Offshoring U.S. Jobs

[Grammatron]

This is something I do not understand. A lot of people on this forum clame USA to be an evil, greedy Empire that just wants to steal resources from other countries so those in the USA can live comfortably. However in order to do so it must move the jobs to other countries where there were none thus creating economies there and in the process pissing off American voters who can reverse the whole system. Please explain.

 

[dsm]

What do you mean by "we"?

The disenfranchised American worker...

(On the other side, I am not talking about "just" China.)

Changing the situaiton is easy, if those in power wanted it to change it could change tomorrow, but they are the ones making it the way it is in the first place.

Cynical. An enraged American consumer that understands what is going on is a considerable force in the market. The problem is educating the disappearing American middle class.

We, the working classes of the world, are not the parties involved, and our interests are not served.

But don't we have the ultimate power under the American political system?

Actually America working class' intersts are served as consumers of the virtual slave labor of China, our new American colonial industrial plantation.

Ultimately, this is not true. Initially, while the American dollar remains important for the bottom line of corporations, the American working class potentially benefit from the lowered costs of production in China. However, as more and more workers loose their jobs, the size of the American market shrinks until, eventually, it is no longer relavent in the overall global market. At that point, American supremacy vanishes.

 

[Malachi151]

The problem arises in the fact that capitalsits themselves operate in relation to self interests (that not the problem), and because of this the drive of a company is to buy labor as cheap as possible and sell the prodcuts of labor in a market where the cost of labor is high.

This means that it is to the advantage of capitalists that there always be a high and low labor market.

The separtion of the world into countries with separate economies facilitates this, allowing capitalists to compartmentalize labor markets.

The individual capitalist, because of competition, can't say, "well, if I pay the guys in Chinahigher wages they will have more money to buy more products from me 50 years from now", becuase if they try to pay them more, then the immediate effect will be an American company that continues to get lower priced labor outselling them in the established Western markets and eventually driving them out of business, so the status quoe is to constrantly keep tryign to get labor as cheap as possible.

This problem existed in America as well, and the problem was solved by the implmentation of a federal minimum wage, which actually worked to the benefit of established industry by taking a basic level of labor cost competition out fo the picture and enabeling the creating of a real national consumer base. The same will have to be done on a global sclae, or else what is going to happen all consumer bases are going to be destroyed as the competition for cheap labor drives labor prices down, as we are starting to see now in America s we comepete with China and India for jobs.

The only thing that has made the America "capitalist" system work over the past 60 years is state regulation. In order to make a global capitlaist sytem truely work it will require a "global state" to regulate it.

 

[dsm]

What this means is that it is now a global playing field for the company, but the problem is that the workers are not thinking globally, only locally.

In the real world, does the average worker have any choice? In the past, when there were still open spaces to move to, the call was to "go west, young man" -- in other words, follow the jobs. Today, it really is not possible for the American worker to move to (say) China or India to compete for jobs that used to be American. Even if the country in question allowed an influx of American workers (which most do not), the American worker would be at significant disadvantage in the new market as most countries (other than the US) do not provide assistance for things like learning the local language.

No, the US worker really has no option other than to think locally.

(I'll see your 2c and raise you 2c.)

 

[Zep]

Zep,

Good post. However, I disagree with the very last paragraph.

At its core, capitalism is consumer driven. Companies that don't give consumers what they want, quickly lose lose them to other companies that do. Lose too many customers, and they're out of business.

If by saving millions of dollars the company is able to offer their product at a much lower price, I expect that's what will matter most to its customers.

But if not, as you predict, then the companies that do stay connected with their customers will be successful and the "globalization" trend will die off.

In my opinion, price matters much more to consumers than "connectedness." But the market will ultimately show us which view is correct.

I don't understand why either result should worry you, however, since it is all a process of meeting consumer demand.

To an extent, you are right. But both price and customer satisfaction need to be provided for the company to survive. Real-life example:

HP Australia recently moved their whole Customer Phone Support centre to India. It's way cheaper in HR terms to do it there, and they have the comms structure and pricing to support it now. It's a good financial move for HP, but...lots of trained customer support staff here in Australia are now looking for work elsewhere and taking their customer inside knowledge and goodwill with them.

Time passes. Then we have an HP product problem and I call HP. I get a guy in Bangalore who is six hours behind me, doesn't know me from Adam or our company from dirt, doesn't know where Sydney is let alone which is the nearest support centre to my office. He tries to be helpful, but he has no ability to deal with anyone outside Bangalore, and so is up against problems he has no control over and cannot beat.

The thing is, my previous support contact did know all this stuff. We were even on first-name terms. He knew my company, our intentions, our ongoing issues, and could put us in touch with the right local support people if needs be. Sure, he cost more for HP to "run", but he also kept the customers satisfied and thus the money rolling in.

In summary, we used to get our HP problems solved in a few hours over the phone and we were happy. Now it takes days, many calls, much email, and may not even be resolved ever. HP may be managing their bottom line better, but this is one disgruntled long-time HP customer who is probably going to Dell next time we buy.

(Btw, if you get into the non-PC stuff that HP sell, it gets WAY worse than this!)

So do you see the importance of customer satisfaction in this equation? In the global economy, some companies are trying to finance-manage themselves straight into the ground...

 

[dsm]

This means that it is to the advantage of capitalists that there always be a high and low labor market.

Perhaps. However, it is not to the advantage of the capitalists to turn a high-priced labor market into a low-priced labor market as that cuts into the ability of the market to buy the capitalist's products.

The only thing that has made the America "capitalist" system work over the past 60 years is state regulation. In order to make a global capitlaist sytem truely work it will require a "global state" to regulate it.

But this may take too long to setup to be of benefit to the American worker. The reason is that the rest of the world will not see a benefit in the "global state" until long after the American worker is no more.

 

[dsm]

This is something I do not understand. A lot of people on this forum clame USA to be an evil, greedy Empire that just wants to steal resources from other countries so those in the USA can live comfortably. However in order to do so it must move the jobs to other countries where there were none thus creating economies there and in the process pissing off American voters who can reverse the whole system. Please explain.

Your incorrect assumption here is that the USA is in control of this situation. It is not -- the corporations are.

 

[Grammatron]

Your incorrect assumption here is that the USA is in control of this situation. It is not -- the corporations are.

Let's say that you are correct and corporations are in control. How would you explain the problems they are having? After all, they're not exactly raking it in right now. After all, if you take away jobs from Americans and Americans are the biggest consumers you destroy your biggest consumer market. Unless of course you mean to say that corporations are stupid and did not see it but are able to run the world.

 

[Zep]

Let's say that you are correct and corporations are in control. How would you explain the problems they are having? After all, they're not exactly raking it in right now. After all, if you take away jobs from Americans and Americans are the biggest consumers you destroy your biggest consumer market. Unless of course you mean to say that corporations are stupid and did not see it but are able to run the world.

Ka-ching!

 

[dsm]

Let's say that you are correct and corporations are in control. How would you explain the problems they are having? After all, they're not exactly raking it in right now. After all, if you take away jobs from Americans and Americans are the biggest consumers you destroy your biggest consumer market. Unless of course you mean to say that corporations are stupid and did not see it but are able to run the world.

Your incorrect assumption here is that corporations cooperate with each other. Sometimes the field is too big for any one (set of) corporation to understand and, thus, they do what they think works for their bottom line in the short term.

 

[Malachi151]

Perhaps. However, it is not to the advantage of the capitalists to turn a high-priced labor market into a low-priced labor market as that cuts into the ability of the market to buy the capitalist's products.



But this may take too long to setup to be of benefit to the American worker. The reason is that the rest of the world will not see a benefit in the "global state" until long after the American worker is no more.

True, hence the problem. Its not to the advantage of corporations that Americans lose all their jobs, yet due to individual competition for cheap labor the companies don't want to increases wages for foreign workers either. Part of the key to success is always finding a cheaper way to make the products than your competition, and there are always short term goals driving the strategy.

There is always incentive to undercut, which is what has created the current situaiton. In the 9160s we had almost everything made in America, then by the 70s a few companies started outsourcing to China. As they did this they were able to undercut the competition and still make higher profits, thus, in order to compete everyone had to follow suit, and now virtually everything is foreign made.

Now, certian companies or individuals, or governments work to secure lucrative deals with local labor providers, those that DON'T do this, i.e. those that don't try to keep labor cheap, because there is no means of global enforcement of rules, cannot compete with those who do. That's how capitalism works, the factor of the lowest common denominator.

The past 50 years has been a "capitalist illusion" because of the high use of state control in all economies, including the US, and the Iron Curtian, whcih took large Soviet block out of the trading sphere, thereby aking the "free world" labor pool smaller, which is to the advantage of labor. Now that the labor pool has just explanded over the past 20 years as the Iron Curtians have come down, and in addition state regulation has decreased, the market is now "freer" than it has been since the 1930s in America, and once again its leading to disaster, as all "free" markets do.

This is just a fact of the operations of capitalism, its neither something that is wanted or desired, its simply what IS.

 

[Grammatron]

The past 50 years has been a "capitalist illusion" because of the high use of state control in all economies, including the US, and the Iron Curtian, whcih took large Soviet block out of the trading sphere, thereby aking the "free world" labor pool smaller, which is to the advantage of labor. Now that the labor pool has just explanded over the past 20 years as the Iron Curtians have come down, and in addition state regulation has decreased, the market is now "freer" than it has been since the 1930s in America, and once again its leading to disaster, as all "free" markets do.

Evidence that market is now "Freer" than 1930's.

 

[Grammatron]

Your incorrect assumption here is that corporations cooperate with each other. Sometimes the field is too big for any one (set of) corporation to understand and, thus, they do what they think works for their bottom line in the short term.

It's better to worry about the long-term bottom line, though. If corporation can have consistent sales it has a potential to increase its market share. It's the difference between a CEO making one big bonus and then nothing or bonus, after bonus, after bonus. If you think corporations are that greedy then surely the latter would occur more often.

 

[DavidJames]

I work for a company that is moving jobs to Canada, India and South America. It is being done for one reason, to save cost and increase profit. I know because I am very close to the situation. I'm talking help desk, programming and unix/nt system administration.

"Because cheaper labor is not enough to move jobs. Another country may have cheap labor but an unstable government, higher taxes, poorly educated laborers, lousy infrastructure, and on and on."

The countries getting our business don't have those problems and cheap labor is exactly why they are getting the jobs.

"After all, if you take away jobs from Americans and Americans are the biggest consumers you destroy your biggest consumer market. Unless of course you mean to say that corporations are stupid and did not see it but are able to run the world."

Corporations aren't stupid, but they have one goal, to make money, more money then last quarter (or the same quarter last year). I'm afraid your belief that they will sacrifice this quarters profits in favor of concern about future consumers is a bit (or maybe grossly) naive.

I have no problems with profits, I own stock and ideally the increased profits my company makes will make my options and shares more valuable. Hopefully, I'll make it to retirement and my kids will find a niche in some industry that has some longevity and pays well. I'm not predicting doom and gloom, but things in this area moving rapidly and many many people in the computer tech field will be affected. It appears the small technology shops will be least affected and I may end up needing to join one to make it to retirement.

 

[Zep]

It's better to worry about the long-term bottom line, though. If corporation can have consistent sales it has a potential to increase its market share. It's the difference between a CEO making one big bonus and then nothing or bonus, after bonus, after bonus. If you think corporations are that greedy then surely the latter would occur more often.

You are being rational but to a different frame of reference! You are thinking long-term, but...

Most CEO's these days are drive-by managers. They are only there for a few years, and their bonuses are linked purely to the profit. They get wage AND share. Any problems left over after they leave is someone else's concern. So long-term planning extends only as far as this particular CEO can see into HIS/HER future, usually only a few dozen months.

This, in my opinion, is why companies always seem to try to do 180⁰ turns every couple of years or so. New CEO, new broom, new profit-generating method.

In addition, the obsession with "pleasing the shareholders" plays a parts too, especially if the shareholders are institutional investors with discretionary power. Lower profits mean less investment, or even shareholder withdrawal (landslide!). So ANYTHING to keep the profit rolling is "a good thing". In fact, this is usually embodied into the bonus schemes for the CEO's.

So... Customer service? Huh! Employee enrichment? Double huh! America (or any other country) first? Triple huh!

 

[dsm]

It's better to worry about the long-term bottom line, though. If corporation can have consistent sales it has a potential to increase its market share. It's the difference between a CEO making one big bonus and then nothing or bonus, after bonus, after bonus. If you think corporations are that greedy then surely the latter would occur more often.

How often is "more often"? Have you checked the difference between CEO salaries and the average worker salaries lately?

 

[Grammatron]

How often is "more often"? Have you checked the difference between CEO salaries and the average worker salaries lately?

Yeah it's quite large but the profit margins have not changed all that much even though according to your theories they should be astronomical.

 

[RussDill]

There is always incentive to undercut, which is what has created the current situaiton. In the 9160s we had almost everything made in America, then by the 70s a few companies started outsourcing to China. As they did this they were able to undercut the competition and still make higher profits, thus, in order to compete everyone had to follow suit, and now virtually everything is foreign made.

Really? has the economy improved, or gone down the tubes since the 60's? It used to be that everything was made in your own town, and that was it. Then towns traded. It used to be that you could really only get stuff in your own region or state, then states traded. It used to be that you could only eat perishable food from your own area, then railroads and refridgeration were invented. Now we are starting to trade more and more on a global scale. Each step was a increase in the quality of life, and at each step, jobs certainly moved around.

Economies are like forests, every now and then, you need a fire to go through, it takes out the old useless growth, and allows for the new (old jobs and methodologies being replaced by new). And like forests, if you put out all the fires, and let old growth take over, eventually, a fire will come along that will be an inferno, that you will not be able to stop, and everything will burn to the ground (This anology may only make sense to those in the US southwest, don't know).

 

[Shane Costello]

Originally posted by dsm:
How do you know?

Because in the case of Intel in Ireland no extra staff were hired as people were being laid off in the US. In fact investment in Intel's Irish operation (I live three miles from there and share a house with one of their employess) stalled, although IIRC there were no lay-offs.

Outsourcing to India and the like is a major talking point here too, since Ireland itself benefited from being a low cost location attractive to US multinationals, and there are fears that we'd now be the ones to lose out to low-cost countries. The multinationals are quick to point out that they've made major investments in their Irish operations and won't be going anywhere. I can see their reasoning. If Intel were to move their Irish operation to India, I doubt very few of their Irish staff would follow. Keep in mind that they've been in these parts for the best part of a decade, so their operation is by now established and efficient. Any move to India would entail quite a bit of downtime, as staff would have to be trained in and facilities set up. I'd imagine that the cost of shutting down an established operation and setting it up again from scratch somewhere else would be prohibitively expensive.

Originally posted by Chaos:
More important: where are all those who just cannot stop praising the virtues of capitalism?

Here's one. Investment by US multinationals in Ireland sparked an economic boom unprecedented in Irish history, and probably the history of any other western nation either. In 1993 unemployment was at 16%, seven years later it was below 4%. Income per head went from 60% of the European average to 125% now. Ireland had tried protectionism and statism for the previous seven decades, and the results were below par growth, falling incomes relative to other European countries, and perpetually high emigration and unemployment.

I've yet to see it satisfactorily demonstrated that free trade is a zero sum game, that job creation in India can only come with corresponding job losses in Ireland or the US. Another point made is that as incomes in these countries rise (these Indian software engineers won't be happy working for peanuts for very long) they'll want to by stuff that other countries make, and expensive stuff at that. A good example is that of Italy and Fiat cars. Giuseppe Agnelli died fairly recently, and the Italian correspondent for one of our dailies pointed out that as the average Italian became better of in the decades following WWII, the position of Fiat became rather more precarious. The reason was that foreign cars had a status that Fiat didn't, and as the average Italian acquired more purchasing power, he or she was more likely to buy a peugeot or BMW than a Fiat.

 

[Drooper]

More important: where are all those who just cannot stop praising the virtues of capitalism?

Right here.

Dean is an economic illiterate and a danger to the US.

This shows all the signs of a healthy functioning economy. Something laypeople like yourself really need to learn from economists is that the decline of industries is a central part of process that increases incomes and prosperity over time.


Just as an historical tidbit. Did you know what kept you great great great grandparents awake at night? It was the threat that that upstart young America was "stealing jobs" and something had to be done.

Oh dear.