Andy makes an excellent point: when we outsource the manufacturing and scaling processes to another country, what we lose in addition to jobs are the innovations and experience necessary to maintain a strong defensive econosystem with respect to our economy.
However, I disagree with Andy's recommendation that we should tax offshore labor - we should focus on making labor in the United States less expensive. Neuter the Department of Labor, get rid of labor regulations with heniously expensive and obnoxious unintended consequences like the mandatory 8-hour work day in California, eliminate the concept of wrongful termination, and put a muzzle on the EPA.
Negative incentives aren't the way to go to encourage job creation. Make the climate more hospitable for large businesses within the U.S. instead.
Have you actually ever been to an industrialized country that lacks an equivalent of the EPA and OSHA?
Go to Beijing, and enjoy the brown air, which is pretty unbreathable on the bad days, and just moderately smelly on the good ones. Whatever you do, don't drink the tapwater, because it'll make even local residents sick. Don't go for a swim in the river, either.
Be careful near construction sites; there are gaping holes with no signs, and if you fall into one and break your leg, tough. Also, if there's construction only on the higher floors of a building, slag from welding may rain down onto your head. Unless you're well-connected, don't even think about getting the construction firm to pay for your medical bills.
If you're a woman and your boss rapes you, and you're not connected, that's too bad. If you're a man and your boss rapes you, and you're not connected, that's even worse.
Californa's labor practices and tax laws aren't ideal, but I'd much rather work in California than China.
> Go to Beijing... brown air... sick... gaping holes with no signs... break your leg... welding rain down on your head... boss rapes you and you're not connected, that's too bad...
Dude, I was in Beijing two months ago. It's not like you make it out to be. Actually, it's a hell of a lot nicer than Detroit.
In fact, I was in China five years ago and again two months ago. It's trending upwards quickly - the pollution was near unbearable five years ago and is rapidly improving. Infrastructure is improving. Air and water quality are improving. The country is gradually politically liberalizing... almost everything is improving in China quickly. Scary quickly, actually.
Over the last 10 years, China is trending upwards quickly and the USA and trending downwards slowly... you might prefer living in Washington D.C. to Beijing right now (but would you, really?)... but you almost certainly won't prefer D.C. to Beijing in 10 years unless something changes.
In fact, I was in China five years ago and again two months ago. It's trending upwards quickly - the pollution was near unbearable five years ago and is rapidly improving. Infrastructure is improving. Air and water quality are improving
All of these things are because of deliberate government policies. I'm sure you know this, but it's worth pointing out. I think you & donw are agreeing with each other here - he's just underestimating how quickly the Chinese government acted to fix what was becoming a problem.
> All of these things are because of deliberate government policies. I'm sure you know this, but it's worth pointing out.
Sort of. If you look at history, every country that's gone through an industrializing process has had an increase in pollution followed by a decrease in pollution. Some of that is attributable to regulation, but it happens in unregulated industries too - almost everyone naturally dislikes pollution, and generally prefer to reduce it.
Saying pollution is down and infrastructure is up because if government policy is almost correct, but slightly misses the mark - pollution is down and infrastructure is up because Chinese people worked to make that happen. But this same process happens similarly in countries with less government regulation as well. Over time, people want lower pollution and waste near them and invest, manage, and produce that result, government or no.
Read what I said - I said "muzzle" them, not eliminate them, Captain Strawman, And I've been to China, and yes it feels like stepping into a smoke-filled room.
While I'll agree that OSHA/EPA are often overzealous when you look at the cost-effectiveness (i.e. dollars spent per statistical life saved), and that labor is expensive, I don't think the rapid abandonment of our standards in a race to the bottom is the solution.
The problem is that places like China have low/non-existent standards that are politically acceptable there (or citizens can't say otherwise). This is their comparative advantage -- not accounting for the externalities of their industrial efforts. As Larry Summers said, some countries in Africa are vastly underpolluted. Not great in the long term perhaps, but harmful for western workers competing for the same contracts in the short term.
So what do you do? Tarrifs on imported goods to make US production more competitive? Limiting trade to countries that have similar standards regarding externalities? Or is it okay for countries to have low/no work and environmental standards because that's (at least in the beginning) the road to economic development?
Exactly. This is the strong case for tariffs. We need to effectively tax the flow of goods coming into the country for countries who insist on promoting a lower standard. If it costs money to protect workers rights and the environment, then any country doing less should see it's good taxed to make up the difference.
I'm sorry, I don't think this is the place for a thread that will inevitably devolve into tit-for-tat politics, but I really have trouble stomaching the commentary that the EPA should have less regulatory power over industry when proof of the big-picture bankruptcy of environmental deregulation is current gushing into the gulf at a few tens of thousands of barrels a day.
Yes, it raises costs to force industries to comply with environmental protection standards. Yes, this is bad for the short-term of our economy. But we will continue to suffer the consequences of the environmental harm we do, even at the current regulatory levels, and more so with "a muzzle on the EPA".
I'm sorry, I don't think this is the place for a thread that will inevitably devolve into tit-for-tat politics, but I really have trouble stomaching the commentary that the EPA should have less regulatory power over industry when proof of the big-picture bankruptcy of environmental deregulation is current gushing into the gulf at a few tens of thousands of barrels a day.
This kind of reasoning is tricky, though. Do we shut down the airline industry when a plane crashes? No, we pick up the pieces, study what happened, and move on. The result, over time, is a safety record that almost no rational person could criticize.
Nothing made by God or Man will ever be perfect, and that includes deep-sea drilling rigs. If you want to regulate the industry with the goal of making accidents impossible, well, good luck with that.
That would be the EPA that is blocking the use of many oil skimmers in the Gulf and forcing the ones that they approve to run at about 1/6th efficiency.
And that's the department of labor that is keeping experienced crews from running the skimmers that the EPA approves.
I forget which department decided that oil in sensitive wetlands was better than putting up sand berms.
The "A-Whale" fiasco appears to be a joint fail between the Coast Guard and the EPA - among many other things they've had to sit around and wait for an EPA permit before they can start the work, and now that they're actually in the gulf there are even more problems:
Well, that does have something to do with oil skimmers, and something to do with the EPA, but it doesn't support what anamax said. Obviously I did search google for terms like "EPA oil skimmer", which came up with this "A Whale" stuff and little else - so I was wondering if anamax had a source which addressed his particular claims (apparently not). The sand berms thing seems to be inaccurately paraphrased by anamax as well.
>Neuter the Department of Labor, get rid of labor regulations with heniously expensive and obnoxious unintended consequences like the mandatory 8-hour work day in California, eliminate the concept of wrongful termination, and put a muzzle on the EPA.
Enjoy your third world working conditions. But you are an executive and/or a shareholder, are you not ?
Enjoy _your_ third world economy, free from pesky pollutant-causing industry and manufacturing.
The poster has correctly identified the value proposition that causes companies to locate their manufacturing facilities elsewhere, and points out (also correctly) that making our tax codes as unfriendly to business as our labor laws will only encourage _those_ bits of the business to relocate as well.
You cannot have all of:
* high wages for manufacturing workers
* cheap products for consumers
* high taxes on business
* large profits that make it attractive to operate a company.
You would probably respond by saying that you'd prefer higher priced products and low-profit corporations, to which I'd reply that:
* cheap products for consumers = higher standard of living.
* higher profit potential = more business growth.
The corporatist sociopaths will say "Even the poorest among us can buy [a bunch of stupid cheap shit], surely our standard of living is high!" Wake up: standard of living isn't a bunch of cheap shit.
If instead of people spending $28.73 on a cheap toaster at Wal-Mart every 3 years, they spent $150 on a toaster every 20 years, the cost of labor would become much less of a problem. People are conditioned from birth by marketing and advertising that these cheap pieces of shit are really good deals.
There are enough examples of manufacturing companies that have a shred of decency improving their efficiency through process design and intelligence that I don't buy it. But, of course, it's much easier and profitable in the short-term to find some people on the other side of the planet you'll never have to meet. iSupply estimated that it costs $6.50 to assemble the iPhone 3G -- labor, equipment, management, everything. Is the cost of labor in Ohio (at $49/hour) really a problem for Honda?
* cheap products for consumers = higher standard of living.
IIRC, consumer products are about 18% of a typical household budget. Housing, healthcare, and education are the majority.
For the millions now with ZERO income, even Chinese-made Wal*Mart crap is unaffordable. Yet the unionized workers of the 1950s - 1970's somehow purchased cars, household products, and clothing like domestically-made Levis blue jeans WITHOUT slave labor from repressive countries and without borrowing trillions fro those same countries.
I will gladly trade somewhat higher consumer prices for confidence that I will be employable in safe conditions at a middle-class wage for the duration of my normal working life.
And I'm very pro-manufacturing: but the environmental externalities must be mitigated and properly priced: my health is very valuable to me, even if there's no clear market price for it.
Yet the unionized workers of the 1950s - 1970's somehow purchased cars, household products, and clothing like domestically-made Levis blue jeans WITHOUT slave labor from repressive countries and without borrowing trillions fro those same countries.
That was only possible because that time period was a window in which our technological superiority made it possible to provide the average working man with that standard of living. That period is coming quickly to a close.
Uh, no. Aside from petroleum issues, it was a SUSTAINABLE CLOSED SYSTEM of trade among similarly-developed countries with similar standards. This could continue even if innovation had suddenly stopped in 1985.
Far more sustainable than the present, which involves unsustainable personal debts, unsustainable trade deficits, and unsustainable federal borrowing.
But please note that CENTRAL POINT OF THE ARTICLE explains WHY our technological superiority lessened, rather than moving exponentially further ahead.
Uh, no. Aside from petroleum issues, it was a SUSTAINABLE CLOSED SYSTEM of trade among similarly-developed countries with similar standards. This could continue even if innovation had suddenly stopped in 1985.
It's only a closed system if you ignore the resources and cheap bottom-tier labor the first world extracted from the third world at a fraction of their potential value. The U.S. in particular was very active in this time period propping up puppet regimes around the third world in order to get cheap access to their raw materials and labor. The world has never been a closed system.
Actually, Andy is suggesting the same thing, cheapen job creation in the US, although he would do it through inflation, which is always more politically popular than deflation (except among people who live off their accrued wealth).
Tariffs on chinese goods would up the cost of those goods to slightly higher than what US-made goods could be sold for.
This will create jobs in America as companies create factories here.
There will be more jobs, and more money in the economy.
On the downside, everything just got a lot more expensive, maybe 50% more.
This is inflation. People don't notice it as much as they notice a 33% to 50% wage cut, especially since the most discontented members of society, the un and under-employed are no longer un(der)employed.
No, Aaronontheweb makes a good point. Of course he's not arguing in favor of environmental disasters or slavery-in-all-but-name. Pay attention to his main point: attack high labor prices here, rather than low prices elsewhere. Andy Grove can be protectionist if he wants, but just because he's not ashamed of it doesn't make it any better of an idea.
"High labor prices" = "High wages." THIS MEANS YOU!
Unless you are worth >$10M, are retired, or live off a trust fund, admit that you're labor not capital: just like highly paid executives, surgeons, and name-brand attorneys are more "labor:" they generate more earned income than asset income.
Go ahead: pull out your 2009 tax return: is the "income from wages, tips, and salaries" greater than the "interest income" and appreciation on your house (ha ha!)? Then you care about WAGES. Stop pretending like you're a Rockefeller: you're not. And your doctor / lawyer / professors / boss aren't either.
(If you persist in an unjustified obsession with your assets, HIGHER WAGES are what will drive housing prices up in the long run...compare incomes and housing prices in Palo Alto and Lubbock, TX, and HIGHER WAGES and GROWING MANUFACTURING will help your stock portfolio: do you really want to see GE and Boeing follow GM into bankruptcy?)
What he's saying is we've lost the ability to compete in the current manufacturing game. But that is Manufacturing 1.0.
We need to create and become the leaders of Manufacturing 2.0 which incorporates environmental and social externalities. Companies who don't operate along these principles should be taxed and those monies put toward continuously improving global standards.
What he's saying is we've lost the ability to compete in the current manufacturing game. But that is Manufacturing 1.0. Manufacturing 2.0 incorporates environmental and social standards and companies who don't operate along those principles should be taxed.
Aaronontheweb, why wait for government action? Come work at my apartment TOMORROW 16 hours/day for $0.20/hr. I'll try to find a way for you to inhale some heavy metals and asbestos while you work. Imagine the fun of trying to predict whether you will be functionally retarded or die of painful cancer first. Either way, you will die painfully, because I do NOT provide health insurance.
Seriously: How did we get from "life, liberty, and the pursuit of happiness" to "drive down everyone's quality life to match the world's most miserable and backward countries?"
Aside from technology that hadn't been invented yet, people in the West lived did very well in the late 20th century. Most people who bothered to show up for work had a balanced diet, adequate medical care, and usually a car. And they somehow managed to do it without rampant workplace death, child labor, or rendering the ecosystem uninhabitable for decades[1]. They even had fundamental civil rights like freedom of religion, freedom of speech, freedom of the press.
[1] Aside from notable exceptions like Love Canal, etc. But I see that as largely the result of ignorance; we now have a better understanding of the impacts of our behavior on the place we LIVE.
This post is silly. No one is forced to work at an unsafe job for any given wage. The job of the government should not be to say "you can only work for this long, for this wage, under these conditions." Shouldn't that question be up to the would-be employee?
And you're not as clever as you think bringing up asbestos. You're far more likely to die in a fire because your building had its asbestos replaced with shitty fireproofing than from the cancer that asbestos can cause.
We all need income to SURVIVE, and indeed FORCED to take the market wage for our labor. The question is whether the market wage will tend toward "Modern Western Wage" or "Communist Slave Wage." Current trade and industrial policies favor the latter.
But the government cannot, by fiat, deem that people should make "Modern Western Wage" because some people's work is not worth that much. Forcing wages to be at that level causes more problems than it solves (i.e. massive offshoring). Minimum wage laws, workplace safety laws, environmental standards, etc, all raise the cost of doing business and make it so only people whose work is worth "Modern Western Wage" can be employed.
The whole point is that "Current trade and industrial policies" favor the former ("Modern Western Wage"), not the latter, which is what is causing the problems in the US. Did you read the article?
Is there a reason why you chose to pivot to this extreme immediately after all I did was argue to attack things that result in high labor costs for domestic manufacturing, or are you just an unserious hyperbolic reactionary by nature?
Then perhaps the more accurate statement would be that food would be all they'd be able to afford. At that point, options are really, really cheap (and incredibly toxic) fast food, or buying some sort of staple in bulk like rice or grains. And if you don't have a roof over your head, it won't do you much good to spend 2/3rds of your monthly salary on a big bag of rice from Costco.
Even with government subsidized corn, its still not cheap enough. I suppose if we round them all up like we did in the 18th century we could manage it. Put their children to work too. Make them slaves in everything but name. Yes, this is what the founding fathers meant by freedom!
However, I disagree with Andy's recommendation that we should tax offshore labor - we should focus on making labor in the United States less expensive. Neuter the Department of Labor, get rid of labor regulations with heniously expensive and obnoxious unintended consequences like the mandatory 8-hour work day in California, eliminate the concept of wrongful termination, and put a muzzle on the EPA.
Negative incentives aren't the way to go to encourage job creation. Make the climate more hospitable for large businesses within the U.S. instead.