Social Question

Hypocrisy_Central's avatar

Did the middle class create outsourcing by accident?

Asked by Hypocrisy_Central (26879points) August 22nd, 2010

I was having a discussion about outsourcing with family members as to what caused it. But hasn’t the middle and lower class de factoly caused it? People who work low end jobs who want to stretch every buck and shop discount and big box department store sending jobs overseas? I mean if they can’t afford or simply don’t want to spend more then $22 for a pair of jeans or get a 40in flat screen for $985.99 how can jobs not go over seas? At wages Americans are willing to work at if those items were made state side they would cost more than the bulk of America would want to pay. Either they would have to do with out or have really cheap crappy items. How could a state side company make quality goods with a workforce that more than likely be unionized and not work for a wage that would allow a company to make a quality 40in flat screen for $985.99 etc and still turn enough profit not to go belly up?

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11 Answers

LuckyGuy's avatar

Sadly it seems consumers are like sheep. If you build it, they will buy. Why do we think we “need” a 40 or 50 in TV. Because it is advertised on TV, magazines, newspaper, internet. “Gotta’ get me some o’ dat!”

The Chinese factories are built with lots of government support – something taxpayers and Republicans vehemently oppose (unless it is funding their particular cause).
Technology has reduced the need for labor significantly and products can be made in the US at reasonable cost. But, the US corporations cannot compete on an equal footing when: 1)top dogs get as much salary as 1000 employees, 2)government does not help fight the battle when a heavily financed foreign company attacks the market, and 3)when environmental and labor laws are not evenly matched.

Consumers have the last say and can influence policy. But as China has already proven Americans have no loyalty and are willing to sell our neighbors out just to save a few bucks.

The day WalMart decides to sell a cheap Chinese made car in their stores, 50% of all the Chinese nationals you see, every grad student, every professor, every Chinese restaurant owner and his family, etc. will line up to buy them No matter how bad they are. There will be no complaints even if the wheels fall off. Right or wrong that shows loyalty and long term thinking. Something most Americans sadly lack.

I figure if the product is “Made in China”, I don’t need it. A spit in the ocean, I know, but that is my vote.

Mephistopheles's avatar

Not sure if I entirely agree with @worriedguy. For one, the US government heavily subsidises certain sectors of the economy, such as defence and agriculture, and it’s in those areas that America really excels in the global market. It’s not that the feds won’t subsidise business – it’s that they won’t subsidise the right businesses.

Secondly, the relative wealth of American CEOs is neither here nor there. The wage of the (wo)man on top shouldn’t dramatically affect a company’s economic competitiveness. You’ll find stupidly rich people in every country.

I think there are several reasons as to why China has overtaken the USA as the factory of the world:

1) The Chinese are hard working
2) There are lots of Chinese
3) There is little to no unionization of the Chinese labour market
4) There is little regulation of environmental standards in China
5) It costs next to nothing to ship a product to China and back again

So it’s really all down to basic economics, not consumer ‘loyalty’ or corrupt politicians. Indeed, it’s commendable that the US has reasonably comprehensive union and environmental laws. It’s just a fact of modern life that we simply can’t compete with the Chinese where low-skilled manufacturing in concerned.

LuckyGuy's avatar

@Mephistopheles I sure do enjoy talking to you.
I partially agree and disagree.
Top dog’s salaries are not based on long term performance or merit. Look at the outrageous salaries paid even if the company is going down the tubes and lower level employess are being laid off. Remember, it is not just one top dog. There are the dozen other VPs and 100 clingons that also suck from the system. It all adds up. GM makes 5 million cars and pays the CEO $5 Million. That is a buck per car just for him. and $0.75 for the next guys down the chain. and… It adds up. Jsut imagine what the engineers could do with an extra $20 that could be invested in improving vehicle performance.

There are other reasons China has the advantage.
They have less than honorable business practices complete with payoffs, kickbacks and backdeals that are rarely prosecuted. They discovered that American management can be bought and use this technique more often than we care to admit..
They steal IP intellectuial property that has been developed by other companys and use it with impunity. Companies have is no recourse.
Look at Chery and GM Matiz QQ. They stole the entire car design. Right down to the cavity molds. Heck, they say the picked the name Chery becasuue it means good luck or dragon or something. BS! Tthey picked it becasue ti looks like Chevy when written in script. Try it.
Chinese companies send engineers to the US to be trained. While they are here they copy prints, try to install back doors on computer systems, gather competitive pricing information – and we let them.
The electronic picture frame fiasco (Target, WalMart) about 2 years ago installed 4 different viruses on pcs: a keylogger, a password stealer, a back door, and something else I forget now. Do we really think that was done by accident?
They know that Americans will always go for the lowest price so they make phones with backdoor coding in the firmware and price it $1.00 less than the Japanese. We buy it. .

My favorite proven scam was selling the cheap fuse kits at Harbor Freight. The fuses were totally bogus. We checked them in the lab, ½ amp and 1 amp fuses would not pop even at 20 amps. People bought those fuses put them in their cars and then a few had car fires. The owners blamed Ford, GM, Chrysler, Toyota for defective wiring. The fuses were total fakes.
How many millions of those fuses are out there now ready to set other cars on fire and damage the reputation of auto makers. These fuse kits had 8 or 10 different sizes and colors and each fuse was labeled.with a value. Was that really an accident? I don’t think so. It was cheap, easy, and predictably Americans will buy them rather than the formerly US made Littelfuse which are high quality..
They are very smart, nationalistic, and ruthless. Our complacency will kill us if we let it.
The middle class needs to wake up and make some tough choices.

While you are at it you can bring you fuses back to Harbor Freight for a refund. They will not pay for the burned wiring harness, however.
Oh, and if got the picture frames, better do a full scan on your PC and change your passwords.

Mephistopheles's avatar

@worriedguy But you’re assuming that if CEO wages were docked, the money saved would be reinvested in valuable R+D work. Not only would that never realistically happen, but the few million dollars that we’re talking about pale in comparison to the immense amounts that most big companies spend on researching new products and supporting existing ones. Besides, most corporate elites make their money through stock options, not wages.

I also think it’s wrong to state that American consumers are somehow disloyal or stupid for buying cheap foreign-made products. You can’t blame a poor family for buying a cheap foreign TV over an expensive domestically produced one when the difference in quality between the two is practically negligible. Despite you bad experience with dodgy fuses, I’ve never had a problem with an item produced in China. In fact, the laptop that I’m typing on right now was made in Cathay and it’s great.

I’d be willing to wager that half of the things you own are at least partly made in China, whether bits of your car engine, your radio, the wood in your desk (assuming you have a wooden desk, of course) and so on. Even if you purposefully avoided all Chinese made products, then you would still have the Tiger Economies to thank for keeping the lid on inflation for the past twenty years.

Ultimately, I’m convinced that the Chinese economic boom has been a good thing. It’s improved global standards of living by a really quite significant amount.

Mephistopheles's avatar

@worriedguy BTW, thanks for the lively debate :)

LuckyGuy's avatar

@Mephistopheles I am enjoying it too. Thanks!

In my previous life I worked for a large corporation and witnessed the abuses of power first hand.. The Asian country manager was promised a rather substantial bonus if he can increase sales in the region by 10%. Imagine you are given $100M annual budget to do it. How would you go about it? Improve quality by using better materials? Increase engineering to design better products, make custom designs to better fit customer requirements? Increase sales and service support? That is why we are not top dogs. For $70M he simply bought a successful company in region that had enough sales of an unrelated product to push the total sales over 10%. Did he help the profitability of either company? Nope, not a bit. He lumped both company sales together and showed he increased sales so he got the bonus. He also increased head count substantially, and payroll, and other liabilities but that was not counted.

To sell a product in China we had to provide a localization plan that forced us to make the product in China within 2 years. That only gave us a 2 year lead time when volumes were low to sell American made products there. After the second year the parts had to be made in China. We started 11 joint ventures in China and one by one, every product we had was counterfeited until our sales dropped to nothing. Eventually most of the factories were sold for pennies on the dollar to Shanghai Automotive. Basically they not only stole the design but the factory too. And Americans paid for it! We can see the counterfeit parts right here in the US. Some even have the same cavity mold marks!
Why don’t we demand China localize here. Sure you can sell a TV here but within 2 years you must set up a JV with an American company if you want to continue selling.
Americans have no idea how much of our wealth is flowing out of the country and into Chinese coffers. Look at the (im)balance of trade. They are not our friends.

Our standard of living would increase if more people were working and making things rather than collecting unemployment and welfare. China understands this and is doing everything in their power to keep their lines rolling. We are too touchy-feely to make similar demands. It would be a fate worse than death for someone to not be able to trade in their 40” TV for a 52”. How else will they appreciate HDTV from the dish?

Regarding the options comment. While people think options are low cost, they in fact
pull money out of the system and consolidate it into the hands of the already extremely wealthy elite. Options are a zero sum game. You pay Paul by robbing investors.
It is mining, farming and manufacturing that add wealth to a country.

I have lots of other examples of Chinese abuses and defective products. Kodak, P&G, GM, Ikegami… The list is endless. Americans don’t see it so it must not be there.

LuckyGuy's avatar

Hey @Hypocrisy_Central See what you started? :-)

LuckyGuy's avatar

@Mephistopheles I see that you are from the UK. We xenophobics automatically think everyone else is American. I’m sorry if my references were a little too localized and obscure. You can google any of them and get full details. The Chery Matiz QQ debacle is a fun read. China not only stole the car design but all the tooling and factory as well. The move was brilliant in its execution. GM didn’t know what hit it.
By the way, did the top dogs get penalized? Nope. Bonus for setting it up; bonus for ramping production; and even a bonus for shutting it down and selling the plant for pennies on the dollar. They lost more than $1 billion (10^9 dollars) on the deal. Snoop around, you’ll find it.

Hypocrisy_Central's avatar

@worriedguy _ Hey @Hypocrisy_Central See what you started? :-) I see some good points on both sides. _If you build it, they will buy. I believe that just watching the commercials on TV, always buy, buy, buy etc, you have to have this because to have that would be lame. But on the same hand they tell you to have the new fangled Illudium Q-36 Explosive Space Modulator that normally cost a bizillion dollars but you can get it here for only $65.99; why pay top dollar?
But, the US corporations cannot compete on an equal footing when: 1)top dogs get as much salary as 1000 employees, That is a fact sadly enough. Would those extra 1,000 workers etc make a difference in the companies bottom line? I don’t know, but at least they would be off the government dole and putting taxes into it.

_ I think there are several reasons as to why China has overtaken the USA as the factory of the world:_
1) The Chinese are hard working They maybe harder workers for what they are paid. I would like to think maybe Americans would be harder workers if they were paid better but then again in many cases where American are paid better their efforts do not increase.
_ 2) There are lots of Chinese_ There are a lot of American –many just out of work right now—.
_ 3) There is little to no unionization of the Chinese labour market_ Being a union man myself this is a sticky one. There are some people who need the backing of a union to get safe places to work and a fair shake on pay. Other unions get overpaid I believe and the conditions and/or perks are sandbagging the business. A lot of protocol BS happens through unions that make things less efficient for the plant or business to operate or keeping cost down.

It’s just a fact of modern life that we simply can’t compete with the Chinese where low-skilled manufacturing in concerned. We are Americans, we cam up with the iPad, the iPhone, supposing put man on the moon, have stealth bombers, etc. I believe if they really wanted they could build a machine that could assemble a teddy bear or a plastic fire truck at least 80% of it, however, that might take a factory of 500 workers and reduce them to 175 or maybe less. Then people will blame big business on being greedy because the fat cat CEO will still have his position, but the guy on the floor with a mortgage, car payment and family to feed will be done in by a machine. All this so another guy in another factory can buy his little girl a toy teddy bear he can afford or at a price we wants to pay.

But as China has already proven Americans have no loyalty and are willing to sell our neighbors out just to save a few bucks. If John Q working in factory ‘A’ wants to buy his little girl a teddy bear and he has the choice of paying $13 for it from a factory ‘B’ in Denver or buy it for $5.75 from factory ‘C’ overseas he will spend the $5.75 from factory ‘C’. He won’t even be thinking that the filler in that bear or the fake fur had something in it or on it that was not right, not until his little girl breaks out in hives or something, he just cares about getting a cheaper price for what looks like the same kind of teddy bear. And creating de facto outsourcing.

Ron_C's avatar

I think the whole corporate business model has failed. There is a constant pressure to grow,and a simultaneous race to the bottom.

What is wrong with a corporation that has a stable size and constantly makes a profit? If it was a public company, the stock would be worth nothing because it isn’t growing. That is just stupid. In the mean time, middle class industrial jobs are outsourced and the remaining middle class is being pressured by decreases in wealth, stagnant wages, and pressures that transfer there remaining wealth towards the richest people in the country. Further the last remaining safety nets, Social Security and Medicare are under attack.

Rebellions happen when the citizens have nothing left to lose.

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