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On 08 Jul 2004 15:58:37 GMT, (Gould 0738) wrote:

You will not pay $1000 for a 60 gig disk drive! If you would, then the
manufacturers could build them here. Fully bundled labor cost in Malaysia
is probably in the $3-5 range, was $1.50 in the early 1990's. So, since the
consumer wants the $60 drive retail, the companies are forced to build
overseas. You think that a PR guy for a union pension fund, should make
$100k+? Then you can hire him, but if you could get the same thing for
$20k, would it not be provident to do so for the benefit of the pensioners,
and stockholders?

No, most folks wouldn't pay $1000 for a disk drive. That would amount to
several days' income for a typical American.

Ironically, when we build them overseas and sell them for $60, that price
represents several days' income for the people that built it.

It's all relative I guess.

The missing portion of this equation is executive compensation. UP Uranus
Widgets and Gidgets, (for example), traditonally grossed $500mm per year in
sales with a respectable 8% operating net of $40mm. The CEO earned $6mm per
year.

UP Uranus moved manufacturing from Oklahoma to Malaysia, and accounting and
customer service to New Delhi. The decrease in personnel cost improved the
company operating net from $40mm to $110mm, activating an "incentive" clause in
the CEO's contract that increased his pay from $6mm per year to $35mm.
The board of directors voted themselves fat bonuses, dividends went through the
roof, and the stock price advanced sharply. The CEO, the board, and the
stockholders were all delighted.

Somewhat less delighted were the ex-rank and file employees of UP Uranus. Many
had to rely on unemployment insurance, some were forced into an early and
underfunded retirement, and others settled for "underemployed" jobs at a
fraction of their former wages and lost homes, cars,
savings accounts, as a result.

Almost as undelighted were the taxpayers in Oklahoma. UP Uranus discovered that
by forming sub corporations in Malaysia
and India and registering these entities in certain Caribbean nations, there
would no longer be any US federal or local sate taxes paid on the proceeds.
Just when UP Uranus dumped thousands of involuntarily jobless people onto the
doorstep of society, UP Uranus engineered a way to avoid participating in the
social costs associated with the layoff.

That's what is defined as "smart business" by many people whose god is a
greenback
and holy writ is last quarter's financial statement. What the hell, let the
common people eat cake. If they get too desperate, they can sell one of their
Lexus......(surely every family has at least a couple of those, right?)

BUT.....we haven't finsihed casting all the villains in this little scenario.
Throw in another 200 million adults of consuming age and blind them all to any
portion of a purchase decision except price. Have them shop in a business that
is so powerful it collects almost 10-cents out of every retail dollar spent in
the US, and have that business inform its competing suppliers that it *expects*
them to offshore
as many jobs and reduce costs as much as possible so that the company's
200-million customers can buy a new toaster for $10, or a microwave oven for
$39.

Winners: The very rich and the very poor. (Most of the very poor being
overseas). Middle class consumers but only to a point. (Higher unemployment and
greater underemployment depresses wages for all,
meaing that it takes as long or longer to earn that $39 microwave as it did
when the
appliance cost a bit more).

Losers: The middle class overall. Skilled labor, white collar professionals,
and tax revenues. (Sales tax doesn't diminish much when the companies
reorganize offshore, so the portion of the tax burden paid by the consumer,
rather than the corporations, remains relatively high. Transfers the tax burden
to the little people).

Is this a "good" thing or a "bad" thing?
That's up to everybody to decide based on individual values and perspectives.
No doubt about it, however, it is a common scenario in contemporary times.

Chuck, you've outlined the case very well, and it is indeed a problem.
So what do we do about it?

Naturally, most of us who aren't on the board of directors of a large
corporation cannot understand the need for the high bonuses that are
paid to these guys. But I have to wonder just what percentage of the
total company profit that those bonuses account for if we eliminate or
greatly reduce them.

Now you have to consider and accept the fact that business is not
confined to this country, and we face competition from world wide
companies. Suppose an upstanding U.S. company decides to fly in the
face of "smart business", and keeps their production in this country,
obligingly pays union wages, and keeps the supports services here as
well. Even if the CEO forgoes his bonuses, do you think that the
product that this company manufactures could compete in the
marketplace against a competing company from say, Taiwan, who used
"smart business" techniques to lower production costs? What would
happen to the market share, stock valuation, and ultimately the
longevity of the U.S. company when its competitive edge is gone? How
long are those workers going to stay employed?

You'll probably remind me at this point to consider that the
government could impose tariffs against foreign made goods in order to
allow U.S. companies to remain competitive. This was how U.S.
businesses got off the ground in the 1700's. It was a smart idea then.
But it's not so good now. Here's why I feel this way:

First off, you will now raise the costs of all goods to the consumer,
which basically makes their take home pay worth less. This gives rise
to rampant inflation (Which is the reason we're in the boat we're in
to begin with), and a general falling off of demand, which will kill
businesses.

Consider also that the U.S. is not the only market for most companies.
In other countries which are not subject to our "Equalizing" tariffs,
our goods will be at a considerable competitive disadvantage, and our
market share will shrink to nothing.

Then you have to consider the backlash that a tariff would create from
other countries who would see this as an affront against them and they
would do similar things against us, further eroding our international
markets.

Chuck, I don't see an easy solution to this. The only solution that
seems viable is the long term equalization of the world's standard of
living. This will take time. In the meantime, the only thing we can do
is choose careers that are not likely to be outsourced. We will always
need services like plumbers, electricians, and other building trades.
Doctors, lawyers, and other professionals will also remain in high
demand. High tech jobs in areas which require a "hands-on" presence
are also not as likely to be farmed out.

Manufacturing is out. The sooner we adjust to it, the better.

Dave