Outsourcing Revisited -- Germany

Discussion in 'Politics, Religion, Social Issues' started by Desertrat, Mar 28, 2005.

  1. Desertrat macrumors newbie

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    #1
    From the NYT:

    http://www.nytimes.com/2005/03/28/international/europe/28germany.html?th&emc=th

    BERLIN, March 27 - Chancellor Gerhard Schröder, in comments published Sunday, calls on German companies to stop moving jobs and factories outside of the country in search of cheaper labor and lower taxes and to invest in Germany to provide badly needed employment here.

    snip

    Recent figures show that early this year unemployment reached more than five million people, or 12.6 percent, the highest numbers since the years before World War II.

    snip

    I wonder how much of this problem is going on in other European countries. I've commented before that I don't really see what a government can do about the problem. Seems to me that Bush and Schroder aren't political-philosophy kinfolks...

    'Rat
     
  2. pseudobrit macrumors 68040

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    #2
    IIRC, Germany has aggressive tax penalties for corporations who move jobs out of the country. So high, in fact, that most companies are forced to stay in Germany. I think the US could do likewise.

    Perhaps there are loopholes in Germany's plan; the US is one giant loophole.
     
  3. Ugg macrumors 68000

    Ugg

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    #3
    Slovakia has become the center of auto parts manf. in Europe. I think the Mercedes 4WD is mostly made in Bratislava. Through generous EU grants, Slovakia builds the infrastructure, has an extremely low tax rate and is pulling in an astounding amount of jobs. However, just like the red states they are net takers of EU funds. Without these funds, they would be unable to take jobs away from western Europe.

    Their schools are *****, the roads are a mess and you really don't want to get sick while in Slovakia as the majority of medical facilities are very run down. While the unemployment rate in Bratislava is under 5%, around Kosice it is over 25% and amongst the Roma or Gypsies it is over 75%.

    It is a beautiful country, one of the most heavily forested in central Europe, but it won't be for long if the government keeps sacrificing the land the people and their health for the sake of big business.

    France is also experiencing a net export of jobs. The penalties are even stiffer in France so it's not so much a true export as it is a matter of new jobs being created anyplace other than in France.

    Germany has slashed their corporate tax rates and personal tax rates, begun charging for some medical expenses, cut employment benefits by over half and imposed very strict limits on who can receive welfare benefits. Even so it will be a couple of years before the net effect is felt. Schröder of course is a Social Democrat, or what we would call a leftie.

    Bankruptcies have increased by a huge amount over the past few years, both personal and private, not nearly as many as in the US or the UK, but the Germans don't have near the level of personal indebtedness that Americans or Brits have and due to high personal savings rates, so the economy hasn't gotten a boost from low interest rates. Also, property price increases are very low and so there hasn't been much of an equity buid up due to home ownership outside of a few prosperous areas. Property has actually decreased in price in many areas due to the falling population levels. Much of the boom in the UK and the USA can be directly attributed to massive increases in property prices.

    Property prices in the Czech Republic and parts of Hungary, Poland and Slovakia are reaching record levels and wages are increasing as well add that to fuel costs and the attractiveness of these countries is slowly starting to lose its appeal. Romania and Bulgaria and parts of the Balkans are slowly starting to gain more foreign investment and if the Ukraine can ever get its act togethere, it'll probably get a fair amount as well.

    Although Germany has done a lot to make itself more attractive to business, the unions haven't given in a whole lot and businesses are hesitant to take on new employees if they are uncertain about the future, knowing that they are stuck with them for a long time whether or not they need them. The other major problem with business expansion in Germany is the lack of buildable land. The majority of it is in the Northeast, where the unemployment is the highest but the infrastructure is sketchy at best.

    Ten years from now it'll be interesting to see what Schröder's reforms have accomplished.
     
  4. takao macrumors 68040

    takao

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    #4
    outsourcing has been a topic for what ? a few decades now ? especially since 1989 whre nearly all companies started to outsource into the east...
    while the job situation in germany is bad in general it's not only because of outsourcing

    for example the general motor-opel disaster ..or deutsche bank who,after a record year and the highest profit increase (60%) ever, decided to fire more than 10.000 of their employees in germany only (and the thousends of jobs provided by the US army which got reduced as well)
    a few thousands here and there, combined with a 'recession' and you're up a few percent pretty fast

    on the other side in austria the job situation is better at the moment (don't know numbers but it was somewhere around 5%)

    other point: a lot of german companies kinda missed the oppurtunity of the new markets in the east ("Bank Austria" was one of the first banks with huge campaings and the OMV (oil) invested a lot of money as well etc.) ..they were to occupied with bringing the DDR back


    and of coures the germans are the absolute world champions in talking everything bad ;) ... not that we austrians are any better ... i have no doubt that in the next few years the situation will get better again
     
  5. Desertrat thread starter macrumors newbie

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    #5
    "IIRC, Germany has aggressive tax penalties for corporations who move jobs out of the country. So high, in fact, that most companies are forced to stay in Germany. I think the US could do likewise."

    And that's exactly why they have that 12.6% unemployment! That's why those very corporations have low profitability!

    Look: Forget about "move jobs out of the country". That very phrasing hides the real problem, okay? The job doesn't "move". Products are imported which are less costly to buy, here. Production costs are lower, elsewhere. Certain jobs are no longer as necessary, here, because that particular job is done elsewhere.

    Back when the US was the world's fastest-changing industrial leader, we had the identical problem internally in the US. Production of cloth moved from New England to the Carolinas. New England thus "moved jobs out of the area". The mass production of cars meant the demise of wagons and buggies and buggy whips and horse/mule traders. Did Henry Ford put all those people out of work? Computers meant the end of the use of linotypes in publishing. What would YOU have done, pseudobrit, about those poor, jobless linotype operators? Stop the introduction of computers? I think not. The advent of email was contributory to the white-collar recession of 1990+/-, since the need for all those middle-management people was notably reduced. Should we have stopped the development of email?

    Further, are you saying that there should be no chain stores importing large amounts of inexpensive consumer items? That there should be tariffs such that all US manufacturers were competitive with foreign manufacturers--the Gebhardt answer? Yeah, we'd buy less from overseas, which means that those countries would have massive unemployment--and thus buy much less from us. Think, "Great Depression, Part Deux". I suggest you read up on the Smoot/Hawley tariff law and its causal relationship with the 1930s.

    The marketplace always has won out over all governmental efforts to control it. It always will. The reason is really, really simple: Decentralized decision making will always win out over centralized decision making when you're talking economics. Centralized decision making only works really well when you're having a war--which is about all most governments are really good at.

    'Rat
     
  6. pseudobrit macrumors 68040

    pseudobrit

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    #6
    So what exactly do you propose we Americans do for a living? Service economy? Serving the few wealthy who outsourced all the jobs at every level? So we'll all make minimum wage cleaning up after the wealthy, and we can use our scraps to buy the junk from overseas they'll be gracious enough to sell to us?

    This isn't just "times-they-are-a-changing." This is the mass exportation of every single job possible to the lowest-cost part of the world possible to maximize profit for an elite few.

    What about the World Bank? The IMF? The international investment groups? That sure as **** doesn't sound like anything I'd call decentralised.
     
  7. pseudobrit macrumors 68040

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    #7
    And what that NYT article neglects to mention is that Germany's high unemployment rate and fiscal difficulties are largely due to the West still integrating the East.
     
  8. skunk macrumors G4

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    #8
    As Takao has pointed out, this is hardly a new phenomenon. And it must be pointed out that it is the directors' duty to maximize profits. The chorus of complaint from the citizens of a country which has achieved economic domination of so many lesser states by questionable tactics (see "Economic Hit-Men") has more than a whiff of hypocrisy about it. What about the US farm subsidies which are ruining the livelihoods of millions of farmers worldwide?
     
  9. takao macrumors 68040

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    #9
    wrong examples sorry... this thing isn't about technical advance a lot of jobs are simple shifted into another country, sometimes just a few hundred kilometers _doing exactly the same thing_

    and didn't henry ford say that every one of his workers should be able to afford the cars they are producing ? i seriously doubt that with a lot of the recent outsourcing and the ultra low paid wages...

    on the other side the averages wages in chez republic,slovakia ,slovenia,hungary and slowly poland exploded over the last 10 years...they are already so high that they are unattractive for outsourcing already and outsourcing further into the east is getting problematic for car manufactures for example

    and talking about laws and tariffs etc. about how many advantages/freedom companies have aka. how "liberal" the economy is... singapure is number one, the US is 11th and austria is aready on the 17th place for example...the difference is not that big isn't it ? do you know that chrysler/jeep is producing in austria despite being higher wages than elsewhere ? same for mercedes or BMW engines etc.
    it's not like those countries don't have such laws...

    sometimes it can be because it's cheaper and sometimes it can be done because of better infrastructure as well

    or lower numbers of union-strikes (unlike france/italy ;) )
     
  10. takao macrumors 68040

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    #10
    or the absolute disgusting methods of the Deutsche Bank: firing ten-thousands customer-service employees after the best,record setting year they ever had after gettign a 60% profit increase... and that are onyl example

    many very big companies did exaxtly the same ...and quite a few had record profit increases
     
  11. Ugg macrumors 68000

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    #11
    The idea of the free marketplace is one of the biggest fallacies ever. There is and there never has been any such thing. Marketplaces are highly controlled by big business and by government. As skunk rightly says, the massive US and EU farm subsidies make a mockery of a free market.

    If free markets were reality, the US would be rapidly moving away from oil as a major energy source due to its high economic, environmental and political costs, and would be embracing other sources. This is so far from the truth as to be laughable.

    I'm all for free markets but only when they are truly free, not simply "free" by an emperor's fiat.
     
  12. pseudobrit macrumors 68040

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    #12
    There is some irony in the fact that the attack dogs we've trained and unleashed on the world have come home and are tearing their masters apart now.

    I guess we're getting a taste of our own medicine.
     
  13. Desertrat thread starter macrumors newbie

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    #14
    I don't pretend to have a clue about how all these changes will play out. I don't know what the US workforce will come to be, insofar as the majority of workers. Right now, I'm not an optimist for many workers' futures.

    One ancient rule for personal success is "Find a need, and fill it." You guys who are still trying to make it through this old world are gonna have to do some figuring about your own talents and abilities, and other peoples' needs and wants.

    "This is the mass exportation of every single job possible to the lowest-cost part of the world possible to maximize profit for an elite few."

    So? Does it not also mean the lowest possible prices for purchases of the productions from these jobs? And, in those parts of the world, are wages rising or falling? Are they not better off than before? Where is it written that the "old" industrialized countries have any right to high wages and low prices? The US, Europe and Japan once had a lock on industrial production. No longer; the "Asian Tigers" found the key. ("Elite few"? Such as stockholders like universities, retirement systems, other corporations as well as tens of millions of individuals?)

    takao said, "wrong examples sorry... this thing isn't about technical advance a lot of jobs are simple shifted into another country, sometimes just a few hundred kilometers _doing exactly the same thing"

    The examples are valid insofar as jobs shifting in location: This has gone on forever. Technical advance is just part of it; mills moved from New England to the Carolinas because of cheaper labor and closer proximity to the raw materials--just as is happening today except that now, it's national borders instead of state borders.

    "and didn't henry ford say that every one of his workers should be able to afford the cars they are producing ?"

    Henry Ford DOUBLED wages: He profited from labor stability, for one thing; less new-hires to train and fewer workplace stoppages from disgruntled employees. The pay scale allowed him to pick and choose from among far more applicants than anybody else. Also, imagine the free, word-of-mouth advertising of "We drive the cars we make!" Regardless, the horseless carriage put a lot of other folks out of work--and that didn't help those folks' pay scale one iota.

    What difference does it make if one loses one's job to technological changes or to manufacturing elsewhere? Neither is subject to control.

    Of course there's no such thing as the perfect, the totally free marketplace. There is still enough freedom therein that efforts to completely control it have always failed. There is still enough freedom to bring harm to governments and giant corporations--as well as to individuals. And there is still enough freedom to bring Good Times to those who have some understanding of it. Somebody's gotta be doing okay enough to buy all those SUVs, right? Or enjoy their brie and vino? It might be the calm before the storm for them, though; I certainly have no way of knowing...

    And I don't theink the track records of the IMF and the World Bank are all that wondrous insofar as bringing prosperity to many of the countries wherein billions of dollars have been spent. Else, why all the economics problems that have continued therein? Africa and South America come readily to mind.

    :), 'Rat
     
  14. Ugg macrumors 68000

    Ugg

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    #15
    Yep, until recently most of their efforts have been failures. Their micro loan program has probably had more of a positive effect on the developing world than all the dams put together. There's something to be said for starting small and working up rather than the other way around. But, therein lies the rub, micro loans and other such programs don't do much for the multinationals.

    Who's to blame? Third world countries ill-prepared to hold off on projects pushed on them by the West? Or the westerners who essentially bribe the leaders of the countries with new planes, cars and all the trappings of western life? As usual, blame probably lies with both.

    I think people need to work things out for themselves, if they don't then dictators tend to pop up with alarming regularity, the middle east is a prime example of this and is most of Africa.
     
  15. pseudobrit macrumors 68040

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    #16
    Typically it doesn't. Price is set by the perceived value of a product, not by the cost of manufacture. Lower manufacturing costs can lead to lower prices if competition has an effect, but if a Thingamabob cost $30-45 when it was made in a first-world nation, it will continue to be priced at $30-45 when it's made in a third-world nation. Competitors who don't follow suit are vulnerable and may be leveraged out with temporary price reductions, but aggressively cutting prices is a good way to ruin most businesses.

    No, the wealthy barons found the key -- cheap, near-slave labour.

    They don't control the bulk of the world economy.

    Hey, I think what we're going to have to get used to in the US is that our time is up. We're no longer going to be a first-rate, first-world nation with the high standards of living we've grown accustomed to. I for one don't think it has to be this way, but the inertia is perhaps to great to reverse course.
    After years of being spared by our corporate masters we've been sold out just like the rest of the world. Their greed has finally overwhelmed any sense of loyalty they may have had left.

    For a few crooked folks with old money, times'll still be grand, but I think we're going to have to get used to the idea that the American Dream as was popularised in the 1950s is dead. In the next 50 years, we're going to look a lot more like Ecuador in terms of socioeconomic structure.
     
  16. skunk macrumors G4

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    #17
    Except that Ecuador will have moved on.
     
  17. Desertrat thread starter macrumors newbie

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    #18
    pseudobrit, I have a problem with "Price is set by the perceived value of a product, not by the cost of manufacture."

    Given what I know of my wife's manufacturing operation in the crafts/hobby world, and several other manufacturers therein, they'd laugh their heads off at such a statement.

    And, "Lower manufacturing costs can lead to lower prices if competition has an effect, but if a Thingamabob cost $30-45 when it was made in a first-world nation, it will continue to be priced at $30-45 when it's made in a third-world nation."

    Ever compare tool prices at Wally, compared with the Snap-On truck? Or compare parts prices at a Toyota dealership, with those at any of the chain parts houses?

    There are a gazillion items for sale, "out there" in the world. Tell me, which are not subject to competition in the marketplace?

    "No, the wealthy barons found the key -- cheap, near-slave labour."

    Which is better: No job, in Bangladesh, at zero per hour, or a job at 20¢ per hour? Everything I read about investments in Asia speaks to rising standards of living in those countries, along with rising wages.

    "Our time is up"? We probably will decline compared to China, I guess, but I really doubt we'll fall to the Ecuadorian level, or that Ecuador will rise very much over the next fifty years. Yeah, I'm a short-term pessimist, but I figure there are more Bill Gates/Steve Jobs-type folks around in some arena or another. This country has always been the place for ideas, and ideas plus investments equals business activity--which means jobs and money.

    'Rat
     
  18. pseudobrit macrumors 68040

    pseudobrit

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    #19
    C'mon, now, this is Business 101. If five companies make a widget for $80 and charge the customers about $100 and I come along and find a way to produce a widget for $5, I'd be the stupidest businessman in the world to start selling my widget for $10 (my profit margin is double theirs!) or even $30 (I've increased net profit by 25%!).

    The market will bear a stated price regardless of the manufacturing cost. If I found a billion-gallon well of sweet crude 3' below the dirt in my backyard, why would I sell for less than the current market rate for a bbl of oil?

    This is like asking me if I've ever compared the prices of new Lamborghinis with the prices of new Hyundais. One'll get you there just the same, but we're dealing with different target markets.

    There are plenty of corporations who are subject to only token competition. Microsoft, for instance. Pharmaceutical companies, too.

    "No, the wealthy barons found the key -- cheap, near-slave labour."

    Ayup. And in America, it took a $20/hr job and turned it into a $0/hr job. Fantastic. Guess who pockets most of the difference.

    We'll fall as far and fast as the bastards running the show think we can without totally losing our minds.

    By the time we're done, the days when a family could live on one 40-hour workweek will seem a distant fairytale -- oh, wait, we're already there.
     
  19. Desertrat thread starter macrumors newbie

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    #20
    "C'mon, now, this is Business 101. If five companies make a widget for $80 and charge the customers about $100 and I come along and find a way to produce a widget for $5, I'd be the stupidest businessman in the world to start selling my widget for $10..."

    Nope. You sell for $79.95 plus tax and smile all the way to the bank. If the competition finds ways to cut production costs, the sales prices keep dropping--for them and for you. Just like it did with desktop computers.

    "This is like asking me if I've ever compared the prices of new Lamborghinis with the prices of new Hyundais. One'll get you there just the same, but we're dealing with different target markets."

    Uh, no, not different target markets. The same: Mechanics. I'll agree that Snap-On stuff is more precisely dimensioned and better finished, but I have some "Brand X" wrenches in my tool box that I've used for over fifty years. And "World Parts" alternators and starters from AutoZone have a lifetime warranty, which Mr. Toyota doesn't provide. WP stuff costs about $50 per each, and Mr. Toyota gets a mortgage on your kid. My experience with two 22R motors (286,000 miles on one, 130,000 on the other) is that WP stuff lasts as long as Mr. Toyota's.

    "There are plenty of corporations who are subject to only token competition. Microsoft, for instance. Pharmaceutical companies, too."

    There are some 10,000 corporations listed in the three NY exchanges. Add in the rest of the world's exchanges. I'd say your "plenty" is rather miniscule...

    Ayup. And in America, it took a $20/hr job and turned it into a $0/hr job. Fantastic. Guess who pockets most of the difference."

    If you're going into the widget-making business, why would you seek a high-cost labor pool instead of a low-cost labor pool? (I stipulate equal quality and productivity, natch.) My overall point is that there has never been a guarantee that one's job will exist through one's working career. That this was the case for most of the 20th Century is in no way a guarantee for the future--as is now being shown.

    All through the 1970s and 1980s, there were numerous articles along the lines of, "The very nature of work is changing." Kipplinger's economics newletter's name is "Changing Times"--and that began publication long, long ago. In the 1990s, Clinton fairly early in his tenure commented at length about the coming changes in work, and the growing importance of education. (I thought it was neat to see a young fella agree with an Old Fart. :D )

    But I've noticed that few have paid attention, and "suddenly" (!) change is not something that happens to somebody else...

    'Rat
     

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