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Thread: Is moving production to places with cheap labor really wise?

  1. #1 Is moving production to places with cheap labor really wise? 
    Time Lord
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    I often hear people say it is. The people moving it have a vested interest in making sure we all think so. I'd have to say I don't agree, but I also haven't studied out all the different perspectives (and there are many out there).

    It seems like it's rewarding bad economic behavior to me. If a country has masses of people ready to work, it's probably because of a combination of bad economic management (why don't they already have jobs?), and poor population control.

    If capital always flows to the lowest common denominator, then it seems to me like, after a while, we'll all be poor, and labour will be just as cheap everywhere.


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  3. #2  
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    the purchase of services and product in the US, makes up nearly 70% of the total GDP, which is over 13 trillion annually.

    would you rather buy from a Chinese Company, or fro an American Company producing that product in the US. these company's can now produce nearly on a level platform.

    where are these working masses at, when only 4.2% are drawing unemployment. this currently is primarily from a slight drop in construction. thanks to the medaling of my generation, we have no up and coming workforce.

    faced with the current social trend toward mandated rules and regulations from City, County, State and Federal Governments which include virtually everything having a cost to employ, small manufacturing operations are no longer able to keep up and stay in the US.

    top this off with just a touch of honesty. do you feel the average American cares where a product is produced or the services rendered, so long as the products are equal in quality. then add the fact this equal quality in many cases is in reality a superior product.

    since its related, let me add the cost many business take on in even building a factory to produce a product. for the cost of the permits alone after every form of feasibility effects on every feasible issue would cost more than the actual construction. Ask any oil based product industry. there are about 100 such industry nearly all of which have moved overseas or just gone out of business.


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  4. #3  
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    If a parent each day clears $100 day cash they can walk into Walmart and buy a pair of sneakers for their kid made in China for $20. They have $80 for other expenditures that enhance their lifestyle....their choice. That same pair of sneakers if made in the USA might cost $100....and nothing left to spend elsewhere in he economy...no snack, video rental, saving for vacation, etc. A television used to cost a month's wages...today that same quality of TV might be purchased for a day's wages.

    The USA is not a net loser in trade. The USa is the world's biggest exporter with 8 times the per capita exports of China. The USA has a trade deficit because American purchase gazillions of cheap goods....most of which are discretionary and not necessities...a second TV, another shirt, do-dads for Christmas, etc. All choices each person makes.

    Among U.S. exports are aircraft, hi tech information systems, communication hardware, military equipment, etc. Industries that don't make sneakers or Christmas ornaments but enhance the infrastructure of the country. Spokane doesn't want a pencil factory but would prefer to have a work force producing silicon chips and computer software.
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  5. #4  
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    The problem with focusing too much on the effect foreign labour has on consumer good prices is that TV's and sneakers aren't the same as food and shelter. Do you see the price of rent and/or peoples' food budgets getting smaller?

    I see people buying cheaper and lower quality food to sustain themselves because the average labourer doesn't seem to be making enough real world dollars to buy the good stuff. This leads to a high obesity rate, because the cheapest foods tend to be higher in fat and lower in nutrients.

    Yes, they can console themselves with a new pair of shoes, a nice TV, or maybe by adding some more flattering clothes to their wardrobe so the cellulose won't show as much.
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    people, who get fat, eat to much, period. you can take this to activity, watching to much TV or what have you, but in the end they simply eat to much.

    lower quality of food; if anything and of all the places on the planet our food in the US is top notch, under any configuration. check out third world populations which qualities would kill the average American and you'll look a long time to find a FAT person.

    the standard of living in the US, average household incomes and in general the living conditions, are unequaled any place on the planet.


    two other factors on our trade deficit; we import more and more crude or refined oil products. many industrial product parts are shipped, with low value, which after used in manufacturing are returned at the higher product value.

    keep in mind, not included in the deficit figures are investments made in the US or through our markets. this figure alone, wipes out any notion of a deficit problem...
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  7. #6  
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    Quote Originally Posted by jackson33
    people, who get fat, eat to much, period. you can take this to activity, watching to much TV or what have you, but in the end they simply eat to much.

    lower quality of food; if anything and of all the places on the planet our food in the US is top notch, under any configuration. check out third world populations which qualities would kill the average American and you'll look a long time to find a FAT person.

    the standard of living in the US, average household incomes and in general the living conditions, are unequaled any place on the planet.


    two other factors on our trade deficit; we import more and more crude or refined oil products. many industrial product parts are shipped, with low value, which after used in manufacturing are returned at the higher product value.

    keep in mind, not included in the deficit figures are investments made in the US or through our markets. this figure alone, wipes out any notion of a deficit problem...
    True to an extent. One can buy an apple for 50 cents, a banana for a quarter, a whole wheat bun for another quarter, etc. Here in Canada we are by no means poor . I question your claim that the living conditions in the USA are unequaled elsewhere. I've travelled to Norway, lived in Germany, France and, of course, Canada...Canada. Norway, and a few other western Europeans are consistantly rated above the USA for quality of life. I was in New Mexico last month for a week and there is nothing of that low quality in Canada or Western Europe. There are tens of millons of Americans who seem left out of 'the American Dream' for some reason or another.

    Back to the American deficit. It's actually peanuts in comparison to U.S. GDP and wealth. Countries like Venezuela, Saudi Arabia, etc. are cash rich but it's on an empty base. Venezuela is the guy living on the street who finds ten thousand dollars in a bag. The USA is a guy wth a university education, a big house, perks, a job earning a hundred grand a year but he only has a hundred bucks in his pocket. He has the ability to generate wealth while maintaining a comfortable lifestyle. The USA has the ability to finance a war in Iraq without barely a hiccup on the economic life of the average American. War at a cost that is multiples the bank account of a Venezuela and the ability to generate such dollars year after year if necessary.
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  8. #7  
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    Quote Originally Posted by Jackson33
    people, who get fat, eat to much, period. you can take this to activity, watching to much TV or what have you, but in the end they simply eat to much.

    lower quality of food; if anything and of all the places on the planet our food in the US is top notch, under any configuration. check out third world populations which qualities would kill the average American and you'll look a long time to find a FAT person.

    the standard of living in the US, average household incomes and in general the living conditions, are unequaled any place on the planet.
    I'm talking about bleached wheat, greasy fries, and other sorts of empty calories. There are some stores in my area that sell "organic" food, which is food that is grown without certain pesticides, etc. The price is above what most mimimum wage earners can really spare just to eat.

    People in third world countries don't do as much processing, or adding of preservatives and such. It's almost an advantage of being too poor to do so.

    If the food you eat has low vitamin content, then you actually have to eat more of it in order to get enough real nutrition. Your body isn't going to go on working right without getting the right protiens and minerals.

    But, the empty calories you're taking in have to be burnt as well, so only people with very high metabolisms can stay thin and get all the vitamins their body needs at the same time.

    Excercise is a good way to raise that metabolism, but you'll need more vitamins if you excercise, so you have to take in more food. So, by this point, your food bill has gotten higher simply because you're buying more total food to feed that excercise program.
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  9. #8 Is moving production to places with cheap labor really wise? 
    Forum Cosmic Wizard icewendigo's Avatar
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    Is moving production to places with cheap labor really wise?
    It depends for who.
    For the guy thats working in the production of the good and thats out of a job its not good even if he pays 10 cent less at walmart. For the town where the factory workers work its bad even if a walmart opens its door. For the guy that owns the production, if he can make something for 5$ less and sell it 10 cent less its good because hes pocketing the difference. The reality is that joe worker has no say in his livelyhood, the owners decide. On the other hand if joe owner doesnt do it but sam owner is allowed to and does, joe's factory will close anyway.

    The sweat shop factor
    If Hitler's ghost conquers Europe and enslaves the population into a giant sweatshop labor camp churning TVs for a few bucks, everyone in the world will benefit from the influx of production at bare bottom price, the same way I benefit from buying nike shoes from kids whiped 12 hours a day to make them for a hot meal a day(a bowl of boiling water). In a similar fashion, I benefit from buying toxic toys that cost 2$ less from industries that ignore all health and safety common sense and that pollute like theres no tomorrow. My kid might have kidney or liver failure 8 years from now but that's not on the toys label, I just see that I saved 2$.

    Can be good or bad, the devil is in the details
    In theory, if the other place's increased economic activity causes more demand for goods and services that your region is better at producing, new jobs will be created to offset those that the moving of the production has erased. And you also benefit from buying stuff from regions that are better* at producing it(for the right resons) Thats the idea I think, but its sometimes hard to measure the benefits or the reason behind the lower cost(is it because the other region is better at it/has built an expertise/better logistics/better trained/creative invation/better methods etc which is great and beneficial, or is it just because people simply get exploited/polluted more which isnt that great. You should go to PBS's website, search for Frontline and look at the show 'Is walmart good for america?'.

    The benefits of a police state
    But also, why go elsewhere when you can exploit labor at home? Look into the soaring business of prison manufacturing in the US, theyve even closed a factory where honest people were working so they could reopen it in a private prison for penies in labour cost... :wink:

    Fat
    were not talking about developing countries, in industrial countries there appears to be more obesity among poor people I think. Whats better for your health, McDonalds or the Fine Cuisine restaurant? Also try to find food without sugar/fructose/corn-syrop or salt, its really though, most cheap prepared food are laced with the stuff. Toxic Monsanto-carcinegenous industrial food usually cost less that organic food made he old fashioned way. If you're better of you wont mnd paying a little more to get better food, but on a tight budget the price might weight more on the balance :wink: .
    Here an interesting video about farm subsidies, fructose and the food industry

    http://www.youtube.com/watch?v=-L4l_ie2aKo
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  10. #9  
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    Part of the problem I see with moving production out of our borders is that means more physical capital gets built there than here. They have more machines, more factories, more stuff like that. When their society comes full circle and they find themselves in a position to demand wages approximately equal to their productivity, we're going to wish those machines had been built on US soil.
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  11. #10  
    Forum Freshman Twilight's Avatar
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    kojax i agree 100%, though i dont really care about america.

    Thing is that the actual means of production are moving to china. Like that story: teach someone to fish instead of giving them fish. Except in this case america, u.k and friends are handing over their fishing rods to the Chinese and offering to buy fish in return.

    Ahh well im no economist so i might be talking nonsense.

    Thing is china's authoritarian type government is working for them in this regard because their government would never allow foolish short sighted acts like outsourcing to pass.

    Also while the rest of the world is essentially buying luxury goods from china, china is probably not buying wasteful luxuries from the rest of the world because their government would likely take action against it. Instead china is buying more means of production, i.e more technologies, more factories, etc.
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  12. #11  
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    General Motors, is doing fine in China. Ironically the fastest increasing items are in the Cadillac line. Might add 95% of buyers pay in cash...

    Las Vegas Sands and other gaming companies are reaping profits/success in Macao. In fact using income from gambling, Macho passed Las Vegas in 2006.

    I don't know if they import all that much, though I think they do, certainly business is moving to them.

    Note; Oil imports to the US are based cost of product. Since 1998 this single item, cost per barrel has gone from 14.00 or so to near 100.00 per barrel, which is all part of our trade deficit. It would take a lot of shoes or toys to compare with the inequities of oil imports/exports...
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  13. #12  
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    Quote Originally Posted by Twilight
    Thing is that the actual means of production are moving to china. Like that story: teach someone to fish instead of giving them fish. Except in this case america, u.k and friends are handing over their fishing rods to the Chinese and offering to buy fish in return.
    No, the west is selling them the fishing rods. Most of the money invested in China comes from the west. The company's that are selling China the raw materials are from the west. China is/has become the middle man thats all, its a good thing, thats the way the system works. Now that there is no great need for manufacturing in the west, western governments can (or should have) start training people up though the education system to work in high-tec industry's, science, technology, engineering, etc. The problem is where do the third world country's fit in.
    Eat Dolphin, save the Tuna!!!!
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