Car made in Coventry? That’ll be a rare commodity in the future.
It’s all a bit odd, isn’t it? In the UK, we looked at the French way of doing things, thought, “bunch of left wing idiots”, and let Thatcher emulate America.
Within a decade our steel industry had been decimated, our coal mining industry had been decimated, car manufacturing had been decimated, clothing manufacturing had been offshored.
In the 90s we had the Tiger economies invest heavily in the UK. Fujitsu built an £800 million DRAM manufacturing plant in the North. No union, but excellent working conditions, and productivity was off the charts and another plant was going to be built next to it, so good was the output.
Plant was mothballed within ten years.
Same happened with LG Semicon in Wales, and another company up in Newcastle.
So, up sprang low pay, “dead mans shoes” call centers, to fill the labor market. Which didn’t last long once Mumbai and Bangalore offered the same service for a tenth of the price.
Our tradesmen have been priced out of the work market, by (admittedly far more dedicated and no less qualified) tradesmen from Eastern Europe who can earn in a day here, what they’d earn in a week back home. Can’t stop them coming; they’re from EU member states. It’d be like stopping people from Alabama seeking work in California...
The main product I work with is American and I’ve recently found out that WiPro (one of the biggest Indian outsourcers) is training up a whole team of guys to compete on consultancy for that product. With the blessing of the company HQ in the States.
(Of course, as soon as those trained consultants are offering to take on work from the continental USA as well as Asia and Europe, and are undercutting the VENDOR, the management in that company will cry foul and whine - but it’ll be too late; they’ll have sacrificed their own profit margin in the name of promoting the “global channel” model. Been there, done that, seen it time and time again).
Let’s get this straight: the free market works as long as it’s a level playing field.
When you have a situation like we have in the UK where ten non-unionized workers in the UK are more expensive to hire than fifty unionized workers in Bangalore, then the Thatcherite/Reaganite model falls flat on its ass.
“If we sack those five consultants, we’ll make another hundred thousand dollars over the next financial year.” We’ve all heard it.
Trouble is, this isn’t the 1980s.
Do that TODAY, and your five ex-workers will be competing against you on your own product, from the ranks of a rival in three months, they’ll be running a team of consultants in Bangalore who can undercut you on supporting your own product within a year (so you lose contracted renewals), and you’ll be out of business in five years... you short-sighted doofuses.
Free trade isn’t the problem. Priorities are the issue. It pains me to say this but the French have got one thing right: there are things that are far more important to the survival of a business, than the Quarterly Sales Target and the P&L.
Making sure you don’t go bust because a services company in Bangalore can deliver the same service with your product, TO YOUR OWN CUSTOMERS, at a fifth of the price, is just one example.
How much of the "Service Industry" hype came from politicians, and how much from MBAs?
My company decided if we eliminated New Product Development, we could save (make) Millions.
Of course, in five years, we had nothing to sell. But many quarters looked really good, so the bonuses flowed for the Chosen.
This is reasonably profound and interesting, in a big picture way, on the general topics of innovation, market disruption and how companies get their lunch eaten while being “smart businessmen” the whole way to insolvency and liquidation. By a Harvard Business School professor. 1 hour long talk, ~400M video download.
It speaks directly to your tales of outsourcing to Bangalore.
How the Principles of Good Management, as taught at the Harvard Business School, destroy companies
Video: Clayton (”Disruptive Innovation”) Christensen keynote at Supercomputing 2010
http://sc10.supercomputing.org/files/SC10-ChristensenPhone.m4v
If you find yourself losing interest, skip ahead to the Saga of Dell and ASUStek, starting at time 0:50:57.
Please don’t blame Reagan or Thatcher for this.
Under Reagan, the US economy grew by one-third. It was a stunning turnaround.
Thatcher had no less of an achievement in taking Britain from a basket-case in the 1970s to great progress. British Steel and Leyland and a host of Govt-run industries were a disaster. It was the right thing to cut them loose.
Their economic track records were great and you cant cite trade trends after they were gone as their fault. As you say yourself, free trade is not the problem. (And besides which Reagan was not a pure free trader; they kept truck import quotas in place and protected steel and Harley Davidson.)
So dont blame them. They didnt put in place, like we have in the US, nutty corporate income tax rates of 35% that tax money that is ‘repatriated’ up to that rate. It actively encourages companies to keep money overseas, where, you know, they can then hire and spend.
In the US, a Chinese made toy in Walmart gets taxed almost 0% rate, while a US made one has to pay for payroll, income, corporate income etc. And you are right, the playing field is NOT level, but The WTO rules and our failure to tariff-level the tax field is OUR fault.
Your DRAM plant is no different from fabs in the US. Or in France or Germany, look at Infineon, or the whole semiconductor industry going ‘fabless’ and sending manufacturing to Taiwan (TSMC). Intel CEO put the blame on US REGULATION. He says it costs and extra $1 billion due to US regulation. I’m guessing Taiwan is not so worried about global warming and about making tight rules on industry.
it’s not free trade, it’s not Reagan to blame. It’s these 2 simple basic facts:
1. We live in a global marketplace.
2. Our LEADERSHIP IS NOT 100% COMMITTED TO WINNING ECONOMIC SUPREMACY IN THE 21ST CENTURY GLOBAL MARKETPLACE.
With their distractions on socialized healthcare, phony global warming scares, environmental over-regulation, and financial regulations to refight the last war, and with sub-par education, our leadership is lacking.
China has an agenda: Become #1. What’s USA’s? what is Europe’s? Why does Europe squander its leadership on outrageous lies and follies like the global warming scam?
Why does Europe not stand UP for itself?
Our top leaders are community activists and lawyers. China’s top leaders are engineers. Who know better how to manage complex technological issues? hmmmmmm.