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It's hard to believe that this product can be manufactured for less money in China than it can be in America. The difference in cost (including importing, and all that goes along with that) can't be more than a couple of pennies per piece. It will sell here for the same $2 regardless of where it is manufactured...
I think it was about 15 years ago that the Japanese were buying our scrap steel like there was no tomorrow. They put it on ships and took it to Japan where they melted it down and then shipped the finished stock back to the US and sold it at a profit. Think of that... transportation to a west coast port, shipping it across the Pacific Ocean, re-melting the scrap and manufacturing new steel, then shipping it back across the Pacific to sell it to the people they bought it from. And turning a profit. How could they do that?
5 years ago my son was driving for a local trucking company. He would take a semi truck load of new tractor tires (other drivers were taking wheels) from our local John Deere Waterloo Tractor Works to a parking lot on the Mexican border in Texas where a crew from a Mexican company would come and trade his trailer for one that had tires mounted to wheels. He would then bring the completed assemblies back from Texas to be installed on new John Deere tractors here. That is a 2400 mile round trip. Someone local finally figured out that they could buy a couple of tire machines and a few trucks and do this work here and make a bunch of money at a cost to John Deere of less than what they could do it for themselves.
There are certainly a lot of issues involved, the biggest of which is the cost of American labor.
Why does a new Ford pickup cost $50,000? Why does a new John Deere tractor cost $250,000? A new combine $400,000? How much would those vehicles cost if Deere and Ford still did all of their work in house, rather than farming it out to less expensive local shops?
Most Americans can't afford American made products. Well, they can buy the products, but can't really afford them. It's all about the easy availability of consumer credit... "Creative" financing. Bankers. Stock holders. Government subsidies...
I remember the uproar when Jaclyn Smith opened her garment factory in Central America. American (California) Labor screamed about Ms. Smith taking advantage of the locals by paying them a dollar and a half an hour. What Labor failed to tell you was that the average wage on the local economy was about two-thirds of what JS was paying and that the working conditions were better. (Change Jaclyn Smith to Nike, Reebok, Lee, Levis, and every manufacturer of small electrical components in America today...)
Maintaining one of the highest standards of living in the world has a price...
How did we get to where we are today? Is it natural evolution that a growing economy has to, at some point, stop? What happens then?
How detrimental to our economy is the cost of compliance with government rules and regulations? How many of those rules and regulations are unnecessary? How many of them are legal?
I'm not an economist. I don't have the answers. Merely thinking aloud.
10 comments:
What you are seeing is the end result of decades of labor unions raping American industry. It's not just about the wages, it's the benefits and the effect of union seniority rules and collective bargaining that prevents an employer from hiring/promoting the best and firing the worst.
The manufacturing labor unions in this country are hanging on by a thread. They have priced themselves out of existence. The government employee unions, though, are alive and well (and are the largest contributors, bar none, to political campaigns). The union representing the county workers here went absolutely ballistic a couple of years ago when the County Board of Supervisors suggested that they pay $25 per month toward their insurance premium and a small co-pay. Seriously. Why should government employees receive better pay and benefits than the people in the communities they serve?
That's the $88,259.63 question, about the gov regulations. Apologies for the number, inflation ya know. ;)
Seriously, though, the rules are one of the main problems. To analyze the circles within circles as to why the rules are the problem would take three pages on your blog, so I won't waste your space. :) The basic answer, to me anyway, is that gov never gets smaller, and as society and industry evolve and improve, gov expands to "supervise" how industry functions. Do you remember, Blue, in 1990 when EPA required businesses to be responsible for purchasing a "stormwater runoff permit" because of the possibility of pollution?
http://www3.epa.gov/region1/npdes/stormwater/
A permit for rain? that's gov for ya.
Now, I realize that construction vehicles leak oil and diesel, but there are easier ways to prevent the fluids from getting into the sewer system than to have companies pay for a piece of paper that says "do this or else".
As always, Grog, I appreciate you showing up and sharing your thoughts. :) You are spot on. Whenever there is growth, the government does its best to suck the life out of it. And many people believe that that is how it is supposed to be and how it should be.
I doubt that the Founders ever envisioned the government being involved, deeply involved, in every single facet of American life and Industry.
Have a gooden!
As a small aside, think about tax. Specifically a value added tax. Specifically everything manufactured from taking raw material from the ground to final 'retail' sale is taxed along the way including the those who actually do the work. Like vast sucking sound ......
Worker
Its not just the cost of labor its the cost of complying with thousands of government regulations. Add to this endless taxes like social security that are hidden and you have your explanation.
I saw 8 American auto factories in Mexico in 1980 today there are over forty. Mexicans do not have real labor unions. A Mexican earns perhaps 1.50 an hour and this is one of the best jobs in Mexico. We see idiots demanding 15.00 an hour today.
How long before a machine gives you your hamburger?
As for exports, the idiots will tout the benefits of not having tarriffs. What is made in the USA today? Tvs, computers, washer machines, what is actually made here.
Yes, I agree with both of you, Anon 19:08 and Anon 19:39. Taxes are a part of it. And fees, and fines and all of the dollars that go to compliance... I'm surprised anyone would even want to do business in this country anymore.
"Unions are a necessary evil" so said my manager father 40 years ago. At that time, there were steel mills on four corners of an intersection. Then the unions out priced us from the market. So instead of having a job with unrealistic wages and benefits, now you have NO job. The Chinese took every industry we threw away. No more textile or leather factories to make clothes and shoes. Again, thank the unions. There is no such thing as an out of work union official with a $500 shark-skin suit.
Back to my Dad. In 1974, the Teamsters Union 150 of Chicago wanted a $1.50 raise for its drivers. My Dad said he go with $.75. Some of the drivers thought that was OK or fair. The died-in-the-wool union-socialist-rabble-rousers screamed that this wasn't even close. They wanted the drivers to vote on it. My Dad told the drivers to make sure they went and voted. He said that if they didn't, then the "feather-bedder-lay-abouts" in the union hall would do the voting for them. My Dad offered to drive them to down town Chicago so they could cast their ballot. He said he'd buy them breakfast afterwards. The union steward and the hard core types politely told my Dad to bugger-off. OK. A week later, the drivers come to work. The dispatchers ask, "What are you doing here?" The driver says, "To work according to my start time." The dispatcher replies,"You voted to go out on strike last night." The driver: "What!? On a Sunday night? You're lying! This is a lock out!" Dispatcher: "Call the hall." Driver calls the hall. Yep, he's on strike - but he was never notified that a vote was taking place. So, for 6 weeks, the drivers are on strike for $5 a day to carry a sign. My Dad prvides coffee, rolls, and sandwiches. Did the union? NO. Did any of the union reps come and see their guys? Not much. When they did, they almost got tarred and feathered. In the end, the drivers settled for $.85 an hour increase. They wouldn't make that back anytime soon. There was no Over Time for the rest of the year. BTW, they were concrete truck drivers. 2 weeks later, the Cement Finishers went out on strike for another 4 weeks. It was a long winter of 1974-75 and dollars were scarce in many of those households especially around Thanksgiving and Christmas.
My father would lend money out of petty cash so the drivers could put food on their tables. He / the company gave the drivers turkeys for Thanksgiving, a no-cash-open-bar and buffet Christmas party, hams for Easter, beer for Memorial Day, and NY strp steaks for Labor Day. Did the unions? NO. Did the drivers say "Thank you"? For the most part, NO. Union members, next to the Snowflakes we see today, actually believed they were "entitled" to unrealistic wages.
So, between the two, they started the slow, suffocating murder of the American work ethic of "an honest day's work for an honest day's wages." You can partly thank the unions for putting us where we are today. And, they continue to think like it's the 1960s or 70's. They are caught in a time warp and not interested in making the US competitve ever again.
We have met the enemy and he is us.
It sure was fun being middle class.
Union leadership, like our government, has the interest of the "ruling class" first and foremost in their minds. Those of us who pay the bills are usually an afterthought...
Yep. Mind over matter. They don't mind and we don't matter.
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