Bush Distances Himself from Aide on Exporting Jobs

Reuters ^ | February 12, 2004 | Adam Entous

[Alberta's Child]

Also . . .

Ironically, the Japanese manufacturer that builds cars in the U.S. typically keeps more Americans at work than their U.S. competitor. Not because they are less efficient, but because a company like General Motors has to carry such enormous pension/insurance costs and pay exorbitant union labor rates that they can only stay in business by outsourcing a large chunk of their operations. Basically, they can only afford to pay these high labor costs for final assembly by having the parts shipped from a supplier in Mexico.

[lelio]

"The (economic) numbers are good. But I don't worry about numbers, I worry about people,"

Almost the exact same words used by a Democratic senator in questioning Greenspan yesterday when he was showing a letter from a gradeschool class from his state (Missouri or Mississippi?).

In it he said that while 2% chronic unemployed might be a small percentage, its a vast amount of people and people is what matters to him. Now people might laugh at that being some Democratic talking point, but its interesting to see Bush picking up on it.

[brownsfan]

They could operate plants here in the U.S. and still under-sell U.S. manufacturers through superior management and by using non-union workers (often former UAW members!)

Hmmm... so would it be safe to say that offshore outsourcing is not necessiarily the most efficient means to reduce costs? The extention of this is that it is not the "high standard of living" in the U.S. that is to blame. In fact, the work force would seem to be an innocent bystander. Lazy, short sighted business executives seem to be a place to start when trying to figure out the offshoring trend? Remember, it was Henry Ford who realized he had to pay his workers enough to afford one of his cars if he was going to sell any cars. (And it worked).

[lelio]

If that happens with autos, either we tariff auto imports, or we lose the industry.

If? Flood of auto parts to come from China.

[oceanview]

yes, that is a move they are making. make parts and subassemblies in china to lower costs, and assemble the cars here.

absent all the other considerations of offshoring, that ALONE is not a bad thing. In other words, where offshoring works is if low tech, low skill jobs are offshore, while at the same time, the higher tech, higher skilled jobs remain here. so if china makes screws, and clips, and plastic parts that we then assemble into finished cars, that's fine.

but semiconductors is a good example of how these low cost nations are getting "smart". first the fabs were going to china, but their engineers could also do low level design, so that went. and as those engineers get more experience and practice, using their brand new fabs and design facilities provided by US corporation capital spending, higher level design is going to china also. and soon, without any fabs or design taking place in the US, why is semiconductor R&D here? the answer: it won't be in 20 years. china will have the entire industry top to bottom.
Except for the sales and marketing departments, the intellectual property guys, the lawyers, and the executive suite. They will still be in the US, you don't really think those guys are going to cut themselves out for the Chinese, do you!

[oceanview]

Bush needs to get rolling on this. At a minimum, he should use the bully pulpit to berate companies like IBM who are offshoring like mad.

[Alberta's Child]

Hmmm... so would it be safe to say that offshore outsourcing is not necessiarily the most efficient means to reduce costs?

In the case I cited -- yes. Remember that I was talking specifically about a complex manufacturing process that is becoming increasingly high-tech over time -- and involves a large product that must be transported in specialized equipment. That's why this works in the U.S., but you don't see any Japanese companies producing textiles in the U.S. The basic premise of globallization is that an economy functions best when individual processes are done in those places that are "best suited" to do them.

Remember, it was Henry Ford who realized he had to pay his workers enough to afford one of his cars if he was going to sell any cars. (And it worked).

Henry Ford sounds like quite the compassionate executive, but that famous approach of his was a bit misleading. Regardless of how much he paid his employees, the Ford Motor Company was not going to generate any kind of profit unless it had the ability somewhere in the production process to exploit what could broadly be defined as an "inefficiency" in the market. This is a complex concept to understand, and a lack of understanding of this is the underlying cause of much grief in our economy. I'll use a very simple example to illustrate the point.

Let's suppose that Henry Ford hired one auto worker to produce a single automobile with his bare hands, using materials he made from his bare hands or dug out of the ground with his bare hands. If Ford paid this worker $1,000 to make this car, and then sold him the car for a price of $1,000, he'd be out of business tomorrow. More likely -- he'd never be in business in the first place.

The only way the scenario I presented would ever work is if the auto worker produces cars that Ford sells to outsiders -- and the difference between his labor cost and the price of the vehicle (plus any profit that Ford makes) is a cost that is "carried" by someone outside the closed system of the auto plant. Ford can pay the worker $1,000 and sell the car for $1,000 -- but only if the worker also produces another car that can be sold for $1,000. This means reducing the unit labor cost of a vehicle from $1,000 to $500 -- and this can only be done by doing something that doubles the efficiency of the worker. At its most basic level, this involves the use of materials that are not made by the same worker who makes the car -- they are made by someone who is "best suited" to make auto parts. And they must be provided to Ford by a source that will charge less than $500 for the materials for that car -- or else there is no reason to use the outside supplier.

When you examine this scenario carefully, you'll notice that Henry Ford's pragmatic approach to his business had to end at the walls of his own plant -- or else he'd be out of business. Maybe he could pay the auto worker enough to allow the auto worker to buy a Ford, but the worker who provided the auto parts could not. Over time, maybe the worker who provided the auto parts could be paid enough to afford a Ford car, but the miners who provided the coal and iron to make the steel for the auto parts could not. Eventually, maybe all of the people involved in the production process would be paid enough money to buy a Ford, but then the truck driver and railroad worker who shipped the supplies to the plant and the Fords from the plant could not.

In reality, this example is overly simplified because the Ford Motor Company never started at the first step with a single auto worker making everything with his bare hands. But the reality is also this: Henry Ford was "outsourcing" part of his process from the very first day he started manufacturing cars . . . because he was building cars using steel from mills in Pennsylvania and tires from Ohio, using materials from iron mines in Tennessee and coal mines in West Virginia -- and none of these other workers was driving to work in a brand-new Ford automobile.

Do you want to know what "outsourcing" today is all about? It's the natural progression of an economy in which "everyone can afford everything" -- because somebody has to serve as the "inefficiency" in the market.

[Sender]

The only way there will ever be truly free trade is if American workers are just as willing to live in huts with no electricity and work in unsafe conditions for a dollar a day, as foreign workers are willing to do so at what seems to them to be a good wage. Of course this will never happen, and it should not. We deserve to have a modern, decent standard of living. As long as the third world is in poverty and desperate to take our jobs for pennies, and corporate CEOs with seven-figure salaries who will do anything to increase their personal wealth, there will never be free trade.

[1rudeboy]

What a load. Try and explain why the freer a country is economically, the higher its standard-of-living.

[Sender]

I can't explain it any more than Malkiw can explain why outsourcing jobs is good for America. I'm just a simple guy speaking my mind.

[1rudeboy]

We don't know whether Malkiw has explained his comment or not, although I suspect his skill at explanation is better than yours.

[Sender]

Hell, even your skill at explanation may be better than mine. And that's not much of a compliment.

[1rudeboy]

Maybe my skill at thinking my skill is better is better than yours?

[B4Ranch]

"There you go, bringing facts into the discussion!"

That will bring just about any emotionally charged discussion to a screaming halt on any forum. Never bring facts into the picture until you are fed up with the nonsense being spewed.

[B4Ranch]

"New York City may be the first place in the nation that has actually developed beyond the point where it can even be called a "service economy" anymore."

Just love your brainy observations! Truth is evil to those who deny it. Keep bringing out these facts, please.

[Swanks]

That's kind of laughable," spokesman Scott McClellan said, adding: "Our economic team is doing a great job."

Actually, the reverse is true. "Our economic team is doing a great job." spokesman Scott McClellan said, (That's kind of laughable)

[B4Ranch]

"I think government has a role in leveling the playing field until those countries "catch up" in living standard. And they will, eventually. I would agree that there has to be some pressure here as well. "

Why not just admit you support Agenda 21 and be done with it?

[B4Ranch]

"Bush needs to get rolling on this. "

How do you think this will happen unless we yell loud enough for him to hear us? So far, Karl Rove has made sure the President is kept in outside sound free areas only. He's pushing Agenda 21 (without ever mentioning the words "One World Government") as hard as he can and doing a better job at it than his father did.

[bvw]

Why would it be a campaign issue? Kerry's in the silk pocket more than Bush.

[EverOnward]

What do you stand to gain by outsouring the jobs in America. I'm betting more than 5% off your next pair of shoes (made in China).