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Discussion in 'Politics, Religion, Social Issues' started by Sparky's, Feb 21, 2004.
Zell: Outsourcing is way of the world
Samuel Zell, chairman of the nation's largest real estate investment trust and known for his sometimes contrarian views, said yesterday that sending jobs overseas not only isn't a bad thing, it's the way Americans will protect their own leading position in the world's economy.
"Most of you have suffered demagoguery surrounding this bad word `outsourcing,' " said Zell, the founder of Chicago-based Equity Office Properties Trust, the leading owner of office space in the Boston area, with about 13 million square feet under its name.
Speaking yesterday at a Greater Boston Chamber of Commerce breakfast, Zell cited a study projecting 3 million jobs would be lost to cheaper labor offshore over the next decade.
I have had a little time to reflect on the issue I thought I posted originally, but I only got angry. I am not sure how to post a link to a PDF on my own MAC so here is the original article that got my blood boiling:
Sparky's, do you think that the insurance company deliberately made US salaries higher than those of India? Or that it was somehow responsible for the disparity in wages?
Nobody can stay in business unless the business is profitable. It doesn't matter if it's a little shop in a mall, or my wife's little box-building business for the crafts/hobby world, or Generous Motors.
The world has been changing, with many countries playing "catchup" to the US during this last forty or fifty years. Folks in the US have been sitting around, fat, dumb and happy in the belief "As it has always been, so shall it ever be." Oops!
Buggy whip jobs went away in the 1920s. Linotype-operators had to find a new line of work, in the 1960s. Textile mill workers' jobs first left New England for the Carolinas, and now to SE Asia. The same sort of thing is now happening in the white-collar world.
It will continue.
The only solution I see is for individuals and the individuals who make decisions for companies to figure out what can be made here that people in other countries will buy. Aand, what services can we provide here that other countries will use...
Some people always have been hurt by changes in the way things are done, and for a long, long time. That won't change. The world will always be in a state of flux, with all manner of changes. The irony in much of this is that satellite communications, an offshoot of NASA's efforts, were invented here and the various uses have been invented here.
"Welcome to the Information Age; it's open to everybody in the world. Step right in!"
The only thing about that is, this is ultimately a self-defeating trend. If more and more people are going to see their jobs go overseas and their salaries cut to half of what they made before (which is typical for people who lose their jobs), who exactly is going to buy the goods and services that the foreign workers are offering?
And I just don't see jobs like housepainting to be a great alternative. Fewer people are going to have the money to hire someone to do things like that for them.
Desertrat, great points. Robert McTeer wrote a brilliant article about this very subject called "The Churn: Paradox of Progress". His point is right in line with yours.
Things change, and great societies change with the world. Corporations will continue to farm work out of foreign countries as long as it's profitable. The labor is cheaper, and the taxes are very mild compared with our corporate double tax.
We, as Americans, are going to have to choose between kissing corporate @$$ in the form of major tax breaks that ensure our own comparitive advantage, or forcing companies to leave by keeping decades old tax policy.
Which reminds me... If Bush is so buddy-buddy with "corporate special interests", then why are companies leaving America in droves?
'Cause they all wave their patriotic flags here in the States while filing for taxes in the Cayman Islands. It's ridiculous how little some very, very large corporations pay in taxes due to all kinds of loopholes. I guess they need the money to continue to buy access to Congress though. I hear Walmart has moved from something like 750th to top 5 on the list of corporate givers over the past 4 years or so. Kinda like Microsoft realizing that once you get really big you better have some expensive lobbyists schmoozing for you in DC or things just don't go your way....
I agree with you in theory, Desertrat, but it sure doesn't help the unemployed much to hear about the jobs going away. And politically, it is not helpful to Bush. (Luckily for Bush it's not PC to complain about "undocumented workers" filling the menial jobs which used to be filled by minority US citizens.)
Personally, I don't think the recovery will take hold until petroleum prices go back down. During the later '90s, gas was cheap, which meant lots of savings for many industries. Simplistic view, I know, but until someone convinces me different...
Because Hoover vacume cleaner corporate charimen moved production overseas cutting labor costs without lowering prices. THat equals profit! Less wages, more profit for the CEOs. What's not to luv?
All this outsourcing is just a way to increase profits for a few at the expense of American jobs. Most of the manufacturing jobs overseas are crap too. The race to the bottom will not end well. Usually these sort of races end in a crash.
mac, as the government has become ever more heavily involved in the affairs of corporations, their lobbying efforts and budgets have increased. Are you surprised? Whether individual, corporation or country, organisms seek to defend themselves from "outsiders".
Regulations impose costs on corporations--and all businesses--and raise the cost of doing business. When the accountants start rubbing the P/E ratio against wages and regulatory costs, something's gotta give.
In a sense, as a country we're not competitive with the rest of the world when it comes to industrial production--just as some corporations are not competitive among themselves. As a country, we're on the verge of Chapter 11, and it ain't gonna be a fun time.
I suggest signing up for the free email subscription to "The Daily Reckoning". It's a contrarian financial newsletter. It takes a while to sorta figure out what is being talked about, since it's an ongoing discussion of economic affairs. I find it's value to be that it doesn't swallow nor follow the CNBC party line, nor drool all over Greenspan's obfuscations. I also subscribe to "Strategic Investment". I've made more than enough money off their advice to justify the subscription cost, although I'm not much of an investor at the moment....
Not surprised a bit 'Rat. Are you content with the status quo?
I hear a lot about dreaded regulations but not much about specific regulations that are bad. What are some of these bad regulations we should get rid of?
In terms of tax code I believe it's big business and big money that prefers complicated laws with small specific loopholes. They can afford full time tax consultants and lobbiests to take advantage of the system. There are a lot of multi-billion dollar corporations that pay almost no taxes. Some even get refunds on top of subsidies.
I think it's hard on small business (which create most of the jobs that stay in this country) but good for mega-corps that pay most of the lobbiests and benefit most from the govt. trough. This administration gives lip service to small business and huge breaks to outsourcing mega-corporations.
mac, whether or not I'm happy with the status quo doesn't matter. Whether or not government regulation is "good" doesn't matter. The amount of regulation we now have contributes to making our corporations non-competitive with the rest of the world. How do we deal with that fact? I don't know.
wwworry, our present tax structure has "growed like Topsy" for over 50 years. I don't pretend to be a corporate accountant nor a corporate tax expert, but I'd bet any corporation would come out ahead if we had a flat tax: "What was your income? What were the costs of production? Send in 10% of the difference." Talk about salary savings! Of course, that would lead to unemployment on a grand scale within the law firms which specialize in tax issues.
Regardless of any of the above, there is no duty for any entity which hires people to make things to be in any one place, nor to operate at a loss. IMO, a lot of this lobbying for Congressional favors of whatever sort is part of a rather wild struggle for survival in a world in which competitiveness is a helluva problem. If the favors don't actually help, the corporation leaves for other locations. Those who stay, outsource as they can.
I saw a window sticker the other day which said that the Ford Exploder's engine was made in Germany and its transmission was made in France. I know some Buick V6 motors come from some country in SE Asia. Question: Is it good that wages rise in otherwise lower-income or in poverty-stricken countries? Does this correlate at all to any idea that we in the US have some sort of right to high wages? Do we have some sort of right to have high wages and very high prices--stipulating high import tariffs on clothing, etc.? Wht do we tell the poor folks who barely can afford a $5 shirt at WalMart (made in China), when to support a domestic textile industry that shirt becomes $20?
I don't have any real answers...It just seems to me that there is little-to-nothing that any laws or regulations can do. And, I see no point in accusing the corporate world of chicanery when they're just trying to survive.
how about international agreements, like GATT, but instead on minimum wages (relative to GDP), environmental standards, and right of workers to organize. Think such things might not only be good for stopping job flight, but also would help workers in other countries to deal with the worst effects of globalization?
GATT, being an international agreement, would require a lot of votes in favor of that minimum wage. Do we have the votes? I think not.
What do you do about China? I just now got a "teaser" about investments in the face of China's efforts at economic domination. (From Gary North.) (Mostly, buy commodities.) Anyhow, it was mentioned that not only is the average wage around $0.61/hr, there are 200 million workers available to step in to replace those now working at those jobs.
China makes 40% of the world's laptop computers, 38% of the world's cellphones, and half of all shoes.
In 1979 there were no millionaires in China. Now, the richest 100 average $230 million. There are some ten thousand who are worth $10 million or more.
U.S. consumers spent $160 billion more on stuff from China than was sold from the U.S. to China--which takes me back to my earlier comment about the idea-folks getting it together.
The Asian rim "Tigers", I think, wouldn't vote in favor of a minimum wage of the US size, since this would raise the cost of their exports.
I imagine the Bushies are hoping and praying that the efforts to weaken the dollar will improve our export picture, and lead to more jobs in export-related manufacturing. The problem is that at some point inflation sets in because of the increased costs of imports (among other things). The government spending via budget deficit seems reminiscent of the proverbial little Dutch boy, trying to plug the holes in the dike. "Let's try to keep this sucker alive, until something good happens." I hate to say it, but we all better hope that this monetary pattern does indeed pay off. (I don't think it will.) A problem I have is that I don't see an alternative--except for the US consumer to shred credit cards and stay home--which means massive unemployment in the service sector.
Got plenty of KY?
It does matter 'Rat. If you don't like something you work to change it. Your inaction signals that you are content with a pay-to-play government.
I know, I know... Dangfino, they all do it, it could be worse, we're better than those other guys.
The brave words of a retired person. When manufacturing jobs moved abroad it was reasoned that the service sector would take over. Just as that process began, companies figured out how to send service jobs overseas. The sad truth is, working class wages in the US are on a downward spiral, and quite possibly, an inexorable one. If you don't believe that, take a look at the settlement in the recent supermarket strike in California. You may choose to have blind faith in "the system," but I can't help thinking about what the country will be like in 20 years if this process continues unabated.
This is a great thread. Lots of great points on both sides.
Anyway, did you know. It costs our government ~$150,000 a year to keep each steel job here? These jobs average $40,000/year pay. It would be cheaper to pay these people to sit at home.
Also, I buy stuff made in sweat shops on purpose. If we all boycott these businesses, where will those people work? There is not some $40/hour factory down the street from them.
Here's the conclusion of "the churn"
Job creation and job destruction are intertwined. They are both key elements in the process through which a society raises its living standards. This shouldn't be all that surprising to most Americans. It's so familiar, in fact, that the concept is captured in a single word--progress. Societies that deny the churn by trying to freeze employment actually retard the formation of new jobs and new sources of income. Societies that allow the churn to work reap the rewards of more employment and better living standards. in these fundamental concepts, ironic as they may seem, lies the key to achieving higher living standards.
I used to subscribe to this theory, that was until service sector jobs began to be exported. These jobs already tended to pay less than the manufacturing jobs they replaced. The net benefit of all this "churn" does not necessarily accrue to all of the players just because they have faith that it will. The trend seems to be towards raising living standards in poorer countries with few labor or environmental protections, at the expense of living standards in the more affluent nations. To make matters worse, the evidence points towards the types of service jobs in the US which by definition can't be exported, set on a downward wage spiral. This is not a path that leads to higher living standards in countries like the US, no matter how much faith one has in the basic economic forces at work.
I'm afraid that we are in another situation in which technology has brought disadvantages as well as benefits. However, as those teenagers clamoring for the deaths of the RIAA and MPAA will tell you, there is no turning the clock back.
Perhaps not, but this isn't a good argument for not looking over the next hill and trying to get a sense of where we're headed and whether we really want to go to that place. There's a huge space for us to explore between reactionary protectionism and blind faith in market forces, and I'm afraid that the latter ideology is winning out at the moment. If we continue to take the fatalistic course, I believe the trend is towards the nations who are not afraid of more proactive economic policies eating our lunch, and then our breakfast, and our dinner.
Great, now you can be cheap and feel good about it too.
Alot of these "wonderful" jobs we are so graciously bestowing on impoverished countries do not even pay enough for that country. You talk about creating high standards of living elsewhere in the world but that is not what is driving these mega-corps to outsource the jobs. It's more profit in the CEOs pocket. Please don't mistake the two.
High standards of living here were created by unions driving up wages and gains in productivity. It was not so long ago that crappy working conditions were the norm here and working poverty was the norm. Well now we are creating that squalor somewhere else except this time when the locals start asking for some of their share of the profits the company will know to leave the country immediately - before they have to pay a living wage.
What it all boils down to is Greed, more Greed and then some more. These companies along with our Govt could care a less about Americans. What they care about is money, they love money and will do whatever it takes for more. Same for business. If building those Imacs in China with child labor, no health care, no taxes,no Osha,and no concerns for the enviroment will profit Apple they will do so even more. Apple is only one of thousands doing this. Our Govt is making it happen. Big Business executives are happy because they get the Money and can screw the common man a little more. Its about Greed. This is why Big Business loves George and the gang. Greed,more Greed and then some more.
Unfortunately for many of us, competition creates a kind of "domino effect" when these sorts of things start. Once the first company goes offshore, others usually find that they must do so as well to remain competitive (and please the shareholders, IOW keep their jobs). Companies don't have much incentive to keep jobs here, because most consumers don't know and don't care where a product was manufactured (or a service performed), as long as it is the best "value" for their money. You can chalk it up to greed and more greed, but once the first domino falls, the others generally follow.
At least a few economists (not just in the White House) have been arguing that it's better just to let things run their course, instead of trying to stave off the inevitable and just postponing (or worsening) the problems later. They may be right -- but then again, the economists' jobs aren't going to India (yet).
At some point you've got to ask yourself where that course leads. Otherwise you're going on blind faith, and that's no way to run a railroad. Another way of explaining this careless attitude towards jobs and wages is to consider for whom this government is run. Do corporations care about the rate of unemployment? Are they for or against wage growth?
If Bush can win this election after millions of jobs are lost and wages stagnated on his watch, then he's liable to concluded that unemployment, like deficits, really don't matter. And maybe that's very much what his advisors and supporters have been telling him all along.