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I work for a plastics company. While most of our competitors were moving their production oversees our company was automating to save on workers cost and kept about 90% of our production in the USA. We have one factory in China and the cost of doing business over there has skyrocketed I’m told. Shipping costs have also increased dramatically and when you are shipping a low cost product often the cost to ship it long distances can eat into a huge junk of your profit margins. All 3 of our main competitors’ build their products oversees and 2 of them have gone out of business this year. Our company is financially sound and still making a profit.
It should be obvious that a service economy can’t exist forever especially not now that our financial sector is shot. The service economy was made possible only by the credit and housing bubble. We have too many Waiters, Attorneys, Chefs, Interior Decorators and a dozen other service based occupations in this country that’s a big reason why we are seeing so much long term unemployment.
American companies can compete with foreign companies as long as the trade laws are enforced and we are going to see that after the recession. It didn’t matter before when it was only middle class people losing their jobs but now that the rich and powerful are losing billions I can’t imagine their not being a real restructuring of the American economy.
Last edited by ddmhughes; 07-01-2009 at 07:12 PM..
Reason: weird copy and paste effect
I work for a plastics company. While most of our competitors were moving their production oversees our company was automating to save on workers cost and kept about 90% of our production in the USA. We have one factory in China and the cost of doing business over there has skyrocketed I’m told. Shipping costs have also increased dramatically and when you are shipping a low cost product often the cost to ship it long distances can eat into a huge junk of your profit margins. All 3 of our main competitors’ build their products oversees and 2 of them have gone out of business this year. Our company is financially sound and still making a profit.
It should be obvious that a service economy can’t exist forever especially not now that our financial sector is shot. The service economy was made possible only by the credit and housing bubble. We have too many Waiters, Attorneys, Chefs, Interior Decorators and a dozen other service based occupations in this country that’s a big reason why we are seeing so much long term unemployment.
American companies can compete with foreign companies as long as the trade laws are enforced and we are going to see that after the recession. It didn’t matter before when it was only middle class people losing their jobs but now that the rich and powerful are losing billions I can’t imagine their not being a real restructuring of the American economy.
Good to see someone here with a positive attitude. Like my mother use to say "Think positive and positive things will happen".
I agree. The US is depreciating the dollar with its monetary policy, and a cheaper dollar means an effective cost of labor that is lower when selling to the rest of the world, and it means that American goods are cheaper on a relative level than goods produced in other countries. When the euro hit 1.6 against the USD last year, American manufacturing increased a lot. I don't think it will be some huge comeback but it will definitely be noticable, IMO, assuming the dollar follows the course that the fed is basically putting it on with its monetary policy.
I agree. How can some one compete with the slave wage they are paying in China? Manufacturing is going, going and will soon be gone.
China has very high inflation relative to the US and a currency that continues to rise in value relative to the USD, despite Chinese efforts to peg the yuan to the dollar. The only reason Chinese labor is "dirt cheap" is because of currency manipulation and teh fact that China is "emerging." Once it emerges its lost cost advantage will to a certain degree go away. A lot of companies are shifting production to Vietnam from China for this reason.
If you want a good case study on a low cost, emerging economy going out of factor due to its success, look at Taiwan. It was once a haven for low cost manufacturing but it became too expensive as it, essentially, became a developed Asian economy. A lot of production there has shifted to China and Vietnam.
China has very high inflation relative to the US and a currency that continues to rise in value relative to the USD, despite Chinese efforts to peg the yuan to the dollar. The only reason Chinese labor is "dirt cheap" is because of currency manipulation and teh fact that China is "emerging." Once it emerges its lost cost advantage will to a certain degree go away. A lot of companies are shifting production to Vietnam from China for this reason.
If you want a good case study on a low cost, emerging economy going out of factor due to its success, look at Taiwan. It was once a haven for low cost manufacturing but it became too expensive as it, essentially, became a developed Asian economy. A lot of production there has shifted to China and Vietnam.
I agree with everything you said but I would also add that China keeps its cost down by having substandard safety and environmenal regulations. I'm in charge of the Safety and Environmental aspects of my company and when you have someone injured at work its very expensive. In China the costs of injuries are shouldered by the employees. In the long run society pays. Safety always saves money in the long run.
I don't think this idea is too far fetched. As a rule we tend to take everything way too far until it hurts us and as a country we've probably done that with manufactoring. When unemployment is 4% nobody really cares about any one sector. But with unemployment in double digits, and likely to stay that way for years, I suspect the pressure will mount to implement whatever incentives are necessary to create jobs. Bringing manufactoring jobs back and/or enticing companies to locate here seems well within reason. And, "if" the dollar falls that will only help provide an incentive for companies of all types to open shop here.
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