Know-How Exchange : Strategy

Its hard to compete with cheap labor.

Currently, it's chepaer to have something made overseas and shipped in versus having it made in own own backyard.

Let's assume we move most of the manufacturing back to the US. At the current rates, everything would cost 4-5 times what it does now. Now, factor in sales tax, corporate taxes, income tax, union dues, etc, and suddenly a $3.00 Frisbee costs $12.00.

Of course there is soooo much to factor in and debate. for now, I'll just leave it at this:

Untill we are willing to either work for pennies, or pay 4 times more for "stuff", things are not going to change much.

This should be enough to get something going....I'll post more later.

We have gone through outsourcing before, and without the country crumbling under us. In the 80s/90s, their was a big concern about 'the sucking sound' of jobs moving south to Mexico. Maquiadoros formed along the border, and did a lot of manufacturing for US companies. This definitely caused pain for some people in manufacturing. It also added benefits to the US consumer through lower prices.

Now Mexico is losing these jobs (to China) and many of those plants are shutting down. Chances are China will do well for a while, but as mentioned above, they will also slow down at some point. There are signs of this already - labor rates in the big cities have skyrocketed, housing prices are also skyrocketing, etc. Once the bubble pops, some other country will step up and be the new palce to outsource to.

Offshore outsourcing is one which brings about a lot of emotions (making a great political football). Without a doubt, it is very painful if you have a job which is being lost. But at a macro level, it is not a bad thing for the US. Here are some reasons why:

- While some jobs move abroad, other jobs form here (for example, 30% of one of the Indian offshoring company's jobs are in the US). There was a study from the Mexico case which showed that roughly the same number of jobs are formed here as are lost due to offshoring. And the jobs formed here are generally higher paying jobs (like marketing!).

- And the lower costs show up in what we pay for products (10% of all products imported from China are sold through WalMart). Are you as a consumer willing to pay more for a product to protect jobs?

- there is also the longer term benefit that as the Chinese people make more, they become customers for our products. This is actually coming true in China, where it didn't really happen with Mexico.