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Economy Title: The Decline of Manufacturing in America: A Case Study One frequent and frustrating line that often crops up in the comments section of this blog is that American labor has no hope, it should just accept Chinese wages, since price is all that matters. That line of thinking is wrongheaded on multiple levels. It assumes direct factory labor is the most important cost driver, when for most manufactured goods, it is 11% to 15% of total product cost (and increased coordination costs of much more expensive managers are a significant offset to any cost savings achieved by using cheaper factory workers in faraway locations). It also assumes cost is the only way to compete, when that is naive on an input as well as a product level. How do these “labor cost is destiny” advocates explain the continued success of export powerhouse Germany? Finally, the offshoring,/outsourcing vogue ignores the riskiness and lower flexibility of extended supply chains. This argument is sorely misguided because it serves to exculpate diseased, greedy, and incompetent American managers and executives. In the overwhelming majority of places where I lived in my childhood, a manufacturing plant was the biggest employer in the community. And when I went to business school, manufacturing was still seen as important. Indeed, the rise of Germany and Japan was then seen as a due to sclerotic American management not being able to keep up with their innovations in product design and factory management. But if you were to ask most people, they’d now blame the fall of American manufacturing on our workers, which serves to shift focus from the top of the food chain at a time when they’ve managed to greatly widen the gap between their pay and that of the folks reporting to them. Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest Begin Trace Mode for Comment # 2. Repeal NAFTA, GATT and other such agreemtments. Thell the WTO to go to hell. Tell the UN to go to hell. Put high tariffs on Chinese goods. Put tariffs on all other imports too. Stop foreign aid. Kick the foreigners out of our colleges.
Replies to Comment # 2. Repeal NAFTA, GATT and other such agreemtments. Thell the WTO to go to hell. Tell the UN to go to hell. Put high tariffs on Chinese goods. Put tariffs on all other imports too. Stop foreign aid. Kick the foreigners out of our colleges. And that would mean the End of the USSA Empire. Isolation would also eliminate the Federal Reserve and the $ as World Reserve Currency. The Top 50 000 would look like a satellite on re entry... I'm all for it....;}
#6. To: A K A Stone (#2) Repeal NAFTA, GATT and other such agreemtments. Thell the WTO to go to hell. Tell the UN to go to hell. Put high tariffs on Chinese goods. Put tariffs on all other imports too. Stop foreign aid. Kick the foreigners out of our colleges. NAFTA, GATT, the WTO, China, nor the UN had one single thing to do with the downward spiral of this manufacturer. It wasn't the union, regulation, government bureaucrats, or the lazy underclass... From the article: This entire mess was created, of course, by Cerberus mismanagement. They hired the wrong people, gave them impossible marching instructions, and have continue to play an expensive game of musical chairs at the highest levels of the company. The initial strategy of “pump and dump” didn’t work, and now Cerberus is relegated to actually operating a company. This is not their strength. But then, what is their strength?
#10. To: A K A Stone (#2) (Edited) The real cause of the decline in manufacturing is government taxes and regulations. We have an 78,000 page convoluted tax code. It costs corporations over $400 billion a year just to figure out how to pay the taxes. Corporations only paid $147 billion in taxes in 2010. So, it costs corporations in America almost 3 times as much money to figure out what taxes they owe than the taxes they actually owe. The SYSTEM IS INSANE. There are more than 50 regulatory agencies in the federal government. 50. Every year, these agencies pump out thousands of pages of new regulations, on top of the old ones that have been piling up since the 1930s. There are about 170,000 pages of regulations total. Complying with Federal regulations costs businesses over $1 trillion a year. The regulatory burden on business has skyrocketed in the Obama administration, especially coming from the EPA. Obama just postponed an EPA regulation that would have effectively shut down building construction in the U.S. next year. On tap is a new regulation that will close 8% of the coal- fired electrical plants next year. No cost benefit analysis is done for any of this. And the Congress doesn't have to approve these new rules. We have a crazy stupid system. This is one of the primary reason why manufacturers are fleeing overseas. 40 or 50 years ago, there was no where to flee to. Today we live in a hyper-connected world. Over the last few decades, countries have reformed their economies, lowered their tax rates, and put their "open for business" signs out. We have slowly gone in the opposite direction. This is something that the left just isn't smart enough to understand.
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