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

[M.D. Holloway]

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?

[snowman]

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?

[M.D. Holloway]

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.

[Flatbutt1]

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.

[DaveE]

Originally posted by LubeMaster77
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.

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.

[1967 R50/2]

Originally posted by snowman
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?

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.

[M.D. Holloway]

Originally posted by DaveE
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.

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.

[legion]

Originally posted by 1967 R50/2
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.

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?

[deanp]

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....

[Jay Auskin]

Originally posted by LubeMaster77
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.

$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.

[RoninLB]

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.

[pbs911]

Originally posted by DaveE
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.

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.

[snowman]

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.

[RoninLB]

Originally posted by RoninLB
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.

Originally posted by snowman
The editorial page on the WS Journal answered the question in the 03-16-06 issue.

thx for clarification

[M.D. Holloway]

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?

[RoninLB]

Originally posted by pbs911
You can thank the greed of the States and the Federal government for forcing corporations overseas. 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.

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.

[snowman]

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.

[M.D. Holloway]

Originally posted by snowman
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

[snowman]

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.

[RoninLB]

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.