like for every prosperous development with 4,000 sq ft houses on cul-de-sacs that go up, there are a dozen new slums.
 
I know what you mean! I see the same thing in the small towns I visited as a child that are now "dead" in the sense that the business's have "dried up".

I blame most of our economic problems on oil and all that is associated with it. Not to mention everything else that's been posted so far.
 
Originally Posted By: pcoxe
We should just declare that all imported goods be certified that they are made to current US Labor, Environmental, and Safety standards. That would level the playing field. No more competition with slave labor and polluters.


+1

Also US has the world standard in environmental consultants who can (expensively)

1) drill some wells, find some chemicals, and lay the blame
2) sue the guy who did it, or got snookered into buying the land
3) clean it up, slowly, issuing a fantastic paper trail then
4) monitor afterwards to prove they did it right.

We have probably 20 years if not more over China in this area of expertise.

Should not be impossibly hard to come up with a "we didn't pollute" label like an ISO certification. Goods that meet this level should have priority coming in. Like Dolphin Safe tuna (I know it's a weaker spec now) it may eventually become the norm. Especially if Walmart goes on a greenwashing binge and demands this of their suppliers. They could set up a paper trail like that for "blood diamonds" for raw materials.

This is why foundries and tanneries are overseas... but lucky for us, the US still makes all kinds of farm goods. We also have a decent natural resource level: wind, water, oil, coal, wide open spaces: Find a map of the world and the US is rarely suffering, even as we consume like crazy.
 
Originally Posted By: spasm3
Not to be political but the reasons are EPA regulations, High Taxation of successful business, Potential litigation and Cost of labor due to Unions , Health insurance Workers Comp costs.


The head of GE has gone on record as saying that there is no reason that American companies can not be competitive by producing in America. I don't have his exact words readily at hand, but they were to the effect of saying that America's executives have just used all the reasons you list as cop-outs, and they need to stop.
 
Originally Posted By: pcoxe
We should just declare that all imported goods be certified that they are made to current US Labor, Environmental, and Safety standards. That would level the playing field. No more competition with slave labor and polluters.

Something like it is already happening. In countries where poor working conditions are the norm, factories that supply American businesses usually have significantly better conditions. But you have to remember that it's not all polluting slave drivers vs. upright Western businesses. The situation is far more complicated than that.

I visited a garment factory in Bangladesh that feeds businesses in the US and UK; if you've bought a dress shirt from Tommy Hilfiger, Sears, Wal Mart, Target, Polo, Dockers, or Macy's in the past two years, I may have seen it on the assembly line. The whole place was kept meticulously clean, well lit, and ventilated. Safety measures were quite extensive, and they had very well equipped first-aid areas. Sensible working hour limits were strictly enforced. Folks who lived in villages where one well supplies water for 30 people would come to work and find liquid soap and electric hand dryers. Most of these were minimum conditions stipulated by the factory's contracts.

Now, was it as nice as working at an American factory? Of course not. For starters, although it had quite a mighty ventilation system, it wasn't air conditioned. Workers were in relatively close quarters by American standards. And here's the real kicker: Minimum living wage in Bangladesh comes out to something like $30 a month.

Are those things problematic? I'm sure most of us would say so. So, the question is, what are WE going to do about it?

One thing to remember is that some of the things that alarm us are not really problematic for people overseas, or may even be normal. To stay with the above example as just one of many, what we would consider to be a hot and crowded area isn't much of a problem for Bangladeshis. It's how everyone grew up. Air conditioning and more personal space would be nice, but those things are not treated as necessities like they are here. As long as the place is kept clean, it's fine.

But far more importantly, here's something to remember next time you buy a $60-$120 shirt: the factory that made it probably got $6-$10 for it. Factories can't pay better or provide more for their employees because our businesses won't pay better. Our businesses won't pay better because they don't want to charge their customers more. And they don't want to charge the customers more because we don't want to pay more.

Another thing to consider: If we don't do business with those countries, someone else will. The decision to give up a friendly business relationship between countries should not be taken lightly.

Besides, given the number of people who are perfectly happy to save a few bucks here and there by shopping at Wal Mart, a company that has sometimes abused American employees worse than some third-world businesses do, it seems we don't want it that badly anyway...
 
the OP's title question is laughable, and absurd, at the same time.might as well ask why can't politicians be honest, or why is there war and disease, and why can't gas be a buck a gallon ? the naivete kool-aid flows freely.
dood -- "... next time you buy a $60-$120 shirt:". right. i'm sure that there are lots of bitogers that spend that on a shirt. thanks, guys, for my first great laugh of the day.
 
If you bought $120 shirt, why is that factory which made the shirt in Bangla Desh gets only $6? Who is pocketing the $114? Doesn't the blame then lies on the American company which is keeping that $114? Why doesn't that company make the shirt in USA for $60 and be happy with $60 in profit? Because they do not want to lose out on the extra "free" $54.

- Vikas
 
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