Help Me Understand The Ecomonics - So How Is The China Mfg Going To Hurt Us?
 

So Asia (China & India) are becoming world power houses in manufacturing and IT. The US is falling behind very quickly and save food processing and a few select industries our manufacturing sector has pretty much banged the dredges. Yet the US still has a high quality of life and the mean income that is darn good.

So, we loose all our manufacturing sectors yet all the other ways the US makes money is still intact - the law stuff, the accounting, the creative end of business, various services even some high end science and engineering. I am sure I have missed something but we are still making money.

I am not so sure that being out of manufacturing is so bad. Look it like this. You want to start your own company. You have a great product idea. You can build it or you can farm it out and then just market it and sell it. You will find out very quickly that your margins get soaked up when you build it your elf and try to be competitive. Let some other poor fool take it in the shorts. The competition to lower mfg costs can be brutal. So why not let Asia take the burdon?

Yeh, um right, trade deficit bad. But overall in terms that mean something, what is the overall economics effect. What would an economics professor say?

Mfg does provide jobs - the majority are the line workers at $8 to $15 and hour. The low wage that is filled by eager Americans? Nope. Enter Asians and Latinos. Even if we had the jobs, Americans wouldn't take them. They are there - I see it every time I go to a factory.

Wasn't it Asimov's Foundation trilogy that had the planet Trantor that manufactured nothing and administered everything? Trantor needed to import everything for everyday life from other planets. NOT a good way to live.

My area of the country would eagerly take all your factories paying $15 for assy line jobs. You won't need to hire illegals or move overseas.

An economics professor would say that a trade deficit is NOT NECESSARILY a bad thing. It shows that the economy is growing faster than the local supply.

I for one am not too worried about offshoring. Low cost labor jobs tend to be offshored, high paying engineering etc. tends to stay here. I dunno if you guys in Ca have noticed, but Silicon Valley isn't exactly empty. In fact, it is growing at a very fast rate. Even alot of the companies that were sending work to computer mills in India have now decided it's more economic to keep the work here.

It's telling that most of the people holding doctorates in the US were born elsewhere: We import brain power. Well, at least we did, until 2001 and immigration became a *****. Why are all these people coming to get higher education and work here? It's because this is where all the jobs requiring doctorates are!

Anyway...both The Economist and Newsweek had articles on this last month.

I respect your position but I disagree. US being capitalistic will put a factory where it will be able to be most effective and most profitable. If there are no factories where you are it is because it doesn't make any ecomonic sense.

Say what you want but US bidness is about profit. It ain't profitable yet - if ever to build items in your hood.:(

Took them long enough to figure it out.

Let's say I offshore a simple coding change--something that would take me 25 hours to code, test, and implement. Roughly one work week.

First I have to have an hour meeting with and offshore coordinator. Let's say the meeting takes one hour. That meeting has burned 2 man-hours.

Now I have to spec out the change. It takes me one hour.

Offshore says the change will take 10 hours. (See--we saved money!) Only 13 hours burned--so far.

I get the code back a week later from offshore that has allegedly been coded and unit tested per my specs. It doesn't compile. I have another meeting with the offshore coordinator and some other offshore QA guy and re-explain the specs. I am promised the working code tomorrow morning. 3 more hours burned.

Tommorow morning, and no code. 2 days of pestering the offshore coordinator and I get that the code will be ready Monday of next week.

Monday of the next week, and I have the new code, and it compiles. *Just to make sure* I decide to run some simple unit test cases...and the code doesn't do what I speced out. Not wanting to have to wait *another* week, I go ahead and correct the code (which doens't meet coding standards). Correcting the code and running unit test cases takes me 15 hours. Additional levels of testing take another 5 hours.

So, I predicted it would take me 25 hours over one work week to make the change myself, and offshore promised me 10 hours of their time plus 5 hours of additional testing for a total of 15 over one work week, and one day, for offshoring. It really took 35 man-hours over two weeks, one day, to offshore.

But the offshore labor costs less, so despite the innefficiency, the company still saved money, right?

Well, lets say I make $30 an hour. If I made the change myself over 25 hours, that would cost the company $750.

Lets say the offshore programmers cost $10 an hour. The offshore coordinators also make $30 an hour. If they made the changes as promised, it would have cost 10 hours of offshore programming time at $10 an hour for $100. Add that to a 2 man-hour meeting at $30, an hour of spec writing, and 5 hours of additional testing for a SUBtotal of $240. That brings the total estimated cost for offshoring to $340.

Per my (often-repeated, real-life) scenario above, there was an additional 18 hours of $30 an hour time. That is an additional $540 of cost. That means it really cost $880. So what, it cost $130 more than it would have if I made the change?

The problem is that every single time I have been forced to send work offshore, this scenario has happened. Sometimes, I've had to send work back 3-4 times before I finally give in and correct it myself. The code NEVER meets standards.

Are Indians bad programmers? No. But they don't have the business knowledge of nor the repeated exposure to the systems I work on to make quick coding changes that meet business needs and coding standards. The offshore guys usually only work on a given system once before moving on to something else.

More an more, the business rules that a run a business are encoded in that company's computer systems. Is it really a good idea to farm out a company's proprietary secrets to the lowest bidder?

Last year I had a job I was trying to source in the US (we try to keep what we can made domestically). It was steel tube, cut and punched, initial run was going to require the equivalent of 25 miles of tube. No fabrication, no paint, no powder coat. The reasons our other steel product went offshore was that we were told it had to be handled too many times, i.e. cut, punched, welded, sent out for powder-coat. In other words too much work.

I had four domestic suppliers look at the project and tell me they were interested, spent the time to meet with all of them give them each a drawing package and waited for their quotes. In the meantime, I sent one package to an offshore supplier I use for something that I tried to make here but could not for a competitive price.

I had a quote and sample back from the offshore supplier before I started calling the domestic vendors back to find out where their quotes were. Each one said they were interested and working on a proposal. I have yet to receive one quote - ONE YEAR LATER! Pretty sad state of affairs when you want to have something made here and there is a complete lack of support from an industry that is crying that all their jobs are going overseas....

$8 - $15 per hour....you must visit a lot of non-union shops. I think the Asia/India mfg growth will be the end of the union in the automotive manufacturing sector. The reason behind it isn't going to be that unions are bad or screw the company, it's because Japan has come here. They've come here and done it without unions. They pay their workers a good wage for the region, the plant environment is a good place to work, and there doesn't appear to be any need for a union in these plants.

So, what will it do to people who aren't affected directly by manufacturing....i dunno. I'm not an economics expert, but it can't be good for inflation. If there are overseas issues, and we aren't making the products, it's going to cost more to get them here. Look at gas prices. They jumped up a whole bunch. They later came down to the low-to-mid $2 range, and not too many people complain anymore. If they jumped up to that 3 years ago, there would be a lot of complaints. I'm guessing it will increase costs for the general consumer. India and China will become more industrialized, and then will begin to grow their own consumer base at a very fast rate.

Currently countries with trade deficits have the highest growth rates. Trade deficits and gov't spending deficits are two different things. Anti international trade ranting is a political scam that's sometimes effective as the flag waving and pro American is a strong emotional issue with voters.

At one time it usually took a country 7-10yrs of using their cheap labor to build an economic base. Not always as Mexico is a good example of economic screw ups. India and China has been out sourcing as they can't handle the entire load.. and their populations is just starting to become consumers. Illegal Mexicans is because Mexico's economy has no job opportunity for them.

Wait till the populist Boston Dems find out what country is in control of LNG Atlantic shipping to the NE US. It ain't the Arabs.

Blue collar job loss is economically doable. White collar job loss due to international out sourcing is another story and our economy has never tested that scenario.

What I think is happening now in the US is a loss of middle class job opportunity. The educated and uneducated spread seems to be growing wider. At one time around here a union construction job could support a family and a new car every few years.. not anymore.

You can thank the greed of the States and the Federal government for forcing corporations overseas. High taxes and mandatory employee benefits both add to the cost of manufacturing. It is hard to understand why a large manufacturer would want to stay in the US.

I would think if the only cost considered was the labor cost, many more companies would remain in the US. It is the cost of doing business, the idea that an employer should pay a wage, benefits, health care, and double and tripple taxes to the State and Federal government have more of an impact on companies moving overseas than wages.

The editorial page on the WS Journal answered the question in the 03-16-06 issue. Aparently we are not a debtor nation, but a net creditor nation. This means that part of our exports that are not being measured is the loaning of money and the income produced by foriegn investments in this country. If this is included we do not have a net defecit.

thx for clarification

What was the alien race in Life, The Universe and Everything that basically just managed the galaxy. Not sure they did anything but bark orders and practice accounting. Not really a bad gig. Why does it seem that the US is heading in that direction?

I agree.

I've posted a few times over the pelican years that we are in an economic war with India and China. Our gov't politicians have had an easy time in the past without world wide competition. I think the current problem is that the economic machine moves exponentially and politicians only move when there is a crisis.

fwiw.. I figure that our economy is much stronger that the talking heads say. Liquidity seems to be moving from real estate back into the stock market. My $ has been where my mouth is for over a year now. This year my mouth is even bigger with more $. If the Dems succeed in raising capital gains & dividend income and start an anti international trade trend I'm cashing out and moving to Belize. Raising taxes is somewhat near term and anti trade is a hidden long term monster with our said economy not reacting till it's too late.

and a rant about the illegals.
Mexico should be charged a million bucks for each Mexican that we legally import to cover near term taxpayer expenses. Illegals should be exported and Mexico charged for expenses. If they don't come up with the cash they could substitute oil drilling rights. What complicates the issue is a possible revolution or insurgency if Mexico's economy didn't have the blow-off valve of shipping their citizens here.

Mexico should go up in flames. Its one of the most corrupt, low life, no count, societies in the western world. The people that run that country have no excuse for what will eventually happen to them.

We should invade

Invade, hell no. WE should just let them keep their own people, that will settle the issue.

Theri country could be just as well off as ours, but not for the politics. Its up to them to settle that.

They can choose the commie way and be much worse off or our way and be only, well, as bad off as we are.

Some of the countries in E Europe are building nice economic models from scratch without old baggage. Mexico could buy and manage it's way out of economic growth dislocation if it had a relentless political leader with power. He wouldn't have to be very bright. All he'd have to do is sign up some Wall St bankers and pr crisis managers. NYC has world talent crisis boutiques that are in that league. Mexico's oil reserves are est in the untold billions afaik.

fwiw.. ny state baggage is so old we are experiencing a population decline. Common knowledge is make your money then get out asap before the state grabs it.

Big problems for US industry:

Healtcare costs
Legal/ liability costs
Unions to a lesser degree
Lack of capital investment
Overzelous EPA/OSHA regulations

I've managed several manufacuring facilities. The ability to find people willing to work on a daily basis is discouraging. Most of the unskilled labor has big time substance problems, lack of work ethic, or think someone "owes" them a paycheck. We have a whole class of people who are looking for a work related accident so they can get off on disability and watch Jerry Springer all day.

Tort reform needs to happen. Frivolous lawsuits are killing the US.

The social safety net is too broad. We need to take care of those who are unable to care for themselves. THe others need a swift kick in the a$$.

Lawyers are major campaign donators to the ___ party specifically.

What cracks me up is being able to be disabled under work contracts but not disabled enough to receive SSI.

They also wrote the best poetry:

Oh freddled gruntbuggly,
Thy micturations are to me
As plurdled gabbleblotchits
On a lurgid bee.
Groop, I implore thee, my foonting turlingdromes
And hooptiously drangle me
with crinkly bindlewurdles,
Or I will rend thee in the gobberwarts with myblurglecruncheon
See if I don't.

Re: Help Me Understand The Ecomonics - So How Is The China Mfg Going To Hurt Us?
 

Read Powershift by Alvin Toffler. Among other things, it deals with moving from an industrial age to an information age. Money can be made without reliance on manufacturing.

Of course none of it will matter once we reach the technological singularity and world operations are taken over by post-humans.


You mean the Vogons?

" Do Androids Dream of Electric Sheep?"

If you ask me shipping jobs to other countries has a limited life. The reason is that as countries expand their economies their standard of living goes up, and their wages get higher, and it becomes less attractive to send jobs offshore. Look at Mexico. They have lost more jobs to China in the last 5 years then they have gained from the U.S. The reason is Mexican wages have risen, Chinese quality has risen, and so Mexico can't compete on price/quality any more. It takes a long time, probably a couple generations or more, but wages in India and China are rising, and will eventually rise to the point where it is not attractive to send jobs there.

By then robots will build everything. Who do you think is going to be building those robot factories?

I, for one, welcome our new robot overlords!

You think we are dependant on oil now, just wait until the robots are in charge. A bunch of tin men looking for an oil can fix.

good.

Just point them south with programed oil field locations. I'm sure Thom can design a black market program that has them returning with delicious women.
Kinda like payback.

We may have moved from an industrial to information based economy, but we still need things. Cars, clothing, electronics etc. My concern is that our economy is not sustainable as we rachet further and further from producing the things we consume. We are a nation that spends all or more than we make relying on others to do the work. What is the logical conclusion to that? What are our kids going to inherit?

You didn't look at the WSJ editorial. We are a creditor nation, meaning they owe us more than we owe them or in other words we make more than we spend as a nation if you count properly. The point is that the so called trade defecit dosen't count all of our countries products that we sell. In other words its a bogus number.

Sounds like the old "GAAP" vs "Pro-Forma" dance. If we move the billions spent on Iraqnam to "good will" column...

Pardon me, but Iraq is no nam. It is the direct result of major screw ups by a series of Democrats. Starting with the biggest screw up Jimmy Carter and ending with the do nothing coke head Willie boy Clinton.

Several close friends died in nam, and the major reason for getting the heck out was we were not being allowed to win, again politics tops reality and american lives.

Iraq is truly supported by the people who are fighting for us there. This is the total opposite of nam, where everyone that came back from a tour was down and out against our being there, not because they didn't like war, but because we were being slaughered for political reasons. The lefties and the Democrats who have a BLIND hatred for Bush are willing to try and sacrifice our troups for political gain, nothing new, but they don't realize that there is a fundamental difference this time. This time the old nam vets are leading the way and letting us win, and win big. We would be out of there at this point but for the lefties and Democarats undermining our troups and president.

As to the defecit, don't bother to let the facts get in the way of your worthless opinion, its probably as solid as your iraqnam one is.

I guess if it is about products, I have to consider some companies like Merrill Lynch - Blackrock or Aetna - virtual products but profitable non the less.

I have introduced a product that has a huge gross margin and provides customers exceptional performance. It is virtual. It does not come in tubes, cans, pails, drums, totes or tankers but customers will spend spend spend for it and they get value and savings while helping improve their bottom line and keep there costs in line.

Products do not have to come in the form of metal or liquid or anything material per se.

Damn that kool-aide must be strong today!

• Clinton was a coke head?
• Iraq is somehow Carter's fault?
• the Iraq insurgency is the fault of the Democrats? (I'll bet the VC were an invention of the tie-dye'd bus-driving hippies, too)
• apart from expending billions in ordnance (defense contractors need that kind of churn) how were/are we 'winning big'? This whole escapade has pretty much gone downhill ever since "mission accomplished" photo op.
• despite my 'worthless opinion' you haven't provided any facts to back up your claim the US is a 'creditor' nation. Or are we adding "debt is credit" to Big Brother and the Ministry of Truth's list of slogans, Winston?

I did reference the WSJ which included a lot of references, But then you have to read real newspapers to know any real facts.The editorial page, the WS Journal, the 03-16-06 issue

Carter lost the middle east to terrorists when he lost Iran. There was no excuse for it. The precedent set there gave hope to all those terrorist that followed that they could do the same thing. So yes Carter is responsible for Iraq.

Insurance companies generally pay for negligence. So torts are not a significant source of company expenses. When comparedto taxes, and employee costs the cots of lawsuits rthat make people cry "tort reform" is minimal. Lawyers are easy scape goats to shift the blame.

I serously doubt the majority of people can define what is meant by "frivolous lawsuit." If a lawsuit is truely frivolous the penalties against those who initially brought the suit more than compensate the falsly accused party. You should be so lucky to be on the receiving end of a frivulous lawsuit.

Lawyers also comprise members of government and the heads of, or consultants to, big business. Very few make a move without a lawyer. Actually one of the only states that is not run by lawyers is LA and California. Those public servants either never went to law school or couldn't pass the Bar Exam. I guess that shows how non-lawyers do such a wonderful job. :D

Man..the number of conjectures stated as fact on this BB are astounding.

All WSJ articles

Motley Legal Crew
February 27, 2006; Page A14
Even as its asbestos and silicosis scams are unraveling, the trial bar is looking for its next industry to loot. It may have found it last week in a state court in Providence, Rhode Island, where a jury found three paint companies liable for creating a "public nuisance" by selling lead paint many decades ago. The mere presence of lead paint -- whether or not it was safely contained -- was deemed a danger to public health.
There are so many screwy aspects to this case that it's hard to know where to begin. The jurors heard no evidence about an injured party, nor were they informed of any specific house or building that constituted the "nuisance." As for the defendants, Judge Michael Silverstein instructed the jury that it wasn't necessary to find that Sherwin-Williams, NL Industries and Millennium Holdings had actually manufactured the paint present in Rhode Island or that they had even sold it there.
The bizarre tort theory in Rhode Island is terrible news for the paint business and the thousands of people it employs, and it has potential ramifications for other industries that make lawful products that years later turn out to have health or safety problems. It also demonstrates once again that "liability" in America has become completely untethered to either legal precedent or basic fairness.



Math Divides Critics As Startling Toll of Torts Is Added Up
By LIAM PLEVEN
March 13, 2006; Page A2
NEW YORK
-- It's easy to raise the blood pressure of an American chief executive. Just talk about rising tort costs and the burdens of asbestos exposure, medical malpractice, product defects and other lawsuits. The tort system is designed to compensate people who feel they've been wronged -- and rightfully so. But the extremes of litigation and the volume of lawsuits considered frivolous drive CEOs nuts.
The latest study puts the cost in 2004 at $260 billion, almost equal to the annual sales of Wal-Mart -- nearly $900 for every man, woman and small child in the nation. It projects that cost will rise to nearly $315 billion by 2007, outpacing the expansion of the overall economy.
Tillinghast's calculations get lots of attention in Washington, where the Bush administration has used the figures as a rallying cry to reform the nation's tort system, lamenting the "deadweight losses" to the economy. "The U.S. tort liability system is the most expensive in the world, more than double the average cost of other industrialized nations that have been studied," the Council of Economic Advisers said in a 2002 study of the subject that cited the Tillinghast research extensively.
The $260 billion for 2004 is almost twice the amount spent in 1990, according to the Tillinghast study. As a percentage of total economic output, tort costs, as defined by Tillinghast, actually fell during the economic boom of the 1990s, but have begun rising again, and could hit 2.27% of gross domestic product by 2007, the highest level since 1989, the study says.

Many economists who have looked at this subject find the numbers game somewhat frustrating, because it misses some bigger questions about how the tort system influences human behavior.
Ultimately, economics is the study of how people respond to incentives. So how should an economist calculate the cost to society of a medical student who chooses not to become an obstetrician because malpractice insurance in that field is getting more expensive? Or the loss to society when a company decides not to roll out a new product because its executives are afraid of potential liability claims if something goes wrong? Neither scenario figures in the Tillinghast calculations.
"A big part of the cost is a black hole," says Douglas Holtz-Eakin, a fellow at the Council on Foreign Relations who was director of the Congressional Budget Office in 2003 when it published its own look at the economics of tort liability.

More important, he says, are costs that may be "altering behavior in undesirable ways."

Nonetheless, Mr. Holtz-Eakin says: "It's an imperfect indication of something that's a big deal."